[HN Gopher] My sixth year as a bootstrapped founder
___________________________________________________________________
My sixth year as a bootstrapped founder
Author : mtlynch
Score : 629 points
Date : 2024-02-16 15:07 UTC (7 hours ago)
(HTM) web link (mtlynch.io)
(TXT) w3m dump (mtlynch.io)
| mtlynch wrote:
| Author here. As always, I'm happy to take any feedback or answer
| any questions about this post.
| kpw94 wrote:
| No question, always nice to read your yearly updates.
|
| Last year looked really promising , your revenue already high
| but profits not there yet, but I'm happy to see you turned a
| nice profit this year! Congratulations!
| havefunbesafe wrote:
| Why the sharp drop in adspend?
| mtlynch wrote:
| Good question! I actually hadn't noticed it changed that
| much, but you're right.
|
| The biggest difference was that in 2022, I hired a paid ads
| consultant to set up ads automation for me on a few different
| platforms. That had a high up-front cost, but then it was
| inexpensive to maintain those ads in 2023.
|
| I also spent money experimenting on more channels in 2022, so
| in 2023, I cut out spending on the ones that weren't earning
| a positive ROI.
| mardifoufs wrote:
| Could you share platforms/channels were more
| profitable/worth it and which of them weren't? I love your
| blogs btw!
| kansi wrote:
| If possible, could you please the website for this ads
| consultant?
| W-Stool wrote:
| Thanks for writing a great summary of year #6 for your
| business. Question: where do your advertising dollars go and
| how do you measure their success?
|
| Good luck in year #7!
| mtlynch wrote:
| Thanks for reading!
|
| > _where do your advertising dollars go and how do you
| measure their success?_
|
| Sorry, but advertising spend is one of the few things I avoid
| sharing publicly. Most other things about my strategy, I
| think our execution is what makes the difference, so I don't
| care if competitors know. With advertising, it was expensive
| to figure out a successful strategy, and it's the kind of
| thing that a competitor can copy perfectly.
|
| I can talk about measuring their success, though. The metric
| I focus on primarily is revenue on ad spend. Material costs
| make up about 33% of the revenue from TinyPilot's product
| sales, so if we get $1.50 for every $1 we spend on ads, we'd
| end up about breakeven ($1.50 from revenue - $1 for the ad -
| $0.50 for materials), so I aim to be at 2.25 ROAS or higher
| on any channel so we have a comfortable margin.
| thomastay wrote:
| Hi mtlynch, I just wanna say that your post brought back a lot
| of memories for me. I distinctly remember reading your original
| post back in 2018. I remember feeling that I really hoped you
| would succeed since your complaints were so authentic. When I
| was reading this post, I was like - wait, i think i remember
| this post - and it's you! Happy to hear that you've made it
| with tinypilot
| mtlynch wrote:
| Thanks for reading, and that's really nice to hear. That
| quitting Google post ended up being more popular than I ever
| expected, so from time to time, people tell me, "Oh, you're
| that quitting Google guy. Glad it worked out!"
| lesuorac wrote:
| Have you thought about expanding into the void left by
| SlingBox?
|
| https://en.wikipedia.org/wiki/Slingbox
| skrebbel wrote:
| Wow that's a seriously cool product!
| marklubi wrote:
| So good to see some actual Startup News on here. I miss the old
| days of this site when things were more optimistic and less
| click-bait.
| BadHumans wrote:
| The world is actively getting worse so it makes sense the news
| is actively getting pessimistic.
| abfan1127 wrote:
| in what sense is it getting worse? While there may be local
| minima, I'd argue that its the best its ever been. News has
| always been pessimistic because negative emotions are easier
| to trigger to drive attention which pays the bills.
| spencerflem wrote:
| Whether the world as a whole is getting worse is debatable,
| but I think it's very clear that tech companies are
| WrongAssumption wrote:
| Is it clear? Microsoft of old? IBM of old? AT&T of old?
| Juggernauts with abusive monopoly power that tech
| companies today could only dream of.
| zilti wrote:
| Apple, Google, Amazon are every bit as bad, and Microsoft
| is still up there, too.
| WrongAssumption wrote:
| Assuming that's true, is that counter to my statement?
| Mine was in response to someone saying it's clear tech
| companies are getting worse, and your response to mine is
| they are just as bad? So also in your mind not clear they
| are getting worse, correct?
| uoaei wrote:
| I'm getting visions of that New Yorker cartoon about
| shareholder value but it's just a techie in Allbirds
| saying "is it really worse, tho?"
| jrockway wrote:
| Yeah, I mean, these companies are at the end of their
| "startup" lifecycle and are now just ordinary big
| companies that exist to chill and produce dividends. When
| you hear "Amazon", think "IBM". When you hear "Apple",
| think "Coca Cola". When you hear "Google", think "Goldman
| Sachs". All of those companies make an enormous amount of
| money but haven't done anything interesting in 50 years.
|
| There will be new startups that eclipse all of these
| companies in interestingness. The one for the next 20
| years is probably OpenAI.
| DanHulton wrote:
| A lot of things are getting superficially better (personal
| computing tech has never been more incredible), but there's
| a lot scary shit that is encroaching on the daily without
| sufficient plans in place to really deal with. Off the top
| of my head:
|
| - Global warming and how we don't seem to have any plans to
| a path to hit any of the less-than-apocalyptic warming
| targets, - Corporate regulatory capture, with more and more
| wealth going to a smaller and smaller segment of the
| population while the impoverished fraction grows on the
| daily, - The rise of right-wing and/or outright fascist
| authoritarianism across the world, even in countries that
| would have fought strenuously against it a scant hundred
| years ago, - This one is a combination of all three of the
| others (and a lot more), I suppose, but capitalism eating
| itself and taking a lot of really helpless-feeling people
| with it.
|
| A lot of things do keep improving, but a) a lot of people
| never get to see or benefit from those improvements, maybe
| more than you think, and b) there are these terrible
| monsters on the horizon and nobody with the power to do
| anything about it seems to be willing to actually do so. It
| shouldn't take a whole lot of empathy to project yourself
| into the shoes of someone for whom shit is the worst it's
| ever been, nor a lot of creative thinking to realize that
| there's a whole lot of those people out there.
| mym1990 wrote:
| Would you agree that whatever you are currently working
| on, either at Nodewood or evisort, is contributing to
| this superficial betterment of the world? Not to be dense
| but you are talking about empathy for people who are at
| the bottom of the human totem pole while posting on a
| tech forum while working on products that most likely
| don't contribute anything to _actually_ making the world
| a better place. If you _really_ cared, you would give up
| almost everything to give up what you have to go help
| those in need...but I guess a post on HN will do as well.
| spencerflem wrote:
| Isn't that sad though? An entire industry that in your
| own words doesn't "contribute anything to actually making
| the world a better place"
|
| I think people realize this more than they used to which
| explains so much of the tech pessimism
| mym1990 wrote:
| It is sad, I work in it as well, I ask myself "wtf am I
| doing" every single day. But the security of having and
| providing a warm/safe home for my family, being able to
| have fun experiences, etc...is too much to give up. I can
| definitely say I am selfish.
| DanHulton wrote:
| Friend, you're not going to get anywhere in life by being
| a disciple of Whataboutism, I promise you that.
| mym1990 wrote:
| You are not my friend, so let's not pretend. My response
| had nothing about whataboutism, and I am skeptical that
| you even know what that means based on your reply. I am
| directly saying that you are speaking from a high moral
| chair, while likely not actually doing anything to help
| the world. Its okay, I do the same thing, the difference
| between you and me is that I am not pretending to be
| Gandhi.
|
| Oh here is a definition of whataboutism: "the technique
| or practice of responding to an accusation or difficult
| question by making a counteraccusation or raising a
| different issue".
|
| I am assuming you won't be able to figure it out though.
| spencerflem wrote:
| I think you two agree more than it seems.
|
| You are allowed to be sad about the world without helping
| it get better, which the parent never implied they were.
| They're just agreeing with you that things are bad,
| assuming they work in tech they're probably just as
| conflicted about it as you or I am, so the attack felt
| kinda out of left field and unrelated to the original
| debate, which is whether things are getting worse in
| general.
| mym1990 wrote:
| The OP is categorically wrong about some of their
| assessments:
|
| "with more and more wealth going to a smaller and smaller
| segment of the population while the impoverished fraction
| grows on the daily"
|
| Poverty around the world is being reduced on a massive
| scale. There are undeniable issues with wealth gaps, but
| the world population is still benefiting greatly from the
| imbalanced amount of downstream wealth coming to it.
|
| "The rise of right-wing and/or outright fascist
| authoritarianism across the world, even in countries that
| would have fought strenuously against it a scant hundred
| years ago"
|
| The world has been dominated by these ideas for the
| majority of its existence. Several of the world powers
| still operate within these ideas, not to mention many of
| the third world countries, the power just moves from
| regime to regime. Acting like authoritarianism is "new"
| because the OP just got an inkling of it in their own
| country is pretty dense.
|
| TLDR op just plucked a few news headlines that get re-
| iterated and made that their world view.
| boplicity wrote:
| We've already passed the 1.5 Degree Celsius limit on global
| warming. That alone has catastrophic consequences.
|
| Yet, the production of fossil fuels remains near record
| levels, and producers are aiming to scale up, as opposed to
| scale down. Political discourse on this topic often amounts
| to "but my expenses are already too high."
|
| For many people, this is still an abstract and slow moving
| problem. Yet, it is a very real problem with dire
| consequences. (That are somehow easy to ignore!)
|
| Is the world getting worse?
|
| In some ways, it's getting better.
|
| Yet, we seem doomed to cause so much destruction. It's
| gonna be bad. Very bad. But not right away (for many of
| us).
|
| https://www.sei.org/publications/production-gap-
| report-2023/
|
| https://www.washingtonpost.com/climate-
| environment/2024/02/0...
| educaysean wrote:
| While I agree that global warming is a serious issue
| without a clear future, it seems a little far fetched to
| attribute that as a factor in the deterioration of
| hackernews community's cultural standards.
| gridspy wrote:
| We've been over-polluting with CO2 for over a 100
| years[1]. I prefer to focus on how now we're slowly
| gaining the will and the way to address that.
|
| - Solar and wind power
|
| - New Nuclear options
|
| - Grid Storage
|
| - Electric vehicles
|
| It would be nice if we'd done a hard left turn on the
| economy and somehow never got here but that was probably
| never realistic.
|
| [1] https://xkcd.com/2889/
| keiferski wrote:
| I think it's more that the startup ecosystem has matured
| considerably since ~2007. Starting a company back then was
| still kind of a counter cultural thing, now it's a common
| career path.
| auselen wrote:
| Just enjoy your time here, plant a tree if that would make
| you happier. Don't dig your self into an hole and loose sight
| of brighter things. / a parent
| matt_s wrote:
| Yeah the site has morphed over time to more tech news/articles
| that Hackers comment on (with some level of what feels like
| promotion) than strictly news about Hackers/startups.
| hasoleju wrote:
| Before I visited HN today I read the whole blog post. I was
| notified by an email from mtlynch in my inbox. I draw a lot of
| inspiration from the consistency he has in writing the monthly
| and yearly retrospectives. Keep up the great work!
| yakito wrote:
| Very interesting, Michael, thanks for sharing! As a founder and
| bootstrapper myself, I really relate to parts of your post (well,
| not so much to that 2000% jump in profit... haha, maybe one day).
|
| I'd like to understand the steps leading up to these six years.
| What motivated you to create that particular product? was it
| simply something that interested you and that you believed had
| potential? What was the goal when you created TinyPilot? Thanks!
| mtlynch wrote:
| Thanks for reading!
|
| > _I 'd like to understand the steps leading up to these six
| years. What motivated you to create that particular product?
| was it simply something that interested you and that you
| believed had potential? What was the goal when you created
| TinyPilot? Thanks!_
|
| It was a "scratch my own itch" kind of path. I had a home VM
| server[0], and any time I messed up its network settings or
| wanted to install a new OS, it was a huge pain to drag it over
| to my desk, disconnect my main desktop from my monitor and
| keyboard, swap everything over to the server, and then put
| everything back how it was.
|
| I saw an article about how Raspberry Pi could emulate a
| keyboard, and I tried that out and got it working.[1] And then
| I felt like there had to be a way to capture video and stream
| it too, and I finally found a way to do that.
|
| I came in at a lucky time because people had been experimenting
| with Raspberry Pi as a KVM over IP for years, but there weren't
| great video capture options. But right as I started looking,
| these cheap HDMI to USB dongles appeared on the market,[2]
| which made it cheap and easy to build a v1.
|
| In the beginning, I thought it was too niche to be a real
| business, but it got a positive response when I launched on
| HN,[3] and more and more people kept buying, so I stuck with
| it.
|
| [0] https://mtlynch.io/building-a-vm-homelab/
|
| [1] https://mtlynch.io/key-mime-pi/
|
| [2] https://mtlynch.io/tinypilot/#hdmi-to-usb-dongle
|
| [3] https://news.ycombinator.com/item?id=23927380
| yakito wrote:
| Thanks a lot! Also, nothing new, but I am new to your blog
| and I love how you document everything! You need to write
| about writing one day ;)
| mtlynch wrote:
| Yes, I'd very much like to! So far, I just have the landing
| page:
|
| https://refactoringenglish.com/
| probotect0r wrote:
| I really enjoy these updates! Thanks for putting out the numbers.
| annoyed_eng wrote:
| I've really enjoyed following your story for years. Thanks so
| much for your transparency. I wish you lots of continued success.
| belter wrote:
| I have two of these and can say it's a great product with great
| support by the creator.
| mtlynch wrote:
| Thanks so much! I'm really glad to hear that.
|
| I take the support really seriously because I get so frustrated
| with most companies' customer service and technical support.
| When customers contact TinyPilot, I always want them to feel
| like they're talking to a real person who's knowledgeable and
| making real effort to help them. It's nice to hear that this
| comes through in the experience.
| thdaraujo wrote:
| That's very cool, Michael. Really great to see your business
| doing well, congrats!
|
| Really interesting to see that adding a metal box and making the
| product more premium made a huge impact on revenue. Have you run
| any pricing experiments after that?
| mtlynch wrote:
| Thanks for reading!
|
| > _Have you run any pricing experiments after that?_
|
| No, I haven't tinkered with the price much for the past few
| months.
|
| I have a hard time doing price experiments because at my
| volumes, I have to collect a few weeks of data before I think
| the evidence is strong, and I don't have a good way to A/B test
| different prices in parallel, so it's easy for two different
| time periods to have different results independent of price.
|
| I've also found that there's a lot of friction around changing
| prices too frequently. When I reduce prices by a significant
| amount, we get emails for a couple of weeks after from people
| who are annoyed they paid a higher price just before a
| reduction, so I've been reticent to invite those complaints.
|
| I don't have strong evidence for it, but $399 for base and $499
| for premium "feels" right because they're round numbers and
| they're close to optimal based on different prices we've tried.
| dheera wrote:
| > we get emails for a couple of weeks after from people who
| are annoyed they paid a higher price just before a reduction
|
| What if you just explicitly guarantee a price match for say
| 30 days? People would feel safe and you can do your
| experiments.
| mtlynch wrote:
| Yeah, I think there are ways we can do it. It's just that
| with every hoop to jump through and layer of friction, it
| makes it a little less appealing than other paths to
| increase revenue, so I end up not doing it.
|
| I think it's very possible that my prices are suboptimal,
| so I will think more about how I can do some price
| experiments while minimizing the downsides.
| m3kw9 wrote:
| Looks useful
| seidleroni wrote:
| That's a really cool product! The only thing I would love is a
| way to zoom into the product pictures on the site.
| theusus wrote:
| How did you manage stress/depression during the time?
|
| I am thinking of going down the same path. Which tools do you use
| for sales and marketing?
| mtlynch wrote:
| Thanks for reading!
|
| > _How did you manage stress /depression during the time?_
|
| I don't think I ever reached the point of depression, but I
| definitely had bouts of severe stress and anxiety about the
| business.
|
| Some things that helped me were:
|
| - Having a supportive partner
|
| - Forming a meetup group and talking to other founders who have
| had similar struggles
|
| - Committing to a work schedule where I'm working or not
| working and avoiding looking at work things during non-work
| hours
|
| - Separating my work email to a whole separate account and
| disabling push notifications so that work doesn't intrude into
| my non-work hours
|
| - Using a GTD-style to-do list so I'm not carrying around a
| mental task list
|
| - Starting my day by sketching out my schedule in 30-minute
| blocks so I have a good idea of what's achievable that day
|
| - Scheduling time to exercise 3-5 times/week
|
| - Reading Dale Carnegie's "How to Stop Worrying and Start
| Living." Carnegie books are all kind of hokey-sounding, but I
| find some of his lessons really effective.
| willsmith72 wrote:
| wow such a great, honest and open article.
|
| i wonder if with sales increasing in spite of the 10% price
| increase, he could increase it even more. personally i would
| rather have less fulfilment and a higher profit margin if
| possible
| huhtenberg wrote:
| Fantastic product site. Clear, concise and good looking. Kudos.
|
| * /r/tinypilot link in the footer leads to a locked sub, so it's
| kinda pointless.
| mtlynch wrote:
| Thanks for reading!
|
| > _/ r/tinypilot link in the footer leads to a locked sub, so
| it's kinda pointless._
|
| Oh, thanks for catching that! I've been unhappy with reddit's
| direction ever since the 3rd-party APIs meltdown, and the
| subreddit was scattering our support resources, so I shut it
| down.
|
| We have a dead link check as part of the build, but I guess it
| wasn't picking up an HTTP error from the locked sub.
|
| I've just removed it!
| beoberha wrote:
| Man this is really cool. The transparency is awesome. Shipping a
| hardware product as a bootstrapped founder sounds (at least) an
| order of magnitude harder than a software product.
|
| Edit: oh and congrats on the success this year! I'd have to
| imagine it feels insanely rewarding!
| mtlynch wrote:
| Thanks for reading and for the kind words!
|
| > _Shipping a hardware product as a bootstrapped founder sounds
| (at least) an order of magnitude harder than a software
| product._
|
| Yeah, it ended up being way harder than I expected.
|
| I actually didn't even mean to make a hardware product. In the
| beginning, I thought people would just buy off-the-shelf
| components and pay me to make nice software to tie everything
| together.
|
| It became pretty obvious early on that people were a lot more
| interested in a pre-made hardware solution than a DIY project
| with ready-made software. And I'm glad I made it to the point
| of profitability and worked hard at it, but I also definitely
| got lucky a lot. There are so many more existential threats to
| a hardware business, especially in the early days.
| moneywoes wrote:
| Love this blog.
|
| Any other similar blogs or communities?
| mtlynch wrote:
| Cory Zue writes about similar topics, and I draw a lot of
| inspiration from him:
|
| https://www.coryzue.com/
|
| Suket Karnawat also left Google to pursue a similar path, and
| he writes regular updates about his progress:
|
| https://suketk.com/
| waprin wrote:
| I have a similar blog / newsletter on trying to bootstrap a
| software business called "Road to 10k MRR" :
|
| writing.billprin.com
|
| I'm definitely a huge fan of mtlynch and was very inspired by
| his transparency especially around year 2 when he was pretty
| far in without much working.
|
| I'd also recommend Jon Yongfook who bootstrapped an image
| generation api for social media marketing to 50k as well. Tony
| Dinh is also a must read. I actually have a notion database
| with a bunch of other bootstrapped bloggers but on the go at
| the moment.
|
| For communities, Indie Hackers is the best known one, though
| there's many others, Microconf, smallbets , etc
| clukic wrote:
| Your home page/blog is by far the cleanest, fastest, and most
| functional I've seen. Can I ask what you use to publish it? I
| can't find any reference to a platform in the HTMl source (which
| is amazingly clean BTW).
| mtlynch wrote:
| Thanks for reading!
|
| Edit: Sorry, I just realized you meant my blog, not the
| TinyPilot website. My blog is just Hugo + Netlify, and the
| source is public.[2]
|
| --
|
| The web tech stack is actually one of my biggest regrets. It's
| a static site generator called Gridsome[0] that the maintainers
| abandoned about three months after I used it to launch the
| TinyPilot website.
|
| At the time I made the TinyPilot site, I was very excited about
| Vue, so a Vue-based SSG seemed great. Since then, I've come to
| find SPAs and most frontend frameworks to be way too much
| complexity, so I've moved away from Vue, but the TinyPilot
| website is still stuck on Vue 2.x and bootstrap-vue (which is
| tied to Vue 2 and Bootstrap 4).
|
| So, it keeps creaking along, but building the 100ish pages on
| the site takes about five minutes, whereas I think something
| like Hugo could probably do it in a few seconds. Plus, we get
| random runtime errors[1] that are pretty hard to debug.
|
| [0] https://gridsome.org/
|
| [1] https://github.com/nuxt/nuxt/issues/5800
|
| [2] https://github.com/mtlynch/mtlynch.io
| lbhdc wrote:
| This was such a great post. I read last years as well, and it was
| super interesting to see how things evolved.
|
| I am curious about your ad spend. I noticed that it dropped 24%.
| Can you talk about your strategy for marketing your business?
| mtlynch wrote:
| Thanks for reading!
|
| > _I am curious about your ad spend. I noticed that it dropped
| 24%._
|
| I added a few more details about that in a different reply:
| https://news.ycombinator.com/item?id=39398746
|
| > _Can you talk about your strategy for marketing your
| business?_
|
| For the first two years, I was primarily reaching out to
| bloggers and YouTube creators that I liked. TinyPilot appeals
| to people in the homelab / IT prosumer community, and I've been
| involved in that space for a few years, so it always felt like
| a pretty organic way to get the word out.
|
| There have been diminishing returns to that strategy, though.
| When we got our first big review, our sales nearly tripled
| overnight.[0] At the time, we were the first affordable KVM
| over IP on the market, so YouTube creators were very excited
| about to be able to break a story about it, and their viewers
| were excited to buy our product.
|
| Since then, we continue to work with reviewers, but even high-
| quality reviews don't get that many reviews because we've been
| around for a few years and there are similar products like
| ours.
|
| We've been experimenting with new channels, but nothing has
| been a huge hit. One of the things I'm trying to do is talk to
| bloggers and YouTube creators about doing projects with
| TinyPilot rather than just reviewing it. We had one a few years
| back,[1] and I think there's potential for new interesting use-
| cases for TinyPilot through experiments, but I haven't found
| anyone with a good idea yet.
|
| It seems like our most successful channel has been word of
| mouth. I think it's a result of putting a lot of effort into
| customer service, so our customers feel good about working with
| us and tell other people about the product.
|
| [0] https://mtlynch.io/retrospectives/2021/02/#tinypilots-
| first-...
|
| [1] https://tinypilotkvm.com/blog/dslr
| digikata wrote:
| A feature that would have been useful from my IoT / embedded
| device development days would be the ability to fully turn
| power on/off of with usb port from software. It's nice
| feature for automated test and dev of embedded devices. Sort
| of adjacent to your kvm focus, but I suspect your h/w might
| not too far off from being able to support that use.
|
| A full A/C plug pwr control is useful too, but a much bigger
| hardware delta.
| slovette wrote:
| I run an IT firm. Pretty sure you've solved a huge problem with
| remote hardware diagnostics for us. Ordered one for test.
|
| Thanks for making this.
| nadermx wrote:
| "I realized that the dominant factor was the size of our
| codebase. We have three times the code that we did three years
| ago. And every line of code requires time to maintain. So, if I
| keep the number of developers fixed but increase the size of the
| codebase, then a higher proportion of our time must go to
| maintaining old code."
|
| That part is so true. Even trying to make everything systematic
| has a cost.
| jurgenkesker wrote:
| Very nice blog and just overal awesome to read.
| afry1 wrote:
| Congrats Michael! I've been following along with your story on
| and off since 2019-ish, very cool to read about how things are
| getting along.
| gnicholas wrote:
| Does the payroll figure include a salary for yourself? If so,
| that would make the jump in profitability even more impressive!
| hapidjus wrote:
| From the article: I don't draw a salary, so the total amount I
| earned from TinyPilot in 2023 was $236k.
| dannyw wrote:
| Try offering an affiliate program if you haven't already. It can
| increase your sales drastically and you only pay for the results.
| mtlynch wrote:
| I did try that for a while and still have a couple of
| affiliates, but it wasn't that successful. It could be that I
| just didn't invest in it enough for it to work.
|
| One of the biggest obstacles was that I hated all of the
| affiliate apps on Shopify. They all require all your customer
| data (email, names, shipping addresses), and most of them have
| privacy policies that grant themselves very broad permissions
| with user data.
|
| I refused to give up our customer data like that, and so we
| rolled our own by hand, but it's very manual, so the only way
| for affiliates to find out their earnings is when I manually
| run a script and pay them once a month.
| ein0p wrote:
| FYI: You can't "not draw a salary" and get that profit out of the
| company. IRS mandates that you pay yourself a reasonable amount,
| and pay (eye watering amounts of) taxes on that amount. You can't
| circumvent any of that by just taking everything as
| distributions.
| mtlynch wrote:
| Are you sure you're not thinking about corporations?
|
| TinyPilot is a single-member LLC, so all the income is on my
| personal tax returns.
|
| When I said I don't draw a salary, it was to prevent confusion
| about whether payroll includes me.
| tgtweak wrote:
| I don't think there were any insinuations that that was after-
| tax income in his personal bank account - just that the company
| earned that much in the previous year and it could be paid out
| (dividends or otherwise) after much in the way a gross salary
| would be.
| ein0p wrote:
| For single person LLC (as the OP said) it doesn't make any
| difference - they're paying all taxes on the entire amount
| and then just deducting business expenses. IOW their business
| account does not require any special treatment. For corps
| (including S corp) there's often this temptation for the
| founders to pay themselves the bare minimum and skirt some of
| the taxes (social security for example). I was pointing out
| that this is a good way to draw unwanted attention.
| tgtweak wrote:
| I think people (and the founder) are focusing on yearly profits
| as their remuneration and comparing it to a salary... but the
| reality is you're creating a company that should be valued (and
| eventually sell) for 7-15X Earnings - and you really should be
| looking at that increase in value vs your increase in profits. In
| reality your net worth went up by over $1.5 million in the last
| year, in addition to earning 236k - that is the actual value you
| created for yourself in the last year and not the 236k you
| cashflowed.
|
| I find it redeeming that despite having a gift for development -
| software and hardware - the biggest factors affecting
| profitability and growth here are things that most MBAs would do
| in a business quite regularly (outsourcing
| design/packaging/fulfillment, streamlining costs, doing price
| elasticity experiments, polling customers and markets for product
| improvement).
|
| I enjoyed seeing the inverted perspective that
| product/engineering is straightforward and low risk but things
| like optimizing fulfillment and operating costs is a new exciting
| endeavor.
|
| One tip I suggest doing is leveraging google ads to figure out
| features that customers are willing to pay for before you build
| them... if they're clicking the ad they are searching for it and
| interested in buying it. Start a few very low cap campaigns
| calling out features you are thinking of building into the
| product, and see which one get's the most impressions and clicks
| per marketing dollar and focus on that. The added advantage is
| you know it will be easier to buy advertising for it once the
| feature is done.
| dustingetz wrote:
| 10x rev valuation is for high margin saas growing at 3x y/y in
| a massive TAM where incremental capital injection results in
| predictable rev growth
| tgtweak wrote:
| 10x ebit is not 10x rev - I think hardware startups that can
| demonstrate economies of scale and straight line growth on
| advertising + additional product segments and markets are
| catching very healthy valuations still - not saas levels but
| large saas companies are pushing way more than 15x ebit.
| Aerbil313 wrote:
| > ...but the reality is you're creating a company that should
| be valued (and eventually sell) for 7-15X Earnings - and you
| really should be looking at that increase in value vs your
| increase in profits.
|
| Muslim here. I think this is completely immoral and I don't
| want to ever participate in stock market if/when I found a
| company. I want my business to be valued with the actual value
| it provides to people (the amount they are willing to pay me
| for my products), not the hypothetical future money it may
| potentially provide to rich people who gamble with their money
| and the economy.
| OJFord wrote:
| What's the difference when the 'product' is the company
| itself? When a buyer comes along offering 7-15x the company's
| earnings for it, why is that not 'the actual value it
| provides' them?
| Aerbil313 wrote:
| Company acquisition is possible without the existence of a
| stock market. What I'm objecting to is the latter.
| kuresov wrote:
| IPO/stock market was not mentioned anywhere in the post.
| It's much more typical to be acquired than to go public.
| Aerbil313 wrote:
| Sorry, you're right. Confused the two for a second.
| avarun wrote:
| You're the only one that mentioned the stock market at
| all, so I would question if you know the difference
| you're alluding to here.
| tgtweak wrote:
| The reality, and this is how a private party, PE firm,
| traditional bank or public market will determine this:
|
| The company is generating profits currently at this rate Y,
| and is growing at this rate X, that means that over 3 years
| it should return those profits + the growth of that profit
| back to the buyer (in cash as dividends and/or in enterprise
| value), and that is factored into a rate of return - if that
| rate is greater than the rates elsewhere, compared to the
| risk, then it makes sense to buy it at that value.
|
| Consider comparing the business to a traditional investment.
| How much money would you need to have invested in medium-risk
| markets to return $236k/yr? To beat the market average you'd
| need about $2M invested to generate those returns. Now factor
| in that the company itself is growing, and the company will
| likely generate >$236k next year, and more the following
| year... so how much do you need to invest today in
| traditional markets to generate 236k+360k+500k (1.09M) over
| the next 3 years? It's around $3M now. Consider that in 3
| years time you could have taken $1.09M out in profit, and you
| now own a business that is worth $4-4.5M (based on future
| earnings potential).
|
| You don't need to be an evil wallstreet hedge fund manager to
| think like this - the owner of a business should consider the
| enterprise value of their business at all times in making
| decisions about their business.
|
| This is how the entire economy works - if you're saying that
| is against your moral Muslim faith then you should not be
| buying any goods right now from public companies, hold any
| mortgages, or keep any money in a bank.
| robocat wrote:
| > immoral and I don't want to ever participate in stock
| market
|
| I feel that is a common opinion amongst people that haven't
| started a business. It is too easy to judge others.
|
| If you are selling a product/service you can't avoid becoming
| part of the capitalist system and you are supporting
| "immoral" companies through your suppliers (e.g. paying
| Google for advertising, paying Amazon for fulfilment).
|
| It is difficult to start a business and keep true to your
| ideals. And people that do walk the line between creating a
| business and keeping their morals is uncommon enough that
| they tend to be remembered for it e.g. Bob's Red Mill:
| https://news.ycombinator.com/item?id=39366542
|
| It is much easier to be tritely moralistic if you don't start
| a business. I often really admire people with idealistic
| values - and morality is critical in business. I don't admire
| people if they go to negative extremes:
| https://en.m.wikipedia.org/wiki/Splitting_(psychology)
|
| Almost by definition starting a business means taking on
| risks. Mixing risks and money is "gambling" and it is an
| inherent property of businesses. Deciding what is good
| gambling and what is bad gambling is a very old problem.
| Buying insurance is reducing risk (less gambling) but
| insurance is gambling by definition. Unfortunately you have
| chosen the moralistic word "gambling" to talk about the
| normal issue of managing risk.
|
| Perhaps you just don't like the rich? One can have shares and
| own a business without being/becoming rich - you don't need
| to directly involve wealthy people.
|
| One can bootstrap a company without taking rich-peoples
| investments - see article. Unfortunately we get hoodwinked by
| the success stories from the VC investment sector. We hear
| less about the losers in the VC game or other ways to play
| the game of business.
|
| Edit: a business is just a complicated machine. If you
| believe selling a product is moral, then you must believe
| that selling a business is also moral.
| Yabood wrote:
| As a Muslim, I disagree. A business is more than the sum of
| its revenues. Marketing, research and development,
| relationship with clients, etc. are all part of the business
| valuation. If a buyer looks at some business and decides its
| worth 10x, then that's not haram as long as you're not
| deceiving them.
| OJFord wrote:
| Advertise features you don't have and disappoint/infuriate
| those would-be users? Or are you suggesting a slightly less
| annoying 'coming soon' type landing page, where if it doesn't
| get enough traffic 'soon' just never comes?
| boarnoah wrote:
| Wonder about this myself, have noticed with folks like Rob
| Walling and presumably others. They all seem to suggest
| testing market fit by essentially doing this for features,
| and in some cases soft launching websites prior to having
| anything ready at all!
|
| Seems risky if you are dipping your toes into something you
| do not have a deep understanding of the product market for.
|
| Anecdotally I've seen with video games (the communities tends
| to be very vocal and somewhat centralized?), where
| inexperienced developers promise things that are
| realistically way beyond the capabilities, or promise things
| too early based on their honeymoon period for rough
| implementations. Then suffer on the other end when they fail
| to meet roadmaps or delivery of features at all.
|
| It seems like an even worse situation with serious software
| with asks for larger amounts of money? Then again maybe this
| strategy can get away with it, because there is that lack of
| cohesive communities with some degree of group think who
| would get up in arms over bad promises?
| hurflmurfl wrote:
| The reason it won't really work for gamedev or complex
| software is that the risk of the business isn't really in
| the product-market fit, but rather in stellar execution.
|
| If your business idea is dependent on being able to do a
| complicated thing, then a POC or a demo might make more
| sense for testing the waters and seeing if there's any
| technical impediment to the idea
| tgtweak wrote:
| on $10/day max spend you'll get 1-2 people that will visit
| the page, and you can put a "coming soon, leave an email and
| we'll let you know" then you can email them when it is
| deployed as well to recoup the adspend. If they're looking
| for a feature you don't have they're not really your customer
| today anyway. If they're looking for a feature that doesn't
| exist anywhere then they have no choice but to wait for it to
| be built.
| vundercind wrote:
| Yeah, it's simply lying.
|
| "Hussle" ethics of "if it works it's OK" are so damn gross.
| koonsolo wrote:
| Sure, but the valuation doesn't buy you any food. In the end
| you need cashflow.
| chenxi9649 wrote:
| depends on what "in the end" means haha
| coldtea wrote:
| it means when the bills come in and are due
| bad_good_guy wrote:
| Why should a company be assumed to be eventually sold? What the
| heck is that kind of perspective. The vast majority of
| small/medium companies are not sold - instead they provide
| regular income to their owners.
|
| This sounds to me like typical toxic silicon valley startup
| mindset.
| robertlagrant wrote:
| > This sounds to me like typical toxic silicon valley startup
| mindset.
|
| I think this is naive cynicism, as it were. Lots of companies
| are started by people who eventually want to sell them, be it
| after 5 years or 50. Being biased against Silicon Valley
| won't give you a good handle on this stuff.
| chinchilla2020 wrote:
| Not true at all. The local corner store, laundromat, and
| plumbing company are usually not something that can be sold
| easily. If they do, it takes years to find a buyer and they
| are getting a low sale price.
|
| Tech startups had high multipliers in the past 10 years
| thanks to dumb money, low interest rates, and lot of hope.
| Most of those things are drying up and many tech startups
| that had decent valuations are now worthless.
| creer wrote:
| > If they do, it takes years to find a buyer and they are
| getting a low sale price.
|
| Is this true of standard businesses like laundromat or
| plumbing?
|
| Or is it a matter of such businesses rarely being in a
| condition that makes a sale easy? If these are in a good
| condition accounting-wise for example, they should
| integrate readily and for a basic multiple of sales into
| one of the neighbors?
|
| What I have seen is unrealistic prices - and that's
| another matter.
| BiteCode_dev wrote:
| Ferrero, Mars, Ikea, Ikea and Valve prove that you can get
| very big and stay private.
|
| Not everyone wants to IPO, or sell to big player.
|
| You may want it to stay in the family, or protect the
| original culture. Maybe you found someone in your team that
| will be a great CEO.
|
| Maybe you like that life.
|
| You don't even need to big huge, look at 37 signal.
| robertlagrant wrote:
| Yes, of course there are different options. I'm not
| saying there's only one option. I'm saying there are more
| possibilities, not fewer. I.e. selling isn't some weird,
| Silicon Valley mindset.
| creer wrote:
| Further to this, even if you don't intend to sell the
| company, it's only really worth something besides the
| salary or dividends you draw for yourself if it is
| generally in a condition where it could potentially sell.
|
| If it's legally dodgy; if accounting is a total mess; if it
| relies entirely on personal connections or favors; if tax
| returns or licensing are a mess; if there is no
| documentation; if there is no consideration for bus
| encounters; etc; etc - then it would take major work before
| it could be sold and it is worth little until that work is
| done. (Besides the current payouts to the owner which only
| exist as long as the owner works on it.) That's because if
| the owner quits or is incapacitated, the company just about
| doesn't exist anymore.
| PH95VuimJjqBqy wrote:
| then do the calculations in 5 or 50 years.
| robertlagrant wrote:
| I don't understand your mindset that says you should
| decide when other people multiply some numbers.
| PH95VuimJjqBqy wrote:
| I don't understand how anyone misread that so badly while
| genuinely attempting to respond.
|
| I suppose we can both say there are things we don't
| understand.
| r00fus wrote:
| So the entire point of a "valuation" is to determine the sale
| price, right?
| cjbgkagh wrote:
| Sale price is just one possible valuation. Replacement cost
| is another. Net present value is yet another.
| tgtweak wrote:
| You don't need to sell it - you can lend against it or sell
| part of it.
|
| I don't think it's a toxic mindset but a financially literate
| mindset.
| mekoka wrote:
| Your question can be rephrased as _why should a company be
| valuated?_
|
| Do you not see a point in valuating a company?
|
| Because if you do see a point, how else will you do it
| without assessing how much someone else would be willing to
| pay to acquire it, i.e. how much would it sell for?
| PH95VuimJjqBqy wrote:
| In real estate there's this idea that if you plan on dying
| in your home then the value of it is unimportant.
|
| That idea also applies here.
| ghurtado wrote:
| Unless you have a mortgage, or your city reassesses
| property taxes, or...
| HeyLaughingBoy wrote:
| The vast majority of small/medium companies aren't _saleable_
| either. However, building them to be sold, even if you have
| no intention of selling, makes them more valuable.
| gnicholas wrote:
| > _The vast majority of small /medium companies are not sold
| - instead they provide regular income to their owners._
|
| This is true. Most people don't want to buy and run a
| restaurant, bodega, hardware store, etc.
|
| SaaS companies, on the other hand, are much more attractive
| to buy. They can be run remotely, often do not require many
| employees, and can be managed by a team that manages other
| companies simultaneously.
|
| The author's company falls into a middle ground. Hardware
| manufacturing has certain idiosyncrasies that make it less
| turnkey than SaaS. But nonetheless, many of the functions
| (shipping out units) can be carried out by staff who are
| trained but not necessarily highly technical. And it sounds
| like the advertising has been pretty dialed in and automated
| (though would need to be tweaked in future years,
| undoubtedly).
|
| There are some types of businesses that are hard to sell. Law
| firms, for example, can only be owned by lawyers! But
| companies like this one (and SaaS companies run by many
| HNers) are much more attractive for buyers.
|
| But even if it's not ever sold, the notion of valuation is
| still useful because it quantifies the value of the future
| cash flows and the anticipated time-cost of running the
| business.
| ensignavenger wrote:
| Eventually, the owners are gonna want to retire or they will
| die. Maybe, the business can be inherited or passed on to
| family, or an employee. But if your family doesn't want to
| take it over and you don't have any employees who are able to
| run it (if it is profitable enough you could consider hiring
| a manager), you either sell or shut down. Generally, most
| find it preferential to sell. And most who have spent their
| life working on something would prefer to sell and use the
| income to fund their retirement- and see the business
| continue.
|
| There are lots of different exit strategies, but oftentimes a
| sell of some sort is the only one that really makes sense.
| awhitby wrote:
| You're missing something. From the post:
|
| > I don't draw a salary, so the total amount I earned from
| TinyPilot in 2023 was $236k.
|
| and
|
| > Result: I worked 35-40 hours per week, a reduction from
| previous years, and traveled more than any previous year.
|
| This is a person who is effectively full-time CEO of this
| business and whose market salary is likely at least $236k. If
| they sold the business, the new owners would have to pay
| someone else to put in those 35 hours.
|
| Maybe the new owner could employ a less-skilled manager and pay
| them less, or maybe there's still lots of potential growth or
| room to cut costs, but that's all quite speculative: right now
| the business has a profit, and therefore a valuation, closer to
| zero.
| avinoth wrote:
| Valuing a profit-generating business that's making $1m in
| revenue as zero is reductive.
|
| Valuation of business isn't necessarily determined by profits
| (perhaps for commodity businesses), It's just one of the
| metric. This is a business that has strong operations,
| product, assets, and IP, honestly quite surprised with this
| take.
|
| Also, a nit fwiw, you automatically assumed the entire profit
| of the business is the market salary for the person running
| this business
| awhitby wrote:
| I don't really disagree. It's a naive analysis, but
| ignoring the opportunity cost of the time the owners put
| into a business, which I was replying to, is even more
| naive, and yet an extremely common mistake small business
| people make.
| gnicholas wrote:
| We don't know that it is profit-generating, since the
| author doesn't take a salary. As for the assumption that
| the profit would be soaked up by the market salary for the
| founder, the fact that he's a former Google engineer or
| whatever is a pretty decent indication that this is true.
|
| I would agree that most people would take some job
| flexibility/autonomy in lieu of part of their bigco salary,
| but my guess is that this particular Xoogler would be
| making well more than $236k (including stock) if he had
| stayed at Google.
|
| EDIT: that doesn't mean he should have stayed at Google,
| just that his market salary would very likely soak up all
| of the profits this year. If he can keep up the growth (and
| ramp down his hours), then it would be clearer that the
| enterprise could throw of cash even after paying for all
| the labor.
| avinoth wrote:
| That's the thing though, it's a Google engineer's market
| salary, and likely the author's as well. But the OP was
| drawing the conclusion that whoever's running the
| business has to be paid the same amount, that's what I
| wanted to address.
|
| > I would agree that most people would take some job
| flexibility/autonomy in lieu of part of their bigco
| salary
|
| This is one of the point the author has repeatedly
| stressed the importance of and I very much agree as well.
| The chance to chart your own journey and the excitement a
| business could bring is anyday more valuable than the
| predictable path of employment for many (including
| myself)
| mryall wrote:
| He did pay himself a salary in 2023. See the P&L included
| in TFA.
| gnicholas wrote:
| The article says:
|
| > _I don't draw a salary, so the total amount I earned
| from TinyPilot in 2023 was $236k_
|
| I assume the salary line is for other people's salary.
| danielmarkbruce wrote:
| The point is it isn't profit generating by any reasonable
| definition of profit and doesn't have some obvious path to
| get there.
|
| Taking into account all the things you mention, many
| reasonable people who spend time buying and selling
| businesses all day would value this business at zero.
|
| The nit is generous - 236k is not going to cover the iq
| points and hard work required to do the role of this owner.
| tgtweak wrote:
| That is true, and you would assume that if he sold he would
| either work retained and draw a salary or hire someone at a
| fair cost.
|
| I think the company is too early to realistically sell - but
| I don't think the value today is zero - it's likely worth at
| least 2x revenue today given growth potential.
|
| Look at lantronix (nasdaq:ltrx) - the company that makes the
| "spider" product line - the original strap-on oob/ipmi. Worth
| $160M while doing $120M of revenue and losing $9M/year.
| csa wrote:
| > right now the business has a profit, and therefore a
| valuation, closer to zero
|
| You're thinking of this like an engineer rather than a
| business person.
|
| 1. When selling a business like this, the $236k would be
| called SDI or SDE (seller discretionary income/earnings).
|
| 2. The _buyer_ determines what, if any, of that SDE will need
| to go to paying someone to do what the seller does. These
| duties could be assumed by the buyer, they could be assumed
| by existing people the buyer employees, the tasks could be
| reduced or eliminated, etc.
|
| 3. Based on 2, the buyer will typically adjust the earnings
| multiple that they are willing to buy at.
|
| 4. For complex businesses that need someone doing one or more
| specific roles, the listing agency for the business, if good,
| will encourage the seller to fill certain roles to improve
| the overall salability of the business and multiple of
| earnings that it will be sold at.
|
| 5. Without really looking into the business, I'm almost
| certain that it can be sold for much closer to $1m (or more!)
| than to your suggestion of (edit) _closer to_ $0.
| gnicholas wrote:
| GP does not suggest a valuation of zero. GP says that the
| profit and valuation is closer to zero. It is not crystal
| clear if this means "closer to zero than it is to $236k" or
| "closer to zero than $236k is" (i.e., less than $236k). The
| second is undoubtedly true.
|
| The first may also be true, but would depend on the cost at
| which the labor can be outsourced reliably, and what
| oversight would need to be done of these outsourced
| activities.
| csa wrote:
| Fair enough. I changed my comment to "closer to $0".
|
| I still think that even talking about or towards $0 is
| bizarre. Saying something like "less than $236k" would
| have been much more meaningful if op meant either thing
| you said.
| danielmarkbruce wrote:
| He's thinking about it like a business person who is
| looking at buying a business. It's worth close to zero. In
| it's current state this business is not an asset, it's a
| organization doing stuff.
|
| Breaking it out into SDE + adjustment is what the comment
| already does, albeit without using that terminology.
|
| One cannot hire a person who can do all the things this
| owner does. The person is a smart former google engineer.
| These people don't grow on trees. It would take a few
| people to do a bad approximation of what he does. The
| adjustment to SDE is going to be 100's of k and you get to
| 0 cash thrown off.
| csa wrote:
| > It's worth close to zero.
|
| Serious question... have you bought a business before?
|
| It's what I do.
|
| This business is not worth close to zero, and the stuff
| that the current owner does (even if he's some miracle
| worker, which xooglers aren't guaranteed to be) can be
| handled any number of ways that cost less than $236k by
| _some buyer_. This may not mean you or the person that I
| replied to, but you two most likely aren't a part (and
| certainly not a significant part) of the market of buyers
| for businesses like this.
|
| I can't tell if you're circle jerking the owner,
| xooglers, or the (limiting) engineering way of thinking
| about businesses.
| danielmarkbruce wrote:
| Yes. Lots of them.
|
| Who is the buyer? The logical buyer of this hardware
| business doing $1m per year and can backfill all the
| things this guy does at some low enough number that this
| business generates cash. And then, enough cash that it's
| worthwhile to go through diligence and paper up a deal
| and take on the risk that there isn't skeletons in the
| closet.
| csa wrote:
| > Who is the buyer?
|
| Realistically, the best buyer would be someone who has
| deep connections in a market that the current owner
| hasn't penetrated that could 5x the volume almost
| instantly.
|
| They would hem and haw about whatever small multiple the
| seller is asking for, and then laugh all the way to the
| bank after close.
|
| I've seen this happen many, many times.
|
| > And then, enough cash that it's worthwhile to go
| through diligence and paper up a deal and take on the
| risk that there isn't skeletons in the closet
|
| For a business of this relatively small size, an agency
| would likely be used, and they would do all of this
| scutwork, and their fee is paid by the seller. Which
| agency or agencies have you used (if any)?
| danielmarkbruce wrote:
| > Realistically, the best buyer would be someone who has
| deep connections in a market that the current owner
| hasn't penetrated that could 5x the volume almost
| instantly.
|
| This is a nice theory. And it could be true, and it does
| happen, but it's more than likely not.
|
| You must be using better M&A brokerages/bankers than I
| ever have. None of them do _actual_ diligence, they are
| selling the business...They are actively making the
| business look different to what it is. They certainly don
| 't take on any risk (they are not a party to the
| agreement in any way) and they certainly don't obviate
| the need to use and pay a lawyer (and most small deals
| are each person pays their own costs).
|
| With respect, are you actually buying businesses? Or just
| doing contracted technical DD? It feels like you are
| missing a good chunk of the picture here. The _default_
| take on the value of this business by a lot of folks
| buying businesses is going to be "close to zero". I
| mean, to be fair, I have not ever bought a hardware
| business so I'm a little out of my depth here... but..
| not miles out.
| csa wrote:
| > This is a nice theory. It could be true, it's likely
| not.
|
| I've done it / do it with taking products and services to
| certain East Asian markets. And sometimes scaled quickly
| at much more than 5x of the original revenue.
|
| > You must be using better M&A brokerages/bankers than I
| ever have.
|
| FEI is one such broker, and know people on both sides of
| transactions done through them that are happy. I haven't
| used them personally, but that's one example.
|
| They definitely do due diligence.
|
| > With respect, are you actually buying businesses? Or
| just doing contracted technical DD? It feels like you are
| missing a good chunk of the picture here.
|
| Funny, I was about to ask/say the same thing.
|
| Yes, I buy businesses. No, I don't do technical DD
| contract or otherwise (frankly, I'm not tech savvy enough
| to do that on my own -- I can sniff out some bad code,
| but I let the pros do what they do).
|
| I/we are on HN reply delay to prevent "flame wars", even
| though I don't think we are flaming. As such, I will stop
| here.
|
| If you are what you actually say you are, I wish you luck
| and all the success in the world. That said, I stand by
| everything I have said above.
| danielmarkbruce wrote:
| I did almost say ~ "it's possible we just see very
| different deals and it colors the perspective".
|
| I never deal with asia. Maybe everything I'm saying is
| off base given it's hardware and asia is a thing in that
| realm.
| windowshopping wrote:
| You should write something about what you do too. Buying
| businesses sounds interesting, can you expand on this?
| windowshopping wrote:
| You should write something about what you do too. Buying
| businesses sounds interesting, can you expand on this?
| danielmarkbruce wrote:
| There are lots of books written about buying businesses.
| I'll give some insight - it's like turning over stones.
| You turn over a lot before you find anything.
| csa wrote:
| > I'll give some insight - it's like turning over stones.
| You turn over a lot before you find anything.
|
| Priceless and totally agree.
|
| The deal flow can be streamlined somewhat, but you're
| still turning over a lot of stones.
| csa wrote:
| > You should write something about what you do too.
|
| I think most of what one needs to know is already out
| there. The key is being adaptable to the current
| environment and being aware of one's value add (skill
| set, network, etc.).
|
| The problem with writing specifics about what I do is
| that it invites competitors and/or haters (e.g., review
| bombers or DDoSers). Some parts of my businesses have
| enough moat such that I don't care, but other parts
| definitely do not. It's not something I want to spend
| additional brain cycles on.
|
| > Buying businesses sounds interesting, can you expand on
| this?
|
| It's largely not. It's financially comfortable, and it's
| nice being your own boss / leading your own team if
| that's what you're into (I am), but I've done more
| interesting work while working for "The Man". A lot of
| what I do is just streamline a system that was
| inefficiently run/managed.
|
| What I do is very similar to what Andrew Wilkinson of
| TinyCo has done, except I am about 10 years back on his
| timeline, and I'm not sure I will end up going public. I
| recommend looking for interviews and podcasts with Andrew
| -- I have found them to be super interesting.
|
| In relatively vague terms, I started a web dev agency,
| and then used that cash flow to start buying businesses
| that generate additional cash flow. Rinse and repeat.
| This is exactly what Andrew did. Note that I didn't learn
| about Andrew until last year, so I was happy to see
| someone taking a similar path and scaling to a holding co
| worth over half a billion.
|
| Some things that I think folks don't do well when buying
| and/or valuing businesses (both buyers and sellers):
|
| - Keep an active deal flow pipeline, ideally one that is
| not widely tapped. This usually entails talking to
| people... lots of people. For example, finding solid
| businesses on FEI is possible, but they will be very
| competitively priced, and it will be prudent to have some
| sort of pocket growth "hack" in mind if you want to make
| it pay off handsomely. On the other hand, targeting some
| "mom and pops" that have little or no idea about SEO and
| SEM can present some soft deals.
|
| - Figure out ways that one party can scale that others
| can't. This is the type of "growth hack" that I mentioned
| above. I know one guy who has one main move. He looks for
| businesses in which he already buys some of their inputs
| at a huge volume discount that smaller businesses can't
| access (supplements are an example of this... I don't
| recommend getting into supplements unless you are already
| eyeballs deep in that world). Another example is having
| access to markets or distribution that the businesses you
| are targeting to buy don't have. One area I target (when
| relevant) that many others don't is East Asian markets.
| Another area I target is just increasing prices (usually
| via segmentation). So many businesses charge way less
| than the market will bear.
|
| - Learn how to negotiate, including how to say no. Many
| people just lay down and leave a ton of money on the
| table. You don't have to be an asshole about it, but it's
| prudent to be aware of what the value is for both the
| buyer and the seller, and it's not uncommon for the buyer
| to have significant upside potential.
|
| - As someone else said, you're basically turning over a
| lot of rocks. There are a lot of people trying to
| bamboozle you, and there are a lot of solid businesses
| that don't really offer a growth opportunity that you can
| efficiently maximize. When you find something that fits,
| it's often a no-brainer.
|
| Let me know if you have any other questions. I will be
| happy to answer.
|
| I will add as a caveat that I can only give you
| perspective from my limited experiences -- there are
| myriad ways to buy and sell businesses profitably, and my
| path is only one of them.
| Aurornis wrote:
| > (even if he's some miracle worker, which xooglers
| aren't guaranteed to be)
|
| > I can't tell if you're circle jerking the owner,
| xooglers, or the (limiting) engineering way of thinking
| about businesses.
|
| I don't know why you're being so unnecessarily demeaning
| about ex-Google people or trying to downplay the
| accomplishments of the person who wrote the blog post.
| There's no need to call it "circle jerking" if someone
| acknowledges that the founder of a successful business
| has accomplished a lot, well above and beyond what an
| average engineer can pull off.
| coldtea wrote:
| If your company makes 50K/year profit (which as a bootstrapped
| founder is what you take home to live with), you haven't
| created half a million of net worth, you've just created a
| company that might or might not make it 2-3 years down the
| line, and which might not be that better than a salaried
| position from a "net worth creation" perspective.
| holoduke wrote:
| No way that 7, 15x is realistic. From my previous 2 startups
| none were sold for more than 4x. And these were healthy growing
| +10m businesses. I am not sure where you got those numbers
| from. I am curious.
| tgtweak wrote:
| What market were they in? What did the growth and earnings
| look like?
| titanomachy wrote:
| Why sell a healthy growing $10m business for 4x earnings? Did
| you have debt to service, or just wanted to do something
| different, or some other reason?
| gamepsys wrote:
| At 4x it almost seems worth it to hire out the rest of your
| day-to-day and let the operation cruise. The company will
| probably under perform over time but you'll get more juice
| from the fruit.
| mewpmewp2 wrote:
| With how fast tech is pacing there's no guarantee that
| this business wouldn't be outpaced by competitors, and so
| if you stay idly by and provide no innovation, the
| business might just fizzle out.
| Aurornis wrote:
| > At 4x it almost seems worth it to hire out the rest of
| your day-to-day and let the operation cruise.
|
| As many small business owners learn the hard way, it's
| nearly impossible to find someone capable of single-
| handedly operating a small startup who would rather
| operate _your_ startup than _their own_ startup.
|
| Frequently, you can find someone to take the role for a
| while. They might even perform well while you're training
| them up. Then they're likely to go off and start their
| own thing, which might come uncomfortably close to
| competing with you (while staying just outside the reach
| of noncompete agreements).
| holoduke wrote:
| Because valuation is different than the actual yearly
| revenue. Company could be valued 10m, but revenue 1m. In
| our case because of legal permits we aquired to run our
| business and would normally take up to two years to get.
| airstrike wrote:
| so 10x revenue, which seems pretty decent for tech
| RowanH wrote:
| It really depends on a bunch of factors, if you've capped out
| your total addressable market, and/or there's no fat to cut
| out of the business (i.e. potential is limited) lots of
| competitors etc, then a low valuation is reasonable.
|
| But if you're growing, have big upside, and can be a rollup
| or been operating quite inefficiently 4x would be
| ridiculously low.
| Aurornis wrote:
| > But if you're growing, have big upside, and can be a
| rollup or been operating quite inefficiently 4x would be
| ridiculously low.
|
| That's the dream, but the number of startups that check all
| the boxes to fall into this category is extremely small.
|
| There's a lot of data supporting 2-4X for small SaaS
| companies. You'd have to be growing at an extreme rate year
| over year over year for 4X to be considered "ridiculously
| low".
| solumunus wrote:
| Ouch. Businesses sell for more than 4x all the time. There
| are countless examples of that.
| danielmarkbruce wrote:
| Give the examples. Businesses this size in this market have
| very few (/0) logical buyers.
| t_mann wrote:
| I can't speak for valuations, but I don't see the 'no
| logical buyers' argument. This product has multiple
| competitor products, mostly at far higher price points,
| any of those manufacturers would seem like a logical
| buyer to me (if only to get rid of the competition). Can
| you elaborate?
| danielmarkbruce wrote:
| It's small. There are very few logical buyers of
| technically complex small businesses. There are logical
| buyers of small businesses and logical buyers of
| technically complex businesses, but at the intersection
| there is not.
|
| Even bog standard SAAS companies struggle to sell at a
| decent multiple when they are really small, and they
| aren't especially complex.
| lozenge wrote:
| You aren't just buying a company, you're buying a job. In
| this blog post, the payroll expense is $250k a year. The
| founder is working for free 40 hours a week, acting as a
| software dev, managing a $40k advertising budget,
| developing the product, and overseeing the customer
| support team.
|
| If you buy this company and hire somebody who can do all
| those things, that $235k of net profit becomes $0.
|
| Buying it just to shut it down without continuing the
| product- eh- does your product really address all the
| needs of the customer base? Or will they go to another
| competitor instead?
| paulddraper wrote:
| Businesses sell for 0x and Infinityx all the time. There
| are countless examples of that.
|
| But _bootstrapped_ business with growth rate for 7x+ (non-
| trivial) revenue are uncommon.
|
| 4x may be "ouch" for a VC but not a bootstrapper.
| Aurornis wrote:
| Not in the small cap SaaS world.
|
| 2-4X is the current range.
|
| The exceptions are for companies with extreme growth rates
| for multiples years in a row. These are extremely rare,
| even more so with pure bootstrapping.
| hn_throwaway_99 wrote:
| Thanks for posting this. I was also misinformed, thinking
| 7/15x was reasonable, but for small businesses valued
| primarily on cashflow, looks like 3x is more accurate (of
| course, growth affects that number a lot).
|
| I thought this had a lot of good data:
| https://www.bizbuysell.com/learning-center/industry-
| valuatio.... For "Software and App Companies", the multiple
| was 3.17.
| hinkley wrote:
| Payback period I assume. 3 years at 3x if revenue is flat.
| I suspect 3.17 is around 30 months if your revenue growth
| outpaces inflation.
| kentlyons wrote:
| Was management in place so when the founders exited the
| company would still grow? With lower valuations (1-3x), the
| purchaser is often buying a job in some way (either for
| themselves or needing to find an operator). At 7-10x
| multiple, the company is already has senior management in
| place so the new owners would expect continued growth without
| their own intervention.
| windowshopping wrote:
| You built two $10m businesses? Geez man where's your blog
| post series
| Andrex wrote:
| Valuation is only useful if you're looking for an exit, and
| maybe if you need to borrow a lot of debt (but if you're
| bootstrapped, that's not on the table). For lifestyle startups,
| profit is cold hard cash and valuation is a number in a
| spreadsheet.
| paulddraper wrote:
| > creating a company that should be valued (and eventually
| sell) for 7-15X Earnings
|
| Only high-growth, high-margin businesses can get 7x+ earnings.
|
| Creating a sufficient level of growth to garner 7x valuation is
| very tough to do bootstrapped.
|
| ---
|
| EDIT: The only reason anyone gets a 10x etc valuation is
| because they're doubling+ year-over-year, and very likely
| they'll be 3x bigger in 18 months.
|
| So basically, that's a 3-4x valuation...of your probable
| revenue in a year and a half.
| abdullahkhalids wrote:
| Any historians here who can comment on when people first
| started selling their businesses? And when did the notion that
| you build a business to sell it, first emerge?
| interstice wrote:
| This is encouraging as someone who is very comfortable with the
| development side of my studio but still finds the business side
| daunting at times
| jacquesm wrote:
| Those multiples only work if you are growing so fast that you
| start to become a threat to an incumbent. Otherwise, you can
| halve that easily, it all depends on what you do as a business
| and how hard it is to copy what you are doing. High multiples
| require strong growth, strong IP and a shortcut compared to
| redevelopment.
| tomashertus wrote:
| I admire the level of insight and transparency. Congratulations
| on an amazing year, and keep swimming!
| bytemonitor wrote:
| Nice job, respect!
| tech_ken wrote:
| Nice work!! It's extremely motivating to see someone succeeding
| on this route, and especially with a hardware product. Did you
| start with any hardware foundations? Or was it something you had
| to learn as you pivoted?
|
| As an aside, this is such a nifty product! Don't personally have
| a use for it (yet), but it definitely evokes gear lust.
| chaosprint wrote:
| This is a really informative and inspiring article.
|
| It has been 6 months (not 6 years) since I quit my full-time job
| as a Rust developer to start my own business.
|
| As time goes by, I can feel the pressure of mortgage and car
| loans, and I can also feel the care and pressure of my family.
|
| My original plan was to make a new IDE for Glicol
| (https://glicol.org), and to develop relevant hardware with
| firmware written in rust for school education.
|
| I sent some cold emails to VCs, but most of them got no reply.
|
| I also sent an email to the Norwegian Museum of Science and
| Technology, offering to perform for children for free, but they
| didn't reply for two months. I shamelessly sent it again, and
| someone finally replied with a rejection.
|
| Only one VC talked to me and thought that I should convince and
| validate a partner first, and he suggested that I go to an
| incubator.
|
| Very good advice.
|
| Later I learned that even Norwegian education startups skipped
| Norway and focused directly on the US market.
|
| People from the incubator also told me that it is impossible for
| Norwegian schools to accept new things independently.
|
| This is very enlightening to me because most of Glicol's visitors
| are indeed from the US. And it took me so long to discover this
| fact.
|
| But if I don't start, I'll never get past those six months.
| CodeWriter23 wrote:
| A deceased friend and I tried something like glicol in the
| mid-80's. We hacked a different crystal oscillator on a Zilog
| SCC board design donated by our employer to make a MIDI
| interface. My friend coded 'lxm', Language for the eXpression
| of Music. My job was to 'mxl', Musically eXpressed Language -
| to capture from the Juno 106 we were developing with. We
| weren't able to market it at that time. For your project, maybe
| find a US-based partner, there are plenty of Magnet and Charter
| Schools that can independently develop curriculum for non-core
| subjects. A possible way in is to find ones with a PTO (not
| PTA), the parents can drive this sort of thing. PTOs are
| independent corporations that serve one or a few schools
| whereast PTA is a top-down org and they are not the place to
| try to drive innovation IMO.
|
| The way I think about investors, they are an extremely high
| interest loan. I have a money partner in my startup, I
| negotiated his equity down to 70% from the 80% he wanted. So if
| this product hits (already have a regular customer) and makes a
| million, he'll get $700K for investing less than $100K. I'll
| get $300K for investing probably about $300K worth of my own
| time and hand half of that to the IRS. Balance that with
| keeping 100% of $0 = $0.
| chaosprint wrote:
| Thank you for the information.
|
| I agree with you about VC and you are obviously more
| experienced as well. At that time, I just thought, try VC.
| Later I could understand the track they wanted me to take,
| and I also had other options such as bootstrapping.
|
| But if it has to be some exponential growth and I am forced
| to change the attitude of exploration, that is not my
| original intention. I'd rather do some other business and
| keep open source software going.
| pka wrote:
| Glicol seems very cool! Looks a bit like Faust
| (https://faust.grame.fr), an FP sound programming language I
| came across recently.
| imhoguy wrote:
| Reminds me Overtone build with Clojure
| https://overtone.github.io/
| ttcbj wrote:
| Congrats! Not sure how many employees you have, but as you get
| into the $200-$500k owner discretionary earnings level,
| definitely take a look at small business retirement plans. If it
| is just you, or just you and a family member, you can use
| something like a Solo401k to defer up to $69k in earnings to
| retirement accounts. The "personal" side of that (like $22k) can
| be Roth.
| yieldcrv wrote:
| I think its prudent for anyone to form a solo401k plan, you can
| have them attached to yourself as a sole proprietor and
| separately attached to a company you form
|
| I dont have the type of income to contribute to it EVERY year,
| but even if you use an employer's 401k you can roll it over
| into yours as soon as you leave or are eligible
|
| solo 401ks remove all the guess work and limitations of your
| other employer's random plans. you can invest in anything, not
| just random vanguard mutual funds, you can borrow against them
| instantly instead of however long the bureaucratic machinations
| take, you dont have to ask anybody - people that dont know the
| answers that they should know
|
| and most importantly, the annual contributions are just the
| first step, it grows tax free and should vastly exceed your
| contributions. once it independently has a big enough net worth
| it can be an investor in private equity and hedge funds'
| feeders and be ready for some large moonshot bets or losses.
|
| but remember, if you equate retirement accounts with the least
| risk possible, generic advice gets generic results. its more
| important that it grows tax free.
|
| not advice, just what I do.
| mtlynch wrote:
| Thanks!
|
| I'm currently contributing roughly that amount into a SEP IRA.
| DrNosferatu wrote:
| Curious about your Zig book!
| mtlynch wrote:
| Cool to know that there are people interested! I'm still a Zig
| beginner, but I'm hoping there are enough Zig-curious folks to
| support a book or course.
| hermitcrab wrote:
| Congrats. Selling hardware+software sounds a lot more stressful
| than selling just software. I hit 20 years as a solo bootstrapper
| in 2025.
| system2 wrote:
| I remember reading the Tiny Pilot website redesign[1] and feeling
| the pain. I am glad you finally took care of the bleeding and
| turned a good profit. I wish you to reach 7 figures this year.
|
| [1] https://mtlynch.io/tinypilot-redesign/
| pdq wrote:
| General question when running a single member LLC: how do you
| determine how much to take as salary versus business profit, and
| how does that affect your taxes?
|
| I'm guessing tax liability is mostly a wash, as if you are taxed
| as an S-Corp, you pass through the profit into personal income
| and pay income tax on that.
| ao98 wrote:
| That's very much a talk to your CPA question - because it
| speaks to audit risk. The IRS wants to see you pay yourself a
| fair salary so you are paying the appropriate payroll taxes,
| social security, medicare, etc. The problem is "fair" is
| somewhat subjective and depends on the profitability of the
| business as well. I'm sorry this isn't a clear answer, but it's
| just not a clear matter. Seek advice and ask "how would you
| defend this stance in an audit".
| dmezzetti wrote:
| Really nice story with great details.
|
| I've been building NeuML (https://neuml.com) for the last few
| years. It all depends on the situation but if you need to replace
| salary, then of course cash flow is important. It can't just be
| about the future value, you have to live.
|
| With that being said, I like to look at it as similar to renting
| vs buying a house. In both cases, there is cash flow except with
| buying you are also building equity.
|
| For those interested in more about NeuML, I published this year-
| in-review last month: https://medium.com/neuml/neuml-2023-year-
| in-review-560457b97...
| renewiltord wrote:
| Huh, interesting. I used the PiKVM product for the same purpose.
| This is very cool. This is a pretty cool product.
| JonChesterfield wrote:
| Their tinypilot kvm works. It's in the category of boring
| infrastructure - I leave it plugged into whatever machine is
| currently in need of attention and `https://tinypilot/` connects
| to it. Little box hanging off the PoE switch, much less bother
| than plugging a keyboard and monitor in. Especially so when I'm
| away from the office.
|
| Recommended. Saved me a lot of hassle. Thanks for the product!
|
| I'd like to be able to power cycle the attached machine but that
| seems inherently messy to implement.
| tgtweak wrote:
| It's a good idea for a feature - many other out-of-band
| solutions have this. I think the issue comes mostly in that you
| would need to unplug the server to add (and remove...) some
| kind of relay-controlled power interrupt.
|
| I would assume that most users of this are in a
| rack/datacenter/server environment and have switched PDUs they
| can remotely trigger power with, and it might make more sense
| to build in PDU management as a software feature over the
| network than try to reproduce the hardware functions.
|
| Would be kind of cool to have a C14 input plug on the device
| and a C13 out beside it that goes to the server/device, then
| you can put an relayed interrupt inside it and also an ammeter
| clamp to measure power draw and detect drops or spikes in
| device power - for those systems that don't have built in IPMI
| already.
| justsomehnguy wrote:
| And noone[0] whould allow to use that in a DC because this is
| now a high-voltage device what can be source of fire, shock
| and death. You need a certification for this kind of tech and
| it's not cheap.
|
| [0] of course most of time it would just go under the radar,
| but you can find yourself in trouble, especially if the
| device malfunctions
| JonChesterfield wrote:
| This thing https://www.audiophonics.fr/en/diy-kits-and-
| boards/audiophon... is a C13/C14 block with a 3.5mm control.
| AC power on if 12V minimal current applied via the 3.5mm,
| otherwise off. I haven't got around to it yet but my sketchy
| DIY idea is power-over-ethernet into a splitter into that.
| That'll power off the server when the switch port is turned
| off.
|
| Strangely I haven't found a relay in the same packaging
| anywhere else.
| mtlynch wrote:
| Thanks for the kind words!
|
| Yeah, power cycling is one of our top requests and a feature
| I'd like to have personally.
|
| If we just plugged into the ATX pins on the motherboard, that
| would be technically pretty straightforward, but it increases
| the work and expertise that end-users have to have. I've looked
| into something like a smart plug, but then users need to
| configure their BIOS to always power on when power is
| available.
|
| Definitely on my list of considerations for Voyager 3.
| JonChesterfield wrote:
| The two ATX pins you short to turn the box on connected to
| the general purpose IO on the pi is probably the obvious
| play. The pikvm people suggest running all the ATX pins over
| another ethernet connection which is probably as neat as
| it'll get, though I'd inevitably connect the ATX-over-RJ45
| thing to the switch PoE at some point and that's probably bad
| with all 8 wires connected.
|
| Plus you'd want a ATX header to RJ45-or-whatever port per
| machine. Workable but not very elegant.
| solutionyogi wrote:
| Michael,
|
| You are an inspiration. I have been following your journey since
| your post about quitting Google hit the HN front page. And what a
| wild ride it has been.
|
| You tried many projects (https://mtlynch.io/projects/), and it
| took a while for you to find your winning idea. And I have read
| each of your retrospectives on TinyPilot
| (https://mtlynch.io/retrospectives/) and know that it wasn't
| easy.
|
| Your journey shows how hard it is to build a business (especially
| hardware-based), but with discipline and perseverance, it's
| definitely possible to create one as a solo founder.
|
| I also have a business idea that I would like to work on, but I
| am not ready to quit my full-time job yet. I have a few questions
| for you:
|
| 1. Have you always been so disciplined in life? If not, how did
| you improve it? 2. As you shared here (https://mtlynch.io/solo-
| developer-year-1/), doubts are natural when you haven't succeeded
| yet; how did you keep going? Did you ever come close to giving up
| and going back to corporate America? 3. I believe you have a
| partner; how did this affect your relationship with your partner?
| 4. Knowing what you know now, what would you do differently?
|
| If you are ever in NYC, please hit me up; I would love to buy you
| a drink and chat more in person.
| mtlynch wrote:
| Thanks for reading and for the kind words!
|
| > _Have you always been so disciplined in life? If not, how did
| you improve it?_
|
| No, I was a lot less disciplined when I was younger. I remember
| as a teen trying to learn Java several times and always getting
| bored a day or two in. I was a good student, but I would
| procrastinate work and distract myself while working.
|
| I probably became more disciplined in my twenties, but I
| unfortunately don't think it was something I tried to do as
| much as it just happened.
|
| One thing I think helped was protecting my focus more. I used
| to hop between different tasks a lot and constantly check
| social media or email if I had a moment of downtime or boredom,
| so I became more aggressive at stopping that.[0]
|
| I also found the book _Deep Work_ by Cal Newport to be helpful
| in staying more focused.[1]
|
| > _As you shared here (https://mtlynch.io/solo-developer-
| year-1/), doubts are natural when you haven't succeeded yet;
| how did you keep going? Did you ever come close to giving up
| and going back to corporate America?_
|
| I went into it with the expectation that it might take 3-5
| years for me to find a successful business, so I think that was
| helpful. I've spoken to other founders who feel disappointed
| that nothing they're doing is working because they were
| expecting success to come quickly.
|
| I definitely did worry that I wasn't cut out for being a
| founder and that my skills made a lot more sense for a big tech
| employee. The thing I found comforting was reading stories and
| listening to podcast interviews with other founders where they
| talked about how many failures they had before they landed on
| the right business.
|
| I never came close to going back to a corporate job because I
| knew I had enough savings to last me, but if my financial
| situation had been different, I might have given up before I
| landed on something that worked.
|
| > _I believe you have a partner; how did this affect your
| relationship with your partner?_
|
| There are lots of effects in different directions. Me not
| having a regular job means that my income is less consistent
| and certain, and she absorbs some of the risks I take. I also
| feel like I'm not a good partner when I'm stressed a lot about
| work, and so part of my motivation in de-stressing the business
| has been to be a better partner in my personal relationship.
|
| > _Knowing what you know now, what would you do differently?_
|
| I wish I'd done educational products ("info products") earlier.
| They're like a microcosm of the experience of launching a
| product because you have to find customers, pitch to them
| effectively, and then deliver something they'll want. Like you
| can do that whole cycle in a month, whereas it would probably
| take 3-10x that long to do it with a SaaS. I made my first
| course right as TinyPilot was getting traction, and that course
| made more than anything I'd done in the previous three
| years.[2]
|
| [0] https://mtlynch.io/eliminate-distractions/
|
| [1] https://mtlynch.io/book-reports/deep-work/
|
| [2] https://mtlynch.io/solo-developer-year-4/#hit-the-front-
| page...
| howon92 wrote:
| Thanks for sharing your experience!
| wenbin wrote:
| Congrats on the incredible journey, Michael!
| mtlynch wrote:
| Thanks so much, Wenbin! It's been really fun following your
| journey with ListenNotes as well!
| nox101 wrote:
| Looking at the device, is it common to have a kvm that can't
| power cycle the computer? I often need to power cycle mine and
| was wondering if this was a solution for when I'm away
| rexreed wrote:
| Looks great. As a note I don't count credit card rewards as
| revenue, but rather I count it as an offset to expenses. In this
| way, rewards don't add to the top line, but rather improves the
| bottom line. Basically I consider it a way to discount my
| expenses, or as a negative expense. The reason is because those
| rewards are linked to expenses. If you spend more, you get more
| rewards. Spend less, you get less. You can't increase rewards
| (generally) without increasing expenses. So I see it as a way to
| discount or reduce expenses vs. increase the top line. Long story
| short, if you see your rewards increasing 10x that means you've
| increased expenses some factor of 10x which isn't so great. You
| could list rewards under the "Everything Else" line of expenses
| as a negative expense in red. The result will be the same on the
| bottom line but it won't be misleading the top line, which should
| be driven as high as you can.
|
| Also those cloud expenses look significant. That looks like an
| 80% increase year-over-year which is substantial. Is there a way
| to shave off a significant amount by moving to a different method
| for architecture? Or will that break your system? I worry about
| rapidly growing cloud expenses especially when you're not that
| huge of a company.
|
| Finally I'm curious about those dividend earnings! Living off
| them is great, especially as you were doing so in the lower-
| interest rate years. Can you share insights in the high yield
| dividends you're earning that are also low risk enough that the
| underlying investment value doesn't erode?
| codegeek wrote:
| Agreed. You should not include rewards as revenue. That is
| incorrect and misleading. I get lot of credit card rewards for
| our business but it is definitely not revenue. If anything,
| some accountants will argue that it is actually an income for
| yourself if you redeem them.
| jjeaff wrote:
| Unless this has changed in the last few years, credit card
| rewards are non-taxable income. you can personally keep the
| rewards and not claim this as income. I'm pretty sure this is
| still the case because if it wasn't my cash back card would
| be sending me a 1099.
| mtlynch wrote:
| Thanks for reading!
|
| I hadn't heard that about credit card rewards. I'll talk it
| over with my accountant. Thanks for the tip!
|
| > _Also those cloud expenses look significant. That looks like
| an 80% increase year-over-year which is substantial. Is there a
| way to shave off a significant amount by moving to a different
| method for architecture? Or will that break your system? I
| worry about rapidly growing cloud expenses especially when you
| 're not that huge of a company._
|
| The big one is Shopify ($4.7k). That's partially because they
| charge a percentage of our sales and partially because we had
| to upgrade to the $300/mo plan when we switched to the 3PL in
| order to get features that bridge our 3PL's system to our
| Shopify account.[0]
|
| The other big jump was in HelpScout ($2.4k) because we used to
| have a discounted rate as a startup, but that ended after two
| years, so we pay a whopping $50/seat.
|
| > _Can you share insights in the high yield dividends you 're
| earning that are also low risk enough that the underlying
| investment value doesn't erode?_
|
| Oh, really nothing especially clever. Just the popular Vanguard
| index funds like VFIAX (S&P 500) and VBTLX (total bond market).
|
| I had some money in VLGSX (long-term treasuries), which didn't
| have a good time when interest rates increased in the last
| couple of years, but fortunately, I was diversified enough for
| stocks to compensate.
|
| [0] https://mtlynch.io/retrospectives/2023/04/#should-we-
| pay-150...
| rexreed wrote:
| Interesting on the cloud expenses (Altho I'd really
| categorize those as SaaS vs cloud, but that's just semantics.
| I tend to think of Cloud as IaaS / Paas / Faas vs. Saas which
| is mostly renting an online application). Regardless, Those 2
| only add up to $7.1k so I'm curious where the bigger ~$9k
| remainder is coming from.
|
| Folks love Shopify, and it does work very well. But for my
| small businesses I've been very happily using Woocommerce on
| Wordpress, basically nothing but the hosting cost for
| Wordpress, and it's been delivering very well. I've done
| several million annually on the Woocommerce / Wordpress
| combo.
|
| That being said, even eliminating or reducing Shopify would
| still have you at a premium vs last year so there must be
| some other Saas / Cloud expense driving that bill up.
| mtlynch wrote:
| > _Folks love Shopify, and it does work very well. But for
| my small businesses I 've been very happily using
| Woocommerce on Wordpress, basically nothing but the hosting
| cost for Wordpress, and it's been delivering very well.
| I've done several million annually on the Woocommerce /
| Wordpress combo._
|
| I don't love Shopify, but it's been overall fine. It mostly
| does what we need, and it's been stable, so I've been
| reluctant to change. Even if we swap out Shopify, we still
| have to pay someone whatever credit card processing fee.
|
| > _Regardless, Those 2 only add up to $7.1k so I 'm curious
| where the bigger ~$9k remainder is coming from._
|
| It's just a lot of little things. A lot of them are around
| team collaboration. Here are the next top five:
|
| CircleCI: $2.3k
|
| Plane (contractor management): $1k
|
| Time tracking: $700
|
| TalkYard (support forum): $700
|
| Inventory management: $600 (we stopped using this after we
| switched to the contract manufacturer)
| snarfy wrote:
| > I had savings in index funds from years working in big tech,
| and those investments generated enough dividend income to sustain
| me.
|
| How big would that savings account need to be for these dividends
| to amount to something substantial to live off of?
| celestialcheese wrote:
| Weird to see CC rewards as income. If you're taking cash-back or
| applying to balance, I'd move to a points-based rewards card ASAP
| now that you're making money and don't need it to live off of.
|
| Our business has a significant amount of cc spend because of ad
| networks that don't charge processing fees, and high CC limits
| acting as nearly free lines-of-credit. This generates something
| like ~$100k annually in points value for us.
|
| We got some opinions from a few tax attorneys and CPAs a while
| back on how to handle this, and the consensus was clear that as
| long as points stay in the programs and are redeemed for
| flights/hotels/etc, they won't need to be recorded as rebate to
| expenses or as income.
|
| Applying the rewards against your balance should be recorded as
| rebate against expenses rather than income. Also, worth noting
| that some cash back programs have started issuing 1099s,
| depending if it's a "Bonus" or percent of spend.
| abi wrote:
| I was curious about this as well! Thanks for sharing your
| research.
| mixmastamyk wrote:
| Great project. Got me thinking that we all have these management
| systems in our computers now (intel me vpro, amd psp) potentially
| compromising privacy.
|
| But, they don't appear to be useful in remote management. To the
| extent that this external device is necessary. Is that correct
| and/or why?
| magnetDD wrote:
| Am I shadow banned?
| software0to1 wrote:
| If you or someone from this community with successful background
| are willing to mentor our startup, we will give meaningful equity
| and mutually agreed compensation.
|
| We are struggling to find ICP. We built an MVP but interest has
| faded away from early customers. We know problem exists because
| large players are solving it. Either our message and who we are
| reaching out for sales is wrong or our product approach is wrong.
|
| We need guidance. Email in profile if you are interested in
| mentoring us.
| nikisweeting wrote:
| So happy for you, thats a wonderful milestone!
|
| I love especially that you share all the nitty-gritty details
| that so many would hold back (e.g. raw revenue/profit numbers,
| where bootstrapping savings came from, failures along the way,
| etc.).
|
| It's so important for people to share success stories without
| sugar coating the difficulties, good, undiluted positive feedback
| provides so more information than generic negative posts like "VC
| funding sucks".
| https://monadical.com/principles.html#:~:text=telling%20some....
| vander_elst wrote:
| Thanks for the write up and congrats!! Sorry for asking, but
| genuinely curious, assuming you wouldn't have had some savings on
| the side, would have you started in the first place? How would
| the lack of backup have impacted the journey from your
| perspective?
___________________________________________________________________
(page generated 2024-02-16 23:00 UTC)