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Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty
by smallerfish 2y ago
Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty nice for you if you can keep it running.
- jbverschoor 2y agoJust enough to keep going is different from a lifestyle business. Ramen/support low margins != a good lifestyle
- YetAnotherNick 2y ago3 million a year for 5 person is something like 400k/person after corporate tax. Which is pretty high and low at the same time(unless it is just freelancing). High in the sense that there would be competition and the other company will have more budget to reduce the price and make the entire segment unprofitable till you die. Low in the sense that you would likely make the same or higher in corporate if you are that skilled to net 3 million/year.
- smallerfish 2y agoOnce the competition has initially shaken out in a new category, minority players can hang on for years. Their product could be perfect for their customers in ways that the big guns don't accommodate.
- idlewords 2y agoIn other sectors that's just called a "small business" and celebrated as the fullest expression of the American dream. I've always found it funny that tech treats the idea of a going concern with such distaste.
- aprilthird2021 2y agoSpecifically investors, not "all of tech". And to be fair to them, if a company doesn't grow, your investment is wasted in that company, right? No shade to good small businesses, but they may not be worth investing in?
- cowsandmilk 2y agoVenture Capitalists, not all investors. See https://codiesanchez.com/book/ https://codiesanchez.com/book/ or https://store.hbr.org/product/hbr-guide-to-buying-a-small-business/10090 https://store.hbr.org/product/hbr-guide-to-buying-a-small-bu...
- CPLX 2y agoWhile I do agree with you, if it took tens of millions of dollars in initial capital to get there, which hasn’t been returned, it’s quite a different thing to the standard small businesses model.
- withinboredom 2y agoSo ... is a restaurant considered a small business? Where do you draw the line on initial investment?
- zdragnar 2y agoWhat kind of restaurant takes tens of millions to start? Most estimates I'm aware of are less than 1 or 2 million at the very most.
- withinboredom 2y agoI imagine some of the themed restaurants in Disney cost at least that much.
- soared 2y agoHaving worked at those, they are shoestring to the core. Guests see beauty, behind it is paper mache and $8/hr college students whose wages are garnished for rent and class fees.
- someone7x 2y agoAt Disneyland? Where there’s a union for food and beverage workers? > We perform everything from preparing and creating treats like turkey legs and churros to serving grant and exquisite meals at the famous and exclusive Club 33. If you are eating in the parks, our members are making that happen. https://workersunited.org/joint-boards/local-50 https://workersunited.org/joint-boards/local-50
- baxtr 2y agoI know a guy who sells kitchens for a living and makes around $2-3 million per year with a profit margin of 60% or so. But he didn’t spend 10s of million dollars to get there.
- AbstractH24 2y agoEven if he did, that’s not such a bad deal. Particularly if the brand has value when he’s ready to move on and can be sold.
- erikerikson 2y agoOr bar owners pulling down similar amounts.
- nunez 2y agoThis is kind of like tech sales at huge tech old-cos. Sales people there can pull down insane comp if aligned to the right account with way less work than a traditional sales grind.
- rchaud 2y agoWhen you see how VC-funded AI startups market their products ("eliminate artists/editors/paralegals"), it's not surprising that they wouldn't be happy with dividends from a profitable business that employs people. Better to throw the money into a "moonshot" company that perennially loses money until BigCo buys them out to acquire their IP and fire everybody.
- amyjess 2y agoMy favorite video game company is a little Japanese outfit called Nihon Falcom. They've been around since 1981, have about 65 employees, release exactly one new game a year, and if you've played any of their games, you can tell they're all made on absolutely shoestring budgets. They have also never posted a loss and have an absolutely bonkers amount of cash on hand (enough to keep the company going for several years on their current budget IIRC). They also make the best story-driven RPGs I've played in my life. And they specifically went the story-driven route because it's cheaper to hire good writers than it is to wow people with AAA graphics or a giant open world or whatever. More video game companies should be like Falcom.
- jbverschoor 2y agoAhh good old dragon slayer iv in the MSX
- deleted 2y ago[deleted]
- tptacek 2y agoI think people are overly fixated on the fact that a successful small business isn't a workable VC investment target (the winners have to pay for the losers, and even with a conservative portfolio of startups, most are going to lose) and they're working everything back from that.
- lenerdenator 2y agoOther sectors are filled with far fewer people with low empathy for other humans. Not none, of course. It's just not a near-requirement.
- Lerc 2y agoI thought that was called sustainable.
- anovikov 2y agoBut in a case like that eventually (once the business has become "sustainable") we will be speaking of 1.5 founders (some full-time founder and some guy who just holds some stock because they started together/knows some know-how) and 3.5 Indians/Ukrainians at $40 an hour. With like 60% of cash going to the main guy, domicile in some tax haven and probably that principal founder living in some tax haven, too, pocketing some 1.5M a year after all (minuscule) taxes. Good lifestyle!
- tptacek 2y agoAny startup investment that doesn't return, I don't know, like 5-10x "sucks" in the sense that it's not making the portfolio successful, but that's most investments in the portfolio. Beyond that: what sucks about this outcome? If your business has just 5 employees, chances are your investor doesn't have a board seat; it's not costing them much, they can just hang around on the off chance that you turn the knobs right and find a breakout success down the line. It's true that investors aren't going to invest in your startup if you tell them that your likely outcome is a healthy, stable 3MM/year. And it would be unethical to tell an investor you were swinging for the fences when your true intention was to bank the money and bunt. But if you really do take a big swing, and end up settling in a comfortable spot, how pissed do you think investors are really? You swung, you missed, that's life in the National Football League.
- dadrian 2y agoA real false start on that baseball metaphor.