Ask HN:social print studio makes $40 million profit per year?

#1

Post by LedZeppelin » Mon, Jul 22, 2013, 11:53 PM UTC

I have a friend who personally knows the founder of http://socialprintstudio.com/, a website where you can get all your fb, instagram, pinterest pics printed on nice paper.

He claims that they make $40 million profit/year. I took a look at the company and feel like this claim is totally preposterous. Last year facebook had about $53 million in profit (I know it's a different industry but that is A LOT of profit.)

This company is bootstrapped and has 10 employees. They make all their sales online yet their shop ranks in the top hundreds of thousands of websites on the internet which is not very high for their purported profits.

I don't believe they ship internationally, yet the country from which the 2nd greatest amount of visits come from is India (they SF based), which is 1/3 of the traffic from america where the most visits come from.

He says they outsource all the printing to China.

Doing the math, and let's say they have a 20% profit margin, that means they make $200 million/yr in revenue. Assuming the average purchase is $20, that means they sell 10 million goods a year, or roughly 30,000 goods/day.

Is there any possibility that this claim is true? I put together a top 50,000 website a few months ago and I get about 23k uniques/day. There's no way this company sells 30,000 goods/day based on their much lower web traffic.

Re: Ask HN:social print studio makes $40 million profit per year?

#2

Post by timmm » Tue, Jul 23, 2013, 12:18 AM UTC

No there is no way they make $40 M/yr profit with 10 employees.

That would make them more successful than Craig's List which remarkably manages to earn $3.3 M (Revenue) per employee per year.

Re: Ask HN:social print studio makes $40 million profit per year?

#3

Post by Casc » Tue, Jul 23, 2013, 12:35 AM UTC

Take it from the founder himself:

https://news.ycombinator.com/item?id=6039053

(I believe he's the founder)

Re: Ask HN:social print studio makes $40 million profit per year?

#4

Post by outericky » Tue, Jul 23, 2013, 12:53 AM UTC

Casc wrote: post #3

Take it from the founder himself: https://news.ycombinator.com/item?id=6039053 (I believe he's the founder)

Well... that wouldn't make them $40m annually.

Re: Ask HN:social print studio makes $40 million profit per year?

#5

Post by cheald » Tue, Jul 23, 2013, 1:15 AM UTC

outericky wrote: post #4

Casc wrote: post #3

Take it from the founder himself: https://news.ycombinator.com/item?id=6039053 (I believe he's the founder)

Well... that wouldn't make them $40m annually.

Nope. By his numbers ("growing six-figure monthly revenues"), they would max at $12m in revenue annually. Profits will be substantially lower.

Re: Ask HN:social print studio makes $40 million profit per year?

#6

Post by systemtrigger » Tue, Jul 23, 2013, 4:52 AM UTC

Even if your friend's numbers are off by an order of magnitude it is an interesting thought experiment to try to reverse engineer the business.

According to SPS' FAQ customers receive product within "4 to 10 business days." Let us assume the partner in China ships directly to the end customer. SPS has one shipping price for all orders - $6 - which seems cheap for international so for simplicity let's assume SPS makes no profit on shipping.

Their cheapest products -- Mini Squares and Prints -- are both $15 for a set of 48. Each is roughly the equivalent of 4 sheets of 8.5" x 11". If the cost per sheet of glossy thick 8.5" x 11" cardstock is about $0.05 and the cost to print, cut, package and prep for shipping is $0.05 then the cost to print an order is ~ $0.50.

Let's use $10M for their annual revenue. If their average order is $25 (including $6 for shipping) that's 400,000 orders.

$25 (gross revenue) - $6 (shipping) - $0.50 (printing & prep) = $18.50.

x 400k orders = $7.4 million

Let's say each employee costs $100k/year. They have 10 employees, so now SPS is left with $6.4 million.

Their next highest costs might be: marketing, office space, servers, employee computers and professional services e.g. attorney. Add to that other costs of doing business like chargebacks and returns, and call it another $1 million in annual expenses.

Even if I am now overestimating actual profit by an order of magnitude, the founders or investors of SPS are still doing well. This in a market I would have bet was oversaturated. But most startups competing in this space probably do not think to run their supply chain and distribution from China. Not to mention the other areas of the business that SPS appears to be executing nicely on.