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
My sixth year as a bootstrapped founder
171–180 of 339 posts
Re: My sixth year as a bootstrapped founder
#172Earlier quoted context omitted.
> 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…
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)?
Re: My sixth year as a bootstrapped founder
#173Looks 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?
Re: My sixth year as a bootstrapped founder
#174Earlier quoted context omitted.
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…
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…
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)
Re: My sixth year as a bootstrapped founder
#175I 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…
> 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…
[deleted]
Re: My sixth year as a bootstrapped founder
#176Earlier quoted context omitted.
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...
Re: My sixth year as a bootstrapped founder
#177Earlier quoted context omitted.
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 di…
> 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.
Re: My sixth year as a bootstrapped founder
#178Looks 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…
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.
Re: My sixth year as a bootstrapped founder
#179I 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…
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.
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.
Re: My sixth year as a bootstrapped founder
#180Earlier quoted context omitted.
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…
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…
He did pay himself a salary in 2023. See the P&L included in TFA.