great write up.
> $920k over four years
so this gives an average yearly salary of 230k. Very close to FAANG senior salary with much more risk, effort and (probably) worse life-work balance. OP quit from google in 2018 and ran some other business, and this is his biggest sale so far. I think it shows how hard it is to make better money outside FAANG even when extremely talented and lucky like OP. But it's probably more about lifestyle choices.
It's not quite apples-to-oranges, because he started a hardware company, which historically has much smaller margins than software.
The difference isn't just working for FAANG vs running a business, the difference is also working in software vs working in hardware.
The difference is working for yourself. It’s the business version of achieving adulthood (for some).
Senior devs are closer to 400K-500K total comp. Very senior devs are above that.
Still, the value of working on your own project full-time (rather than someone else's thing) can easily justify accepting the difference.
I'm surprised no one here has factored in the very real risk of getting laid off.
Do you think that this risk is bigger than you business being hit by the market?
Probably not, but it's still not 0
I am very surprised no one factored - starting own company can be much more realistic to achieve than landing $400k/year gig at FAANG - it is not like one walks into a lobby and gets a job.
Keep in mind stories of people telling how they were passed on by some big name corp just to go on to build something big.
If you are maximizing income, go work for the company that pays you the most. If you consider other things then it's not that simple: * control on which project you work on * choose your cooworkers * choose your office location * return to office policies * choose process and bureaucracies It's about how many degrees of freedom you want.
> Very close to FAANG senior salary
Base salary maybe. But more like ~40% of FAANG TC. (Which only furthers your point)
It’s not worth it. Neither is freelancing. One of the appeals of freelancing was being able to work from anywhere in the world and still make money, but with wider availability of remote jobs that advantage evaporates.
Working for a good company is still the best most consistent way to make good money and have a good life.
How many companies let you work 3 days a week? Not from home, just three days a week aka5 day weekends every week?
Depends. Are we talking hours? Because if so, then most companies barely give 2 days worth of work per week. And in many cases, people probably work half of that, maybe 4 or 5 hours of actual focused work per day.
A freelancer spending very little time working probably isn’t making much money. But an employee who spends little time working, is still bringing in those same paychecks, week after week.
High risk activities are never going to be accurately represented by a single data point.
good point it's the 99 out of 100 cases that fail miserably that more accurately reflects expected value.
Sure, its educated gambling, but it is not fair to exclude high value exits too.
It is when they’re effectively lottery tickets.
A big part is that you are not working for man but yourself.
Anyone whose run their own business knows you're not working for yourself.
Don’t forget your investors and your board.
It's a bootstrapped business, no investors/board.
Kinda sobering when you think about it.
interesting to reconcile this with calls to tax the rich. maybe we should be rewarding such effort after all? think about the tens of thousands of jobs created from people working at Google who'd make L3 or less at Google working twice as much...
Speaking as a small business owner/entrepreneur myself, there are lots of tax deductions available to people like me that aren’t to some collecting a salary. And that’s without doing any of the borderline or outright illegal stuff that I see many other business owners do, such as taking fancy vacations, leasing luxury cars, or buying real estate for personal use but writing them off as business expenses. The IRS basically now lacks the resources to go after most such cases, and even if they’re caught, the penalty often just amounts to paying back the avoided taxes. There’s really very little incentive to play by the rules. I’ve had CPAs tell me outright that I’m leaving money on the table by not using some of these so-called tax minimization strategies. Anyway, it’s all kind of beside the point because “tax the rich” as policy covers so much ground that it’s impossible to discuss the pros and cons without specifying what specific proposal we’re talking about. My point is simply that business ownership and entrepreneurial activity are already quite well incentivized/rewarded by the current tax code.
What are these miraculous tax deductions you are talking about?
Writing personal expenses as business expenses is tax fraud, not tax optimization. CPA suggesting this should be fired.
Should be but won't be.
I can also attest that in my local small business community I have been met with puzzlement and suspicion for not engaging in expense fraud and PPP fraud. Deviation is almost completely normalized.
1. The Trump era automatic 20% deduction for LLC or corporate income. Totally unjustifiable, it's 20% off your revenue for everyone with a company for no public policy reason that I know of 2. You can mostly avoid paying into SS/Medicare by taking the large majority of your compensation via distributions, not salaried income
Just off the top of my head
You mean QBI? To apply, it needs to be matched with W-2 wages so you won't escape SS/Medicare, and it's not against revenue but profit.
It encourages paying more wages, but it’s still a 20% giveaway to the business owners for paying themselves. I know that my own effective tax rate went down a couple percent when QBI took effect. If the idea behind the requirement to pay reasonable wages is to get more SS/Medicare tax revenue, then QBI more than offsets any gains. Plus the business owner can tweak their own numbers to determine what’s the most advantageous mix of W-2 vs K-1 income. It’s another advantage not available to regular wage earners.
Yeah, in general the big tax advantages from a limited company mostly relate to the ability to be flexible with how you get your compensation, as there are a bunch of ways to minimise tax paid/get government support.
The millionaire farmer near us (in Ireland) got state support for sending all his kids to university because of this kind of flexibility, while my parents (wage earning suckers) didn't.
Of course it’s against the law, and so is not obeying the speed limit. And both are being done every day widely and more or less blatantly with little to no chance for consequence. In fact you’re probably more likely to get a speeding ticket than to be audited. Hence the CPAs who would recommend some of these “strategies” as long as there’s even the slightest plausible justification, because in their experience there’s very little risk for pushing the envelope.
my very first exposure to this was paying for parking. i worked at a large private university which had a beautiful but very big campus. ofc for some reason the institution decided that employee's had to pay for their own parking, which i disagreed with on moral grounds and the fact that parking was so far away it was like a 20 minute walk just to get to my work space...so i did an experiment where i basically never paid for parking in my entire 4 years there.
it would have cost me about 2 grand to diligently pay for parking. the actual expense from tickets? about 100 bucks maybe 200. and some of them got automatically thrown out just by challenging them. now towards the end of my time there i did see a guy get towed as he was walking up to his car. i started paying for parking then.
Interesting, I had the exact opposite experience as a student at a public university in California. There were meter maids patrolling the parking lots constantly, and it was common for people to be ticketed within minutes. It must have been a huge revenue driver for the school. The enforcers were so zealous I received multiple tickets despite having a valid annual pass displayed clearly in my window, which I then had to burn time fighting to get dismissed.
I'm not sure I follow what you're saying. People who work at Google should pay more/less tax? Or that people who start companies should get more tax breaks (or pay more?)
I'm European so I don't really click with the obsession some places have with avoiding tax, so you may have to explain it like I'm 5 :-)
Lol, Europe is the home and crown palace of tax evasion, look to the Netherlands, Ireland, Switzerland, Liechtenstein, Andorra, Gibraltar, Isle of Man, Jersey...
In Europe most average people are happy to pay tax, despite there being a number of tax havens as you point out. I'd say most people have a low opinion of them. Versus the USA particularly, where it seems many people dislike paying tax.
I have no idea what you're talking about. I don't know a single person happy with the tax rate or the general performance/effectiveness of government spending. Practically every single restaurant, bar or other kinds of brick-and-mortar shops is evading VAT and income tax, it's so normal that when I was buying winter tires this morning, they straight up asked me whether I need a receipt or want to skip the VAT over phone. Every single aspiring entrepreneur I talk to asks me how to incorporate in one of the tax havens and otherwise lessen the tax and bureaucratic load. My city is full of immigrants from western EU countries who wanted to pay less tax.
You're not in Western Europe, which is where more people tend to be happier to pay tax (particularly the Northwest/Protestant areas), because they believe they'll get the benefit from paying the taxes.
OTOH, look at places like Italy where there's more evasion, because people don't feel that they get anything back.
Even when I visit the west and tell people I pay 10% income tax with healthcare and social insurance included, they immediately ask me how hard is it to move.
Especially funny with Germans who still believe they are richer than the eastern part of Europe, but a SWE working for the same US company from here makes 10-20% more due to lower tax. The faces they make when they finish the mental calculations are incredible.
Yeah, that's fair. I can totally see why people without family commitments et al would move.
I'm not massively happy about the amount of tax I pay, but I do like living in a relatively prosperous society without too much suffering, so it's fine I suppose.
The thing is, I don't see a relatively prosperous society without too much suffering when I am visiting the west or north of Europe... At least not more than the east, and definitely not enough to justify the tax hike.
Generally, the east of EU is much safer and while it's poorer and that is its own kind of suffering, there's nothing like the bombings, muggings, general dirtiness everywhere, etc. I feel perfectly safe any time during day and night in Warsaw, Poznan, Prague, Brno, Bratislava, Ljubljana... Definitely not in Paris, Berlin, Brussels and so on.
I think a big part of the difference in tax acceptance between the USA and Europe might be that European populations per country tend to be a lot more homogenous.
In the USA I think you get a lot of resentment over people paying for populations who they don’t feel they themselves are part of. Whereas in Europe it’s more plausibly a “there but for the grace of god go I” situation, where the person using some form of government assistance may plausibly be your second cousin.
Of course no one talks about this directly because it’s wrong think. I suspect this is also why a lot more right wing people are anti tax and left wing people are tax accepting. On the left you have less of the in group out group sentiment, for whatever reason.
There is already a very big tax break for entrepreneurs: QSBS.
You have to stick it out for 5 years (the rollover provisions are not well aligned with SAFEs), but all your capital gains are tax free up to $10m.
Reforming the rollover provisions or making it not a hard cut off would certainly be helpful though.
we go into debt 2T every year without the extra money I would argue a lot of the nice to haves get cut from people's budgets.
where do you think Netflix and google ads fit in Maslow's hierarchy of needs?
Also, big tech had a huge amount of jobs cuts recently.
Depending on how he managed things, possibly tax advantaged; especially if he could take advantage of the Qualified Small Business Stock (QSBS) tax exemption - 100% capital gains with no taxes.
It's not clear to me if the $920k is including his salary. If he paid himself a good salary, the numbers will look different.
It seems like the $920k include all profits. The sale alone yielded $490k in profit.
Correct, I did not draw a salary.
Money wise, FAANGs are more like 2x of $920k with comps. If the output is guaranteed, and stress is kept at 2x FAANG, it's like trading stress and the thrill and difference in experience for money. I would choose this.
>so this gives an average yearly salary of 230k. Very close to FAANG senior salary with much more risk
this is just bad analysis, and as part of that you don't understand risk.
Financial risk is the variance of the expected outcomes, it is not a component of the expected value. The risk that you will fall short is always balanced by the risk that you will strike it rich; otherwise, you have calculated your expected value wrong. Expected value does not include variance, it's the missing factor.
your faang salary is your upper bound on income, is the cost you bear eliminating the risk; the risk the entrepreneur takes is rewarded by the option on vast riches.
You are looking backward as if you could have guessed a priori what would happen. If you could guess looking-backward-in-advance that you'd wind up with a faang salary running your own gig, definitely worth "the risk".
I don't understand this. Afaik the parent argues that the 230k/yr is a lucky outcome of starting a business, far more people end up with less or nothing. And this "winning" situation of gaining 230k/yr is barely in range of a "sure" outcome of being employed at Google. Concluding that if even a successful entrepreneur is set to gain less then an employee at faang, entrepreneurship is not a sound decision for fang employees. How is risk portrayed wrong here?
>How is risk portrayed wrong here?
because he portrayed risk as "the risk of losing money", but that is not a proper definition of risk.
it's easier to understand the concept with the stock market because there is a market price (there is not a market price for startups). If a stock in the market has a price, what does it mean to say that it's a risky stock? that it might drop? No, not if you say that to the exclusion of the risk that it might also go up.
If a company has a price in the market, and you are an omniscient who can definitively say that there are a bunch unaccounted for factors that increase the probability that that stock will go down, what you would conclude (because you are an omniscient who also understands risk) is that the price of the stock is wrong, not that the riskiness has been mis-assessed.
This is an important area of finance, it's the basis, or rather the inescapable conclusion, of option pricing, the famous Black-Scholes model. It turns out the option price calculation does not contain any of the probabilities of what might happen to the stock/company in the future, the option price is only based on the variance of the outcomes. How can that be? Turns out the probabilities (the expected value) have already been accounted for in the market price of the underlying security. If a market is fairly pricing stocks, riskyness means degree of variation in outcomes.
There is a probability in variance, the probability "that you will wind up away from the mean". the FAANG salary is the mean, with no risk, meaning you aren't going to fall below or go above. He called out the other option as "risky" and somehow decided that the outcome this founder experienced was the upper limit, had no chance of being higher. He had no basis to think that, and his analysis is basically Monday night quarterbacking. "Since you didn't make the field goal, you shouldn't have tried, should have tried for a touchdown instead", ignoring that on average it's easier to get a field goal.
Meh. He could have made 10M or 0.
Google founders themselves could have got a nice job at IBM.
Op is free as in bird too.
> If I do this again, I’d wait to tell my team about the sale until it’s a done deal, but I’d also make sure the team knows that an acquisition is always a possibility. I’d explain before I even start looking for a buyer that an acquisition might happen, and that the team won’t necessarily know it’s happening. If it did, I’d prioritize a buyer whose vision aligns with the team’s interests, as I did with TinyPilot.
> This strategy is not ideal or fair to everyone, but it feels like the least bad of many flawed options.
That's better than the norm, but I agree it's not entirely satisfying.
For sales larger than the one the author wrote about, I wonder whether the possible problems that the author mentioned could be averted by making the sale a win for the employees.
Ideally, the employees already would have enough vested equity, for the sale to be positively life-changing. But if not, maybe, as the sale is planned, everyone gets issued RSUs that vest immediately if and when a deal closes? Or bonuses? Or maybe the sale terms include retaining everyone for at least a year at double compensation?
(More generally, I believe in cutting in early startup employees on equity in a more significant way than is conventional. And maybe the imminent-sale alignment risks are another instance in which significant pieces of the pie would help and be appropriate.)
Author here.
Happy to answer take any feedback and answer any questions about this post.
>I didn’t want a bad outcome for anyone, but the worst case for me was significantly worse than the worst case for any other member of the team.
Your worst case is you lose the deal and the time and money you spent on it, and their worst case is they are fired and lose their healthcare (that is how it works in America right?), is that correct?
Thanks for reading!
>Your worst case is you lose the deal and the time and money you spent on it, and their worst case is they are fired and lose their healthcare (that is how it works in America right?), is that correct?
Yeah, I get that perspective.
As I said, I don't think there's any good solution here. I don't think it's fair for me to hand the company over to someone who might just fire the employees, but I also can't promise to keep everyone in their role forever regardless of a sale.
For added context, everyone at the company worked part-time, generally a max of 20 hours per week. Some were contractors who had multiple clients, others were founders with their own side projects, and others worked part time because they wanted to focus on other things in their personal life. Nobody had healthcare insurance through the company.
So, in the worst case of an owner coming in and firing everyone, it would suck, but it's also not like anyone would be like, "Oh no! I just bought a new house on the expectation that I'd be at the company for the next 20 years!"
The worst case for me isn't just that I lose some time and money. I was terrified of not being able to sell the company by the time my son was born. I was the sole founder and manager, so I can't exactly say, "Okay, I'm going to take a few months of paternity leave. Pay yourselves and our vendors while I'm gone." So I'd be probably in a position of letting down both the team and my family trying to keep the company afloat while becoming a new father.
Alright, thanks for answering my question!
Great writeup. The writing was clear and engaging that it made me want to read it, even though I'm not in the industry. I have a question that is adjacent to your experience, but not specifically about the post. But hopefully your experience of founding a company for four years could shed some insight. Some background: I'm an incoming medical school student, and sometimes I wish I went into tech rather than medicine. My question: would it be worthwhile for a medical student to invest time to learn programming in order to potentially found a software company (I know you founded a hardware company, but previously worked as a software engineer)?
Now I know this is such a broad question, with many factors that could influence whether this pursuit is worthwhile, but maybe your experience could point out whether this is even something to consider. For example, would I even gain the necessary skillsets required to found a company whilst pursuing medicine? Would knowledge of tech compliment a medical-related company, or would I better spend my time working on the non-tech side of a company?
Your writing is great to highlight the complexities in the world of indie businesses. Thanks.
Thanks for reading and for the kind words!
First, a meta comment is that I've found that you should weigh advice based on how similar the advisor is and how closely their success matches what you want. So, given that I came in with a background in software already, my advice might not be a good match for you.
I feel like I went down a lot of misguided paths as a founder following advice of people who were successful but were very different from me (e.g., their goal was to reach $1B in valuation, they love pitching to customers).
That said, the thing I recommend to a lot of people curious about starting out with an indie business is to create a course or a book. People call these "info products" and that term has kind of a stench to it, but I think they're a great way to learn. I prefer the term "educational product" because there's less of a stigma. I created a video course in year three of going off on my own, but I wish I'd done it sooner.
I think people feel reluctant to create an educational product because they feel like they're not an expert at anything, but you don't have to be the world expert on something to make a course. You just have to know enough that you can get your students from level N to level N + 1. You can take something that you recently learned and make a course that you wish that you'd had that would have let you learn the same information in 5 hours rather than 50 hours. And you don't have to be the world's greatest teacher as long as you can find some people who enjoy the way you explain things.
Creating an educational product is like a microcosm of the full experience of launching a business. It forces you to think about what customers want, build something that fills the need, and then market it to find customers who want it. And all that stuff is hard, but it's much easier to do with a course. If you spent 50 hours making a course and find out you can't sell it, you lost 50 hours. You can learn from the failure and try a new course or product the next month. If you spent 2 years learning to code and building a tech product and find that nobody wants it, you'll feel very tied to that idea and have a hard time pivoting to another idea.
I have my issues with Pieter Levels, but I think he's a great case study in trying businesses rapidly and then doubling down on the ones that work. When he started, he didn't know how to code well, so his early products would just be like a Google Sheets spreadsheet that he sold access to.
Given the numbers, the stress, the freedom, the self-actualization, would you still quit Google and take this journey, knowing then what you know now? Do you feel richer or poorer for the experience? What's next for you?
Re-posting from a similar answer I gave in another thread:
Yep, still happy with the decision. A lot of my comp at Google was stock, so I would have made a lot from the stock price movement over the last six years, and I'm a bit envious of that, but still yes.
I do still love the independence of working for myself, so I'm happy to have had the last six years of that rather than feeling unfulfilled at Google.
With everything shifting around AI, and big tech could be doing massive dev layoffs in the next five years. Given that risk, I'm happy to have experience as a founder rather than a dev who could be laid off immediately in a down market.
https://news.ycombinator.com/item?id=42126800
>Do you feel richer or poorer for the experience?
Definitely richer. I'm glad I did it, and it was so much more meaningful than the work I did at Google or any previous job.
>What's next for you?
My wife and I just had our first child over the summer, so I'm mostly on paternity leave to enjoy time with my family, but I'm slowly easing back into work. My next project is a book about what I've learned about writing effectively as a software developer.[0] Eventually, I'd like to try building a SaaS, but working on a book is much friendlier to an unpredictable work schedule at the moment.
Have you had any consulting or speaking opportunities come up from these blog posts?
No, nobody's ever really reached out about consulting/speaking. I haven't pursued it either, as I prefer to have products rather than making money from one-off jobs.
Congratulations on the kid!
Thanks! It's been really fun. Of course, challenging at times, but overall I'm really glad I've had this time off to enjoy with my family.
Thanks for the article and for including so many specific numbers in it for our benefit (details that I imagine many others might have decided to omit).
Now that you've been through this process, how would you go about finding a buyer yourself?
Also, are there any resources you found valuable for starting your business? How did you go about hiring your first employee and setting everything up for them as employees?
Again, thanks for the writeup and congrats on the sale!
Thanks for reading!
>Now that you've been through this process, how would you go about finding a buyer yourself?
It would have been tough to find a buyer. Before I met Quiet Light, I was worried a broker wouldn't take me, and I'd have to find a buyer myself. So my plan was to (in order) start more loudly telling other founders that I'm looking for a buyer, reach out to more adjacent companies pitching them on a strategic acquisition, discuss on my blog that I'm looking for a buyer, and if all else fails, put up a banner on the store website saying the company is for sale. The problem was that the more loudly I advertise the company is for sale, the more obvious it is to buyers that I'm desperate to sell. It also risks spooking customers who might not want to buy hardware from a company whose ownership is about to change.
>Also, are there any resources you found valuable for starting your business?
Minute for minute, the best resource I've found is Jason Cohen's talk, "Designing the Ideal Bootstrapped Business."[0, 1] The key insight for me is that bootstrapped businesses have very different strengths and weaknesses than a VC-backed startup, so you should pick a business that plays to those strengths.
I also enjoyed Start Small, Stay Small by Rob Walling [2] and The Mom Test by Rob Fitzpatrick[3]. The tl; dr from those is that you need to avoid the trap of building something for months and then looking around for customers once it's done. You instead should flip it and talk to customers before you even start and find out what they need.
It's not a book or resource, but one of the most valuable things I did and wish I did it earlier was create a course. It's a very condensed version of the experience of bootstrapping a business because you need to identify a need, create a product that fills the need, then market it to customers. And you don't have to be the world expert on anything, you just need to know enough to get someone who's at level N to level N + 1 and who likes the way you explain things. And you can pick a small topic and create a course with 30-100 hours of work.
I spent 60 hours on my first course, and it made $10k, so it's not like a smash hit, but it's the highest ROI thing financially I've done since quitting Google.
>How did you go about hiring your first employee and setting everything up for them as employees?
In the first few months, I was assembling all the devices, packing boxes, and printing out instruction sheets myself. It wasn't sustainable because I was also trying to write code and do customer support. It was during COVID and my wife and I were quarantining strictly, but she also was looking for a job since she was in grad school, so she was employee #1.
We started with just Google Docs. I'd write things and share them with her, and she'd ask questions or make updates.
My next hires were developers, which was a pretty dumb decision because it's the most expensive role, and it's the job I like doing most myself. I was finding that I didn't have time to advance the product because customer support was taking too much time, so I should have hired a customer support person. But I hired devs because I'd hired devs before and worked with a lot of devs, so it was a role I felt comfortable hiring. For that, I tried to add lots of automated checks on Github and document things there. I also wrote guidelines on my blog that became official guidelines for devs within the company.[4]
We moved into an office in early 2021, and at that point, I had to hire real W-2 employees rather than contractors. For that I used JustWorks, which I hated. I switched to Gusto, and they were poor but not terrible. In the future, I'm going to avoid creating a business that needs W-2 employees because in the US, it's just set up so badly for small businesses to manage the paperwork around it.
As we were moving into the office, we also switched from Google Docs to Notion, and I had a good experience with Notion. It's set up well for internal documentation, and it's user friendly, so it's easy for everyone to do basic searching and editing.
I could go on and on about hiring, but those are the biggest things that come to mind.
[0] https://www.youtube.com/watch?v=otbnC2zE2rw
[1] https://mtlynch.io/notes/designing-the-ideal-bootstrapped-bu...
[2] https://mtlynch.io/book-reports/start-small-stay-small/
(been an avid reader of your posts over the years. thanks so much for sharing!)
Q: personal guarantee loans/contracts
I know it's common practice for lenders & commercial real estate to make small business owners personally guarantee the loan/contract.
Did you have any of this? And if so, how did you unwind those contract?
Thanks for reading!
No, the only place where I was personally on the hook was credit cards, but that was fine because I just paid the balance and closed the accounts.
I maybe had to give a personal guarantee to rent our office, but it was $600/mo and the landlord was extremely laid back and agreed to month-to-month after our lease was up.
I didn't take out any small business loans to start the business, as I started it with my own cash, and then it generated enough revenue to sustain itself.
The buyer may have had more complicated agreements with his lenders to purchase the business, but I wouldn't be exposed to any of that.
One thing that wasn't really covered was: why did you sell?
Especially at a 2.4 multiple... It seems like you could have just let it keep running mostly on autopilot (assuming the team could keep working on improvements)?
Thanks for reading!
I wrote about that in a previous post: https://mtlynch.io/i-sold-tinypilot/#why-sell
I'm curious, did you consider hiring a CEO to run the company? Or is the company too small for that?
Yeah, 2023's profits was $235k,[0] which is good, but it doesn't leave a ton of room to hire some sort of executive to replace me. I don't even know if I'd attract someone qualified if I gave them the entire profit, but at that point, it makes more money to sell than to own a company that's just breaking even with someone else in charge.
[0] https://mtlynch.io/solo-developer-year-6/#tinypilot-became-2...
Just wanted you to know that I've been looking at a lot of your blog entries for Tiny Pilot over the last few years. This is the first one I've skimmed to the end.
Great writeup!
Thank you for the hint about the business phone registered in a call redirect service.
how many businesses you run?
Right now, I just have one business that makes money. It's an ingredient parsing API that I wrote in 2018.[0] It was not a good idea, but it still makes $100-200/mo without me doing anything. Until a few months ago, I also had a website about the keto diet that made about $100/mo, but I sold it because I wasn't doing anything with it.[1]
I'm currently working on a book about writing as a developer, and that's my main focus for the next few months,, but I don't know if I' call it a business because I haven't sold anything yet.[2]
Imo, you can make good money, and do some good, guiding the numerous laid off developers on the business pastures, if only you figure out how to scale beyond the usual personal couch model. Perhaps some sort of QA platform with paid access: free-tier for read-only users, basic-tier allows asking questions, and premium users get occasional 1-1 guidance? Just a random idea. This might work because they can relate to you and thus trust you, unlike yet another MBA suit.
Thanks for the article. Great read. Can I ask how you sold the website making $100 month?
Just through that blog post linked above. I put up an interest form and got a lot of responses within a day, so I turned off submissions and offered it to the best bid. We did it through Escrow.com, which worked okay.
“My lawyer warned me that when I sell my business, I lose limited liability protection. If the purchase agreement didn’t limit my liability to the buyer, the buyer could later sue me for any amount, even if it exceeds what they paid in the acquisition.”
“Sales below $1M are usually asset sales, meaning that the buyer is purchasing assets from the business but not the business itself. So, I technically still own a company called TinyPilot, but I transferred all of its physical and intellectual property to the new owner.”
Aren’t these contradictory? If it’s an asset sale, the deal is between TinyPilot LLC and the buyer for the assets.
I don't know about the author's case, but often asset purchase agreements will make the principals / shareholders party to the agreement personally with specific liability provisions. If there are no assets left in the company, the buyer has no recourse against it, since it is essentially an empty shell (in certain cases, insurance could be an exception to this). As a buyer, you will want to have some protection against issues you don't know about at the time of sale (perhaps because you weren't told about them, or the seller was negligent).
Author here.
Yeah, that seemed strange to me, too, but that was how my lawyer told me it worked. And the buyer's lawyer cared enough to fight about the exact amount of liability, so I assumed the buyer's lawyer felt that way as well.
In practice, it seems like liability protection would have to change in some way otherwise the seller could abuse the system. Like imagine that I sell the new owner $200k worth of inventory and then the new owner discovers that, unbeknownst to either of us, the inventory has some kind of defect and is unsellable. If the buyer comes back and says, "Hey, I want my $200k back," it would be strange if I'm allowed to say, "Oh, too bad for you. I've shut down the LLC that sold you that inventory and moved all the money to my personal accounts, so there's no money for you now."
A typical acquisition of the legal entity from the shareholders provides protection because there’s no limited liability in the deal (as it’s a sale by the shareholders (as individuals)). An asset sale has higher risk for the buyer (because the sale is, essentially, looting the corpse of a legal entity) with the benefit of not having any liability for the legal entity’s past deeds. Purchasing assets from the company while also expecting the former owner to be on the hook for the value of assets is trying to eat their cake and keep you on the hook to make them another cake.
That said, U.S. LLCs are not normal limited liability companies (like they are in the rest of the world). A U.S. LLC is a weird amalgamation of tax and law. Perhaps what you’re describing (as described to you buy your lawyer) is just one more weird aspect of U.S. LLCs.
(Outside of the U.S., a limited liability company is nothing like a U.S. LLC. The closest the U.S. has to a typical limited liability company is an Inc.)
> A U.S. LLC is a weird amalgamation of tax and law.
What do you mean? LLC aren’t AFAIK about tax: they are about limited liability. How is that different from other countries’ LLC-equivalents?
What are named something like “limited liability company” in other countries are, as GP said, not equivalent to LLCs, they are approximately the same thing as US corporations.
US LLCs are a comparatively newer business form that was created mainly to be a streamlined form (compared to a corporation) for corporate joint ventures. They've since become popular for other uses beyond the original focus.
Thanks! That's helpful context.
Absolute gold for any founder or would-be founder, as are all his posts on TinyPilot and his other web businesses. Raw numbers and transparency abound, and the overall tone is that of a well-organised, fair-minded person.
Agreed. I saved it in case it goes offline, for when I'll need to sell my future business, if I ever start one.
Nice writeup - Wow your broker fee was crazy high 15%. I paid 3% when I sold a $5M business in the UK.
So your fee was higher
150k > 88.9k
> I had a dedicated TinyPilot GCP project, but it was within my personal Google account.
This sounds crazy to me. Never ever mix your business and personal accounts for anything! The point of an LLC (in any jurisdiction) is to keep your personal and business concerns separate, so why would you break that rule for Google? Which is why my reaction to these lines:
> I always sent emails related to the business from my @tinypilotkvm.com email address.
> I always used @tinypilotkvm.com email addresses whenever signing up for services on behalf of TinyPilot.
was along the lines of "Well, DUH!" Of course, that's the first thing you do with a new business: dedicated bank account, dedicated email address.
I don't know which project is going to make it and which is not; will be very painful opening companies for all of these. So I open one once something is doing $5k+/mo only.
if you have a couple projects making a couple thousands a months, you could still open one company to manage those projects
The pain and cost very much depend on one’s jurisdiction (hey, once upon a time it literally required an act of Parliament!). And there are levels to it, too. Absolutely, the first time one sets up a company one needs to hire a lawyer. But after that it’s more of a judgment call.
$5k/month is $60k/year — I am not myself comfortable with the unlimited personal liability risk that brings without a company.
> $5k/month is $60k/year — I am not myself comfortable with the unlimited personal liability risk that brings without a company.
Yeah, here that's not such a problem; I wouldn't do a LLC at all if it would not really help with selling it.
That doesn't really contradict my point. Create separate accounts as soon as you open a business, not as as soon as you create a new directory under ~/projects/.
Yeah, so my entries under ~/projects are 'new' until $5k/mo, so that works.
Author here. Thanks for reading.
>This sounds crazy to me. Never ever mix your business and personal accounts for anything! The point of an LLC (in any jurisdiction) is to keep your personal and business concerns separate, so why would you break that rule for Google?
The finances were always separate. The company GCP project was on a dedicated billing account within GCP, so I don't think it violated any rules about business/personal separation of an LLC.
>was along the lines of "Well, DUH!" Of course, that's the first thing you do with a new business: dedicated bank account, dedicated email address.
Dedicated email address: yes.
Dedicated bank account: no, not from the start.
What bank do you use that will give you a dedicated account for every business idea you have before you even know if it will materialize into something?
I have a business checking account under my sole proprietorship before I know if the business will turn into anything. A few months into TinyPilot, I registered an LLC and created dedicated bank accounts at that point.
But there's so much work and friction in opening a business bank account in the US that I couldn't possibly do it as soon as I have the idea for the business. I had ~10 other businesses that flopped before TinyPilot. It's impractical to have dedicated bank accounts for each one ready to go on day one. And registering an LLC is ~$600 all-in plus a few hundred in yearly renewals, plus $200 to shut it down.
Regarding GCP migration: I would just add the new account(s) as Owner to every relevant project. Then they can remove you after the 30 days or whenever they're comfortable.
Thanks for sharing with such clear concise information. I believe this is very valuable insight for some of us.
People use a broker for these amounts? I did a bunch of sales around 1m$ just with escrow myself. But that was a while ago; is it the norm or?
He explains that the broker found a buyer he couldn’t have found by himself. If I recall correctly he had looked for buyers but none had met his criteria.
For what line of business? Were there multiple smaller sales totaling 1m$ or multiple 1m$ sales?
2.4x annual profit seems like a pretty bad deal.
Low multiples are pretty normal for a small business. There's a lot of risk for the buyer. IMO it makes selling an ongoing concern not worth it if you can significantly reduce the time required to just keep running the business.
Congrats on the sale! Wondering what your thoughts are of these extremely low cost kvm’s from Sipeed (NanoKVM)?
Do you think that allows you to expand your market since the hardware is cheaper as you maintain great user experience? Or does that force you to go upmarket as hobbyists need only the minimal feature set?
A lot of very cheap risc-v boards like milk-v duo sbc are available now
Thanks!
>Wondering what your thoughts are of these extremely low cost kvm’s from Sipeed (NanoKVM)?
>Do you think that allows you to expand your market since the hardware is cheaper as you maintain great user experience? Or does that force you to go upmarket as hobbyists need only the minimal feature set?
To be clear, I'm totally gone from the company at this point, so I'm not thinking about strategy for TinyPilot at all anymore.
But I will say that every year, I'd see a new KVM over IP pop up that claimed that they were going to undercut TinyPilot by 60%. And then they fizzle out, and I never hear from them again.
My suspicion is that people see TinyPilot and say, "Wow, that looks like $100 worth of hardware being sold for $400!I could do what they're doing and sell for $200 and eat their lunch and still make $100 on every unit!" But then as you get into it, there are all these more subtle costs like compliance testing, tariffs, customer returns, insurance, etc.
And that's before you even get to customer support. For a KVM over IP, you can't just give customers a "have you tried turning it off and on again?" support response because the issues are more technical and deal with things like NATs and proxies. So if you're making $20 per sale on a low-cost device, and then the customer has one conversation with a support engineer, you lost your profit and probably would have been better off not selling to them at all.
So, I think there's room to reduce prices as hardware prices come down, but I'll be surprised if other vendors can slash prices to below $100 and still run profitably in the long-term.
Can't those "more subtle costs" be pulled out of the product cost itself and offered or at least expressed separately? Say customer support, if it'd be offered as a paid service instead of "free" as in baked-in-product-cost, thus giving the customer a choice to either go for that easy-pick fruit of available paid support, or the alternative of investing more of their own effort into figuring out and solving the encountered problems by using the docs available to them, or maybe giving up on the problematic use-cases in the first place? Or tariffs - is it bad to let the customers know that there are cost differences in the product offered to them due to their request coming from different tariff-impacted markets?
>Say customer support, if it'd be offered as a paid service instead of "free" as in baked-in-product-cost, thus giving the customer a choice to either go for that easy-pick fruit of available paid support, or the alternative of investing more of their own effort into figuring out and solving the encountered problems by using the docs available to them, or maybe giving up on the problematic use-cases in the first place?
My sense was that the customers would have been pretty unhappy about that setup. Like, a common question was, "I plugged in my device, but I don't see it on the network. What do I do?" They'd be pretty annoyed if I had just said, "I'll help you if you pay me $99 for customer support."
I think in practice, if I tried to pull that, the customers would just say, "Okay, then I'm sending it back for a refund," or, "Okay, then I'm calling my credit card company for a chargeback," both of which are costly for the vendor.
Plus, I personally don't like the dynamic of customer-paid support. If customers have to pay for support, it incentivizes the vendor to make the product difficult to use so that customers need support.
I always want my products to work so well that customers don't have to contact support. So, if a customer has an issue, I want to feel the cost of that as the vendor so I'm pressured to fix it.
>Or tariffs - is it bad to let the customers know that there are cost differences in the product offered to them due to their request coming from different tariff-impacted markets?
For tariffs, I actually meant tariffs that I pay as the manufacturer. For most of the time I was running the company, we were sourcing most components from overseas and doing final assembly in-house, so we paid tariffs on components as they came in. That's a huge headache, especially when we have distributors in other countries, and we're paying tariffs multiple times for multiple border crossings. And tariffs seemed to change per shipment by 2-3x for reasons that were never clear to me.
Tariffs that the end user pays are a whole other headache. We didn't have a way of predicting what tariffs the customer would pay, so customers would sometimes be upset that we didn't warn them, especially in countries when they receive the tariff bill after they've already received the item. At one point, we tried to use DDP, which is supposed to let us pay the tariff on the customer's behalf, but we tried it a few times and the customer was charged a tariff anyway, so it seemed like it was just a huge expense that did nothing.
These are very insightful, thank you for sharing this @mtlynch