> We’re also a company that has purposefully operated right around breakeven for years.
And here is the problem. Take VC money and now you are forced to run company at breakeven point.
This company would be perfectly fine operating with half the staff and generating for the CEO half a million in profits per year - every year.
He could have met his family financial goals long ago and still keep the company.
This is what folks at 37signals figured out years ago and good on them. Do not take VC money unless you are already a millionaire and aiming for the moon.
Agreed in general. But, in this specific instance, his outcome is probably comparable to what it would have been had he optimized for profits. Given your 500K/yr estimation, he's selling for 8x earnings - not the best, not the worst.
I've taken the profit optimization route for my own business, and often wonder how much money I'm leaving on the table by not hiring a larger team and chasing (profitable) growth.
Also, "not the best, not the worst" combined with "securing my families financial future" and "doing the right thing by my team/employees" and "relieving myself of a management and company ownership role I don't enjoy" sound like a totally better outcome _for him_, than spending another ~7 years managing something he's bored with and not starting new things.
For a lot of other people, a half mil a year profit from a successful small company they'll own pretty much in perpetuity might be what they'd choose. I can see why he didn't. (I'd almost certainly have made the same choice myself.)
I suspect in most cases you would have quickly hit a growth ceiling with that larger team. Fantastically fast growing companies have generally growth pulled out of them by the market. Yes, there are things you could probably do to grow faster, but those things are the spontaneous insights that occur in the shower.
ha no. do the math on it and you'll see that a sale is far more profitable for equity holders than cashflowing profits for the same nominal amount. I.e. distributing $3.7M in profits yields you personally a lot less than having your equity purchased for $3.7M.
You're comparing apples and oranges - 500K/year of profits first needs to get taxed. Then distributed to shareholders pro-rata, then taxed again at the personal level. Also, you're assuming he could have made 500K year in profit from the very beginning.
Yeah but you pay a higher tax rate and get no benefits of QSBS. Generally there is a lot more opportunity for tax optimization on sales than on income.
Isn't this only if the distributions are immediate? Forgive me, not an expert in LLC v. corp structures but I have an LLC so I'm curious to hear your expanded thoughts. Thanks in advance.
> "This is what folks at 37signals figured out years ago and good on them. Do not take VC money unless you are already a millionaire and aiming for the moon.
reply"
But 37signals/Basecamp DID take investment money.
They took money from Jeff Bezos investment company named Bezos Expeditions - back in 2006 (14 years ago).
For most bootstrapped SaaS businesses, the number of active free trial users is so low, it's not worth your mental capacity.
Also. You really don't want customers who will buy from you at $29/mo and won't buy at $39/mo. This is because if $10 makes difference in their purchasing decision, the value they are getting out of your subscription is roughly what you charge. This segment of customers will churn the fastest as they will be constantly on the edge revaluating whether your subscription is "worth it". You might as well not care about whether they become customers or not. So why bother with cheesy tricks to make them convert. It's not worth it.
You always represent value even if you don't pay. You might introduce the music to someone who will pay. It's freemium model applied to music industry.
All of our corporate computers have this now instead of IE11....very refreshing as a web developer to have something modern to target for intranet apps.
In Australia, independent administrator is appointed who is working on behalf of creditors. Government is usually another creditor so they are not exactly an independent party.
You can close your position by buying the month after futures. This will require you to store crude oil for just one month. I think the issue is that storage facilities are almost booked out and the remaining capacity is just so expensive.
Appharbor does look like a zombie startup. The last blog post 5 years ago, the last tweet 3 years ago. Alexa ranks them at #466,765. I was their customer many many years ago but eventually switched to AWS.
But... it adds up.
For example, just looking at the last $39 USD transaction in my Stripe dashboard which gets converted to $53.72 AUD (I charge in USD but receive AUD)
Stripe currency conversion fee: $0.88 Stripe processing fees: $1.69 Total: $2.57
That's 4.78% fee. Now add this new 0.5% and we are over 5% fee on transaction processing.
Is this expensive enough for me to consider alternatives? No.