>you think you will bootstrap something again?

Yes, definitely. Not hardware again because I think getting to the scale where you can use external vendors is so difficult and risky that it requires more specialized hardware expertise or VC backing.

I'm going to start with educational products because I liked my brief experience with that and never had time during TinyPilot, but I'd eventually like to build a SaaS that I can grow in a calm, sustainable way.

>I do have to say, I was somewhat surprised by the low multiple on the valuation, but perhaps that's just what the range is for a business of this nature. We're spoiled in the world of software and recurring revenue.

Yeah, from what I've heard, SaaS businesses sell for a much higher multiple, often selling as a multiple of revenue rather than earnings.

The other thing that's really reduced valuations is interest rates. When interest rates were <1%, private equity was bidding up prices of businesses because it was a decent place to park money, but now that you can get 5.3% from a money market, the additional return from buying a business isn't worth the risk.

>What about the tax implications of the sale. Have you figured out how much of the sale you'll be able to put in your pocket?

Still working out the exact figure with my accountant. His expectation was that I'll keep a pretty large percentage after taxes because of Section 174. I had a large amount of expenses each year in software development from overseas contractors, and with Section 174 changes that went into effect in 2022, I had to amortize them over 15 years.[0] But with the liquidation of the company, I can count those expenses immediately, and they offset the income from the sale. So Section 174 is still a bad deal for software founders, but at least when you liquidate the company, you don't have to wait out the full 15 years of amortized expenses.

[0] https://blog.pragmaticengineer.com/section-174/

>My question is, did you change anything on your strategy after you were set on selling? Or the goal was still the same, optimize earnings?

Once I started the process of preparing the company for sale, it did change a lot of the strategy.

For example, one of the things I'd been thinking about was how to allow users to purchase recurring subscriptions to their TinyPilot Pro software licenses rather than having to remember to re-purchase every year. But once I started the sales process, that basically became non-viable because it meant I'd be investing thousands in software development, but it wouldn't pay off for another year or so, so it would weaken our profit and loss statements and result in a lower valuation.

There were a lot of things like that, where I had to reject any investment that wouldn't pay off in three months or less.

The other thing that was a bummer about preparing to sell was realizing that everything effectively becomes so much more expensive. Normally, if I want to give someone a $5k bonus, it costs me $5k. When I knew I was about to sell and wanted a 3x multiple, the $5k bonus effectively costs me $20k because it's $5k for the bonus itself and then -$15k for the sale price on a 3x multiple. I could try to argue that the $5k is "discretionary" and therefore not part of SDE, but I think the buyer would be in their right to argue that it's not discretionary, as it sets bonus expectations for future years.

[0] https://mtlynch.io/retrospectives/2023/08/#what-would-make-r...

>What was the time split between the sale process and running day-to-day operations? I know bigger companies have dedicated teams for that, but I'm curious how does it look like in smaller ones.

It varied from week to week, but I was spending 10-25 hours per week on the sale for about five months.

But beyond wall time, the time I spent on the sale was often much more stressful than anything else and left me mentally drained for anything else. The sale involved preparing reports that I'd never created before, and it was extremely important for me not to make any mistakes because I didn't want the buyer to think I'd provided fraudulent information.

I also had to focus much more on short-term results than normal. Part of this was a lack of time to oversee complex projects, but the other part was that it's to my detriment to invest in something that pays off in six months if I sell the company at month three. But I can't run that way forever, so I knew if I tried to run the company like that indefinitely, I'd pay the penalty for always focusing on the short-term at the expense of long-term.

Yes, you're correct. The buyer takes out the loan. This was an asset sale, so assets transferred over but not any debts.

The seller (me) can approach a loan broker and show their financials, and the loan broker can say, "I think it's likely that the SBA would approve this loan, and I can connect you with lenders I think would offer the SBA loan for acquiring this business."

The SBA pre-qualification isn't binding or official, but I guess the loan broker's prediction is accurate enough that the brokerage will list businesses as SBA pre-qualified based on the loan broker's assessment.

>What do you think is next for you?

Next is either an educational product or a SaaS business I can build either fully solo or with 1-2 teammates in customer support roles.

>Would you do it all over?

No, not knowing what I know now about how difficult it is to succeed in hardware.

I'm grateful that TinyPilot worked, but there's definitely a reason why there are so few bootstrapped hardware companies.

In the first few years, there were so many things that could have clobbered the business, like supply shortages, manufacturing errors, lost shipments, design mistakes. I did a lot of things to mitigate these risks, but a lot of it just came down to being lucky enough to avoid random disasters.

For example, there were definitely times in the business where a critical part could have been lost in shipping, and we would have been dead in the water for months if it went missing or got delayed.

As the business matured, we were able to mitigate those risks better, but I wouldn't want to go through those first two years again unless I had a huge amount of investment or co-founders with more specialized hardware/manufacturing expertise.

>Why wouldn't you go back to a corporation and try to make a software product there, as an employee?

Oh, boy. So many reasons!

The thing I really love about running a company of my own is that I don't have to get anyone's approval to do things. If I have an idea, I can work on it, and I don't have to convince anyone or justify the time or money.

I also really love being able to choose my own hours, tools, and schedule. At Google, I found real-time chat distracting and net negative (I get that they bring value to some people, just not me), and I found that most meetings were a waste of time. At TinyPilot, we never used real-time chat, and we were deliberate and efficient about meetings.

At Google, I often found that things that were good for the company or my team or our customers were often not aligned with incentives for me (e.g., it was easier to get promoted for launching a complex feature than for a trivial feature that solved the problem elegantly). With my own small company, it's much easier to align incentives between me, my teammates, and our customers.

I could go on and on, but I guess the underlying issue is that I place a high value on independence and autonomy, and no employer can match what I get on my own.

I share more about the finances in my annual review posts:

https://mtlynch.io/solo-developer-year-6/#tinypilot-became-2...