4 ms·

"the profit margins for my single-player SaaS business were somewhere around 90%. " Thos are not 'profit margins' - not even remotely. Maybe you mean 'gross m

"the profit margins for my single-player SaaS business were somewhere around 90%. " Thos are not 'profit margins' - not even remotely. Maybe you mean 'gross margins'. But even then, software is an inherently IP-based business, it's about as appropriate as saying: "Hey, this $25 book only costs $1 to make". That 'software' is open to anyone, anywhere, means it's just that much more competitive, and margins are not 90%, on average they are probably negative. Twitter has yet to make a dime. They are a few billion in the hole still. I think the same with Square. Has Uber turned a dime in profit yet? It's only a very hardened and entrenched few that get into solid, positive margin space.

jasonkester 9y ago
Thos[e] are not 'profit margins' It's still Income minus Expense, right? For a single founder, it's exactly as though the $25 book costs $1 to make, because you are the printing press, binder, paper supplier, ink supplier, distributor and author. Yes, you can arbitrarily drop that number by having the business pay you a "salary". But the end result is the same. The money going out the door (to people other than you) is a tiny fraction of that going in.
- alexasmyths 9y ago
  The 90% figure refers to 'gross margins' and really means 'income minus cost of goods sold'. In software, usually 'gross margins' are meaningless - it's a term used in most other industries and from classical economics wherein most of costs were actually COGS. "Yes, you can arbitrarily drop that number by having the business pay you a "salary"." No, it's not 'arbitrary' at all salaries and operating costs are the relevant costs to the business. Software (and books) are IP businesses - the 'cost to make the book' or to 'run a website' are not useful in terms of understanding the business or profitability. FYI - for most 'software businesses', net margins (i.e. after 'salaries and operating costs') are negative.
  - jasonkester 9y ago
    ... so if salary is zero, gross margin and profit margin are the same. Which is the case for a single person business. I understand the point you're trying to make, but it's still a bit silly to suggest that my business is not profitable because I may eventually spend some of the money it makes.

jasonkester 9y ago

Thos[e] are not 'profit margins' It's still Income minus Expense, right? For a single founder, it's exactly as though the $25 book costs $1 to make, because you are the printing press, binder, paper supplier, ink supplier, distributor and author. Yes, you can arbitrarily drop that number by having the business pay you a "salary". But the end result is the same. The money going out the door (to people other than you) is a tiny fraction of that going in.

alexasmyths 9y ago
The 90% figure refers to 'gross margins' and really means 'income minus cost of goods sold'. In software, usually 'gross margins' are meaningless - it's a term used in most other industries and from classical economics wherein most of costs were actually COGS. "Yes, you can arbitrarily drop that number by having the business pay you a "salary"." No, it's not 'arbitrary' at all salaries and operating costs are the relevant costs to the business. Software (and books) are IP businesses - the 'cost to make the book' or to 'run a website' are not useful in terms of understanding the business or profitability. FYI - for most 'software businesses', net margins (i.e. after 'salaries and operating costs') are negative.
- jasonkester 9y ago
  ... so if salary is zero, gross margin and profit margin are the same. Which is the case for a single person business. I understand the point you're trying to make, but it's still a bit silly to suggest that my business is not profitable because I may eventually spend some of the money it makes.