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My sixth year as a bootstrapped founder

(mtlynch.io)
1071 points mtlynch | 6 comments | 16 Feb 24 15:07 UTC | HN request time: 0.724s | 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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holoduke ◴[16 Feb 24 19:06 UTC] No.39401539[source]▶
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.
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1. titanomachy ◴[16 Feb 24 19:22 UTC] No.39401731[source]▶
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?
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2. gamepsys ◴[16 Feb 24 19:53 UTC] No.39402112[source]▶
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.
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3. holoduke ◴[16 Feb 24 19:56 UTC] No.39402150[source]▶
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.
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4. airstrike ◴[16 Feb 24 21:56 UTC] No.39403489[source]▶
so 10x revenue, which seems pretty decent for tech
5. mewpmewp2 ◴[16 Feb 24 22:05 UTC] No.39403563[source]▶
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.
6. Aurornis ◴[16 Feb 24 22:47 UTC] No.39404035[source]▶
> 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).