From 0 to Startup: How We Made $70,000 in Revenue in Our First 6 Months – Part 1 | Hacker News Reader

From 0 to Startup: How We Made $70,000 in Revenue in Our First 6 Months – Part 1

blog.kevinyun.co

72 pointskevinyun33 comments

I'm very wary of hearing you made $xyz of revenue.

My current company (multi-million dollar telco) is continually chasing revenue, and it's driving us into the ground. We recently did a $4 million dollar expansion to our cable infrastructure to accommodate a new little community, involving many kilometers of fiber, a few expensive switches, etc, etc. After all of that, we got less than 20 customers paying ~$100/mo. The expected break-even for this project? Over 200 years.

The kicker? The people in charge got raises and promotions because they netted the company more revenue.

Tell me about your profits.

Thanks for bringing up that point -- and sorry to hear that! Profit margin has been pretty good (~40% margin), after all expenses have been said and done

Thanks for the reply, and NICE! Keep it up.

I'm not a laywer, but this scared me: " There’s really no need to worry about setting up the business logistics from the onset since these are all secondary activities in comparison to what really matters: the business. Also, no need to initially worry about incorporation, but do assume that anything government-related will take longer than expected."

You're already pulling in $70K in 6 months and you're clearly operating what looks to be a company. Seems to me you're putting yourself up to some serious liability if something were to go wrong. Also, getting all your IP and other legal issues sorted out will save you massive headaches later on. Sure if this fails and no one cares to fight over equity, IP, and no customers sue, you might be fine. But what if it's a rousing success? You could be setting yourself up for some undue stress and some tax ramifications that outweigh putting it off.

Thanks for calling this out. When I started this, I really had nothing to lose (no personal assets of significance). Since there's something to lose now, I can definitely assure you the business will (very) soon be an entity with liability protection.

If you haven't already, you should consult an accountant ASAP to check whether you need to pay estimated taxes before year-end to avoid a penalty.

I see what you're saying and I used to think like this. But you can't think about what you have to lose now, you have to think about you could lose in the future.

For example, I'm reincorporating my company and talked to a startup lawyer this week. Did you know that if you incorporate in this calendar year, if you hold on to your stock in your company for 5+ years, you pay no capital gains taxes up to $10 million. Basically, if you ever sell your company many years from now, you have some big upside. It's not guaranteed that Congress will grandfather in 2014 for this rule. Once again, I am not a lawyer and only paraphrasing.

It's this example and dozens of other things you might not know and could potentially hurt you in the future. But glad you're getting it taken care of.

I have always understood that setting up a corporation (LLC or S Corp or C Corp) was the first thing one should do, not the last. Perhaps there are tax/revenue/productivity disadvantages to corporations that I'm unaware of?

Just as a trivial example of what the lack of incorporation can cause, my neighbor decided to open a dance studio, foolishly signed a 5-year lease for a space that was unrealistically expensive, and proceeded to fail. She was threatened with a lawsuit to collect the rent. Rather than declare personal bankruptcy which would drag her husband down as well, she negotiated a deal to keep paying some portion of the rent, and had to find a part-time job to raise the money. No more business, and now indentured to some sleazy landlord, all because she didn't think to form an LLC at the outset.

The real story is that you found a market with huge demands which didn't have much competition (not many design schools) that you could fulfill.

Everything else is irrelevant except for "keep going".

$70,000 is a nice haul, but over six months it averages to a little more than $10,000 a month which at least in the bay area pays for about 1.5 developers. I hope their growth curve is still more vertical than flat.

It definitely will. He's onto something - categories of education which can convert to immediate employment are going to be the biggest winners in the online education space.

I had this idea in Jan 2012 and even did the ground work. - Essentially devbootcamp type thing and I didn't pursue it because I'm really bad at teaching people - I get very annoyed very fast :) ...

Hmmm. $11,666 per month for 1.5 developers is roughly $100,000 per developer per year. You must be talking about junior developers, because salaries around here for experienced developers aren't that low. They can't be--not when senior/experienced developers can get $100,000 working just about anywhere else in the country for less than 50% of the cost of living as in the bay area.

I was being generous, also I know in at least Arizona senior developers are not paid anything near 6 figures. About 50K at best.

Move.

1) He's wrong. My first job in Arizona I got paid more than that, 15 years ago. 2) It's so, so much cheaper to live in Phoenix than in one of the tech centers. And a different lifestyle. Some people want a big house and a boringly steady job.

I'm not wrong, look at jobs at the University of Arizona (Tucson) for experienced C/C++ programmers. $45K a year.

Universities are not going to pay as well as the private sector, or even many government or non-profit organizations, for the same work. Using that as an example doesn't help your argument.

I don't live in Arizona anymore, I live in the bay area.

Arizona salaries are lower than the Bay Area but not that low, at least in my experience (from living there 2007-2010). Mid-to-senior Java J2EE or .NET programming positions are offering $80K to $100K. There are lots of VB.NET or ASP.NET types of programming jobs for around $30/hour W2 contracting or $50-$60K full time, sometimes more.

$70k is revenue, not profit.

yea. At 40% margin (from elsewhere in the thread), that's $28,000 profit, for an annual profit so far of just over $50,000. If we assume that all the salaries except his own are coming out of that gross before profits so that $50,000 is for him alone, then it's a decent income for a college kid - although I'm not sure if that's a fair assumption, and given he says he has no idea how to bookkeep, I don't know if, say, all the student fees were paid upfront for the courses next month, but he hasn't taken out the instructor fees for next month because they haven't been paid yet. So it's very hard to judge whether he's actually got a solidly profitable business going - but to be fair, he does say "It’s not much, but it’s a start" so it's not like he's yelling "I HIT IT RICH GUYS".

There's a lot of trivial details in this first post I realized as well (and I'll go into the main stressors later), but I definitely, agree with you. I think Marc Andreeson really hits the nail with this post: http://pmarchive.com/guide_to_startups_part4.html

   Ironically, once a startup is successful, and you ask the founders what made it
   successful, they will usually cite all kinds of things that had nothing to do with it. People
   are terrible at understanding causation. But in almost every case, the cause was actually
   product/market fit.

I'm trying to avoid this.

If one were to look at it dis-passionately - you basically got lucky:

1. lucky that online education is in huge demand. 2. lucky that there are not many bootcamps doing design. 3. lucky that you were a designer at this time

But as PG often says - "luck is a definite necessity but not the only criteria".

But your article still has a lot of value. The more important part of your message is that:

___ success has nothing to do with your current situation or pedigree ___

Thats what you should focus on. You were probably beating yourself up mentally and worried about a ton of stuff - none of which really mattered in the end. Its a good lesson but its also near impossible to learn without going through it yourself.

I've been thinking about this a lot. It would be awesome if someone wrote some sort of guide for identifying markets with large demand and little competition. Like you say, once you find such a market, everything else falls into place. Indeed, at that point there is probably not much you can do wrong.

Do it. Write the article :)

It's not that hard. Just visit some forums that cater to some particular niche. Then, start reading and understand what problems these people face.

Yes. I co-founded a business that:

    1) Had a few competitors 
    2) Had web savvy customers 
    3) Had non web savvy providers

So with a nice website and a small adwords budget ($10 per day), we got $500,000 in orders in 4 weeks.

And if you're curious ... We install floor and wall tiles in the bathrooms of large hotels. Everyone laughs at our faces when we tell them what it's about.

The amount of money in "blue collar" work is staggering. The guys who game yelp and adwords and who aren't complete nightmares to work with are up to their necks in work. Its easier for me to find a decent pediatrician than a decent plumber in my town.

Over 4 grand for a course. How many units at a university would you compare your course to? Time wise it looks like about 2 classes for a quarter system school (which works well to compare because they are also 10 weeks long per class). That puts your cost per unit much higher than a UC school. Must be good stuff you're teaching.

I guess someone has to bring it up, but a digital design school is not a startup.

Care to explain why this is not a startup?

Because it's not scalable (yet).

For their startup to increase revenue to 100x or make $7M in revenue, their efforts/time put in/costs would need to be 50x-100x higher. For it to be a startup, at this scale their efforts should only be 2x-3x higher.

In other words, if they can't get to $10M in rev with 20 people or less, it's just not scalable and right now it looks like they need several hundred tutors, program coordinators etc. to do so.

For it to become scalable they have to do something like this https://onemonthrails.com/ for design. ;)

Does a startup need to be scalable on day one? Would you consider Nintendo a scalable company? They started selling cards in the beginning - which isn't very "scalable" in your mind. Would you consider Samsung a scalable high-tech company? They started as a trading company and diversified into textiles, insurance, securities and retail before also adding electronics.

Or to use a more relevant example 37signals, their humble beginnings was a design studio which then had a string of unsuccessful products such as the usability report before finally hitting it big with BaseCamp.

Lots of retail based businesses are highly scalable through a franchise model. If they can nail down the playbook - they can license that and repeat with new locations.

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