I Left Stanford & Bought A Small Website, Tripled Revenue In 6 Months
Hello! Who are you and what business did you start?
My name is Jake Gaba, and I run Indifferent Broccoli. We are a game server hosting and rental company.
Our customers are gamers who want to play survival video games, such as Minecraft, Valheim, ARK: Survival Evolved, and Rust, with friends on their own server. It’s like real estate, but virtual. Instead of renting a beach house in Miami, gamers rent a private Valheim server and build their own Viking castle.
I bought this business for $25,000 in February, and have since grown it from about $1600 MRR to $5000 MRR. MRR refers to monthly recurring revenue or the amount of revenue generated from paid recurring subscriptions each month.
What's your backstory and how did you come up with the idea?
Last fall, I started my MBA at Stanford’s Graduate School of Business, but for a variety of reasons elected to take a one-year leave of absence after completing my first quarter. While Covid’s effect on the business school experience was a factor in my decision, my main motivation was the opportunity to craft my own entrepreneurial “independent study.” Taking a gap year from school is a perfect time to start a business for the entrepreneurially inclined. I have the freedom to commit to my new business, but also a diamond-encrusted safety net to fall back on at the end of the year. I spent winter break brainstorming ideas for how to spend my year away.
Growing a business is like getting fit. It is simple, but not easy. If you lift progressively heavier weights three times a week for a year, you’ll become jacked. The challenge comes from staying disciplined over a long period of time.
My only constraint was the idea needed to be video game-related. My background is in computer science and digital art, and video games are the perfect overlap for someone with both a technical and creative mind--an ambidextrous brain as my former employer called it. After compiling over 100 potential project ideas--from starting an eSports team to building a game studio focused on making one-versus-many games for Twitch streamers to play against their audience--I ultimately decided to buy an existing business. With only a year to dedicate to the entrepreneurial endeavor, I realized starting from scratch was not feasible.
My acquisition journey began with a Google search: “video game SaaS companies for sale.” From my search, I found Ali Digital Broker and the listing for 7d2dServerHosting.com. On an introductory call with Ali and the owner Will, the stars aligned. Will had built a great small business, but he was ready to move on. After a few rounds of negotiating, we sealed the deal for $25,000. You can see Will’s perspective on the process on his popular YouTube channel.
Take us through the process of acquiring the business
Because I bought an existing business with a customer base, I did not need to spend time validating the demand, product, or business model. Instead, I’ll elaborate on the acquisition process.
If you want to learn to grow a business, play “grand strategy games” like Crusader Kings II. It’s the best way to exercise your CEO skills without putting actual capital at stake.
The element people are generally most interested in is valuation. I valued the business based on a multiple of seller-discretionary earnings (SDE), which refers to the amount of money the owner can take out of the business. It includes the owner’s salary + net profit. For a business of this size, a typical SDE multiple can range from ~1.5x to ~3.0x depending on several factors such as growth rate and growth potential, degree of automation, key customer risks, and distribution channel risks. Each party will have a different perspective on each of the factors affecting the value of the business, so the goal is to reach a price both sides consider fair, even if not ideal.
In 2018, the business generated about $9,800 SDE ($15,400 revenue). In 2019, it generated about $12,200 SDE ($19,900 revenue). In 2020, it generated about $9,500 SDE ($21,500 revenue). In 2020, SDE was lower due to hiring a contractor to handle customer support.
We settled on a purchase price of $25,000.
I did not hire a lawyer for this process and instead relied on information and contract templates from the Stanford GSB Search Fund Primer.
Pro tip: I financed the business by borrowing on margin from my stock broker. You can quickly borrow up to 50%-75% of the value of your portfolio at low interest rates (2% APR in this case) using your portfolio as collateral. The primary risk is getting maintenance-called if your portfolio drops a certain %. But if your portfolio consists primarily of an S&P 500 index fund, then that is unlikely.
After closing the deal, the first step I took was to review every support ticket from the previous few months. I compiled a list of low-hanging fruit improvements I could make based on recurring customer issues. Reviewing my git commits, I see the first few fixes I made were:
- · Fix a bug that displayed the wrong FTP port to customers
- · Fix a bug that prevented users from adjusting the day/night cycle on their server
- · Add a “Launch Server Now” call-to-action button to the hero image of the landing page
Not too exciting. But these bugs were common issues customers emailed us about.
Describe the process of taking over the business, what did you do next?
After I got the hang of running 7D2D Server Hosting, I launched a game server hosting service for a new game: Valheim. I was lucky because Valheim was released a few weeks after I took over the business, supported dedicated server hosting, and was a hit—one of the fastest-selling games on Steam. Early March, Viking Server Hosting, a near carbon copy of 7D2D Server Hosting, was born. Within a few weeks, it had almost as many paying subscribers as 7D2D.
7D2D Server Hosting:
Viking Server Hosting:
While Viking Server Hosting was successful, I did not want to continue making generic brands for each new game. I needed a central hub that could start building a reputation in the marketplace. Enter Indifferent Broccoli.
My business hosts multiplayer game servers, which means my customers are hanging out with friends when using my service. Most game server hosting companies have generic, similar-sounding names, which are not worth mentioning when playing with friends. My hypothesis is that I can stand out by making a brand that is distinct, memorable, and worth mentioning to friends.
My entry into the market is probably slower than it would have been with a more conventional server hosting name. People cannot tell we host servers by our name. But long term, I have faith in the power of a distinct and memorable brand as potential customers and future employees repeatedly see our name and logo.
Indifferent Broccoli can also serve as a foundation for when I expand beyond game hosting. In the future, the world will see the Indifferent Broccoli Game Studio, Indifferent Broccoli YouTube Channel, Indifferent Broccoli eSports Team, and more.
As for the Indifferent Broccoli name, I could fill an entire extra article with the story of where the Indifferent Broccoli name and style came from.
Since launch, what has worked to attract and retain customers?
My primary distribution channels are:
YouTube sponsors and affiliates
Listings in “Top server hosts” rankings
Organic Google search ranking
Answering server hosting questions on Reddit
I initially promoted the site on Reddit and through Google Search Ads. Reddit worked great as a free (other than my time) source of leads.
Google Ads
Google ads, unfortunately, were not worth the spend; although, with further testing and optimization, I’m sure they could be. I spent $3,710 on Google Ads and got 62 new customers.
YouTube
The best source of customers I’ve had so far is sponsoring YouTube videos. NizarGG was the first YouTuber I worked with. Our first sponsored video Top Ten BUILDING MISTAKES in Valheim brought me about 40 new subscribers. I’m continuing to build relationships with gaming YouTubers and Twitch streamers to increase the number of opportunities I have to sponsor videos.
Another successful channel for Indifferent Broccoli is getting included on “Top Game Server Hosts for ______” rankings. Many of these sites will list your business if you simply email them and show them your TrustPilot score. Others will list your business for a fee.
How are you doing today and what does the future look like?
Since I acquired the business, I’ve more than tripled our MRR by reinvesting earnings back into the business. My goal is to at least double MRR again by the end of the year. If I reach $8333 MRR ($100k annually) by the time I return to business school next January, I’ll be A-OK.
My most recent endeavor has been managing interns I’ve hired for the summer. My interview process was unusual. For round 1 I had a standard 15-minute intro interview. Round 2, however, was unique to Indifferent Broccoli. I grouped the candidates into teams of four, and I had them play on a new Valheim server. They had one hour to work together to beat the first boss, while I observed and listened to their group voice chat. That group interview gave me insight into their true personalities and ability to work as a team. It was also fun for the candidates and an experience I hope they will remember. For the final round, I tested their ability to do the actual intern job.
Through starting the business, have you learned anything particularly helpful or advantageous?
New trends allow for new entrants into the market—I was able to quickly gain Valheim customers when the new game was exploding—however, the real winners from a new trend are the businesses with existing reputations.
The established game server hosting businesses were initially able to rank at the top of “Valheim Server Hosting” Google searches, and they were organically included in conversations on Reddit when people asked for server host recommendations. The work to capitalize on a trend occurs before the trend exists.
What platform/tools do you use for your business?
For payment processing, I use Stripe.
For analytics, I use Google Analytics, Google Search Console, and SEMRush.
For email, I use Gmail, Zoho Mail, and Sendgrid.
For version control and project management, I use GitLab.
For community building and internal team communication, I use Discord. This is the natural hang-out spot for gamers.
For recruiting intern candidates, I use Handshake.
For affiliate link management, I use FirstPromoter.
My tech stack includes:
· Node.js
· MongoDB
· Tailwind
· ElasticCloud
· DigitalOcean
· Brooce
I procure servers from:
· Hetzner
What have been the most influential books, podcasts, or other resources?
If you want to learn to grow a business, play “grand strategy games” like Crusader Kings II. It’s the best way to exercise your CEO skills without putting actual capital at stake.
Professional musicians practice scales. Professional CEOs should play CK2. It teaches everything except sales, including:
Resource allocation
Relationship management
Building a team
Making decisions under time pressure
Mergers & acquisitions
Other influential resources:
Advice for other entrepreneurs who want to get started or are just starting?
Fundamentally, all businesses are the same. Whether you are starting a restaurant or a game server hosting company, your business is the four or five steps that make up your marketing funnel. If you stay focused on optimizing the funnel, and consistently make improvements week after week, you will see progress.
- Step one: Impressions (or people walking down the sidewalk in front of your restaurant)
- Step two: Landing page views (or people entering your restaurant)
- Step three: Dollars spent
- Step four: Repeat purchases
Growing a business is like getting fit. It is simple, but not easy. If you lift progressively heavier weights three times a week for a year, you’ll become jacked. The challenge comes from staying disciplined over a long period of time. It’s the same with growing a business—if you execute ideas targeted at optimizing your funnel each week for a year, then you’ll have a solid business.
Are you looking to hire for certain positions right now?
I’m always looking to meet talented people. At the moment, the priority is meeting with gaming content creators interested in partnering on either a sponsorship or affiliate basis. If you have an audience of gamers on Twitch or YouTube and want to make additional income, let’s chat.
Where can we go to learn more?
Visit IndifferentBroccoli for more information about the games we support and join our Discord to stay in touch.
We also have Facebook, Instagram, and LinkedIn pages.
If you have any questions or comments, drop a comment below!
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
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