Sortfolio, our visual directory of web designers, has been helping companies find web design firms (and helping web design firms find clients) since October of 2009.
Sortfolio works
It’s been working quite well for people. In a recent survey we conducted, 45% generated new business through Sortfolio, and 64% said leads were moderate to high quality.
We believe in Sortfolio. It’s still the best way to browse web design firms. It beats Google, text directories, or hiring your friend’s cousin. Browsing by visual portfolio, budget range, and location is the most perfect combination we’ve found to hone in on the right fit for your web design project.
Sortfolio deserves a better home
However, we haven’t been able to dedicate many resources towards improving it or promoting it. Our efforts are focused on our products and our Job Board. We believe Sortfolio deserves to thrive, but 37signals is no longer the best home. So we’re looking to sell it to a company that can give Sortfolio — and its customers — the love and attention they deserve.
Revenues and business model
Sortfolio has been holding steady between $17,000-$20,000/month for quite some time now. Paying customers are billed $99/monthly. They can cancel at any time. Free listings are available for all. Currently there are just under 10,000 total accounts, 195 of those are Pro accounts. We’re sure a dedicated sales person could upsell quite a few people.
Futher, the Sortfolio model could expand into a variety of other verticals including photographers, wedding planning, catering, illustrators, artists, etc. I’d love to see a Sortfolio for calligraphy or hand lettering.
Make us an offer
If you’re interested, make us an offer. We’re open to anything as long as it’s cash. We’re not interested in equity. Maybe it’s all cash, maybe it’s cash + royalties on future sales. Who knows. Come at us with something serious and we’ll consider it.
If you’re interested, or have any other questions, please email jason@37signals… We expect to receive a lot of offers, so we won’t be responding to anything we don’t consider a serious offer. We’re serious about selling so please be serious about buying. We’ll help get the word out whenever you are ready to relaunch.
Chris Newell
on 04 May 11Is there any costs associated with running the site as well, such as server costs or advertising costs?
Salman
on 04 May 11Wow that sounds like a pretty established business to me. The only thing one has to consider is that amount of marketing required to keep it going (seeing as the SVN blog is a huge reason it got to where it is now).
I could see this going to another established player (a strong following) or someone already in the same market.
Jon Campbell
on 04 May 11But without 37signals behind it would it really be as useful or valuable for companies searching for a reputable designer.
Brad F
on 04 May 11This has raised my curiosity. However, I am not sure how you expect someone to make a “serious” offer based on “it has been making xxx for some time now”?... Though, I am sure someone will.
However, here are some things I would like to know (if possible) before making an offer:
1) Roughly how much does hosting the site cost based on traffic, database size etc.
2) Is the customer billing built into the product or is it wrapped up in a billing process that you use for your other products.
3) Related to that… roughly what are the costs for a billing service for something like this? This is something we could research before making an offer, but if there was an idea to the cost, that would be helpful up front.
4) I feel much of the value of the site comes from the fact that 37s was able to market it. You know, those every now and then posts on svn that promote some of the pro customers. Would that still be a possibility?
5) I believe I saw Sortfolio on “The Deck”. This also adds value to the product. However, since, 37s is affiliated with The Deck, was 37s paying for that (if it was listed on there)?
I understand if these cannot be answered here, but I would think anyone interested in taking it over would want to know this stuff as well.
Good luck with the sale!
Carlos Taborda
on 04 May 11I don’t really see this ending well for whoever buys it. Good luck, don’t say we didn’t warn you.
Anonymous Coward
on 04 May 11@JF
To make sure I understand:
1. Is 37signals simply selling all of the IP & assets for Sortfolio. Not it as a business, that might have existing earnings. Meaning, you’re solely selling domain, software that runs sortfolio, trademark of “Sortfolio” etc and not the hardware,
2. Do you have any liabilities? E.g. software licenses used that will need to be renewed/paid, web hosting fees, support contracts, email hosting, etc?
3. More information on the current billing system like the previous commentor please. Is the billing system built within, are you using another a 3rd party source (QueenBee)?
4. Who is your gateway to process payments?
5. How many charge backs do you get per month?
George Anderson
on 04 May 11Does it come with the #37 car?
Anonymous Coward
on 04 May 11@JF
6. What’s the average lifespan of a paid account?
7. What’s the average lifespan of a free account?
Brett Sinn
on 04 May 11Carlos, Don’t say we didn’t warn you? That’s silly. You’re not a fortune-teller to predict something in a pessimistic tone. You’re a number. You’re white-noise. You’re blind.
There’s real value in trying to connect clients to quality service providers. There are probably hundreds trying, but it’s the execution that sets Sortfolio above the others. That’s what matters. There’s potential in that.
I hope whomever buys this rocks the hell out of it and provides real value to both the designer and the client.
Arik Jones
on 04 May 11My offer: $1
(Hopefully the “price is right”)
;)
Mike!
on 04 May 11There is too much math and percentages on the main page.
Patrick Haney
on 04 May 11Sortfolio had promise, but I’d love to hear about the percentage of those listings that caused spam and unsolicited emails. Since joining Sortfolio after its launch, I’ve had only 2 decent project leads come from it and numerous issues with spam and other companies emailing about offering us their services (the nerve of those people). I’ve since removed our company’s email address from Sortfolio and haven’t noticed much traffic to our website otherwise.
If someone does pick this service up, I would hope that the first order of business would be to address this issue. I don’t see a lot of value in the service as it is now, and I’m not convinced that becoming a paid customer would make much of a difference.
Brady Wetherington
on 04 May 11I don’t remotely understand this. From the guys who say “build something that scratches your itch, charge for it, stay small, iterate, never sell” to say, “Oh, by the way, and we’re selling this thing.” I don’t get it.
It makes 20 grand a month? Hire someone to be in charge of it. Hire someone to develop for it. As previous commenters mentioned, plenty of its value is associated with being tied in to 37s.
I kinda feel like this is some kind of trick – to find out how much people would pay for such a service, and then you guys get to run the numbers and write another blog post about how stupid it is to sell a company that is running and makes money.
Kyle Fax
on 04 May 11I think I’ll buy 2.
Carlos Taborda
on 04 May 11@Brett Sinn,
Not being pessimistic, I just see that if 37s decides to make a site that sells used socks, it will do well. It’s risky to buy such a generic site that has seen some income mainly because 37signals is behind it – not because the product itself is amazing.
I personally like sortfolio a lot! I just do not believe it is a smart investment. That’s all.
Anonymous Coward
on 04 May 11This is only slightly related, but what happened to the redesign of this blog which you wanted to do through Sortfolio? http://37signals.com/svn/posts/2164-picking-a-firm-from-sortfolio-to-redesign-signal-vs-noise
Chris Harrison
on 04 May 11Wow, people are so cynical, or maybe they just lack imagination? This is a great deal for the right person, with an established brand and a good size client base (and revenue) someone with ideas and passion could really do something great with this site.
And while it’s affiliation with 37signals certainly helped build the product into what it is, that doesn’t mean it won’t survive without it. It doesn’t align with 37 signals core products so it makes sense for them to sell it to somebody with a burning desire to do something with it.
JF
on 04 May 11Re: SvN redesign… We didn’t have enough time to dedicate to the process so we put it on hold. Even though we were going to hire someone else to do the project, it still requires attention from us. At that time we found we didn’t have the extra attention so we couldn’t move forward with the project.
Hank
on 04 May 11@JF
Why did you delete my comment asking how Sortfolio is different to administer than Job Board.
Also, why are you asking anyone’s comment questions in the blog related to Sortfolio?
Joe
on 04 May 11I’d buy it just to own some 37signals’ hand-crafted source code.
Neil Kelty
on 04 May 11So how many of those 195 will be canceling their account once notified that 37S was no longer going to own the product?
Robert
on 04 May 11I want to give you guys kudos for two things.
(1) Making something awesome like Sortfolio. While I don’t think you guys could make a successful business out of selling used socks, I do believe that you could make the most successful used socks selling business.
(2) selling Sortfolio. I don’t care what any of these other haters say. If you have a product that isn’t compatible with your long term goals, then get rid of it!
DHH said you should always be working on your best idea, and if you aren’t you are doing something wrong. Well, all you are saying here is that this isn’t your best idea, but you are giving someone else the chance for Sortfolio to be their best idea. I see nothing wrong with this.
Maybe Yahoo! will buy it from you for 300x what it is worth and then sell it back to you 10 years later after they couldn’t figure out what to do with it.
rishi
on 04 May 11Way to practice what you guys preach. Get rid of all distractions…. even if it is making $20k/mo.
Hope you guys find a good buyer!
Nacho
on 04 May 11A better home? Let’s try new feature.
Do not sell, just hire a team to manage it! And done. I would work on it even for free.
Matt Staton
on 04 May 11This is basically a directory. I run a water damage directory and marketing, sales and attrition are the biggest factors to consider.
What percent of your revenues are spent on sales and marketing?
What’s your attrition rate for pro customers?
Kind of interested…
Hristo
on 04 May 11Matt,
Can you explain what you mean by attrition rate for pro customers?
joe sixpack
on 04 May 11hmm, even 37 signals starts selling it’s users. when the price is right. must be bubble time,
Nacho
on 04 May 11I got lot of hits from my last comment, so I had to do a formal presentation in my blog. Go check out my article about the New home for Sortfolio.
ggwicz
on 04 May 11This is awesome. Most companies would keep things like this really quiet and “under wraps”.
Matthew Staton
on 04 May 11By attrition rate I mean I want to know how many of the pro (paying) advertisers stop paying – or drop off the platform.
If I sign up 100 but 80% drop off in 90 days, my sales will never keep up.
Martin Kivi
on 04 May 11We’ve had Sortfoio Pro listing pretty much since the site launched. It has generated quite a few good leads (and awesome projects) and still continues to do so. What’s currently great about Sortfolio is that it attracts a lot of startup founders who are looking for excellent service providers (that’s the feedback we’ve gotten from our clients).
What I’m wondering though is if the new owners would be able to keep marketing Sortfolio as successfully as 37signals does. Especially to the enterpreneurs, who are our main target group. If they don’t, the Pro listing value could go down really quickly.
Duncan
on 04 May 11Maybe try selling it here: https://flippa.com/ ?
Lance Jones
on 04 May 11Hey guys, will you continue to point to the new home for Sortfolio? A 37s backlink would be highly desirable.
Also, would you consider ongoing (passive) promotion of the service?
Thx.
Adam
on 04 May 11The fact that you’re more interested in selling Sortfolio than in spinning it off into a separate company makes it seem like you have low confidence in its future prospects. That might be worth addressing more directly (as in, why you don’t want to do that).
I think Sortfolio’s success is largely based on 37signals’ reputation. Taking that relationship away will likely hurt its value considerably.
Perhaps a company that’s already in this business would be interested in buying your customers, and possibly your software.
Rick
on 04 May 11Most of sortfolio’s value lies in its connection to 37s, Jason, the blog and the team.
Why can’t you guys find a manager and a team for this?
JF
on 04 May 11@Lance We’ll be happy to announce the sale and the new launch here on SvN and on Twitter, but we won’t be promoting Sortfolio on 37signals sites once it’s been sold.
@Rick Because someone else can do a better job with Sortfolio than we can. It’ll always be a small dog for us because it’s not core to what we do. It can be a much larger dog elsewhere.
Berserk
on 04 May 11There were never no itchy scratchy. It fillled no need for 37s.
I agree with those saying that most of the value is in the connection to 37signals. However, the asking price is going to be significantly big that it should attract only a motivated buyer. The possibility of using the software for other service based markets is probably the biggest asset for the new owner.
Phil Willis
on 04 May 11It’s impossible to put a price on it without knowing the expenses involved (hosting, staff and advertising).
But for argument’s sake: $250,000 in revenue minus $200,000 for 2 or 3 full-time staff and hosting gives $50,000 earnings per year.
Based on a Facebook P/E ratio – you should expect to pay $50,000×125 = $6.25 million
Realistically – it’s probably worth between $1 million and $2 million.
a
on 05 May 11asd
Davis
on 05 May 11@Phil: $1-2M????
It has just 195 paying customers! I don’t follow your pricing logic.
Volkan
on 05 May 11@Phil Willis You think a steady business that makes 50k is worth $1-2 million? When do you expect to make that back, 40 years? Everyone is crazy enough to make valuations based on possible upside, then working backwards. But all businesses also have possible downside. This is seldom factored in.
ggwicz
on 05 May 11@Phil Willis I don’t like your math. At all.
Merle
on 05 May 11Just weird all of it.
Phil Willis
on 05 May 11For those that don’t like (or understand) the math.
Take your spare million and put in the bank at 5% and what do you get?
$50,000 a year.
So even without upside – as a baseline you’d have to think it’s worth around $1m.
If you think the business has upside (and why would you buy one if you didn’t) then you’d probably be prepared to pay more.
@volkan – Remember: You don’t have to make your money back on the purchase of a business. The business itself is an asset. A business that makes money, is worth something. And you can still sell it to someone else.
That’s like saying: Why buy a rental apartment for $200k when you can only rent it for $800 per month?
Because at the end of the day – you still own an asset that gives you $800 a month and if you get sick of being a landlord you can sell the apartment to someone else for $200k.
@ggwicz and @davis – Just out of interest, what do you think the business is worth? More or less than $1m?
Hamid
on 05 May 11I think it worth. It was growing and firms looks for IT staff.
Ian
on 05 May 11@JF – well – this is a good example, that planning should be done before you start project.
If project generate $25k / month – what’s the problem to hire someone to work on it?
Josh Ahrens
on 05 May 11I’ll jump in here.
My problem is convincing every customer of sortfolio that we’re every bit as good as 37s.
Sortfolio is beautiful and the best way to browse these types of jobs. I know this, but I sure as fuck don’t have the resources to convince anybody of this.
Honestly, 37s is either doing this as a “Gotcha!” grab or they are really selling this fucking software. I’ve read Getting Real and ReWork so I’m going to assume this is real.
So that being said, for the right person it could be a good fit. It’s just going to be difficult once it’s out of 37s hands to convince customers to continue to pursue this avenue.
Honestly though, it’s so much superior (for browsing) any other site for a web designer, I just can’t imagine someone not implementing the design.
dylan
on 05 May 11Weird situation, but cool subtext: 37signals’ employees time is so freaking valuable via their other products, that it isn’t worth a minute for this smaller project – even if just time spent managing new employees. A gutsy 80/20 move…
That being said, I do think that the pro subscribers are paying primarily for the 37s marketing connection. A sale to an established media player with an even bigger audience might be a win-win scenario.
Paul Montwill
on 05 May 11I am not surprised, contrary to what people write above, that 37signals is selling their side business. It is just too small for them and take away their attention from core business. They learn to minimize and say NO.
And for a potential buyer… if the price is right, it is just a matter of calculating everything. Stop rumbling about people leaving after they find out 37S is no longer behind it and just estimate the drop-off percentage. Let’s say 20-25%. Maximum. 37signals was great to gave it a boost and attention to take off in the very beginning. But now it is the mundane job to grow it – step by step. It is a sales man job – pick up the phone, send emails etc.
And remember that you also buy a database of 10,000 accounts! It is one of the winners. If you use it smart, pay attention, give a lot of love – you can win it….
El
on 05 May 11Is “Sortfolio has been holding steady between $17,000-$20,000/month for quite some time now” not enough to hire someone to work on it?
ggwicz
on 05 May 11@Phil I am not saying I do know what it’s worth, I’m just saying that using a simple math equation based on assumptions won’t help me figure it out. I understand your math and it has a a handful of applications in reality, I just don’t think it’s a good tool here.
Mike
on 05 May 11I think it is only worth what someone is willing to pay for it.
John
on 05 May 11This is how they promote it:
How will you be promoting Sortfolio to potential clients?We’ll be promoting Sortfolio to hundreds of thousands of businesses using a combination of web-based advertising targeted at small/medium businesses, local contextual advertising, relevant mailing lists, and links on sites frequented by small/medium business owners. Sortfolio will also be actively promoted on our Signal vs. Noise blog which is read by over 100,000 people a day. We’ll also be promoting Sortfolio to our own customer base which is made up hundreds of thousands of business owners. Lastly, we’ll be seeking out national press to cover Sortfolio’s growth.
Zach
on 05 May 11Would you be interested in a sale with partnership? I’d like anonymous coward and JF’s questions answered, but agree with many of the comments regarding it’s success – at least in part – attributed to 37’s own marketing power. A partnership could help us leverage that strength, but remove day-to-day development, vision, etc. off your hands. Email me if you’re interested.
Anonymous Coward
on 05 May 11If I bought it the first thing I’d do is design a usable footer!
Mike
on 05 May 11You could probably design the exact same site for under 10K
you are basically paying for the 200 customers
I would think 50-60K would be the value of this site
STP
on 05 May 11Note that an ad on The Deck currently goes for $8,300 per month. Certainly that is an important part of the equation, since The Deck is a significant part of the way Sortfolio is currently promoted. If you wanted to keep that campaign going, that’s half of the monthly revenue out the window right off the bat.
Matt Henderson
on 05 May 11I’d just like to offer an experience contrary to Patrick Haney’s. Since advertising on Sortfolio, we’ve received probably one solid lead per week (obviously a lot more than we have the resources to service). It allowed us to be extremely selective in the work we chose to participate in. The service has earned us far, far more than we’ve spent on it.
AC
on 05 May 11@STP: Interesting. So half of the revenue is used to maintain an average of 200 paying customers. Add to that the server costs and salary and the profit level is not very impressive for a two year old 37s service.
Which is why it’s being dropped.
silas
on 06 May 11Should throw in the Job Board then you got something.
Paul Montwill
on 06 May 11It would go for around $125-150k. Remember about 10k accounts list + 37signals heritage + 200 clients.
AC2
on 06 May 11So half of the revenue is used to maintain an average of 200 paying customers.
Funny! You are pulling someone else’s wild guess on how revenue is being used to come up with your own theory.
Lesson: Don’t use the peanut gallery’s numbers for your financial analysis.
OnLooker
on 06 May 11When Jason states that revenue “has been holding steady between $17,000-$20,000/month for quite some time”, you could assume he meant net profit and not gross profit. But, he really did not specify and people should know what happens when you assume.
OnLooker
on 06 May 11Whoops!!! Sorry, some simple math will reveal that JF was talking gross revenue. Roughly 195 pro accounts at $99 gets you the 17k ~ 20k revenue he is talking about. Safe to assume any buyer would eat into that existing revenue.
Also, to all the “don’t listen to the haters, skeptics” etc… underestimating how much of Sortfolio’s revenue is weighted by the fact it is currently a 37s product would be a mistake. Not that there it does not have value, it certainly does. I’m just not sure you can bet the ranch on it turning a ~$240k profit once it turns over to a new owner.
AC
on 06 May 11No. I guess 37s has a discount on The Deck, but if the buyer would like to maintain that exposure then that’s what s/he would pay (only asuming that STP didn’t pull $8,300 from nothing). Anyway, the marketing required to pull in both paying customers and potential customers for the customers is not free.
@OnLooker: “Revenue” is revenue :). But yes, since profit is the only thing that matters (according to DHH) it’s surprising that it wasn’t mentioned.
AC, no relation
on 06 May 11AC: “only asuming that STP didn’t pull $8,300 from nothing”
That’s the number quoted on The Deck’s home page!
James
on 09 May 11Sounds like Jason wants a new car!
cbmeeks
on 10 May 11I admire your honesty about it being a “small dog” compared to your core products.
But it appears to be pretty polished. Why not hire a salesperson on commission only to promote and sell business on the site? Why 2-3 of them? If it’s commission only then the overhead should be fairly minimal (some accounting would be needed but I’m sure you have an accountant on staff).
Then 2-3 salespeople could bring that $200k business to $2m and then you have a “real” product worth attention.
Anyway, just saying…
Dan
on 10 May 11Businesses are bought, not sold.
This discussion is closed.