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Jun 3, 2016 · 18m · top-founders

You Won't Believe How He's Sold 350 Businesses in 6 Years, EP 254: Thomas Smale

Nathan Latka · 8m spoken Thomas Smale · 8m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

Host Nathan Latka interviews Thomas Smale, co-founder of FE International, to explore how his bootstrapped online brokerage scaled to close over 350 website and SaaS acquisitions while generating $1.5 million in annual advisory revenue. Smale shares expert insights on digital asset valuation multiples, deal structuring, and the operational discipline required to scale a high-performance advisory firm.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 50.7% of the talking time here. How this is scored →

Nathan as informed peer 4.8 Guest teaching 3.3 Guest disagreement 2.5 Nathan pushing back 4.8
05100:0010:001:37–7:40 · Nathan as informed peer 7/10 Origins and Founding Story of FE International Nathan challenges Thomas's practice of valuing SaaS businesses on net profit multiples, citing standard SaaS metrics such as churn under 3% and forward ARR multiples of 5-11x. Thomas clarifies that sub-$1M ARR micro-SaaS deals lack scale and trade on net profit rather than top-line revenue.7:40–11:24 · Nathan as informed peer 5/10 Case Study of PlanScope Sale to Josiah Nathan analyzes the PlanScope transaction by estimating customer count and valuation multiples from monthly revenue. Thomas politely corrects Nathan on the buyer and seller identities and explains normal churn ranges for small SaaS assets.11:24–14:36 · Nathan as informed peer 5/10 FE International Operational Structure, Revenue, and Broker Compensation Nathan repeatedly drills into FE International's internal broker compensation splits, comparing it to the standard venture capital 2-and-20 model. Thomas firmly refuses to share private internal salary and tiered commission numbers.14:37–17:20 · Nathan as informed peer 2/10 Mid-Roll Sponsorship Promotion and Weekly Cash Contest Announcement The segment consists of an ad read for HostGator, weekly cash contest rules, and a rapid-fire Famous Five questionnaire with light banter.1:37–7:40 · Guest teaching 6/10 Origins and Founding Story of FE International Nathan challenges Thomas's practice of valuing SaaS businesses on net profit multiples, citing standard SaaS metrics such as churn under 3% and forward ARR multiples of 5-11x. Thomas clarifies that sub-$1M ARR micro-SaaS deals lack scale and trade on net profit rather than top-line revenue.7:40–11:24 · Guest teaching 4/10 Case Study of PlanScope Sale to Josiah Nathan analyzes the PlanScope transaction by estimating customer count and valuation multiples from monthly revenue. Thomas politely corrects Nathan on the buyer and seller identities and explains normal churn ranges for small SaaS assets.11:24–14:36 · Guest teaching 2/10 FE International Operational Structure, Revenue, and Broker Compensation Nathan repeatedly drills into FE International's internal broker compensation splits, comparing it to the standard venture capital 2-and-20 model. Thomas firmly refuses to share private internal salary and tiered commission numbers.14:37–17:20 · Guest teaching 1/10 Mid-Roll Sponsorship Promotion and Weekly Cash Contest Announcement The segment consists of an ad read for HostGator, weekly cash contest rules, and a rapid-fire Famous Five questionnaire with light banter.1:37–7:40 · Guest disagreement 2/10 Origins and Founding Story of FE International Nathan challenges Thomas's practice of valuing SaaS businesses on net profit multiples, citing standard SaaS metrics such as churn under 3% and forward ARR multiples of 5-11x. Thomas clarifies that sub-$1M ARR micro-SaaS deals lack scale and trade on net profit rather than top-line revenue.7:40–11:24 · Guest disagreement 2/10 Case Study of PlanScope Sale to Josiah Nathan analyzes the PlanScope transaction by estimating customer count and valuation multiples from monthly revenue. Thomas politely corrects Nathan on the buyer and seller identities and explains normal churn ranges for small SaaS assets.11:24–14:36 · Guest disagreement 5/10 FE International Operational Structure, Revenue, and Broker Compensation Nathan repeatedly drills into FE International's internal broker compensation splits, comparing it to the standard venture capital 2-and-20 model. Thomas firmly refuses to share private internal salary and tiered commission numbers.14:37–17:20 · Guest disagreement 1/10 Mid-Roll Sponsorship Promotion and Weekly Cash Contest Announcement The segment consists of an ad read for HostGator, weekly cash contest rules, and a rapid-fire Famous Five questionnaire with light banter.1:37–7:40 · Nathan pushing back 6/10 Origins and Founding Story of FE International Nathan challenges Thomas's practice of valuing SaaS businesses on net profit multiples, citing standard SaaS metrics such as churn under 3% and forward ARR multiples of 5-11x. Thomas clarifies that sub-$1M ARR micro-SaaS deals lack scale and trade on net profit rather than top-line revenue.7:40–11:24 · Nathan pushing back 4/10 Case Study of PlanScope Sale to Josiah Nathan analyzes the PlanScope transaction by estimating customer count and valuation multiples from monthly revenue. Thomas politely corrects Nathan on the buyer and seller identities and explains normal churn ranges for small SaaS assets.11:24–14:36 · Nathan pushing back 8/10 FE International Operational Structure, Revenue, and Broker Compensation Nathan repeatedly drills into FE International's internal broker compensation splits, comparing it to the standard venture capital 2-and-20 model. Thomas firmly refuses to share private internal salary and tiered commission numbers.14:37–17:20 · Nathan pushing back 1/10 Mid-Roll Sponsorship Promotion and Weekly Cash Contest Announcement The segment consists of an ad read for HostGator, weekly cash contest rules, and a rapid-fire Famous Five questionnaire with light banter.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 56.5% · guest 43.5%0:00 · Nathan 56.5% · guest 43.5%3:00 · Nathan 35.3% · guest 64.7%3:00 · Nathan 35.3% · guest 64.7%6:00 · Nathan 35.8% · guest 64.2%6:00 · Nathan 35.8% · guest 64.2%9:00 · Nathan 32.4% · guest 67.6%9:00 · Nathan 32.4% · guest 67.6%12:00 · Nathan 52.7% · guest 47.3%12:00 · Nathan 52.7% · guest 47.3%15:00 · Nathan 82.4% · guest 17.6%15:00 · Nathan 82.4% · guest 17.6%18:00 · Nathan 99% · guest 1%18:00 · Nathan 99% · guest 1%
Sharpest disagreement ▶ 13:51 Thomas firmly refuses to disclose internal broker pay

Thomas pushes back against Nathan's repeated badgering, stating that broker compensation is private internal company data.

 Hardest push from Nathan ▶ 13:47 Nathan presses on commission splits despite refusals

Nathan refuses to accept Thomas's privacy deflection, demanding the exact percentage split and citing public VC fee structures as precedent.

 Biggest teaching moment ▶ 6:14 Thomas explains sub-$1M ARR SaaS valuation dynamics

Thomas educates Nathan on why sub-$1M ARR SaaS transactions trade on net profit rather than top-line revenue multiples due to lack of scale.

 Nathan holds their own ▶ 5:38 Nathan challenges net profit valuation with SaaS metrics

Nathan demonstrates SaaS finance expertise by detailing monthly churn, ARPU, LTV, and typical 5-11x top-line ARR multiples.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Origins and Founding Story of FE International 7626 Nathan challenges Thomas's practice of valuing SaaS businesses on net profit multiples, citing standard SaaS metrics such as churn under 3% and forward ARR multiples of 5-11x. Thomas clarifies that sub-$1M ARR micro-SaaS deals lack scale and trade on net profit rather than top-line revenue.
Case Study of PlanScope Sale to Josiah 5424 Nathan analyzes the PlanScope transaction by estimating customer count and valuation multiples from monthly revenue. Thomas politely corrects Nathan on the buyer and seller identities and explains normal churn ranges for small SaaS assets.
FE International Operational Structure, Revenue, and Broker Compensation 5258 Nathan repeatedly drills into FE International's internal broker compensation splits, comparing it to the standard venture capital 2-and-20 model. Thomas firmly refuses to share private internal salary and tiered commission numbers.
Mid-Roll Sponsorship Promotion and Weekly Cash Contest Announcement 2111 The segment consists of an ad read for HostGator, weekly cash contest rules, and a rapid-fire Famous Five questionnaire with light banter.

Statements from this episode (8)

Disclosure
FE International closed over 350 deals, averaging 80 annually
“We've done just over 350 now coming up to 400 deals. So kind of number moves, moves quite consistently upwards. So we do in the last 12 months, we did about 80 deals. So we do about one and a half deals a week.”
Thomas Smale Jun 3, 2016 ▶ 2:26
Insight
Low owner involvement increases SaaS valuation multiples, says Smale
“So a owner working 40 hours a week, who's a very technical owner who does all the programming themselves. That business is going to be worth Less in terms of multiple than a business where the owner works five hours a week and they're not doing anything techni…”
Thomas Smale Jun 3, 2016 ▶ 4:43
Insight
SaaS businesses below $1M ARR sell on net profit, not revenue
“So that will definitely apply where a business is doing over a million ARR, but on smaller businesses we deal with, so our average deal size is around 250,000. For deals at that level, there just isn't the scale, so buyers don't tend to pay a multiple of reven…”
Thomas Smale Jun 3, 2016 ▶ 6:18
Assertion Not publicly verifiable
PlanScope Sold for Around $100,000 via FE International
“It was a relatively small sale. It was around a 100,000 dollars.”
Thomas Smale Jun 3, 2016 ▶ 8:42
Assertion Not publicly verifiable
PlanScope Generated $3,000 Monthly Revenue at Time of Sale
“It was around 3000 dollars a month.”
Thomas Smale Jun 3, 2016 ▶ 9:17
Insight
Sub-$500K SaaS businesses average 7% to 12% monthly churn
“Yeah, we usually see between seven and 12 would be the average we see for something in the maybe like half a million or below asking price range.”
Thomas Smale Jun 3, 2016 ▶ 10:49
Disclosure
FE International took a 15% commission on the $100,000 PlanScope sale
“Yeah, so we charge 15 cents. We take, well, around 15,000 off that.”
Thomas Smale Jun 3, 2016 ▶ 11:02
Assertion Not checkable as stated
FE International generated around $1.5M in commissions in 2015
“I was around 1.5 million in commissions.”
Thomas Smale Jun 3, 2016 ▶ 12:31
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