Thanks for reading!

One subtle point about the profit is that because I'm selling a physical product, there are still a lot of unrealized gains in inventory. I estimate that if stopped purchasing new material and just liquidated my existing stock, there'd be about $350k in profit at the end.

That said, I don't think hardware is a good path for a bootstrapped business. I went into this thinking I'd mainly be focusing on selling the software to people who already had the hardware, and then it turned out that there was much more demand for pre-made hardware.

There are many a lot of other tech business paths that are much friendlier to bootstrappers, like content businesses, SaaS tools, and educational products. I know of several founders making a comfortable living in those domains, so I wouldn't generalize based on my experience.

You could account for your inventory as an asset and then expense it once sold. That would make you much more profitable on paper right away! :)

AKA Cost of Goods Sold (COGS)

Not quite. Inventory is an asset on the balance sheet. It only becomes COGS on the income statement when the goods are sold.

I figured the idea of labeling the inventory as an asset was part of the practice of later deducting the cost (expensing). I.e. you can’t expense it twice.

I think you're both saying the same thing... when you buy new inventory, the entries are:

(subtract cash) (add to inventory assets)

This is not an expense yet. Then later when you sell it:

(subtract inventory) (add to cogs)

COGS is an expense account.

Since an income statement doesn't show assets, it wouldn't appear on the income statement until it becomes a COGS expense.

Yes basically because of matching. The income statement is sloppy without it and difficult to determine operating performance

https://en.wikipedia.org/wiki/Matching_principle

I'm assuming this was slightly in jest, but paying yourself is all about free cash flow when you're bootstrapped, fronting inventory and growing. And in practice, with hard goods this is really difficult unless your gross margins are really high.

If there's a single rule for small business it's "Cash is King". Cashflow is what kills you and the monthly income statement is way more important than your balance sheet.

This is actually why the balance sheet is more important than the income statement. The income statement can obfuscate what's happening to cash flow. A close study of the balance sheet reveals whether working capital is consuming retained earnings.

of course, you could always look at the third leg of the three legged stool, the cash flow statement.

Thanks for writing Micheal, I’m also 30-something ex-Google SWE and currently all-in on solo dev bootstrapping, so your blog is one of my (many) big inspirations.

As you note, I do think if your primary objective was to catch up to SWE compensation, your project idea filter was probably not optimal. But it’s still great that you have the spark of something with TinyPilot. One thing I see repeatedly in the indie hacker community is hockey stick success where people struggle to get the engine going but often once they find the spark it takes off. The ten year overnight success.

Also worth noting many indie hackers add part time stable income such as contracting as their finances require.

If people are looking for a straightforward path where they leave their SWE job and quickly get similar stable income as a bootstrapper, they’re in for an unpleasant surprise. But if you can “make it” you control your own destiny , face unique challenges demanding true creativity, and have uncapped upside in a way you’ll never get at BigTech .

I do think content businesses are an easier launch point . Adam Wethan of Tailwind and Nathan Barry of Convertkit are both examples of bootstrappers who self-funded by starting with info products. I think one mental trap for solo devs is to over identify as SWE and not as online entrepreneurs with SWE skills as a particularly helpful asset.

Wish you and TinyPilot the best of luck and look forward to future updates.

> I think one mental trap for solo devs is to over identify as SWE and not as online entrepreneurs with SWE skills as a particularly helpful asset.

This is one of those scary truths that chased me out of entrepreneurship.

It's scary because it shines a light on the enormity of the task outside of building the product (and building the product usually isn't easy). Parts of it (sales especially) can be very fun, but a lot of it is painful.

I scratched the itch of "can I make something from nothing" and after that realized there was a reason I didn't major in business in the first place. I left with a newfound appreciation for what they do!

Maybe I misunderstand something, but inventory is not an expense until it's sold; it shouldn't influence profit in any way. It seems that what you call profit is actually free cash flow (profit after taxes minus investments into operating capital).

Most (but not all) inventory gets old as time goes on, and the 2022 model isn't as cool as the 2023 version. Which is to say, having a bunch of 2023 stuff on hand is a liability until it is sold. Imagine a car dealership right as Covid shuts things down in 2020.

Generally true, but with the continuous saga of component shortage and that market dynamic has shifted over time from a broad shortage to specific segments particular newer, high end ICs type you can't reliably get your hands-on having inventory and liability on the books is still a better way to go for now.

My current large corp employer is making hardware products and I can not tell you how much more even in 2023 time and effort is spent by teams procuring material to keep production up, including pushing hard on our suppliers.

It may be a risk, but it certainly isn’t a liability in the financial sense.

Turns out striking out on your own as a solo founder is truly challenging for most. I also learned this the hard way, it takes a certain skill set to do all the research, product development work, business development, sales, and marketing by oneself. Much less coordinating a manufacturing pipeline in the case of a physical product like this.

If I needed a KVM I'd definitely consider supporting Michael, just because of the care for and dedication to the cause he has demonstrated over a significant period of time.

It depends on the media. HBO's Silicon Valley for example depicts being a founder as being mostly stress and existential dread punctuated by occasional moments of great excitement. I find this to be pretty accurate.

Startups are pretty hard compared to a lot of things. Even if you have funding from the most prestigious seed fund, most startups will fail before they get to the stage mentioned in the blog post. The nature of the game is that 95% of the time you fail and the rest of the time you get rich. This is why it's so important to execute quickly and keep trying things until you find something that works.

How bleak this reality is depends on your perspective. If you expect it to be like most things in life where you follow a prescribed path and get a reliable result then it's quite bleak indeed. If on the other hand you want to go out and have adventures it's pretty cool.

Success is a means to an end: success enables you to do the things you want to do that you couldn’t do otherwise. If the things you can do don’t require financial success, why does financial success matter? The author is apparently having a great time living his life and building his company, who cares if he could make more money back at Google?

Entrepreneurship is about making your own path, not about maximising money.

So unfortunately, this is called delusion. This is worse than working five years on a failing crypto project with funding for five years.

I tend to measure progress as a function of financial / skill gain over time spent. What a lot of solo founders fail to realize (regardless of education) is that time is the real risk in startups. Sure, you could wait five years for a $2M exit, but how much of your own time / investor time did you burn? At some point, you have to ask whether a "business" is really more of a side-project and whether you're being honest with yourself about how much you value your time.

For context, someone with a high school degree and a poor understanding of social media marketing could make more money with zero employees power-washing driveways. I don't mean to be harsh - but time is valuable.

The value of life lived is different for each individual, but slowly bleeding out what could've been a prosperous education and career for someone who might just be bad at managing a business is a travesty. I have friends who do this, they're misguided but they also have huge sums of family money paying their rent etc... alas another form of delusion and a detached form of reality.

I've literally made more revenue paying a college kid to farm black soldier flies with waste from a vegan coffee shop. I'm literally not kidding.

Domain expertise matters. Solving a problem for businesses with software is what most successful tech companies are doing - but it's very difficult if you don't have some insight into the process and problems of some group of businesses.

Observations as a regular human worked in the late 90's and around 2010 because there was lots of obvious stuff stuff to do when the web was taking off and mobile taking off. Outside those windows...domain expertise.

As an outsider is there an effective format for attaining domain expertise via interviews in the sales process?

People seem to do it. I'm sure it's a lot of hard work but there are concrete examples. Stripe, Blend off the top of my head.

I spent 9 years building domain expertise in a traditional engineering field and have many ideas for startups that would 100% be successful if I had the time/capital/grit/etc... not just me, anyone with my experience would be able to do it. It is incredible how absolutely awful most engineering software is. Meaning software for mechanical, civil, chemical engineers, etc... The business logic backends are basically all ancient codebases written in C++ or Fortran. CI/CD? Testing? Clean code? Yeah, no. You're having spaghetti code for dinner. And the greybeard who wrote that line of code 25 years ago and is still hanging out in a back office is reverting your changes if you touch "his" code. Imagine what someone could do using a language like Julia or Python/Numpy with modern software engineering practices could build. You would be able to iterate and add new features so quickly, none of the current players who all basically built their stuff in the 90s would be able to compete. I applied for a job at one of these companies and they earnestly asked me if I knew how to code in Delphi... um, no, have you guys heard of React or Electron?

Are you saying the software products used by (for example) chemical engineers are no good? What are they using the products for? On what dimensions could the products be made better? Ie, faster, easier to use? Something else?

Specifically chemical process simulators used by Chemical Engineers are all very, very long in the tooth. I sold and trained other engineers to use these products for years. They are fine in the sense that thousands of engineers around the world use them on a daily basis to get work done successfully, but they could be so much better. I'll give you one specific example. Engineers will spend hours, days, and sometimes weeks (I'm not joking) trying to get simulations to converge without any luck because they fail to manually generate 'good' initial guesses for the models. And because engineering design is an iterative process, you don't need to just generate good guesses once, you'll need to do it many times as you iterate towards a final design or solution. A neural network could be trained and used to assist generating these initial guesses. I built a prototype in Tensorflow that did exactly this and the results were very good - of course this was trained on a dataset generated for a very specific plant. But it worked, and it worked well. But all of the companies in this space are stuck in the early 2000s and just want to keep doing what they've always done, there is very little innovation going on.

Chat? My email is my username at google's email service.

What makes you think the folks developing CAD/CAE software are so behind (nay, negligent)? No amount of React will solve topology or perform naming and matching (look it up, modern CAD can’t live without it).

A lack of respect for established success is both a superpower (don’t listen to the bozos) and foolishness. Knowing when to use each is what makes some pursuits blossom and others slowly burn out.

Not talking about CAD/CAE, that's not my expertise at all. I'm specifically talking about chemical process simulation.

And React obviously gets used for the GUI instead of something like Delphi. As I said, for the business logic, there are amazing new languages available like Julia that allow devs to iterate significantly faster than in C++.

I guess I made a bit of a leap of faith assuming that it's just as bad in the other engineering disciplines.

Selling things to people might give you domain familiarity, but it won't give you domain expertise.

I think a better approach is getting actual domain expertise in the door one way or another. E.g., a cofounder, an early hire, or a consultant. Thinking about the domain experts I've worked with in the past, I'd look for 10-20 years of work in the industry, hopefully in a few different roles or companies.

For B2b, sales conversations and stalking users in their work is the process of achieving domain expertise, then product market fit.

You have to start with some hypothesis however.

Typically the media reports on startups with significant investment by venture capital firms. This startup is bootstrapped, (i.e. self-funded) that makes the process significantly more difficult.

If you are going to bootstrap a hardware company then this is the reality. And most companies never even get this far.

> Or is the point of the "bootstrapped experiment" not to earn a basic living?

With no offense to the methods of this founder, no, I don't think that's the point of his (yet?). Maybe an eventual goal, but he clearly has no need for immediate profits, he'd rather do a good job with the product.

It's true that most people can't afford to to not have enough earnings to pay for basic living expenses while pursuing the entrepreneurship path. The middle ground would be to keep a day job as you go along that path.

moonlighting is very hard, and typically means your business will not get the best of your focus and energy. It also fosters an unhealthy and antisocial attitude; people need downtime to avoid burnout.

One overlooked factor in these numbers is that the founder now has more levers to pull. For example, they are paying $206k in payroll, and in an emergency situation, could let some staff go and take over those functions themselves.

I've experienced the same thing with my bootstrapped startup; I'm not paying myself any more money than I did 3 years ago, but if I need money, I can double or triple my own salary within a month or two.

The reason the founder isn't doing that now is likely exactly the same reason Uber or other VC startups consistently lose money; they are optimizing for growth, not profit/salary.

> The reason the founder isn't doing that now is likely exactly the same reason Uber or other VC startups consistently lose money; they are optimizing for growth, not profit/salary.

Optimizing for growth is very risky and makes sense to VCs. VCs diversify into dozens of companies. The odds that one company will be a moonshot are pretty good. But as an individual founder you're 100% exposed to the growth/collapse of your one company.

>> is the reality much bleaker? Of course, because the media suffers from survivor bias. No one gets article written about them for failing.

But lets give the OP some credit- if the company becomes more profitable it could be worth many years salary in equity. And someone who can start a company can usually start another company, which is kind of security I think a lot of people don't have.

Look, if you are getting a large salary from a FAANG type gig, every study shows for your wealth you should stick with it. If you don't want to, or you don't have that choice: lets help that person learn to hunt and kill for themselves.

The reality is super bleak. Listen to the Indiehackers podcast and you will see that most of the 'crazy success' stories involve someone getting lucky and ending up with $10k/mo, that is a low junior dev salary at a FAANG.

The most recent episode featured a guy who was an expert at building and selling Shopify apps. He built 10 different apps, but 97% of his revenue was coming from 1 of them. Even in his own special niche he had a 10% success rate. It was something like the 4th product he had launched also, so it wasn't the product of lessons learned.

I don't want to make it sound bleak because everyone should experience building something from scratch (I have tried and still dabble) but it is really a tough game.

Every person's situation is unique, but less money can be equivalent given the tangible costs (transportation, food, clothing, etc) and intangible (stresses of any particular jobs like meetings, hours, etc)

If you attain relative independence at 10 K per month, it might be worth it.

Personally, I am a very independence-minded person and I am not sure what offer would I have to receive in order to drop my current business (with a lot of small customers, so not a single chokepoint) and become a cog in some big wheelhouse.

Experience of my peers (I am soon to be 45) says that big wheelhouses can sometimes collapse with alarming speed and once you get used to the putative safety, the aftereffects can break your family, your mind (one guy I knew really fell into a bad alcohol habit after being let go from a bank) etc.

I think 10k/month from a product and 10k/month from FAANG have a vastly different value quality of life wise

I'm sure you know about this already, but it's worth spreading the word any chance I can get: Look into Financial Independence

You don't need THAT much money to retire. You can put all your money into the stock market, then withdraw 4% per year and live off it and reasonably expect to live like that indefinitely, since the exponential growth of your savings will balance out the ongoing withdrawals and inflation.

At $40k a year you could retire with $1M saved, which could be doable in 10 years of saving FAANG money pretty comfortably.

<RANT relevance="Low">

On the topic of FAANG sucking: I'm another FAANG guy making the big levels.fyi bucks. This job is great, best job I ever had, but I do hate it as well. I have to ask for permission to take a few days off. My only real long vacation opportunities are during the same time of year as everyone else on the planet, so traveling anywhere is a stressful overpriced fiasco. I spend hours every week getting yelled at in meetings over stupid fucking no-op line items on spreadsheets. I can't take my kid to the park during the winter because I'm stuck going into an office during the entirety of daylight hours every day. While I was typing this rant, I got a popup from Slack telling me I need to update the format of my pull requests to match some stupid fucking template.

People aren't meant to live this way, it's bullshit. </RANT>

And that's your best job so far?

Which FAANG uses slack? Because I'd like to avoid them. Microsoft and Google sure don't, but then they have their own thing going on, so I'm not sure that's any better.

This rant was awesome. Please post more like it. I am at the point in my career where I don't really need a manager. I am mature enough to come to work and produce valuable things. Still, managers are required in the corporate world, and they ask you do all sorts of dumb things that add no value, e.g., "pull request reformatting".

I'm sorry to hear about your holiday situation. I assume you have about 20 business day or more per year. One idea: Pre-plan 3-4 holidays at the start of the year. Get them pre-approved by your manager. Also: Ask if you can buy more holidays (give up base salary). Most managers think you are crazy for asking, but few say no. (It required some finess with HR.) If you could get 5-6 weeks of holiday per year, you might be able to put up with more b/s from your manager. It helps me a lot. I try to take a one week holiday every quarter. Also: Ask your partner if you can take a holiday alone. Be upfront and tell them "nothing shady", but you want to go backpacking in India or drive accross New Zealand for two weeks (or whatever). Most partners are supportive if you are making very good money (like you).

That's a great suggestion, thanks for that. Especially if I went for a less demanding and remote-friendly role I'll bet that would work really well to keep a decent work-life balance.

I'm just going to tough it out one more year, and hopefully I can get out of this hamster wheel forever after that. I managed to save about $500k in 4 years, so I should be able to move somewhere normal, buy a house, and live in it with my family while working on a revenue stream

>You don't need THAT much money to retire. You can put all your money into the stock market, then withdraw 4% per year and live off it and reasonably expect to live like that indefinitely, since the exponential growth of your savings will balance out the ongoing withdrawals and inflation.

>At $40k a year you could retire with $1M saved, which could be doable in 10 years of saving FAANG money pretty comfortably.

It depends what kind of securities you are buying and where, especially if you want to secure your kids’ future (their education/healthcare/land/legal risks). I also think a 4% withdrawal rate is too optimistic given the demographic changes that are projected to occur, I am using 2% for my calculations.

There's also combinations to consider - for example, GP saves $0.5 mil, yielding $20k/yr, generates additional $20k through work.

Firmwarrior, you need a different manager.

4% is specific to 60/40 US portfolio with 30 years horizon to not die poor at the end of it , a safer rate would be 2/2.5%[0]

[0]https://www.youtube.com/watch?v=1FwgCRIS0Wg

Just went and listened, and sure enough the first episode was on point. Justin Welsh. Smart guy, but he does attribute a lot of his success to being one of the first people to create posts specifically for linkedin, which allowed him to acquire an audience of about 20k very quickly.

Yeah he is actually doing pretty well. The people who do the best seem to be the ones who do newsletters and courses on... how to build SaaS companies lol.

LOL. Totally agree. In the gold rush, sell shovels. I also like it when people who are really good bloggers or technical writers do some navel gazing and write a post about how their most valuable skill is writing and it should be yours also. I have a good laugh when I see those.

1 out of 10 sounds about right. Especially if you're taking a shot in the dark and/or not competing in an established market. Truth be told, it is tough, but its not the path of least resistance, so there's nothing else to expect. It is easier to push through if you have thick skin. If you have grit, you can iterate through projects quickly and find the one that connects with a market. The trap is falling in love with your idea without first proving it can generate revenue. I know guys who have poured tens of thousands of dollars into SAAS, only to discover after-the-fact that nobody wants to buy it.

Furthermore it's very few businesses that make it past 20 years and it's very hard to transition from one business to another. I am now in that tight spot as a successful businessman in year 14

What do you do?

The most conspicuous examples of so-called entrepreneurs and founders are really just class bullshitters [1]. This class of solopreneur as portrayed by "the media" typically comes from a well-off family, so basic living expenses are already covered behind the scenes.

Another frivolous example is the boutique kombucha company founder living a posh Manhattan lifestyle, with frequent updates to their instagram about their life and "success". The hip status of being a founder/entrepreneur is their ultimate goal, not financial success, as finances are not a concern for this class of individual.

[1] Class Bullshitters - https://news.ycombinator.com/item?id=30556312

You're making a lot of assumptions about what leads to entrepreneurial success. My gut feeling is working at a big business and attending an ivy league school isn't going to offer better preparation for bootstrapping a business than the hustler who learned to code on the side. In fact, it may actually harm your chances.

Entrepreneurship is something very special, if you can pull it off. It's not something that being spoon fed knowledge through typical education prepares you for. It's incredibly difficult and fraught with risk. But the rewards exists, so it's worth it to take a shot if you think you have what it takes and the opportunity seems worth it.

For what its worth, I'm a bootstrapped founder, and I do make a living off of it.

The ivy leagues spoon feed knowledge like the NFL spoon feeds intense football to the players. These are the students who only make it look easy.

What’s your startup?

You raise good questions, especially for someone considering striking out on their own.

Personally I'm laser focused on this question: "How do I match what I could earn in salary as a software engineer?" Beyond that - I can figure it out on my own. Until then - I'm burning savings and need to figure it out.

As far as I can tell, the safest fastest way to get from A (unemployed and without income) to B ("engineer salary") is as follows, assuming "engineer salary" is 150k/year.

1. Have enough savings to live for 1 year with $0 income and another year with reduced income - say, 50k/year. Having 40k on top of that in savings: half of that to get you started, half to buy businesses in the future and/or to buy services to do that then.

2. Buy an ad supported online business on Flippa. Budget: 20k. This can be for one or multiple businesses, though multiple is probably better for quicker growth & profit potential. (It doesn't have to be Flippa btw, but that's 'good enough' for our purposes).

3. Assume no income in year 1. In this year you add pages to your site(s) and continuously improve them, using Google search analytics to confirm what you're doing is working. Your traffic should be increasing.

4. Assume 50k/year income in year 2. This is either through ad revenue or selling one of those sites you bought (probably the latter). Continue doing what you did in year 1, but better.

5. By year 3 you've hit your goal. By year 4 you've exceeded it. Every year after that, you can expect your income to substantially grow, for at least the following 3 years.

Until a google algo update wipes you out and you are screwed. If you are going to go down this path it's better to sell the pick axes than go mining for gold. Learn how to mint the sites yourself and sell them on flippa to guys who think they can buy retirement $20K at a time with no sweat equity.

I read some of your comment history and I’m impressed: you’re an SEO expert. I’ll take your advice seriously.

What do you think about using AI to create a lot of niche websites - carefully, crafting a few dozen pages around search intent, w a real tool like SEMRush or Ahrefs - and then releasing them on the world, letting Google penalize some but making it up on volume?

To me it seems like it could work.

To quote Matthew Mercer - You can certainly try. But in all seriousness, run a test. As far as tests go this one is about as low cost as they get. In general, I don't expect purely ai written content to do all that well - and that's probably a good thing for now. That said, nothing beats a practical test for this sort of thing.

It actually highlights the survivorship bias in startups

TinyPilot is an okay venture, if they raise outside capital or do a big exit they will look like an overnight success

Everyone else will have tried the single venture five iterations ago, gone in debt and had to get a job for the next 10 years before hoping their life, family and health let them try again

Richer people just iterate faster, are flexible enough to upskill if they chose to apply themselves in this way

I hope this doesn’t discourage you! There’s a thriving community of indie founders who are earning a good living from their own companies, many of whom are developers who struck out on their own.

Most don’t have fancy degrees or companies on their resumes, though a few do. Many don’t have a college degree at all.

It’s definitely possible to build a profitable small tech business. We’ve been running our own company full-time for over 6 years now, and make a better living than we did as employees. It did take 3 years of patience as it grew from a side project (so we’re in year 9 now, all told).

FWIW self-funding a hardware company, especially when outside expertise is required, is definitely bootstrapping on hard mode. (Though I do know someone who bootstrapped a rocket company!) Most of us do software.

I encourage you to check out a MicroConf Local if you’re interested in learning more about the indie founder world.

As an employee, you are essentially a business owner with one customer. Your customer can cut you off at any time with a 3 AM e-mail, even if you pour your heart into your work. You lose access to it too. You own nothing, any thing you do, your customer owns 100%. There is no intellectual property of yours it's all theirs. Owning a business is super hard and you won't make as much money until you sell, if you are lucky to sell. But, being an employee is even more crazy.

The 46k website redesign was also a huge thing....

https://mtlynch.io/tinypilot-redesign/

I find it remarkable that someone would go into business for themselves to NOT pay for their living standards. In a start-crunch sure, but if you got revenue, pay yourself. The whole point of going into business for yourself is to pay yourself. I think some people get wrapped up in the emotional aspects, and fail to see the pragmatic aspects.