Company Size Question


5

I have a "one man band" software company. My revenues are about $250,000 per year with 90% margins. I know my levers of growth, and expect to be 1 Million per year in about 18 months time, with similar margins. However, I don't see ever being more than 2 Million per year, and that might be a stretch. It may be possible, but I can't imagine it right now.

My question is this: Is it OK to be just a 1 Million dollar/year company?

I will never be on TechCrunch, I will never be a "wunderkind" like 37Signals, Joel, and the rest. I'll just be a guy making 800K/year anonymously. I also approached an angel investor and he called my company "the living dead". His category for a company that makes 1Million but doesn't really grow from there. It keeps ringing through my head....living dead, living dead. It really hurt my feelings, to be honest.

But the customers and money do come in, and they need my product....

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asked Nov 4 '10 at 02:51
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Jacare 30
71 points
  • If you really want to run a company for growth then go ahead - but you'll probably have to pick a different market/niche or expand your business. I think most of us would be more than happy earning 200k to 800k net from a one-man company. If you sold this venture or just hired someone to run it you could free up time and capital to start some other ventures and "swing for the fences". I think the guys at 37 signals would say you are doing it right. I would imagine trying to change things now could be very risky - you could go from very profitable to a big loss with one or two bad decisions... – Tim J 8 years ago
  • The growth from about 800k to higher levels is littered with failures. It would be tough to give any decent advice without more knowledge of the business, market and customers. I don't see the attraction of techcrunch. Who cares really? – Tim J 8 years ago
  • With that kind of revenue just advertise your company on TechChurch if you want the recognition. Or just buy yourself a nice shiny plaque to hang on your office wall. Enjoy the Success. – Frank 8 years ago

5 Answers


4

You're the only one that can answer that question. This is about you (and your family), not about anybody else. Do what makes you happy, and forget about the rest.

If you are happy making $1M/year in revenue, then I say keep at it, and ignore the negative comments. Personally, I think it's rare to find a one-man software company making that much, so I would consider that quite an accomplishment.

But, if you really want to be the next Facebook, and get on TechCrunch, you should try for it, otherwise you'll never be happy. Just be realistic and understand that very few of us will ever get to the Facebook level (and it really is unneccesary for most businesses). Getting on TechCrunch isn't an indicator of success. There are plenty of very successful businesses that have never been on TechCrunch, and that we have never even heard of. There are some metrics you can measure to decide whether a business is successful or not, but at the end of the day the definiton of success is in the eye of the beholder. Again, it's all about you, and your definition of success.

Personally, I don't see anything wrong with owning a $1M/year company. In fact, I would be delighted if I were in that position, and I would guess a lot of the other folks on this site feel the same way. Heck, I would be happy with $250K/year and 90% margins! That would be enough for me to quit my job and focus on my business fulltime.

answered Nov 4 '10 at 03:42
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Zuly Gonzalez
9,194 points
  • At 200K per year, it really buys a lot of material goods if you keep your housing costs reasonable. i already have 2 BMW's, a lake house on an acre of land, lots of new clothes, all the gadgets you can think of, travel, tickets, etc. And donate to PAWS (helps animals). At 800K/year that is a lot of money to spend actually. I will probably dump most of it into funds for the kids, and donate more to PAWS. I am also going to look into the idea of acquiring companies. I like that idea from Frankie B, it had never occurred to me. – Jacare 30 8 years ago
  • I love that you donate to PAWS. My goal is to someday start a no-kill shelter. It's an ambitious goal that requires a lot of cash, but I'm hopeful. It sounds like you are doing pretty good for yourself! I hope to be there with you someday :-) I definitely wouldn't be worried about what one person said. Not everyone needs a $100M. Best of luck to you! – Zuly Gonzalez 8 years ago
  • +1, but this is starting to sound like just an opportunity for bragging... ;-) – Avi D 8 years ago
  • @AviD: Haha :-) Don't worry, we'll all be there some day too! – Zuly Gonzalez 8 years ago

2

Whether or not it's OK is a very personal decision. It depends on what your career goals and ambitions are. Some businesses are "lifestyle" businesses or are in an such a small niche they can never become multi-billion dollar behemoths. What kind of a business are you looking to run? Are you looking to build an empire and become famous or are you fine with making very decent cash while still enjoying the benefits of being your own boss?

With net revenue of 800k, I would blow off the angel and reinvest in the business myself. Why give up the equity? If you want to grow further, you can hire someone to replace yourself or use some of the revenue to build other products or services. Perhaps a vertically integrated product or diversify into another industry altogether?

In either case, I think you need to toughen up your skin a little. You are doing much better than most small business owners. Who cares what others think?

answered Nov 4 '10 at 03:39
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Oleg Barshay
2,091 points

2

It is better to own 100% of a private company that makes 250k to 1m per year, then to have your company diluted with you owning 10% of a company that makes 5m. There is nothing that restricts a private company's growth as compared to a public one.

You are doing a great job. Keep it up.
Continue to reinvest at a healthy yet conservative pace (meaning dont place all your eggs in the one venture).

The stages of equity are a game that is very different from forming an actual business.
If you ask me, I would rather start a real brick and mortar business with real revenue and make it grow than to spend 80% of my time promising to the next round of investors of what might happen. That is a lottery that I personally stay away from.

With revenues of 1m you could start buying out your competitors, or start absorbing them for equity. Grow your company to its limits before ever considering private equity, and even then do it as terms of what i would call a "personal exit", meaning you get full value for your company in $$$ cash and a good % of future profits 5- 25 %.

answered Nov 4 '10 at 12:07
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Frank
2,079 points
  • Thanks for the comments. Actually, this thread got me thinking. There is a SAAS application I can create, a reporting tool, that I can charge ~ $10/month (or more) for, and it can also extend as a mobile platform for my app. I already have over 60K Users, and that should extend to 150k in – Jacare 30 8 years ago
  • Also, you have me thinkng about acquisition. That is not a bad idea, I truly had never thought of it. – Jacare 30 8 years ago
  • Thanks Franky B, I like the way you think! – Jacare 30 8 years ago
  • Its nice to see others share in the success. I always look at aqusition as an exit strategy because capital gains are taxed more favorably. So if you company nets 1m per year, its reasonable for you to be able to expect 3m to 4m for an exit, while getting 5-25 % of future revenues and maybe hanging around 6-12 mos for the transition. The 3m to 4m is taxed as capital gains, thus getting you a little more than actual earned income. It can provide the next project a huge jolt of capital. But make sure you squeeze all the juice, get this company as far as you can do alone (privately) – Frank 8 years ago

1

If a little criticism hurt your feelings then do NOT ever think about going for private equity at any stage. I agree with others, happiness is a personal quest while being content is another. Sometimes doing the little things like saving for another day ahead will allow other ideas and social conditions to come into place for you to thrive in another product if you so choose. All I can offer is this, I have tons of cash and been unhappy and broke and happy so either way one doesn't relate to the other. Look within yourself for validation and forget about the common trappings. Be well grasshopper

answered Nov 4 '10 at 04:38
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Xs Direct
275 points

0

You don't have to be a big business to be successful. Your profit to revenue ratios are extremely good and I'm sure there are many people who are envious of you.

Why not use some of your income to invest in other startups. This will still leave you time to work on your own business, but also gives you the advantage of helping others and hopefully profiting from that as well.

I think your real issue is what do you want out of life? A bigger company, more hassle and probably only a small increase in profits or what you have now?

I'm aspiring to have a company like yours so don't beat yourself up over one negative comment. Celebrate your success!

answered Nov 4 '10 at 13:18
Blank
Smart Company Software
1,190 points

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