4 ms·

You Only Need to Build a $3 Million Company (Part 1)

7 points by transburgh 19y ago

zach 19y ago
Wow, an article about startup goals that's written from the point of view of an annual profit rather than of a buyout jackpot.
ladyada 19y ago
33% margin? sounds rather optimistic as most people struggle for profitability...
- nostrademons 19y ago
  Depends on the industry. 33% margins are not unusual in software. Take a look at some tech companies on Yahoo Finance. Microsoft has about 40% operating margins, Google about 33%, Akamai about 20%. Among smaller startups, margins are even higher. PlentyOfFish.com has roughly 99% margins: $5M in revenue on roughly $50k in expenses.
staunch 19y ago
You can live that kind of lifestyle on a very high salary working in the financial industry. What that kind of money doesn't buy you is total financial independence for life. That's the biggest prize in my book.
- natrius 19y ago
  The chances of becoming financially independent from the sale/IPO of one startup are very low. First of all, most startups fail because they run out of money. If you're trying to work within the traditional VC world, there will be pressure to grow at an insane rate that may or may not be the best thing for your company. The more people you have working for you, the higher your burn rate, and the more beholden you are to the desires of your VCs. If you shoot for a sustainable business instead, you can work for less than 10 years in 1-2 companies you found and be pretty well off. Most people don't get filthy rich from a couple of years of work. Shooting for sustainability gives you a higher chance of success than being forced to grow your company to a size where it'll get your VCs the return they want (or doing so of your own volition). I agree that financial independence is the goal to shoot for, but I think the method the author describes can get there at least as often as the traditional VC route.
kingnothing 19y ago
$1M a year is a good bit, but it's still not fuck you money. That's what I'm aiming for. Worst case, I'll fall short and still do well.
- ced 19y ago
  Or end up with Friendster.com
  - nostrademons 19y ago
    I'd rather end up with Friendster.com than spend the 2-3 years he spent on it at a day job. At least he had his year of fame and (hopefully) learned some valuable lessons with his dot-bomb. It's better to do something than do nothing - if you happen to get rich doing something, that's just gravy.
    - ced 19y ago
      Sure. My point was that the "worst case" might be worst than selling right now. Holding out for fuck you money is sometimes a bad decision. I wish I had built Friendster, of course.
ed 19y ago
Anyone else think this article is purely masturbatory? Yes, 1MM/yr is nice -- but I don't need a blog post to tell me that. Let's bring every 20-something reading this article down to earth for a bit: creating the sort of wealth discussed in this entry IS NOT EASY. It's damn near impossible, in fact. We're raised in a culture that teaches us life will be handed over on a platter and I think it's seriously wrong to fuel those ideals with fictional "what-if" scenarios.
- natrius 19y ago
  I'd say it's easy compared to building a company that will get acquired by $LARGE_TECH_COMPANY. There are plenty of people going down the route the article describes. They just don't get written about on Techcrunch because the target audiences are usually smaller and there's no huge round of funding to announce. Anyway, most of the stuff discussed on this site doesn't fall within the realm of possibilities that could be described as down to earth. Everyone here is a little crazy. In a good way.
ced 19y ago
Oy, is that really the ideal we're supposed to aspire to? The American Dream? Think about how many people in need one could help with 1 million per year...
- lupin_sansei 19y ago
  You can help a lot more people with 1 million than you can with nothing. If I made it I would be happy to give a lot of what I made out to worthwhile causes.
- SwellJoe 19y ago
  You must be new here. You see, this is a site about starting businesses. People start businesses to make money. Businesses that make a lot of money are generally better to start than businesses that don't.
  - ced 19y ago
    Sure. What does that have to do with what I said? Maybe I come off as morally smug, or something... I should be more careful about it. I meant to say that I feel much more motivated by reading rms's dream to cure HIV ( http://news.ycombinator.com/comments?id=9736 http://news.ycombinator.com/comments?id=9736 ) than some guy's dream of owning a Mercedes.
    - kingnothing 19y ago
      Owning a Benz is realistic. Curing HIV isn't a pipe dream, but it's close.
    - SwellJoe 19y ago
      Yes, you came off as morally smug. Most of the folks I know who start businesses (and I know a lot of them these days) aren't grading themselves on "number of fancy items owned". In fact, people who start businesses seem to be less impressed by the trappings of wealth than most. pg rolls in a Mazda 3, and I don't recall ever seeing any particularly expensive cars in the YC lot, even when Joe Kraus, Evan Williams, Ron Conway, etc. were there (though I may not have been paying attention). When you run a business revenues are a measure of how much you're building something good, so you want high revenues because you want to know you're building something good. It has nothing to do with what you plan to buy with the money.
menloparkbum 19y ago
It would be more interesting if the author provided some examples of successful 1 person shops bringing in $3M per year.
- NickDouglas 19y ago
  Yeah, wake me when part 2 is up.
  - transburgh 19y ago
    wake up...part 2 is up http://www.gobignetwork.com/wil/2007/6/1/you-only-need-to-build-a-3-million-company-part-2/10162/view.aspx http://www.gobignetwork.com/wil/2007/6/1/you-only-need-to-build-a-3-million-company-part-2/10162/view.aspx

7 points by transburgh 19y ago

zach 19y ago

Wow, an article about startup goals that's written from the point of view of an annual profit rather than of a buyout jackpot.

ladyada 19y ago

33% margin? sounds rather optimistic as most people struggle for profitability...

nostrademons 19y ago
Depends on the industry. 33% margins are not unusual in software. Take a look at some tech companies on Yahoo Finance. Microsoft has about 40% operating margins, Google about 33%, Akamai about 20%. Among smaller startups, margins are even higher. PlentyOfFish.com has roughly 99% margins: $5M in revenue on roughly $50k in expenses.

staunch 19y ago

You can live that kind of lifestyle on a very high salary working in the financial industry. What that kind of money doesn't buy you is total financial independence for life. That's the biggest prize in my book.

natrius 19y ago
The chances of becoming financially independent from the sale/IPO of one startup are very low. First of all, most startups fail because they run out of money. If you're trying to work within the traditional VC world, there will be pressure to grow at an insane rate that may or may not be the best thing for your company. The more people you have working for you, the higher your burn rate, and the more beholden you are to the desires of your VCs. If you shoot for a sustainable business instead, you can work for less than 10 years in 1-2 companies you found and be pretty well off. Most people don't get filthy rich from a couple of years of work. Shooting for sustainability gives you a higher chance of success than being forced to grow your company to a size where it'll get your VCs the return they want (or doing so of your own volition). I agree that financial independence is the goal to shoot for, but I think the method the author describes can get there at least as often as the traditional VC route.

kingnothing 19y ago

$1M a year is a good bit, but it's still not fuck you money. That's what I'm aiming for. Worst case, I'll fall short and still do well.

ced 19y ago
Or end up with Friendster.com
- nostrademons 19y ago
  I'd rather end up with Friendster.com than spend the 2-3 years he spent on it at a day job. At least he had his year of fame and (hopefully) learned some valuable lessons with his dot-bomb. It's better to do something than do nothing - if you happen to get rich doing something, that's just gravy.
  - ced 19y ago
    Sure. My point was that the "worst case" might be worst than selling right now. Holding out for fuck you money is sometimes a bad decision. I wish I had built Friendster, of course.

ed 19y ago

Anyone else think this article is purely masturbatory? Yes, 1MM/yr is nice -- but I don't need a blog post to tell me that. Let's bring every 20-something reading this article down to earth for a bit: creating the sort of wealth discussed in this entry IS NOT EASY. It's damn near impossible, in fact. We're raised in a culture that teaches us life will be handed over on a platter and I think it's seriously wrong to fuel those ideals with fictional "what-if" scenarios.

natrius 19y ago
I'd say it's easy compared to building a company that will get acquired by $LARGE_TECH_COMPANY. There are plenty of people going down the route the article describes. They just don't get written about on Techcrunch because the target audiences are usually smaller and there's no huge round of funding to announce. Anyway, most of the stuff discussed on this site doesn't fall within the realm of possibilities that could be described as down to earth. Everyone here is a little crazy. In a good way.

ced 19y ago

Oy, is that really the ideal we're supposed to aspire to? The American Dream? Think about how many people in need one could help with 1 million per year...

lupin_sansei 19y ago
You can help a lot more people with 1 million than you can with nothing. If I made it I would be happy to give a lot of what I made out to worthwhile causes.
SwellJoe 19y ago
You must be new here. You see, this is a site about starting businesses. People start businesses to make money. Businesses that make a lot of money are generally better to start than businesses that don't.
- ced 19y ago
  Sure. What does that have to do with what I said? Maybe I come off as morally smug, or something... I should be more careful about it. I meant to say that I feel much more motivated by reading rms's dream to cure HIV ( http://news.ycombinator.com/comments?id=9736 http://news.ycombinator.com/comments?id=9736 ) than some guy's dream of owning a Mercedes.
  - kingnothing 19y ago
    Owning a Benz is realistic. Curing HIV isn't a pipe dream, but it's close.
  - SwellJoe 19y ago
    Yes, you came off as morally smug. Most of the folks I know who start businesses (and I know a lot of them these days) aren't grading themselves on "number of fancy items owned". In fact, people who start businesses seem to be less impressed by the trappings of wealth than most. pg rolls in a Mazda 3, and I don't recall ever seeing any particularly expensive cars in the YC lot, even when Joe Kraus, Evan Williams, Ron Conway, etc. were there (though I may not have been paying attention). When you run a business revenues are a measure of how much you're building something good, so you want high revenues because you want to know you're building something good. It has nothing to do with what you plan to buy with the money.

menloparkbum 19y ago

It would be more interesting if the author provided some examples of successful 1 person shops bringing in $3M per year.

NickDouglas 19y ago
Yeah, wake me when part 2 is up.
- transburgh 19y ago
  wake up...part 2 is up http://www.gobignetwork.com/wil/2007/6/1/you-only-need-to-build-a-3-million-company-part-2/10162/view.aspx http://www.gobignetwork.com/wil/2007/6/1/you-only-need-to-build-a-3-million-company-part-2/10162/view.aspx