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.