4 ms·

Well, what do you suggest instead of "profitable"? It's an extremely useful fact and contextualization, and obviously no one thinks you really mean "profitable

Well, what do you suggest instead of "profitable"? It's an extremely useful fact and contextualization, and obviously no one thinks you really mean "profitable"? What do you suggest we call it? "monetarily self-sustaining hobby that pays for the direct - but not opportunity - costs the founders, er, hobbyists, incur in, uh, playing with it, which they are doing in the hopes that beyond paying for the current direct costs, in the future the hobby's revenue is able to be used, either through sale of the hobbyist's ownership at a rate commensurate with a multiple of the hobby's then-present revenues and which valuation will factor in the ability - as of the extent to which it will have been proven by that future date, of the founders to use outside money to generate value for the outside shareholder, -- or, in lieu of such a sale of ownership, through sufficient growth of revenue, to have made the hobby a more valuable use of the founders' time, in retrospect, than the amount of money they lost by not doing something different?" I humbly submit that "profitable from day 1" (or day 7 or 14 )is a useful shortcut to name all of the above. Of course it doesn't mean really profitable. But it also doesn't mean that you're hosting a news a blog that has readerships but hasn't made a penny.

tptacek 14y ago
Profit = Revenue - Costs. The mistake Cohen is talking about is mostly about not fully accounting for costs. If, after factoring in opportunity cost (ie: what your full-time salary would be had you done something other than start your venture), that equation produces a negative number, you are not "profitable". It's weird that this should generate so much controversy. The concept of opportunity cost is not controversial among businesspeople, among investors, or among economists. The term you are looking for to describe the "kind of profitable" to which you're referring is "cash flow positive".
- its_so_on 14y ago
  Fine, the article should therefore argue, "Stop claiming to be profitable since day 3: claim to be cash flow positive not including consumer expenses such as apartment, car, home Internet and mobile telephone, since day 1." Such an important semantic difference. (Not.)
  - tptacek 14y ago
    For virtually everyone on HN, the difference between $1000/mo profitable (which BTW is a dream scenario for the majority of would-be founders here) and $11k/mo underwater is about as extreme a distinction as can be made. Why do people keep talking as if this is a semantic argument? It isn't a semantic argument. I know it feels amazing to build something with enough traction to reliably put $1500 a month in the founder's pockets, but that "profitability" is counterfeit. You cannot run that business forever; it is paying you less than the minimum wage. If you think this is a semantic difference, try re-reading Steve Albini's "Some Of Your Friends May Already Be This Fucked" rant.
    - Evbn 14y ago
      What if the 1500 per month only requires 10 hours per month maintenence for the year after launch?
      - its_so_on 14y ago
        You don't understand. Internet profit isn't profit, we just learned that. Obviously the Internet works such that if it took you 100 hours to develop it, the Internet eats your hard drives every 30 days and you have to spend 100 hours again just to be at the same place. It's no different from standing at a lemonade stand for 100 hours. No different at all in any way. /s
        tptacek 14y ago
        You realize that's a total straw-man argument, right?
        its_so_on 14y ago
        It's not a straw-man argument. The post would make perfect sense if it were talking about an offline, labor-intensive business. Unpaid development time has nothing to do with cost-of-running-a-business expense. That's a fact. You can say from YOUR point of view it does. But it does not from the business's point of view. This is like saying that a surgeon can't launch a profitable web business, because the time spent on it will not generate as much profit for him as if he had spent the time practicing surgery. that's plainly completely false, and the web business can be very much profitable (just not to him.). Just THINK about it.
- btilly 14y ago
  That actually isn't his point. He's very clear that what he's talking about is that your cost of living should be counted as a business cost. Once your business is covering your cost of living, he says that you should count it as profitable, even though you're not yet making the salary that you could.
  - its_so_on 14y ago
    But that's obviously stupid. See my other comments. If you stop working on it and pay someone 800 per month to maintain it and do nothing else, and ten years later the account payments go into has 200k in it, what, is that 200k from another dimension? This is so obviously wrong. The article is completely wrong economically, and can be summarized as: "Don't say you're profitable from day 1: say what you mean, that your business is cash-flow positive with respect to its own business expenses other than your original time in developing it." whoop-de-doo. not an important semantic distinction, but I will grant the author it. I will not grand the author the contention that you shouldn't tell people if this is the case.
    - btilly 14y ago
      The difference is that the author is implicitly assuming that you've got a business that requires your active involvement to keep going. If the business requires 0 energy from you, and makes money, then his point becomes much less relevant. But most of the businesses in question are not like that. You have paperwork to keep them going, decisions to make, customers to serve...
debacle 14y ago
If you are making more money on your bootstrapped startup than you could be on oDesk with similar time investment, you are profitable.
- its_so_on 14y ago
  These guys are saying, "If you're a businessman that can make a cash-cow from buying 500 hours on oDesk, but instead of buying that time you're also a coder and do it yourself - BAM, suddenly the cash-cow isn't profitable anymore." Fine, it's not profitable. It's still profitable.
  - debacle 14y ago
    What this guy is saying is "If you're a businessman that is 'profitable' because your server costs $20 a month and your startup brings in $1500 a month, while you put more than 200 hours a month into it, then you're not profitable." And he's not wrong, because on oDesk you could be bringing in $4000 a month with the same time investment, and the only reason your startup is profitable is because you're not factoring in all of the capital costs (not just cash).
    - its_so_on 14y ago
      Yes, the guy is saying "if your startup brings in $1500 while you put more than 200 hours a month into it, then you're not profitable." But it's wrong. Because you're developing it, you're not hired labor. This is the fundamental reason it's wrong.
      - debacle 14y ago
        That's not how business works. For any definition of 'business.'
        its_so_on 14y ago
        So let's get this straight. You're saying that a surgeon can't create a profitable online business if the total profit from it to him is less than if he had spent the same time practicing surgery? we're not talking about whether it's "worth it" for him, we're talking about from the point of view of whether the online business can be called profitable to an outside investor. Nobody cares about your unpaid sunk development costs.

tptacek 14y ago

Profit = Revenue - Costs. The mistake Cohen is talking about is mostly about not fully accounting for costs. If, after factoring in opportunity cost (ie: what your full-time salary would be had you done something other than start your venture), that equation produces a negative number, you are not "profitable". It's weird that this should generate so much controversy. The concept of opportunity cost is not controversial among businesspeople, among investors, or among economists. The term you are looking for to describe the "kind of profitable" to which you're referring is "cash flow positive".

its_so_on 14y ago
Fine, the article should therefore argue, "Stop claiming to be profitable since day 3: claim to be cash flow positive not including consumer expenses such as apartment, car, home Internet and mobile telephone, since day 1." Such an important semantic difference. (Not.)
- tptacek 14y ago
  For virtually everyone on HN, the difference between $1000/mo profitable (which BTW is a dream scenario for the majority of would-be founders here) and $11k/mo underwater is about as extreme a distinction as can be made. Why do people keep talking as if this is a semantic argument? It isn't a semantic argument. I know it feels amazing to build something with enough traction to reliably put $1500 a month in the founder's pockets, but that "profitability" is counterfeit. You cannot run that business forever; it is paying you less than the minimum wage. If you think this is a semantic difference, try re-reading Steve Albini's "Some Of Your Friends May Already Be This Fucked" rant.
  - Evbn 14y ago
    What if the 1500 per month only requires 10 hours per month maintenence for the year after launch?
    - its_so_on 14y ago
      You don't understand. Internet profit isn't profit, we just learned that. Obviously the Internet works such that if it took you 100 hours to develop it, the Internet eats your hard drives every 30 days and you have to spend 100 hours again just to be at the same place. It's no different from standing at a lemonade stand for 100 hours. No different at all in any way. /s
      - tptacek 14y ago
        You realize that's a total straw-man argument, right?
        its_so_on 14y ago
        It's not a straw-man argument. The post would make perfect sense if it were talking about an offline, labor-intensive business. Unpaid development time has nothing to do with cost-of-running-a-business expense. That's a fact. You can say from YOUR point of view it does. But it does not from the business's point of view. This is like saying that a surgeon can't launch a profitable web business, because the time spent on it will not generate as much profit for him as if he had spent the time practicing surgery. that's plainly completely false, and the web business can be very much profitable (just not to him.). Just THINK about it.
btilly 14y ago
That actually isn't his point. He's very clear that what he's talking about is that your cost of living should be counted as a business cost. Once your business is covering your cost of living, he says that you should count it as profitable, even though you're not yet making the salary that you could.
- its_so_on 14y ago
  But that's obviously stupid. See my other comments. If you stop working on it and pay someone 800 per month to maintain it and do nothing else, and ten years later the account payments go into has 200k in it, what, is that 200k from another dimension? This is so obviously wrong. The article is completely wrong economically, and can be summarized as: "Don't say you're profitable from day 1: say what you mean, that your business is cash-flow positive with respect to its own business expenses other than your original time in developing it." whoop-de-doo. not an important semantic distinction, but I will grant the author it. I will not grand the author the contention that you shouldn't tell people if this is the case.
  - btilly 14y ago
    The difference is that the author is implicitly assuming that you've got a business that requires your active involvement to keep going. If the business requires 0 energy from you, and makes money, then his point becomes much less relevant. But most of the businesses in question are not like that. You have paperwork to keep them going, decisions to make, customers to serve...

debacle 14y ago

If you are making more money on your bootstrapped startup than you could be on oDesk with similar time investment, you are profitable.

its_so_on 14y ago
These guys are saying, "If you're a businessman that can make a cash-cow from buying 500 hours on oDesk, but instead of buying that time you're also a coder and do it yourself - BAM, suddenly the cash-cow isn't profitable anymore." Fine, it's not profitable. It's still profitable.
- debacle 14y ago
  What this guy is saying is "If you're a businessman that is 'profitable' because your server costs $20 a month and your startup brings in $1500 a month, while you put more than 200 hours a month into it, then you're not profitable." And he's not wrong, because on oDesk you could be bringing in $4000 a month with the same time investment, and the only reason your startup is profitable is because you're not factoring in all of the capital costs (not just cash).
  - its_so_on 14y ago
    Yes, the guy is saying "if your startup brings in $1500 while you put more than 200 hours a month into it, then you're not profitable." But it's wrong. Because you're developing it, you're not hired labor. This is the fundamental reason it's wrong.
    - debacle 14y ago
      That's not how business works. For any definition of 'business.'
      - its_so_on 14y ago
        So let's get this straight. You're saying that a surgeon can't create a profitable online business if the total profit from it to him is less than if he had spent the same time practicing surgery? we're not talking about whether it's "worth it" for him, we're talking about from the point of view of whether the online business can be called profitable to an outside investor. Nobody cares about your unpaid sunk development costs.