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My sixth year as a bootstrapped founder

mtlynch.io

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Re: My sixth year as a bootstrapped founder

#51

Post by tgtweak »

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.

Re: My sixth year as a bootstrapped founder

#52

Post by reactordev »

abfan1127 wrote: post #10
BadHumans wrote: post #8

Earlier quoted context omitted.

[flagged]

in what sense is it getting worse? While there may be local minima, I'd argue that its the best its ever been. News has always been pessimistic because negative emotions are easier to trigger to drive attention which pays the bills.

[flagged]

Re: My sixth year as a bootstrapped founder

#54

Post by dustingetz »

tgtweak wrote: post #51

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 - t…

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

Re: My sixth year as a bootstrapped founder

#55

Post by tgtweak »

ein0p wrote: post #49

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.

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.

Re: My sixth year as a bootstrapped founder

#56

Post by tgtweak »

dustingetz wrote: post #54
tgtweak wrote: post #51

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 - t…

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.

Re: My sixth year as a bootstrapped founder

#57

Post by DanHulton »

abfan1127 wrote: post #10
BadHumans wrote: post #8

Earlier quoted context omitted.

[flagged]

in what sense is it getting worse? While there may be local minima, I'd argue that its the best its ever been. News has always been pessimistic because negative emotions are easier to trigger to drive attention which pays the bills.

A lot of things are getting superficially better (personal computing tech has never been more incredible), but there's a lot scary shit that is encroaching on the daily without sufficient plans in place to really deal with. Off the top of my head:

- Global warming and how we don't seem to have any plans to a path to hit any of the less-than-apocalyptic warming targets, - Corporate regulatory capture, with more and more wealth going to a smaller and smaller segment of the population while the impoverished fraction grows on the daily, - The rise of right-wing and/or outright fascist authoritarianism across the world, even in countries that would have fought strenuously against it a scant hundred years ago, - This one is a combination of all three of the others (and a lot more), I suppose, but capitalism eating itself and taking a lot of really helpless-feeling people with it.

A lot of things do keep improving, but a) a lot of people never get to see or benefit from those improvements, maybe more than you think, and b) there are these terrible monsters on the horizon and nobody with the power to do anything about it seems to be willing to actually do so. It shouldn't take a whole lot of empathy to project yourself into the shoes of someone for whom shit is the worst it's ever been, nor a lot of creative thinking to realize that there's a whole lot of those people out there.

Re: My sixth year as a bootstrapped founder

#58

Post by mym1990 »

reactordev wrote: post #52
abfan1127 wrote: post #10

Earlier quoted context omitted.

in what sense is it getting worse? While there may be local minima, I'd argue that its the best its ever been. News has always been pessimistic because negative emotions are easier to trigger to drive attention which pays the bills.

[flagged]

At almost any other point of time you could have made a similar list with the relevant issues of the time. The news cycle today is so much more accessible, and is skewed towards pessimism, so your view of the world will also skew that way depending how much news you consume. Trying to condense the world state into "getting better" vs "getting worse" is not a useful exercise, its anyone's guess. The world is definitely changing though, and many people don't like that.

Re: My sixth year as a bootstrapped founder

#59

Post by kansi »

mtlynch wrote: post #25
havefunbesafe wrote: post #14

Earlier quoted context omitted.

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 e…

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

Re: My sixth year as a bootstrapped founder

#60

Post by Aerbil313 »

tgtweak wrote: post #51

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 - t…

> …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.

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