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I sold TinyPilot, my first successful business

mtlynch.io

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Re: I sold TinyPilot, my first successful business

#151

Post by mtlynch »

gigel82 wrote: post #46

This is interesting. Once manufacturing (and other tedium) was outsourced, I'd have thought that's "making it". More or less "passive income" presuming the employees took care of everything else. If the revenue truly was 208k, you'd just need to "hang in there" for 2.5 years and you'd make whatever you got in the sale, then everything else coming in later would be just "extra".

Thanks for reading!

>Once manufacturing (and other tedium) was outsourced, I'd have thought that's "making it". More or less "passive income" presuming the employees took care of everything else. If the revenue truly was 208k, you'd just need to "hang in there" for 2.5 years and you'd make whatever you got in the sale, then everything else coming in later would be just "extra".

Yeah, I definitely understand that expectation, but I don't think I could have gotten it to 100% passive income.

Even if everything ran perfectly, everyone still needs a manager. So at the bare minimum, someone has to check in with the team, make sure everyone's being paid, etc.

But with so many moving parts in a hardware company, things are never running perfectly. There's always something going on like some part is no longer available or some process has changed with our vendors or one of our vendors has made a mistake and we have to work with them to fix it.

I theoretically could have hired a COO to manage operations, but that person would have to be comfortable managing a dev team, support teams, and making hardware/logistics decisions. So even if I could find a qualified COO willing to work for a $150k salary, the full cost after payroll taxes and benefits would likely exceed any profits the company was making.

Re: I sold TinyPilot, my first successful business

#152

Post by SCUSKU »

ignoramous wrote: post #49
alberth wrote: post #34

Broker commission: $88,900 Legal fees: $18,297 This equates to ~18% of total sale price. Most people don't realize how much get eaten up in deal/closing costs. Congrats to him for the successful exit. Reading his blog post over the years should be eye opening to anyone just how hard starting/running a business is.

> how hard starting/running a business is That it is, but here Michael is explicit that most of the pain [0] was from doing hardware, software, and e-commerce all at once. Surely, there are other relatively easier businesses in tech? [0] Reminds me of Avery Pennarun's A profitable, growing, useful, legal, well-loved... failure (2012), https://news.ycombinator.com/item?id=3754531

Thanks for posting that article, quite a throwback -- but first I've ever encountered it. Really great piece. I do think we've all been sold on the entrepreneur vision/lifestyle, but the unsexy reality is it's an insane slog that might not even pay off.

It's always good to get these reality checks from time to time.

Re: I sold TinyPilot, my first successful business

#153

Post by groby_b »

ThePowerOfFuet wrote: post #124
yojo wrote: post #80

Earlier quoted context omitted.

My wife runs her own consulting business, I’m taking a break from tech work. This means we buy insurance on the federal marketplace (healthcare.gov). It is expensive, but not insanely so. Family of four, living in Oregon, non-smoking, our premium is ~$1k/month. Granted it’s a high deductible ($12k), but it protects us from the kind of catastrophic emergency that could wipe out our savings. We are fortunate to not hav…

> Family of four, living in Oregon, non-smoking, our premium is ~$1k/month. Granted it’s a high deductible ($12k), but it protects us from the kind of catastrophic emergency that could wipe out our savings. We are fortunate to not have expensive, ongoing conditions. Family of two, living in the EU, non-smoking, our premium is ~€0/month. Granted it's a €0 deductible, but it protects us from the kind of catastrophic em…

Your premium is paid by your employer. Please revisit the statement when you are self-employed.

Also, turns out there is a deductible if you don't want to pay a fortune for self-insurance.

Well, at least there is in Germany. And the premium ends up being ~$1k/month.

US health insurance is crappy in many ways, but EU health insurance isn't a magic fairy unicorn either.

Re: I sold TinyPilot, my first successful business

#154

Post by DaiPlusPlus »

mattgreenrocks wrote: post #103
flawn wrote: post #53

Earlier quoted context omitted.

Watch out for survivorship bias though, everybody might think that but a lot more still fail.

Business is rife with survivorship bias, and indie hacking, doubly so. The really honest ones will tell you how much of a role luck played. Most, however, will be quick to take credit for luck's role, often deluding themselves.

> Business is rife with survivorship bias, and indie hacking, doubly so.

Indie-hacking-projects have the benefit of a dignified exit by open-sourcing - a lot of whatever value in any technology/code/designs was created will be preserved - which is a good thing.

It's a shame that oftentimes the "best" outcome for a startup or small software/tech company (where they get acquihired by Apple specifically) is not only their product/service gets shut-down, but all traces of it are systematically removed from the Internet and everything the company's founders do is effectively memory-hole'd - the _Dark Sky_ app is the textbook example of this.

-----

Separately, when a company is small, stable and profitable it isn't a failure as far as the bank is concerned, but not exactly a hyperscaling unicorn - so when the founders/owners want to exit their only real option is to sell-out to either their competition for a managed wind-down-and-migration - or worse: an M&A firm (which will only make a lowball offer, then replace staff eng with a skeleton maintenance crew, and mis-manage the company's products/services for a decade as they hemorrhage-out loyal customers due to declining product quality).

Required reading: https://pivotal.substack.com/p/the-worst-outcome-is-a-medioc...

Re: I sold TinyPilot, my first successful business

#155

Post by abtinf »

xyst wrote: post #35

Wild. I vaguely remember this founder spending an obscene amount of money on some boutique firm to give homepage a small update. Seems he exited the Google grind about 6 years ago. I guess salaries were between $180-250K during that time frame. Google grinder for 6 years: $1,080,000-$1,500,000 Entrepreneur: “$920k over four years (with sale)”, but doesn’t include the 2 bombs he had prior to successful exit. (None of…

> grinder

That’s the hint you aren’t comparing like kinds.

Re: I sold TinyPilot, my first successful business

#156

Post by hermitcrab »

makk wrote: post #42

“I immediately knew I was onto something.” Every successful bootstrapper who I know personally says this. The ultimate success didn’t happen instantly but the product/market fit was obvious on day one. And they didn’t iterate their way to that point. They walked away from whatever they were doing before, restarted with a blank sheet a paper, and the new thing immediately resonated.

IIRC PayPal started off as an encryption library and went through more than 10 iterations before it became what it is now.

Re: I sold TinyPilot, my first successful business

#157

Post by PKop »

ThePowerOfFuet wrote: post #124
yojo wrote: post #80

Earlier quoted context omitted.

My wife runs her own consulting business, I’m taking a break from tech work. This means we buy insurance on the federal marketplace (healthcare.gov). It is expensive, but not insanely so. Family of four, living in Oregon, non-smoking, our premium is ~$1k/month. Granted it’s a high deductible ($12k), but it protects us from the kind of catastrophic emergency that could wipe out our savings. We are fortunate to not hav…

> Family of four, living in Oregon, non-smoking, our premium is ~$1k/month. Granted it’s a high deductible ($12k), but it protects us from the kind of catastrophic emergency that could wipe out our savings. We are fortunate to not have expensive, ongoing conditions. Family of two, living in the EU, non-smoking, our premium is ~€0/month. Granted it's a €0 deductible, but it protects us from the kind of catastrophic em…

But after taxes and lower salary, I bet you're more than $12k/yr behind an equivalent US employee's net earnings yes?

Re: I sold TinyPilot, my first successful business

#159

Post by [deleted] »

nativeit wrote: post #125
yojo wrote: post #80

Earlier quoted context omitted.

My wife runs her own consulting business, I’m taking a break from tech work. This means we buy insurance on the federal marketplace (healthcare.gov). It is expensive, but not insanely so. Family of four, living in Oregon, non-smoking, our premium is ~$1k/month. Granted it’s a high deductible ($12k), but it protects us from the kind of catastrophic emergency that could wipe out our savings. We are fortunate to not hav…

I had the misfortune of suffering through a multiple sclerosis diagnosis when I was just 18-years-old, and the bottom line cost for that (only outpatient care) was approaching $50k in 2001. I imagine that price has more than doubled since. It caused my financial condition and professional development to crash and stall just as it was beginning. It’s impossible to know what might have been, but I sincerely believe tha…

[deleted]

Re: I sold TinyPilot, my first successful business

#160

Post by cpncrunch »

runako wrote: post #29
mtlynch wrote: post #8

Earlier quoted context omitted.

Thanks! > 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 inte…

Congratulations! > Yeah, from what I've heard, SaaS businesses sell for a much higher multiple, often selling as a multiple of revenue rather than earnings. Adding some color as I have been through the process of selling a SaaS. Based on what you have written, at that stage of development, multiple on SDE is most common. 2.4x is on the low side for growing SaaS businesses, but this business is hardware with real COGS…

From the Quiet Light site, the SaaS multiples are in the 4 to 4.5x income range, which is still incredibly low. They have one for sale that involves 5 hr a week work for just over 4x multiple. Not really worth selling for that amount unless desperate or wanting to retire.
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