Making a million bucks/year in revenue | Hacker News Reader

Making a million bucks/year in revenue

discuss.joelonsoftware.com

127 pointsparaschopra55 comments

In his third response (when he gives "a few ideas") "speedy" basically describes Dropbox:

  Don't you wish you never had to worry about your  
  computer crashing or hard disk dying?  
  An idiot proof backup, and one where I don't have 
  to set _anything_ would be nice.

I bet Dropbox is making a million bucks.

With 24 employees and > 1PB of storage to manage, I'd certainly hope so ;-) Assuming the now-old number of ~3M customers (http://gigaom.com/2009/11/24/dropbox-raises-7-25m-crosses-3m...) it wouldn't be untoward to figure 4% are paying $10-25 a month, netting over a million a month in all.

Dropbox is not a backup.

Backblaze is.

Can you elaborate? I use dropbox as a quick and instant document backup. It works great.

I think paid accounts could be used as a document backup service as you get access to unlimited history but with free accounts I believe backups are only stored for 30 days.

The important bit is "one where I don't have to set _anything_"—you do have to put the files you want synchronized into your Dropbox folder. (This is the part I've found hard to explain to people that just save things to wherever the Save dialog opens.)

This could actually be worked around; once Dropbox enables per-folder sync, they could also provide a daemon (as an option) that automatically finds and sets up sync for any folder you seem to be making personal use of. Kind of like how Picasa works with pictures, but with everything on your computer that's yours.

Dropbox most definitely backs up your files to their servers as well, even for free accounts. For paid account's, it's perpetual.

Or Time Machine :-)

No, he describes Time Machine for Windows, which has almost nothing to do with Dropbox.

A little nugget of wisdom:

What if you made an app that could take database connection specs, and an Amazon S3 account and then automatically backs up the database for you (wish I had this app).[...] What if you didn't even ask the user if the database was MySQL or MS SQL or Oracle in the connect settings? The app could quickly spin through all possibilities and figure it out for the user. Make the app (and programmer) do the heavy lifting, and let the user (thousands of different users) benefit. That's the secret. My app does lots of brute force searches/checks to relieve the user of having to do that. The competition doesn't.

It's an interesting thought experiment. An interesting variant, though, might be to divide all his numbers by 10: what can you do to make $100k/year? Now that's not "rich" kind of money, but it is "making a good living independently" kind of money. And the numbers actually don't look daunting at all: bill at $52/hour, make 8 to 9 sales per month of something at $1000/pop, or make 111 sales per month of something at $75/pop.

bill at $52/hour

If you have year-round, full-time contract work with no downtime due to acquiring new clients or negotiating new jobs with existing ones, then you probably don't have enough clients to be truly independent.

Well, yes, but you can change the numbers to account for that. Say, bill at $100/hr? Or take the route of selling software. My main point was that the bar is much lower than the targets he gives, if your goal is "make a good living" rather than "become rich".

I like your general point.

I'm sure there are unforeseen expenses in all of those scenarios that would require some padding to insure against, but the contracting scenario is the one I'm most experienced with, and the assumptions behind your numbers have bitten me in the past.

If you work as a consultant in the US in tech, juniors tend to make 50 to 75$. If your anywhere good/experienced/wanted, 125$/150$/hour.

You'll probably also find it's easier to get work if you bill at triple that. Generally people don't hire super-cheap consultants.

Try rebilling $20 / month at 10 sales per day, it really adds up.

subscriptions > one time sales

Don't forget the churn factor.

The figure to measure is 'retention'.

When cancellations equal signups (in this case 10 per day) you will stop growing. With the 10 signups per day as a base and a retention of 6 months on average that would mean that you stop growing after about a year and you'll end up with 1800 active accounts at that point for $36K per month in income.

The number for $520 an hour that was listed is actually very doable. My friend is a consultant at the moment and his price per hour is $500. Granted he doesn't get to take all of that home at the end of the day, the company he works for takes 25% of that, which still $375 an hour. Since he doesn't have to find his own clients (the company does that, hence the reason they take 25%) he has 40 hours of work a week. Since he is a consultant he can take anytime off he wants, but it is unpaid, lets assume that he works for 11 months out of the year, 40 hours a week.

$375 * 40 hours * 4 weeks * 11 months = $660,000 per "year"

That is still a substantial amount of money, yes it is not close to the illusive 900,000 the original thread was asking for, but it still shows a good example of what is currently doable if you have the skills.

What field is he in?

Medical.

I know this has been covered here before, but here's a real-world example of succeeding at this: http://www.balsamiq.com/blog/2010/01/03/a-look-back-at-2009/

This guy is my hero.

Just make something people want or, better still, make something you want. Is there much advantage starting out defining how rich you want to be? Just keep going for a few years and then, if you're lucky, you can look back and go "Oh, I've got enough now, I think".

Is there much advantage starting out defining how rich you want to be?

Yes.

Quantifying your goal helps you answer questions like "How can I get there from here?", "How long will it take?", "Will I ever make it there at my current trajectory?", and "Do I still need to work anymore?"

And it will also tell you, "How much do I have to charge, and to how many customers?", which will help you avoid low-margin, hard-sale markets, and get you thinking about recurring revenue.

Does how much you charge really depend on how much you want to make?

It does in helping you realizing if the market you're targeting is big enough to achieve your goal.

If your goal is to make a million dollars a year with a certain product or service, the number of units of that service or product that you can provide (e.g. you have time to take on only so many projects a year, you're hand-building furniture and can make so many a week, etc.) or the expected number of sales you can make tells you how much you would need to charge to reach your goal. price = $1,000,000/# units

But it really depends on what end of the stick you're looking at. The OP's objective is to reach a certain revenue. You can look from the other side and say "I'll be selling my product at that price, which means I'll make price*units per year."

Better yet, what can you sell for $5 to 200k people? Aim low, aim wide, and hunt with a gatling.

Not necessarily better yet. In fact you've completely missed the point. Recall the post about the company making $1000 per day on their iPhone app. They sell it for $25 and have staked out a niche. Meanwhile hundreds of other apps try to aim low and wide and for the most part make nothing because they charge too little and can't make up for it in volume. The point of the post is it's easier to sell something to 1000 people than 200,000.

Do you happen to remember the name of this app? Thanks.

http://iteleportmobile.com and http://news.ycombinator.com/item?id=1365776

Yes indeed. Additionally, people forget with app sales: There aren't that many potential clients. Even if they get everyone who'd buy their app if they knew about it, they still don't top out at silly amounts of money.

Unless you hit a lottery, it is incredibly hard to reach 200k people.

Err...the internet?

Plus, unless you're selling insulin to diabetics, making 200k sales on the Internet probably means having 2MM to 20MM good prospects. Not visitors from Techcrunch, not uniques on your blog: millions upon millions of qualified prospects. That is highly non-trivial. Then actually converting them is also non-trivial.

Yes, case in point Evernote (which I would call a very popular app).

- Premium accounts are $5.00 / month

- 50,000 paying subscribers

- 28 Months (time it took to get to 50k paying customers)

http://mobile.venturebeat.com/2010/03/26/freemium-summit-eve...

but that's $5/mo not $5 total. On an annual basis you can just multiply the subscribers by 12 and it's like making 600k sales/year, expect they are automatic. That is $3mm/year.

Luckily you only need little less than 17,000 people at $5/mo. Not 200k.

There is a huge difference, both in real terms and more importantly in psychological terms, between $5 a month and $5. Most people requite far more incentive to sign up for a $5 a month service than they do to buy something for $5.

Why worry about a million a year in revenue (or did we mean profit here) - what you really want is probably the lifestyle you think you will get when that happens.... perceptually, what's the difference between a million a year and 10 million a year in revenue? What really matters is what you, as the owner, take home, and the life you live while doing so....

Great point. A lot of people spend all their time trying to earn more money, but they don't remember that money is worthless if you don't have the time or the need to use it. Time is the most valuable currency we have in our lives, it's the only currency we can't earn more of. We can only choose to spend it better.

90-95% profit margin isn't exactly realistic. Not that people and some companies don't hit that mark but it is rare. A much more realistic range is probably 30-35% if you are in the tech world and much lower if you are in the world of physical products.

Yeah I agree. If the margins are that high, then you'll have a ton of competitors come in, which will end up lowering it in the end. It may be possible in the beginning, before the competition forms.

Pro audio equipment has pretty high margins. The barrier to entry is fairly high (lots of R&D involved), so there aren't a ton of compmetitors, and the competitors like making good margins so the prices never get too low (improving technology and cheaper materials also helps with that). If a competitor tried to own the market by selling equipment at consumer margins, they'd probably starve on the low volume they'd get.

I disagree strongly with that, and I've got the numbers to prove it. Software is one place where you can definitely get that sort of profit margin.

I've taken the approach of selling a service for $250,000/year to a small number of people. The sales cycles are longer, but the customers are very loyal if you provide good service, and it's much easier to support 5-10 clients than 200k clients.

When starting a business, if the idea is even reasonably good in a decent sized market and you stick to it, getting to $1M per year in revenue is not the hard part. In fact, after two companies of my own, it was almost too easy to get that far in each one. The hard part is making a decent amount of money at that revenue level because realistically you are going to have at least a few employees in the company to get there. ie: $1M isn't what it used to be.

In my experience, getting to $10M dollars should be the real goal and that proves to be quite a bit more challenging because this takes some real scale and the skills from 0 to $1M are quite a bit different that say the skills from $5M to $10M range....the job of CEO is completely different between the two and most people don't prove to be good at both types of the "jobs".....so the company hits a ceiling and never quite gets there.

Interesting. Can you elaborate how exactly job changes from 0 to $1 M as compared to $5 M or $10 M range?

I would guess that the job changes from managing people to managing managers.

Yes, that is definitely part of it.

As stated by another reply, part of it definitely is the shift from managing people to managing managers.

The other main shift is that the scope of what you are doing goes beyond what one person can keep in their head. You can't know everything going on any more and you can't be telling people exactly what to do.

The closest analogy I can come up with it that it's kind of the like difference between "procedural programming" which you can get away with for the $1M company as compared "object-oriented programming" for the $10M+ company.

You can't possibly know every detail of every object's design and at the same time you need to have techniques to discover how well all the objects in the company are being constructed and acting as the "system engineer" making sure all the "objects" (ie: teams) still interface together well.

I can tell you from experience... the job changes from making to managing. (c.f. http://www.paulgraham.com/makersschedule.html)

Another way of saying same. If employees are in your future, focus on revenue per employee (RPE).

Napkin math: sub-$100k RPE and your wee company is nominally profitable after salaries, fixed & variable costs. Greater than $100k per employee, profits scale nicely.

While nice to talk about the Goog's RPE ($1 mil '08), I prefer to "fish" for company ideas a little closer to Earth. For inspiration, Inc 5000 companies with 50 or fewer employees, sorted by revenue:

http://www.inc.com/inc5000/2009/search_results.html?showrank...

I agree on RPE, but the data on the Inc. website is highly suspect, however, with regard to number of employees.

I did a random sampling of several companies that had tons of revenue with just 1 or 2 employees and checked out their websites and the Inc. data is flat out wrong in many cases.

http://www.healthport.com/management_overview.aspx

this company is listed as 3 employees on INC., there's 4 in their management section alone...seems INC maybe has PUBLICLY listed employees, and is not counting the chairman...

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