My sixth year as a bootstrapped founder | Hacker News Reader

My sixth year as a bootstrapped founder

mtlynch.io

1,071 pointsmtlynch321 comments

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.

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

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.

Do you mean EBITDA?

aka Earnings before interest, taxes, depreciation and amortization

> …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.

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?

Company acquisition is possible without the existence of a stock market. What I’m objecting to is the latter.

IPO/stock market was not mentioned anywhere in the post. It’s much more typical to be acquired than to go public.

Sorry, you’re right. Confused the two for a second.

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.

As others pointed out, nobody else mentioned sale by public offering.

But let's go with it anyway, why is that different? It's just a way to have multiple owners, more easily very many of them than you could manage in a private sale. So why is the stock price not the actual value people see that slice of the company as providing them?

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.

> 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.

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.

Uh? Islam says nothing about the stock market. Participating in businesses and having shares is completely halal, and encouraged actually. That's the good way of generating long term revenue, as opposed to lending or profiting from interests. The very first Muslims and the prophet himself PBUH were merchants and traders, and business owners.

I’ve met people that believe that any extension of credit that has a premium attached to it is against the rules. And that the very real fact that any transaction on a modern exchange involves the extension of credit with a premium, leads to a situation where the exchanges themselves are forbidden.

I don’t have any opinion on if this interpretation squares with their religion but it is certainly true that stock exchanges are run on extending credit and paying a premium for it.

Mhmm I can see that argument being quite valid for trading stocks in general. As in, a actively trading since it inherently involves margin and leverage at one point or another, but just owning a share of a publicly owned corporation is a bit different imo.

As you said it depends on interpretation, and I think it depends but it's not as clear cut as the comment I was replying to could make it seem for others.

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?

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?

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

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.

Yeah, it’s simply lying.

“Hussle” ethics of “if it works it’s OK” are so damn gross.

Sure, but the valuation doesn't buy you any food. In the end you need cashflow.

depends on what "in the end" means haha

it means when the bills come in and are due

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.

> 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.

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.

> 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.

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.

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.

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.

then do the calculations in 5 or 50 years.

I don't understand your mindset that says you should decide when other people multiply some numbers.

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.

> 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.

So the entire point of a "valuation" is to determine the sale price, right?

Sale price is just one possible valuation. Replacement cost is another. Net present value is yet another.

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.

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?

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.

Unless you have a mortgage, or your city reassesses property taxes, or...

gais, taxes exist, therefore the idea of not worrying about the sale value of your property doesn't apply!

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.

> 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.

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.

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.

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

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.

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.

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)

He did pay himself a salary in 2023. See the P&L included in TFA.

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.

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.

> Also, a nit fwiw, you automatically assumed the entire profit of the business is the market salary for the person running this business

Not really a big assumption given that the person is capable of operating an entire software and hardware business by themself.

It’s more complicated than that, though: The salary someone receives from a company isn’t 100% passed through untouched. To pay everything from taxes to benefits, the most they could realistically expect to take in equivalent compensation would be closer to $150K (approximate), which is actually below market rate just about anywhere for someone with these qualifications.

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.

I am disappointed that NASDAQ and US securities regulators allows companies without audited profits to go public. "Worth" 160M? Not to me.

> 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.

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.

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.

The other poster is right, if you told someone who knows about business valuations about this conversation they'd be confused and bemused.

Easiest place to start is valuations arent capped at one year of profit, or last years profit...the silly mistake is the one year thing, the more advanced mistake is looking at profit instead of cash flow.

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.

> 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.

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.

> 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)?

> 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.

> 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.

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.

I'd just like to say that I very much appreciated reading both of your responses, and commend you both for firmly but politely and reasonably disagreeing.

Second that. Good to see a polite but firm discussion in the comments. Also very interesting topic, would love to be a fly-in-the-wall in a meeting between these two.

You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?

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.

> 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.

> 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.

What is your take on ecommerce businesses that generate most revenue from a single platform, e.g. Amazon or Shein or TikTok?

It seems like a lot of concentrated risk, and scaling is a challenge, considering the number of Amazon roll-ups that were on fire 2020-2021 and are now on the ropes (See "Amazon aggregators fall on tough times", https://www.axios.com/2023/09/05/amazon-aggregators-tough-ti...)

> What is your take on ecommerce businesses that generate most revenue from a single platform, e.g. Amazon or Shein or TikTok?

It’s not something I do due to the “concentrated risk” you mentioned. Scaling can be done, sometimes quite easily and effectively (e.g., Amazon ads can be quite efficient at scaling).

In general, I try to avoid or minimize exposure to capricious single points of failure, especially in sales/marketing, production, and/or distribution. I consider most large tech companies to fall into the capricious category unless I have someone on the inside who can make things right for me. This access to insiders is not as robust as I would like, but I’m working on it.

All that said, I know plenty of quite successful business owners who have gone all in on a single platform like Amazon or YT.

Regarding the roll ups, i think many of the businesses were bought at unreasonably high values. The linked article refers to this.

Covid changed many markets, in some ways permanent, and in other ways temporary. I was passing a lot on what I considered unreasonable prices for certain businesses. I could have played hot potato, but there was no reason to do so.

Idk, optimizing inefficient systems sounds a lot more interesting to me than working for the man, as you put it. Thanks for writing this out. It seems very difficult to get into. I'll reread this a couple times.

> Idk, optimizing inefficient systems sounds a lot more interesting to me

Yeah, I guess I’m being somewhat disingenuous. I like optimizing systems, but I’m aware that it’s not everyone’s cup of tea.

You learn that very quickly at cocktail parties when people ask you what you do, ask for more than the headline answer, and then have their eyes glaze over when you get into the details.

> than working for the man, as you put it.

As a nerd/geek, and I fall into that category, working in a good skunk works type of place is pretty damn fun. It usually doesn’t pay well compared to most tech jobs, it’s often not that prestigious, but damn… it can sometimes tickle the brain like no other.

One potentially bad part of it is that most skunk works are funded in some way by the DoD, so some folks may object to that.

> Thanks for writing this out.

My pleasure.

> It seems very difficult to get into.

Hmm… my first instinct is to say that it’s not, but I might be short-selling my skills, network, and (frankly) privilege if I say that.

I think it’s open to far larger group than is actively trying to participate in it.

I think the main keys are:

- Understand fundamentals of business. I have been around this my whole life, so it came quite naturally to me. That said, it’s learnable, and a lot of things fall into the common sense or empathy categories.

- Be good at contracting and hiring/firing. There are a lot of bozos in the workforce, but there are also plenty of hidden gems.

- Be good at marketing/sales. Although it’s possible, I think it’s tough to hide behind a screen and also scale.

- Talk to your customers. PG beats this drum, and there’s a good reason. Note customers here are customers of any business you own as well as business you want to buy or entities you want to sell a business to.

- Start small, but do things that scale. People think you need a lot of money to start doing this. You don’t. If you do really well, you don’t have to ask around much before relatively large sums of money start finding you. I currently prefer to self-fund, but I’m thinking about transitioning to some sort of dividend growth entity — I think that they will be en vogue in certain circles over the next 10 years or so.

It seems like you enjoy talking about this - is there an email I could reach you at to have a longer conversation at some point down the line? I'm really interested in just about everything pertaining to your experience. If you'd rather not post yours, you could email me directly at [redacted].

Quite difficult to be like you. In any case, much obliged to you, sir!

I have a feeling a lot of the lessons you learned could also apply to developers who want to be better at freelancing (my case). But I don't know if there is a way to pass down that knowledge while you also get something out of it.

For what is worth, I appreciated your comments in this thread.

For freelancers who want to improve (it was my case years ago), the best book is "The Secrets of Consulting", by Gerald Weinberg.

https://www.goodreads.com/book/show/566213.The_Secrets_of_Co...

Thank you for making me aware of this author. I see he has several books on topics I find valuable.

I am glad I was able to help you.

If you like "The Secrets of Consulting", the next one for you should be "Exploring requirements: quality before design", by Gause & Weinberg. What an eye opener it was for me!

Noted.

I read the book 'Built to Sell'[0] recently. It's written for founders, but gives you insight into how buyers think and what they are looking for.

[0] https://builttosell.com/

> (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.

> 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.

Fair comment, and I thought about changing it. I didn’t for reasons listed below:

- The comment was mainly directed at xooglers, specifically the mindset some folks have towards them. Googlers and xooglers were something to behold in the “don’t be evil” days. That reputation has decreased substantially since, imho (I’m guessing directly or indirectly due to structural changes in the org). This is not to say that there aren’t some super impressive googlers and xooglers (there are), but the hit rate is much lower than it once was. If the op had just said “a smart engineer”, I wouldn’t have commented on it — I imagine the dude is plenty smart, although I doubt that it makes his efforts difficult to replace (see below).

- In general, I try to take the air out of reputation virtue signals that I think may not be warranted. Google, googlers, and xooglers are now in this category. Other groups in this category are groups like Harvard grads, Stanford grads, MBAs, PhDs, name brand consulting firms, name brand IB firms, etc. Note that I am a member of several groups that sometimes send these virtue signals (I try my best not to), so I’m dog fooding my own criticism every day.

- I don’t know the engineer who owns the business, but I find it unlikely that he does things that both must be done and must be done at a (relatively high) labor price that the owner could command in the market. I expect neither are true. The “circle jerk” comment was a reference to me thinking that the person I was replying to was putting far too much weight on something that has (imho) much less impact on the profitability and ultimately the price of the business. I’m OK disagreeing on this point — different strokes for different folks, and that’s why the market price talks.

These people actually do grow on a tree called Google. All the Google layoffs means there are more smart former google engineers than ever currently available for hire. More importantly, doesn't have to be a former google engineer, any smart engineer can do what he currently does, google didn't teach him anything special they just hire smart engineers when they find them.

There’s a reason they were laid off. I find this mind boggling, I’ve met so many mediocre and low performers that are still highly sought after by simple virtue of having done nothing at faang or Stanford. It’s basically the software engineering professions McKinsey. Everything they touch is a huge money sink with no real added value and probably long term damaging to society and yet somehow they all keep climbing the ladder. All while other actually high value people are just lost in the noise.

I agree with you overall. But the reason someone is laid off mostly likely has no bearing on ability or actions. Not having the ability to influence layoff decisions doesn't mean you were a bad engineer or providing more value than others

I have no particular advantage in this space and don’t even own a TinyPilot. I think it’s worth $250K to me, and think it’s worth much more than that to someone who can create additional value by virtue of having some advantage relevant to the business (existing manufacturing, fulfillment, service, etc ops).

If you are valuing a business on SDE the multiple is usually 2.4-3. So this business as it is today would be worth more like 566-708. The beauty of building a business is that as the bottom line goes up your business is worth more, but it ALSO fetches a higher multiple. So a business with a bottom line of $1M will get 5-7 times earnings (note: not SDE), whereas a small business gets a lower multiple based on SDE.

Valuations for vc’s acquiring is very different than private equity firms acquiring a business like this.

If you build something that makes 100k/y it can sell for 7-15x or that.

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.

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.

What market were they in? What did the growth and earnings look like?

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?

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.

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.

> 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).

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.

so 10x revenue, which seems pretty decent for tech

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.

> 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".

Ouch. Businesses sell for more than 4x all the time. There are countless examples of that.

Give the examples. Businesses this size in this market have very few (/0) logical buyers.

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?

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.

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?

I think this is one of those areas where a competitor buying you can make sense. Either your product is attractive to higher margin customers, at which point they are buying into a higher end market, or your product is part of the low-end, and by buying you out and shutting you down, they hope to convert some of your lower margin customers to higher margin customers, and let some of your high-maintenance customers go bother one of your mutual competitors (which is honestly the most Sun Tzu-ish, borderline Machiavellian, reason to fire a customer)

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.

The last startup I was at that sold 'only' made the owners millionaires, when they were hoping to retire.

If you're in your thirties or forties, a million bucks won't even get you a school teacher's lifestyle for the rest of your life. A million bucks makes the rest of your work life low-stress, but not non-existent. You still have to work, you just don't have to worry about paying rent, or getting exploited by your boss. You can always quit, and you can always say no (one of the reasons some bosses like a hint of desperation on their employees)

They bought water view condos, one got his teeth fixed, and then they had to go right back to work.

Interesting story.

Forgive me but I'm not sure I see the relationship to my comment.

A million after taxes is worth 20 years at 100k after taxes (50% rate).

Investing a million today say in real estate over 20 years will give you money to live on while you rent and a the property can be sold for double in 20 years. Repeat and this strategy would bring increasing wealth for a 20 year old.

No one makes $100k and pays $50k in taxes.

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.

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.

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.

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.

You built two $10m businesses? Geez man where's your blog post series

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.

> 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.

I think you need to have ARR(annual recurring revenue) to have a multiplier like this. I think the company makes money when somebody buys the device, but that's it.

It would also help to know the TAM(total market area). How big is the remote KVM market? That gives you an idea on how many devices it's possible to sell in a given year.

Looks like the device sells for about $400.

It wouldn’t be that bad if you are already substracting salaries right? Having a few years in which your earnings are zero due to purchase price is pretty doable if you start earning a cool 100k every year after (even better if it’s a growing business).

> Only high-growth, high-margin businesses can get 7x+ earnings

Not really, the S&P 500's P/E multiple has historically been at around 15x and now is somewhere around 30x [0]. And with that, we're talking about large, mature businesses that are not growing super fast -- more like 6-7% annualized, post-inflation [1].

[0] https://www.multpl.com/s-p-500-pe-ratio

[1] https://www.investopedia.com/ask/answers/042415/what-average...

Sorry, I should have said revenue.

There is a lot confusion in this thread (sorry) over "earnings multiples" vs "revenue multiples."

On HN you will almost always see revenue multiple discussed.

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?

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

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.

Great advice here!

The math on multiple needs a revision for 2024. SalesForce and Atlassian are valued at 6x and growing faster than ever with over $1B in revenue. No one else is getting a better multiple than that in SaaS right now without a very eager buyer.

Enterprise Value is great in theory. In practice once you get to enough free cash flow you are really just making the decision on whether to take X years of profits in advance for selling all future profits.

Even at 2x-3x, it comes out to “I’ve made enough money/I’m tired, I’m gonna cash out and pay a big tax bill.”

I’d rather make a business that is run by the team and stay with it.

QSBS equity ownership is common amongst US bootstrapped businesses; which can change the tax concerns upon sale.

more like 3.5/4x sales for a small saas not certanly 7-15x

not relative to sales, relative to earnings

Not everybody wants to sell their startup though. Accessing that liquidity without selling can be very very risky. Also, small companies like this can’t command big premiums because too much operational/institutional knowledge is held by the owners, so a lot of that “profit” is really more like a wage for the founder.

I’m in the infancy of a bootstrapped company while witnessing the general enshittification of all these formerly treated VC backed companies as they prepare for /adjust to being public companies. I also recall many decent products like Quora (yes there was a period where it was actually good) go to shit and fail chasing $$. I feel like the culture is shifting for new founders and a lot us want to aim for sustainable businesses that deliver real value rather than VC moonshots that say yes to everything that makes them more money.

I think “lifestyle” business carries negative connotations and bootstrapping/roof shots don’t capture this mindset yet. For me personally I guess it’s like, I’d rather have a $100m business that does cool shit and is focused on doing one thing, than be forced into chasing growth at all costs in all directions to get a potentially much bigger exit. If I had such an exit I’d draw it down at a sustainable rate anyway that ends up not being different from the earnings of a private company of similar value.

I guess with similar luck and results maybe I could be a billionaire instead of a hundred millionaire, but idk if that really matters, and I’d then get the typical SV meaningless ennui while being glad to leave the shitshow I created before it got even shitter. Running something I’m proud of for the long term seems like a more meaningful and rewarding way to spend my time and it can actually make the world better even if it doesn’t capture as much of that value.

Like, what if the dominant social media company had refused to serve ads and optimize for watch time? What if major cloud providers had a cohesive vision instead of cobbling together every stupid thing a $100mm spend customer wanted? What if YouTube could serve recommendations based on similarity/enjoyment? They could still be major successful companies. But selling your company, taking on investors, and maybe even lending against your equity threatens to destroy that.

It is in my experience that not all businesses can be sold.

>you're creating a company that should be valued (and eventually sell) for 7-15X Earnings

Why should an exit be the primary goal? There is nothing wrong with starting a business with the intent of continuing to run and own that business. This should be normal.

For some I suspect that it's not the primary goal, but when some investors pull up with an offer in that range it seems irrational not to take it.

Problem with valuations is that there has to be a buyer for that 7-15x. There is a lot of businesses that are not sellable because “owner is the business” and then comparing to normal job makes sense, because that is other realistic alternative.

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.

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.

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!

Classic scaling problems.

Most people aren’t entrepreneurs, most people are risk-averse, cynical big company worker drones.

The worker drones have way more time to spend on hacker news, since any job at a big company is infinitely easier than being an entrepreneur.

Hence why the comments on every Show HN post for the last 7+ years is dominated by low stakes nitpicks. The type of things you hear in big meetings at big companies. “I would rephrase this on the landing page.”

Exactly. I started my SaaS almost a decade ago, with stints of in-between consulting to finance the whole thing.

For the first half of the decade, I used to drink the cool-aid too: rewriting components using the framework-of-the-day, stating my opinion on whatever I considered to be important on HN, Reddit... Resulting in a lot of stuff, but not in reasonable ARR.

A few years ago, after making lots of cliche mistakes, I had another rough period, resulting in me buying out my partner's half that I gave to him for free without any contingencies, and having to consult again to finance the buy-out.

After that I decided to take the leap for the third time, and took a deep dive myself into sales and GTM, resulting in what I consider a ramen profitable ARR right now for someone with a family of four with a working spouse (little over 100K€ ARR).

I'm now slowly and steadily growing, but reinvesting almost everything I make back into it.

My next big learning step will be figuring out at least one repeatable way to get new clients.

I'm still in dubio whether I should do proper marketing, or just hire 2 SDRs and hand them a list with contacts...

I am very picky on my customers, so they tend to be very sticky, and buy extra modules as they renew their licenses, so I'm quite happy with how everything is evolving...

However, the whole thing takes time, a lot of time, and it requires a lot of grit and patience. So while it might sound interesting in a short comment on HN, it's basically just grinding every day, throwing things up to a wall, and seeing what sticks... If I'd blog about this every week, it would probably be really boring.

It might take 2, 3, 5 or 10 years to get to € 1M ARR, or maybe I'll never get to this amount, but I'm ok with that. I have friends who got investors, sold or were acqui-hired, and to me they seemed not to be happier at all during the job. And while it's nice to get FU money, I'm not sure that I'm willing to exchange years of my life for it, as i'm currently mostly enjoying myself and building the kind of company that I would love to work for.

The reason I'm no longer posting on Reddit, HN and the likes, is that - all things considered - I already have too much things on my plate, and posting on social media is not the best use of my time.

I do keep skimming articles to get the big picture as a hobby, but skip most of the shiny new things (TM), and stopped contributing because the value-add for me is so low.

Highly relevant comic for me: https://xkcd.com/386/

I imagine there are many others that share a similar story.

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.

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...

Just found about your blog. Great job and you are a great inspiration. This is a personal question and I hope you don't mind. Do you have kids? How do you manage risk, especially financial risk of startup?

No, I don't have any kids. I think it would be much harder to follow the path I did if I'd had children to support.

I've been thinking about risk a lot in the past year. I used to feel like I had this safety net of getting a job in big tech again if the founder thing didn't work out. When all the layoffs and hiring freezes began, I realized that my safety net may have disappeared.

It's scary to lose the safety net, but at the same time, I felt grateful that I've had the last six years to practice earning money without an employer. If I had been laid off, I'd be in a terrible position of competing against thousands of other recently laid off employees who are all desperate for work. If TinyPilot were to fold, I don't think I'm guaranteed another successful business, but I feel like I'm more likely to build a profitable business than to get a job as a developer in a poor tech economy.

| 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.

Can you recommend some?

The first 50 episodes of the Indie Hackers podcast had a big influence on how I approached bootstrapping. The episodes that stood out in particular are:

- Pieter Levels: https://www.indiehackers.com/podcast/043-pieter-levels-of-no...

- Tracy Osborn: https://www.indiehackers.com/podcast/029-tracy-osborn-of-hel...

Josh Pigford (who sold Baremetrics for $4M) has also documented all of his failed ventures:

https://joshpigford.com/projects

Thank you!

> 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.

Something that helps with this fast cycle is that many people have prior experience which they can turn into an info product. For example, Daniel worked for many years at AWS, and then after quitting could write up https://dvassallo.gumroad.com/l/aws-good-parts by leveraging his many years on the job.

If the info product is along the lines Daniel describes,

"This is an opinionated book. We only cover topics we have significant first-hand experience with. You won't find most of the knowledge we share here in the AWS docs."

it's really valuable.

I find it similar to how it's more effective for a fresh university student to ask senior classmates which classes are good and which professors to avoid, rather than asking professors or academic advisors. They'll get more relatable advice from peers.

The same goes for lots of knowledge or skilled work, whether accounting, construction, or something else. First-hand experience that doesn't appear in textbooks can be so valuable to others.

Agreed. I read your original post during a time where I was starting up a solo company and it's great to see you've eventually seen success after all these years! The points you make about which problems seem interesting as an engineer and which ones lead to actual success resonate a lot. Congrats on TinyPilot!

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.

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.

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.

Glicol seems very cool! Looks a bit like Faust (https://faust.grame.fr), an FP sound programming language I came across recently.

Reminds me Overtone build with Clojure https://overtone.github.io/

Wow. I am in similar situation. I quit job after having a baby and when workplace discriminated against me. I decided not to fight and rather start something of my own.

Now, I see no traction after building an MVP. We are in EduTech and eCommerce space. It is so hard to get any response from decision makers.

People would rather pay big corporations millions than talk to a regular person who is offering $200 software.

I don't know what to do.

Shift to a different MVP. Try to get some revenue immediately.

My special relationship to Glicol is a different story as it was not designed for commercial use and it's purely experimental during my phd.

It's just because of people's encouragement that I try to build the education interface for it.

And after checking a few existed edu interface, I realise the core tech on their products is close to zero. All the hard work is on the sales team and marketing.

So the first few deals are the most important at the moment, and I need to fight with the idea that I want to improve the code before I talk to schools.

At least that's what I learnt so far.

"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.

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?

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.

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.

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...

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.

>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)

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!

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.

Author here. As always, I'm happy to take any feedback or answer any questions about this post.

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!

Why the sharp drop in adspend?

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.

Could you share platforms/channels were more profitable/worth it and which of them weren't? I love your blogs btw!

If possible, could you please the website for this ads consultant?

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!

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.

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

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!"

Have you thought about expanding into the void left by SlingBox?

https://en.wikipedia.org/wiki/Slingbox

No, that's an interesting idea. I don't know that much about that market, but I guess it seems like a bad sign that SlingBox couldn't make it work even with dominant market position.

How detailed is your time tracking in terms of what you actually did (not the mythical calendar/plan/TODO list)? You're not going to get down to 20 hours a week without identifying the chunks of time you're doing and essentially outsourcing it to someone on the Tiny Pilot team (or removing yourself from meetings).

I think detailed tracking can be helpful, but I don't think it's necessary. I reduced time I spent on TinyPilot in 2022 even though I don't have rigorous time tracking to prove it.

Do you have recommendations for granular time tracking? I don't know of any tool that seems like it would do what I want. I know there are tools that track your active window, and I'm not crazy about the privacy aspect of those, and I don't think window titles map perfectly to activities. And then I could manually log every hour of my day, but I feel like the time I'd spend bookkeeping aren't worth the insights I'd get from it.

Always interesting to follow your progress Michael! I managed to sell 100 units last year and feel ashamed compared to your numbers but hey it’s better than the nothing of the previous year!

Nice work! I think units sold varies so much by business, so no need to feel shame at all.

Selling 100 units per year is a nice spot to be in because you're making sales frequently enough that you probably have some knobs to adjust and see what impact it has on your results, and that makes it so much easier to improve. That's why I've always been afraid of businesses that rely on enterprise sales, where you're going for 3-4 big deals per year, and the sales cycle is 6-18 months. It seems so hard to know whether you're doing well or poorly until it's too late.

You’re right. I find you very inspiring Michael. Your writing has given me a lot of new ideas on a crossroad I’ve been stuck at recently.

Wow, super inspiring.

I've coming up on a crossroads where I'm considering leaving my high-paid low-pressure cushy remote job at some big tech company to chase some silly ideas I have. The timing feels right - but I can't help but be fearful of a jump without any sort of indication on whether I can actually pull that off.

Thanks for the transparency and sharing - you've got a new fan!

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.

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.

Thanks!

I'm currently contributing roughly that amount into a SEP IRA.

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.

I was curious about this as well! Thanks for sharing your research.

> 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.

Same for us. One of the business cards we use gives 5x rewards on online ad spend, which translated to lots of free flights and hotel rooms over the years.

During the early part of the pandemic when points were not usable, we converted them to cash or credited them to existing expenses (the card gave a 25% bonus to use this feature).

> During the early part of the pandemic when points were not usable, we converted them to cash or credited them to existing expenses (the card gave a 25% bonus to use this feature).

Man this was one of the biggest silver linings on the pandemic. Chase allowed groceries and home improvement purchases to be paid for with points. 1.5x redemption. Paid for all the materials for my home renovation with them.

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.

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.

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

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.

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.

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.

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?

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

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.

On top of being a successful founder and a great writer, Michael is also a uniquely nice and generous person. He was the second customer of my startup and, before paying, advised me to raise the price.

That is truly a great customer who cares about the longevity of your product/service enough to be willing to pay what it's worth.

Thanks so much, Sam! I'm proud to be such an early customer of CodeApprove.

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.

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?

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.

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?

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.

> 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.

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.

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/

Try offering an affiliate program if you haven't already. It can increase your sales drastically and you only pay for the results.

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.

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).

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

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

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!

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

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 ;)

Yes, I'd very much like to! So far, I just have the landing page:

https://refactoringenglish.com/

Congrats. Selling hardware+software sounds a lot more stressful than selling just software. I hit 20 years as a solo bootstrapper in 2025.

I've really enjoyed following your story for years. Thanks so much for your transparency. I wish you lots of continued success.

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.

I’m curious if you’re getting killed by the new Section 174 changes?

In 2022 you spent what looks like at least $150,000 in what’s now classified as Research and Development. So this means you’d have a tax burden of around $30k even though you only made $10k in profit.

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....

Thanks so much, Nick! Really great to hear from you!

I have two of these and can say it's a great product with great support by the creator.

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.

> 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?

650+ according to his expenses

Thanks for sharing your journey. Are you worrying that someone can copy the idea and bootstrap a new business with the same product? I checked the product website, there are already other players on the ground.

That's a a great story. It's sad how much time and money is required to launch a profitable business and how many people never get this opportunity in spite of the fact that they could add a lot of value. They just need a few years of runway. Very few people are given that chance. Ex-developers from big tech are in an insanely privileged position, especially if they were able to accumulate some big pay packages. All developers I know outside of big tech are all broke.

Hire a verified hacker for quality service (spyrecovery36 @ gm ail.com ). They offer service like ( phone hack, Upgrade grade, GPS track, face book recovery, delete criminal record, whatsApp recovery, retrieve lost wallet and many more...

>> Would circuit boards work after being drenched? Probably not.

Here is Adrian's Digital Basement putting computers in the dishwasher:

https://www.youtube.com/watch?v=3eX3IGPq8AQ

And the 8 bit guy:

https://youtu.be/LlLDN2kn7-0?t=299

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.

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!

Huh, interesting. I used the PiKVM product for the same purpose. This is very cool. This is a pretty cool product.

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.

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”.

There is no difference in a single member LLC. All profits from the LLC pass though as income which is ultimately taxed at the same rate as salary (including SSI, Medicare, etc).

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?

> I don’t draw a salary, so the total amount I earned from TinyPilot in 2023 was $236k. People often wonder how I survived on the meager earnings of my first five bootstrapper years.

TIL a $230k income is meager. Jokes aside, what am I misunderstanding here?

I earned roughly zero in my first five years, so that was the part I was saying was "meager." Year six was when I earned the $236k.

I admire the level of insight and transparency. Congratulations on an amazing year, and keep swimming!

Pretty well-written blog. It's impressed to me about how you managed your bootstrapped company and switched workloads to 3PL to reduce stress of your people. Hope to see the future progress of your company in your future article.

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?

Love this blog.

Any other similar blogs or communities?

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/

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

Thanks for sharing your experience!

Do a significant share of your sales happen on Amazon? If so, have you experimented with sending inventory into Amazon so they can do the fulfillment and you can get a Prime badge on your listings?

They do, but I've been reluctant to give more power to Amazon. They make us jump through so many hoops and come up with dubious reasons to deny payment, and handing over a bunch of our inventory to them gives them power to control us even more.

This shows that going out on your own is not always strictly better or more rewarding. As a software engineer you can simply rent your skills and be part of a bigger team and company that's arguably doing something more impactful than building widgets.

The finances work out better too. Market salary as a software engineer is easily in the 200-300k range and increases over time with experience and skill. You can also more easily cap your work hours at 30-40 hours a week especially if you're remote. Then if you can figure out a way to do that while living in Southeast Asia, it's hard to imagine quality of life getting better than that as you're now living like a king and should be able to save as much as 50% of your income and retire young.

Building and owning your business has other non monetary value

Going out on your own may not be always strictly better or more rewarding, but this founder story is just one datapoint. Since most companies have an employee equity pool that is sized at only 10-20%, working for them is by definition giving 80-90% of the value you create away to the founders and investors. The rewards of either starting a company or being a sole proprietor (e.g. indie dev or consultant), can therefore be expected to be very substantial, on average, perhaps even 5-10x per unit time worked, and that's not including the secondary non-financial benefits of not working for someone else (e.g. freedom, autonomy, etc.). I do wish more people were aware of this principle, because the willingness of engineers in the aggregate to acquiesce to 10-20% ownership is why VCs and founders become so inappropriately rich by comparison. Just my 2c.

Been doing this for a decade+ and never nor peers are making 200k. Getting close after a lot of inflation though. Lucrative jobs exist but are not available because they simply won’t allow you to join.

This is kind of like saying, just be a successful actor. It’s significantly not up to you.

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...

I’d never heard of KVM before. I had to Google it before I figured out what KVM over IP meant, but once I got it I want to get it.

Maybe add something on the homepage for folks that’ve never heard of KVM?

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

I really enjoy these updates! Thanks for putting out the numbers.

how did you source the metal enclosure? I'm interested in making my products look more "professional" but don't know how I'd go about it

It was quite an ordeal!

Our hardware engineering partner subcontracted the design to a team of industrial designers they'd worked with in the past. We ordered prototypes of the design from both China and vendors in the US. The Chinese versions were better by leaps and bounds.[0]

We iterated a few times from there and eventually landed on a design we liked and worked with the Chinese vendor to produce the first few thousand. The Chinese vendor kept running into issues, though, so they were producing them at about 50% the speed they quoted, which was just barely enough to keep up with our sales.

When we switched to the contract manufacturer, they took over manufacturing the cases in Vietnam. They had trouble getting started as well, but they got the hang of it after a couple of months and can produce cases much faster than we consume them.

[0] https://mtlynch.io/retrospectives/2022/11/#with-metal-cases-...

Was wondering about this is you don’t mind. The post states disappointment with the US manufacturer but for a prototype. Maybe it could have been improved if you’d asked? Perhaps they didn’t know they were in a horse race.

I tend to think of a prototype as a rough sketch. Unless of course they told me it was a demo to win the job.

The impression I got was that they really weren't interested in working with me. Most of the sheet metal vendors I reached out to didn't even return my calls.

The one vendor that called back accepted the job, but when it was done, they just handed me the prototype and asked for my money. They never asked whether I was satisfied or if there were things they could improve if given the opportunity.

> Would circuit boards work after being drenched? Probably not.

Absolutely they would. It's common to put finished boards into an ultrasonic bath, even.

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.

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.

There is no email in your profile.

Does the payroll figure include a salary for yourself? If so, that would make the jump in profitability even more impressive!

From the article: I don’t draw a salary, so the total amount I earned from TinyPilot in 2023 was $236k.

Congrats on the incredible journey, Michael!

Thanks so much, Wenbin! It's been really fun following your journey with ListenNotes as well!

That's a really cool product! The only thing I would love is a way to zoom into the product pictures on the site.

his story serves as a strong deterrent for those who want to quit their jobs at FAAG to do a startup. Financially, it just doesn't make sense. It is only for those who prefers startup lifestyle and are willing to sacrifice potential economic loss for it.

Wow that’s a seriously cool product!

Curious about your Zig book!

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.

Very nice blog and just overal awesome to read.

Nice job, respect!

Looks useful

Am I shadow banned?

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.

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.

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.

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.

I looked up the CPU for one of the devices. It's the same one used in Raspberry Pi 4.

So I think I figured out the secret to him making almost a million dollars a year: he has a privileged background (worked at Google) and somehow that helped him tap into a market of people who don't know that a good price for a Raspberry Pi 4 is $35, not $350 or $400. I can see $65 with a nice case and shipping. Maybe up to $100? But $400 is ridiculous.

I just bought a mini PC for $350 that has 32gb of ram, a windows 11 license, and is not much bigger than these devices by the looks of it.

People who find this small device useful must just not want to spend their (likely high $/hour) time with mundane things getting their expensive toy home servers working or something

I can't tell if you are trying to prove my point or discount it.

But you can't justify $300 for installing and configuring free software. As you say, you can get a much more powerful computer for even less than they are charging.

I was agreeing with you that it seems overpriced and relying on a niche market that doesn't care about being cost effective hardware-wise.

It's sort of apples and oranges because the mini PC you purchased almost certainly can't capture HDMI video and can't emulate a USB device.

>I looked up the CPU for one of the devices. It's the same one used in Raspberry Pi 4.

It's the same CPU because inside it is a Raspberry Pi 4. We publish instructions for people to build their own.[0]

>he has a privileged background (worked at Google) and somehow that helped him tap into a market of people who don't know that a good price for a Raspberry Pi 4 is $35, not $350 or $400. I can see $65 with a nice case and shipping. Maybe up to $100? But $400 is ridiculous.

$65 isn't even enough to pay for the raw materials. If I sold for $100, I'd barely cover the cost of raw materials and the labor to assemble devices, test them, and fulfill the order.

There are a lot of expenses to running a hardware business, and I listed them in the post. How do I pay software engineers, hardware engineers, support engineers, and customer service staff if I'm selling a product whose profit margins are only a few percent?

[0] https://tinypilotkvm.com/blog/build-a-kvm-over-ip-under-100

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