WordPress Plugin Acquisitions: A Guide for Small Software Developers
Last Updated January 21st, 2022 · WordPress
WordPress plugin acquisitions are at an all-time high. Each day it seems like another huge plugin has been sold to an equally huge software or web hosting company. The summer of 2021 was one of the wildest times in terms of WordPress product ownership changes. In fact, so many plugins were changing hands that Post Status began tracking them all in a list for the community.
Of course, most of these plugin deals were between huge corporations and large development houses. There hasn’t been a lot of public talk about smaller, less expensive plugin acquisitions. Yet those kinds of transactions do exist and happen frequently enough not to be dismissed. Our company, Link Software, has been involved in several smaller plugin acquisitions in the past several years. The portfolio of WordPress plugins we have put together is now strong enough to generate a nice portion of our monthly revenue.
We thought it was a good time to write out our thoughts, and advice, for other small software developers interested in acquiring their own WordPress plugin. There is an opportunity for WordPress developers with budgets of all sizes. This guide is meant to offer you an explanation of why you should get involved, how to find the right plugin to acquire and the steps involved before and after your purchase.
Why Small Developers Should Acquire WordPress Plugins
WordPress plugin development is a great situation for small and medium-sized developers and agencies to get involved in. Everyone has seen the stats about how pervasive WordPress is as a content management system. Despite claims about the rise of its competitors, or its impending decline, WordPress is going to be around for a long time. It is a great starting place for anyone interested in selling software, the platform is easy to work with, and WordPress offers plenty of ways to develop your skills.
Get Immediate Access to a User Base
Many small and medium-sized developers are looking to create elaborate web applications from scratch. That road is fine, but difficult, and can take quite a while to gain traction and attention from potential customers. WordPress allows anyone to release a software product and get actual users and feedback very quickly. This is a blessing when it comes to acquisitions because you can immediately discover what plugins have traction with the community. Acquiring an existing WordPress plugin lets you start day one of your journey with users. This is much better than spending months trying to build a product and drum up interest to onboard initial users.
Grow Your Marketing and Support Skills
Marketing is a huge part of software development. A lot of developers don’t want to hear or acknowledge that but it is true. Acquiring a WordPress plugin is equal parts programming and marketing and, in some cases, the time spent marketing is even higher. Taking over an existing WordPress plugin is a great chance to sharpen your marketing skills to try and increase installs and sales. You can spend less time getting the product off the ground and more time trying to grow what has already been established by someone else.
In addition to marketing, owning and operating a WordPress plugin helps improve your support skills. This ties into taking over an existing user base. Any plugin you acquire is going to have users who need help. You’ll be required to handle support tickets and learn how to take customer feedback and apply it to the product. For developers without a lot of experience handling support, purchasing a WordPress plugin is a great way to get better very quickly.
Generate Revenue Quickly
Growing a business’s income is one of the main reasons anyone considers acquiring a WordPress product. You can certainly acquire plugins that are pre-revenue but it’s not something we recommend. A plugin that brings in a monthly income, no matter how large, is much more motivating than one that does not. And for those of you concerned about managing an e-commerce setup there is no reason to worry. One of the nice aspects of WordPress development is that a lot of products exist to make managing sales simple. Easy Digital Downloads and Freemius make handling payments and licenses fairly trivial now. You don’t have to worry about rolling your own payment solution anymore.
How to Find a WordPress Plugin to Acquire
Now that we’ve gone through some reasons why you should acquire a WordPress plugin it is time to review exactly how you go about finding one. In our experience, the three best ways to find quality plugins to acquire are through marketplaces, your own social network, and by searching WordPress.org and cold emailing developers.
Searching through one of the dozen or so marketplaces and auction sites for deals is the most common approach to finding a plugin to buy. Marketplaces can be very hit or miss and a lot of the higher-end ones have valuations that are too high for smaller developers. There are occasionally opportunities worth investigating though and there are three sites we recommend if you are serious about finding a plugin to acquire.
Most of the listings at MicroAcquire are traditional SaaS products. You occasionally find a WordPress plugin for sale here and, when you do, they are generally interesting. The valuations on this site are all over the place and a lot of the listing information is purposefully vague or obfuscated. You can reach out to the seller for more information but, typically, a little research and deductive reasoning can help you identify the plugin for sale on your own.
We recommend you keep an eye on MicroAcquire because it’s experiencing incredible growth as a platform now and the number of WordPress-related listings is sure to grow in the future.
Flippa has a well-deserved reputation as being a pit of spam sites and general garbage. Occasionally, you can find actual gems there if you have enough patience and understand how to properly search the site. Like MicroAcquire, valuations vary widely but the auction format of Flippa gives you a little leeway in terms of how much you might pay. One upside to Flippa is that they make communication between buyer and seller very simple. It’s also very easy to see exactly what is for sale which makes doing your own research easier than other marketplaces.
Our first two plugin acquisitions came from Flippa listings and we came very close to a third before losing out. There are deals to be had here if you are willing to wade through the mess.
A WordPress-only marketplace, FlipWP is a recently launched site from WordPress community members Iain Poulson and Alex Denning. This is a membership site that requires an annual fee in order to view the listings. This limits the number of people competing for the products being offered. FlipWP sees irregular updates at the moment but hopefully, the number of listings grows and improves. Prices, like our other marketplace recommendations, vary wildly. There are plugins on offer at FlipWP with million-dollar asking prices and others that are only asking for a few thousand dollars.
We purchased a plugin that was listed on FlipWP earlier this year. The process is very hands-off from the perspective of FlipWP. There is a contact form that sends your message to the seller. From that point on it’s between you and the other party to work out details and handle communication.
Of all the marketplaces, FlipWP has the most potential in the WordPress space. We’re very excited about the future of FlipWP as the market for plugin acquisitions continues to grow.
Network and Business Connections
It really does pay to network. The more you get involved in WordPress-related communities the better your odds of an opportunity arising are. There are so many WordPress communities, Facebook groups, and Slack channels to join that you should be able to find someplace to meet others like you. Eventually, as your connections grow, you will hear about potential acquisition deals.
You can do more than just join communities and hang out in forms though. There are more proactive options like running a blog or writing a newsletter to grow your audience and network. We used to run a site called The Plugin Economy where we interviewed WordPress developers about their products. That experience gave us a lot of contacts in the WordPress community and eventually led to our latest plugin acquisition.
WordPress.org Plugin Directory
Finally, the not-so-hidden gem of WordPress plugin acquisitions is the directory at WordPress.org. There are tens of thousands of plugins listed at WordPress.org with marketing copy, screenshots, installation information, download information, direct access to code, and support forums full of customer feedback. Working your way through plugins on the directory, finding potential acquisition targets, and cold emailing the owners is a really interesting way to acquire a plugin.
Keep in mind there is a WordPress.org API available as well. You don’t have to do all of this manually if you are feeling a bit adventurous. We have built a small internal tool we use to do market research and pinpoint plugins and categories that are worth pursuing. It’s nothing fancy but it does a nice job of helping us do research.
There is a lot to consider when you are browsing the directory and looking for potential acquisitions. You will go through a lot of hits and misses, dead ends, and maybe even a few bruised egos. Cold emailing is not for everyone and it does take some practice to develop a good approach. It’s worth an attempt though and, even if you don’t find anything viable to acquire, you will at least have done some market research and expanded your knowledge of the WordPress plugin landscape.
Things to Review Before Purchasing
Let’s say you’ve identified a plugin to acquire. You’ve reached out to the current owner and have established a dialogue. Now it’s time to do some research and really figure out if the plugin is worth persuing and making an actual offer on. This is the most important part of the process and a mistake here can reverberate down the line and cause an untold number of headaches.
Always keep in mind that there is more to acquiring a WordPress plugin than some files full of code. You need to do your research and due diligence about many different aspects of the product. The code needs to be good and work correctly, of course. After that, you need to consider revenue and payment processing (one of the biggest pitfalls of the whole process). The plugin’s marketing and website are very critical as well.
This is obvious, at first glance, because you don’t want to take on a plugin that is broken, doesn’t work, or has serious issues that can’t be fixed. It’s also good to understand all of the technology used in a given plugin before you take control of it. Knowing what you are capable of taking on and improving the plugin is a key piece of the acquisition puzzle. If the plugin you are interested in uses technology that you are unfamiliar with or don’t enjoy working with then consider another option.
Ask the current owner if there are any outstanding bugs or issues with the plugin in its current state. There is nothing worse than taking on a new project, finding out on day one that there is a huge issue, and then scrambling to learn a new codebase and solve an emergency at the same time. Most good plugin developers know of any existing problems with their plugins and great developers have plugins that are generally error-free already. This is WordPress, of course, so weird configuration errors and problems do exist so be prepared for anything.
Finally, ask the developer if there is a list of planned features or a release roadmap for the plugin. This includes any in-progress releases they are developing that aren’t finished yet. Almost every plugin developer has a list of ideas for their products. If they haven’t written anything down it is worth asking if they would be willing to do so after a sale just to give you a head start on future features and updates.
Of course, this is where the money is made with WordPress plugins. Almost all plugin acquisitions are for freemium products. It’s important to understand how the premium version of the plugin works and how it differentiates itself from the free version.
You’ll want to review the code for any premium versions or extensions just as closely as you do the free version. Ask the same questions about known bugs and feature roadmaps. Some plugins can have a whole handful of additional add-ons, each with its own level of complexity, so make sure you’re prepared to take on that kind of development burden.
This is a good time to think about some post-purchase possibilities. Do you see some opportunity to raise the prices and still provide good value? Are there additional add-ons, or extensions, the current developer has never thought of that might increase revenue? It’s unwise to put the cart too far before the horse at this stage because you haven’t taken over anything yet. But planning ahead a little wouldn’t hurt.
Ask for a report or spreadsheet detailing all of the revenue the plugin has generated going back as far as possible. In our experience, this data comes in all sorts of forms and it’s rarely very well organized. The key numbers we look at are the monthly revenue over the last 12 months, the split of that revenue between first-time customers and license renewals, and the license renewal rate. We focus on the last 12 months, if possible, because older plugins might have come out of the gate and been very successful and then trailed off. We don’t want to overpay for a plugin that is trending downward in terms of revenue.
This part can be touchy for some people, especially if you’ve cold emailed them out of the blue. If the plugin owner isn’t willing to share what you need to make a good decision then just walk away. It’s foolish to make any purchase like this without knowing all of the facts. Hesitancy from the owner at this stage doesn’t bode well for the rest of the transaction.
Pay Attention to Renewal Rates
Some owners will boast about their future subscription revenue. We’ve had plugin owners tell us that they have thousands of dollars in scheduled payments coming and ask us to take that into account. There isn’t a lot of publicly available data about average renewal rates for WordPress products but no one has 100% of their licenses renewed. Having said that, we feel anything less than 50% is a sign of big trouble. You can run a successful product on one-time sales or lifetime licenses but recurring payments are the bread and butter of making any WordPress plugin successful.
We could write an entire blog post just about taking control of another party’s payment accounts.
Understanding how a plugin handles payments is so important we decided to bold this text.
Please, please learn everything you can about how the plugin you want to acquire has set up their payment accounts. Are they using Stripe? Do they also accept PayPal? Are there other, less-common payment options?
Every serious WordPress plugin that sells licenses should have unique Stripe and PayPal accounts for the product. This is not common practice and is a mistake we have made ourselves in the past. If the owner of the plugin you want to purchase is using their personal, or company, Stripe and PayPal account for their plugin you are going to have great difficulty during the acquisition process.
There are so many headaches this particular situation can cause. In fact, we would suggest walking away from any deal under these circumstances. But if you insist, here are some problems to know about.
Transferring Stripe data from one account to another is an awful migration process that can take weeks. And, when it’s done, you will only have customer data. Past payments and subscription data can not be transferred in a Stripe migration. You will need to find an online tool to re-establish your subscription data or build it by hand yourself. Then you have to monitor these subscriptions, as they process, to make sure the licenses successfully renew.
Plugins with low revenue, or no subscription-based payment setups, might make this process acceptable. Unfortunately, a plugin with high volumes of sales or large numbers of subscriptions can make for a nightmare scenario where you could potentially lose out on future recurring income.
You can exchange ownership of a PayPal account from one party to another. The process is pretty simple. Of course, if the current owner of the WordPress plugin you are looking to acquire uses their personal PayPal account they aren’t going to give you control.
In this situation, you’ll have to make a brand new PayPal account after you acquire the plugin. All of the customer data, automatic payment profiles, and other information will be totally gone. You’ll have to notify everyone who paid via PayPal that their payment details will need to be re-entered for their subscriptions to continue. You will lose subscribers as people will naturally forget to update details or decide they don’t want to bother renewing.
Give any plugin’s website and social media accounts a thorough review before an acquisition. We typically ask for an admin account to be created on the plugin’s marketing site during the research phase. Not everyone is open to this, of course, but it’s important to ask. Understanding how the marketing site works in terms of plugins or third-party services helps prepare you for any potential pitfalls.
It’s not just technical aspects of the site that are important to examine. One of the easiest wins we’ve seen with our own plugin takeovers is improving the marketing website. Fixing bad copy, adjusting designs, and improving SEO have allowed us to quickly double and triple monthly revenue immediately after two of our purchases. Recognizing the current shortcomings and having an actionable plan to solve them can sometimes be enough to want to go ahead with an acquisition.
For social media accounts, we make sure they are currently operational and that we will be given control of them after a sale. Mailing lists are another important area to ask about. Taking over an existing account or at least receiving a subscriber list after purchase is critical to any post-purchase marketing campaigns.
How to Settle On an Acquisition Price
Once you have found a plugin, reviewed it, and found it worth acquiring it is time for the uncomfortable discussion about price. Many plugin developers, even ones you cold email out of the blue, have some general idea in mind of what their product is worth. Of course, someone’s asking price and what you are willing to pay rarely align. Let’s discuss the importance of knowing your limits, some key revenue statistics to consider, and how your own personal constraints can impact how much you want to pay.
Know Your Budget
Decide on what your maximum price is. It’s so easy to get caught up in the excitement of plugin acquisition. Before you know it, you might agree to a price you really can’t afford. It’s vital you stick to your guns when it comes to your budget. If the seller won’t budge on a valuation you can’t suitably afford or recover in time with future revenue, then walk away.
There’s nothing worse than purchasing a plugin and then realizing afterward you made a terrible mistake. Then you have to either work extra hard to recover your lost money or try and pass your new headache on to someone else in another sale. You can avoid this disaster by staying true to your budget and paying what you can afford to risk.
Understand Common Valuations
Valuations are always tough to nail down. Everyone has different methods for placing a valuation on their WordPress product. It’s hard for anyone to take the emotion out of their project which is why you sometimes see people trying to sell their plugins for outrageous prices. In our experience, a common-sense owner will take their recent revenue and then multiply it by 2.5x or 3x. So, for a plugin that’s made $3,000 in the last year, a common valuation might be $7,500 to $9,000.
Valuations are also dictated by a given marketplace as well. For instance, MicroAcquire seems to have higher asking prices than most other places. There’s probably influence from traditional pricing techniques used to value SaaS products in play here. Flippa, on the other hand, has lower prices but also worse product quality so there’s a trade-off involved.
Valuations of Free Plugins
We are mainly interested in revenue-generating WordPress plugins. If you find yourself looking to acquire a plugin making no money then standard valuations can be tossed out the window. Our suggestion would be to try and determine a value based on the plugin’s existing codebase and active installations. If a free plugin has a huge amount of users, with a codebase that can be extended with a premium version or add-ons, then it is worth far more than other free plugins with limited appeal in those areas.
Learn to Negotiate
Finally, don’t be afraid to counter-offer and have a back-and-forth with the owner. Rarely does an acquisition happen where the seller and buyer agree right away on a price. It doesn’t hurt to offer a lower price than you are initially presented as long as your return offer isn’t insulting. If you receive pushback on your counter it might be helpful to explain your reasoning. You should have enough information about the plugin to make good arguments for why you think your offer is valid and reasonable.
If you experience hesitation from the seller, you can ease concerns by making your post-acquisition plans clear. A lot of plugin developers want to be sure their products will be in good hands when they are no longer involved.
Morgan Hvidt, who recently sold his plugin White Label to us, offers this advice:
“As a seller, it’s important for me to trust that the buyer will take care of existing customers. Hearing that the seller has a plan and an understanding of existing users helps instil trust in the early stages of accepting an acquisition offer.”
Negotiating is something that most people find difficult. You get better at it with practice and even when a deal falls through you learn valuable techniques to use in your next attempt. It’s important to get the price you want but without insulting or angering anyone. Keep that in mind during the back-and-forth process of agreeing to a final price and you’ll be ok.
Completing the Acquisition
It’s time to figure out how to transfer the plugin after the final price has been agreed upon. There are plenty of ways to go about this and mainly depends on how the purchase was handled. We’ll go over how to move the assets of the plugin from one owner to another first and then discuss the transfer of funds. Finally, we’ll wrap up by going over your first steps as the new owner of the plugin.
Transfer Accounts and Assets
In a perfect world, the current owner has individual accounts created for everything related to the plugin. As we discussed above, this isn’t always the case. Make sure you have an itemized list of every account you’ll need to maintain the plugin after the purchase. At the very least, you’ll want to get access to the following:
- Payment Accounts (Stripe, PayPal, etc.)
- Domain Name
- WordPress.org Account
- Email Accounts
- Social Media Accounts (Twitter, Facebook, etc.)
- SaaS Accounts (MailChimp, ConverKit, etc.)
- Source Control Account
There might be other accounts to consider depending on the plugin. If the plugin relies on a third-party API, for example, you’re going to want access to the developer account.
The assets of the plugin can include:
- Source Code
- Files and Database for the Marketing Website
- Lists of Customers and Active Subscriptions
- Marketing Assets (Graphics, Content Marketing Material, etc.)
Transfer the Funds
There are several ways to handle the transfer of funds for an acquisition like this. For small amounts, with a party you trust, you can simply send the money directly from buyer to seller. Some people like to do this in chunks. For example, you send the seller 50% of the agreed-upon price before they send you the assets. Then, after review, you send the remaining 50% to complete the transactions.
For larger, independent deals an escrow service is often preferred. Escrow.com is the most commonly used service. We have had less than stellar experiences with Escrow.com, with some parts of the process taking days, and their support team offering slow or incorrect feedback. There aren’t many competitors though so you might just have to go this route and settle for any small interruptions along the way.
Finally, some marketplaces have their own built-in payment transferring services. This can be similar to what you get with a place like Escrow.com or similar websites. Generally, these are pretty safe and reliable so if you’re seller prefers to handle the transfer via the marketplace, or the marketplace requires it, you should be ok.
What to Do After the Acquisition
When the deal has been completed the real work begins. We suggest addressing tiny wins and fixes first. Get familiar with the codebase you have inherited by fixing outstanding bugs or adding tiny features. Give the marketing website a good lookover and put effort into making improvements. Reconsider your new plugin’s pricing structure. Contact existing customers about the ownership change. Update the plugin’s listing at WordPress.org to reflect the new changes. Don’t forget to make adjustments to the listing’s copy to improve search result placement.
Do You Have More Questions About WordPress Plugin Acquisitions?
There is a lot to consider when acquiring a WordPress plugin. Hopefully, we covered most of them in this post. If you still have questions, please don’t hesitate to reach out. Link Software has been developing and selling WordPress plugins for several years now and we’d be happy to help.
We are also always looking to acquire more plugins. If you have a WordPress plugin you would be interested in selling we would love to take a look.
For questions or sale inquiries, please contact us via the form below: