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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

#241

Post by wilkystyle »

danielmarkbruce wrote: post #193
csa wrote: post #187

Earlier quoted context omitted.

> This is a nice theory. It could be true, it's likely not. I’ve done it / do it with taking products and services to certain East Asian markets. And sometimes scaled quickly at much more than 5x of the original revenue. > You must be using better M&A brokerages/bankers than I ever have. FEI is one such broker, and know people on both sides of transactions done through them that are happy. I haven’t used them persona…

I did almost say ~ "it's possible we just see very different deals and it colors the perspective". I never deal with asia. Maybe everything I'm saying is off base given it's hardware and asia is a thing in that realm.

I'd just like to say that I very much appreciated reading both of your responses, and commend you both for firmly but politely and reasonably disagreeing.

Re: My sixth year as a bootstrapped founder

#242

Post by matchagaucho »

sirspacey wrote: post #233
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…

Great advice here! The math on multiple needs a revision for 2024. SalesForce and Atlassian are valued at 6x and growing faster than ever with over $1B in revenue. No one else is getting a better multiple than that in SaaS right now without a very eager buyer. Enterprise Value is great in theory. In practice once you get to enough free cash flow you are really just making the decision on whether to take X years of pr…

QSBS equity ownership is common amongst US bootstrapped businesses; which can change the tax concerns upon sale.

Re: My sixth year as a bootstrapped founder

#243

Post by paulddraper »

hinkley wrote: post #225
paulddraper wrote: post #167

Earlier quoted context omitted.

Businesses sell for 0x and Infinityx all the time. There are countless examples of that. But bootstrapped business with growth rate for 7x+ (non-trivial) revenue are uncommon. 4x may be "ouch" for a VC but not a bootstrapper.

The last startup I was at that sold 'only' made the owners millionaires, when they were hoping to retire. If you're in your thirties or forties, a million bucks won't even get you a school teacher's lifestyle for the rest of your life. A million bucks makes the rest of your work life low-stress, but not non-existent. You still have to work, you just don't have to worry about paying rent, or getting exploited by your…

Interesting story.

Forgive me but I'm not sure I see the relationship to my comment.

Re: My sixth year as a bootstrapped founder

#244

Post by nubela »

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…

It is in my experience that not all businesses can be sold.

Re: My sixth year as a bootstrapped founder

#245

Post by lukoktonos »

ilaksh wrote: post #238

I looked up the CPU for one of the devices. It's the same one used in Raspberry Pi 4. So I think I figured out the secret to him making almost a million dollars a year: he has a privileged background (worked at Google) and somehow that helped him tap into a market of people who don't know that a good price for a Raspberry Pi 4 is $35, not $350 or $400. I can see $65 with a nice case and shipping. Maybe up to $100? Bu…

I just bought a mini PC for $350 that has 32gb of ram, a windows 11 license, and is not much bigger than these devices by the looks of it.

People who find this small device useful must just not want to spend their (likely high $/hour) time with mundane things getting their expensive toy home servers working or something

Re: My sixth year as a bootstrapped founder

#246

Post by ilaksh »

lukoktonos wrote: post #245
ilaksh wrote: post #238

I looked up the CPU for one of the devices. It's the same one used in Raspberry Pi 4. So I think I figured out the secret to him making almost a million dollars a year: he has a privileged background (worked at Google) and somehow that helped him tap into a market of people who don't know that a good price for a Raspberry Pi 4 is $35, not $350 or $400. I can see $65 with a nice case and shipping. Maybe up to $100? Bu…

I just bought a mini PC for $350 that has 32gb of ram, a windows 11 license, and is not much bigger than these devices by the looks of it. People who find this small device useful must just not want to spend their (likely high $/hour) time with mundane things getting their expensive toy home servers working or something

I can't tell if you are trying to prove my point or discount it.

But you can't justify $300 for installing and configuring free software. As you say, you can get a much more powerful computer for even less than they are charging.

Re: My sixth year as a bootstrapped founder

#247

Post by al_borland »

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…

>you're creating a company that should be valued (and eventually sell) for 7-15X Earnings

Why should an exit be the primary goal? There is nothing wrong with starting a business with the intent of continuing to run and own that business. This should be normal.

Re: My sixth year as a bootstrapped founder

#248

Post by Aurornis »

avinoth wrote: post #115
awhitby wrote: post #94

Earlier quoted context omitted.

You're missing something. From the post: > I don’t draw a salary, so the total amount I earned from TinyPilot in 2023 was $236k. and > Result: I worked 35-40 hours per week, a reduction from previous years, and traveled more than any previous year. This is a person who is effectively full-time CEO of this business and whose market salary is likely at least $236k. If they sold the business, the new owners would have t…

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…

> Also, a nit fwiw, you automatically assumed the entire profit of the business is the market salary for the person running this business

Not really a big assumption given that the person is capable of operating an entire software and hardware business by themself.

It’s more complicated than that, though: The salary someone receives from a company isn’t 100% passed through untouched. To pay everything from taxes to benefits, the most they could realistically expect to take in equivalent compensation would be closer to $150K (approximate), which is actually below market rate just about anywhere for someone with these qualifications.

Re: My sixth year as a bootstrapped founder

#249

Post by Aeolun »

paulddraper wrote: post #166
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…

> 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…

It wouldn’t be that bad if you are already substracting salaries right? Having a few years in which your earnings are zero due to purchase price is pretty doable if you start earning a cool 100k every year after (even better if it’s a growing business).

Re: My sixth year as a bootstrapped founder

#250

Post by ilamont »

csa wrote: post #207
windowshopping wrote: post #191

Earlier quoted context omitted.

You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?

> You should write something about what you do too. I think most of what one needs to know is already out there. The key is being adaptable to the current environment and being aware of one’s value add (skill set, network, etc.). The problem with writing specifics about what I do is that it invites competitors and/or haters (e.g., review bombers or DDoSers). Some parts of my businesses have enough moat such that I do…

What is your take on ecommerce businesses that generate most revenue from a single platform, e.g. Amazon or Shein or TikTok?

It seems like a lot of concentrated risk, and scaling is a challenge, considering the number of Amazon roll-ups that were on fire 2020-2021 and are now on the ropes (See "Amazon aggregators fall on tough times", https://www.axios.com/2023/09/05/amazon-aggregators-tough-ti...)

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