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My sixth year as a bootstrapped founder

(mtlynch.io)
1071 points mtlynch | 10 comments | 16 Feb 24 15:07 UTC | HN request time: 0.564s | source | bottom
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tgtweak ◴[16 Feb 24 16:51 UTC] No.39399561[source]▶
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.

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bad_good_guy ◴[16 Feb 24 17:24 UTC] No.39400048[source]▶
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.

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1. robertlagrant ◴[16 Feb 24 17:31 UTC] No.39400153[source]▶
> 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.

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2. chinchilla2020 ◴[16 Feb 24 18:09 UTC] No.39400759[source]▶
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.

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3. BiteCode_dev ◴[16 Feb 24 18:10 UTC] No.39400765[source]▶
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.

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4. creer ◴[16 Feb 24 18:10 UTC] No.39400766[source]▶
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.

5. creer ◴[16 Feb 24 18:17 UTC] No.39400864[source]▶
> 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.

6. PH95VuimJjqBqy ◴[16 Feb 24 18:20 UTC] No.39400909[source]▶
then do the calculations in 5 or 50 years.
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7. robertlagrant ◴[16 Feb 24 18:21 UTC] No.39400922[source]▶
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.
8. robertlagrant ◴[16 Feb 24 18:34 UTC] No.39401110[source]▶
I don't understand your mindset that says you should decide when other people multiply some numbers.
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9. PH95VuimJjqBqy ◴[16 Feb 24 18:50 UTC] No.39401315{3}[source]▶
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.

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10. robertlagrant ◴[17 Feb 24 15:40 UTC] No.39410430{4}[source]▶
> I don't understand how anyone misread that so badly while genuinely attempting to respond.

Probably because when given a chance, you don't take the chance to explain yourself better, and just do a junior high Uno reverse card response.