It is straightforward to get a body-shop consulting business to mid-7-figures.

In an acquisition of that business, you're going to get a very low multiple on your forward revenue. That's because, in general, you can't plug a body-shop consultancy into a bigger sales machine and amplify the profits; sales and delivery in those businesses are delicately balanced, and while they can be scaled, they can't be abruptly scaled by an acquirer.

If you can bootstrap a product business, none of that caveat applies. You should bootstrap if you can!

"It is straightforward to get a body-shop consulting business to mid-7-figures."

Sorry, no. This is demeaning. It's not easy and it's not straightforward.

disclosure: Been running a "body-shop consulting business" (also demeaning) for 21 years in London, started about a dozen other businesses, 2 are 2MM+ rev/50% EBITDA profit recurring revenue companies.

Please don't demean "consulting" or "agency" work. In my experience it is way more challenging to win and grow business in those circles than it is in a well times SaaS company. I learnt a LOT doing that for a long time. The work is just as relevant.

They had to say it was straightforward because the previous poster had said they had done it. That's how the cocktail party works. ;)

My background is in this kind of consulting work. I'm not demeaning it.

What evidence do you have that it is "staightforward"? If it was, everyone would do it.

I think you've misconstrued the word "straightforward" to mean "easy". They're subtly different concepts.

What's the playbook?

Establish yourself. Specialize. Hire someone to increase delivery capacity. Sales capacity improves; ratchet delivery up with it it (get better at recruiting). Raise rates continuously and aggressively. Give it 2-3 years (once you've got your sea legs).

Be good at what you're doing and steer clear of commoditized work. You can't scale up a generic IT consultancy this way. Or maybe you can! I've never tried.

>steer clear of commoditized work

can you give more details about this from your own perspective? What does commoditized work mean to you and what should one assume about IT consultancies that tend to dabble in this kind of work? What are the problems with it in your opinion? Is this work even avoidable?

I have my own thoughts on this I just don't want to bias your response.

I'm curious to hear your thoughts, and I don't think you'll bias tptacek, he's spent a long time doing it.

I spent a lot of time in consultancies and started one myself, I'm not tptacek but here's my two cents.

Does the buyer see you as a commodity? How hard is it to find someone else to do what you do?(as defined by the customer not you) Can you differentiate yourself from competitors?

I think it really comes down to establishing a brand. And the problem is if you can't establish a brand you can't charge enough to fund growth (and at the beginning charge enough to give you time to grow the company).

A company with a brand can charge 2-3x their labor costs. A company without one can maybe charge 25% more than their labor costs and this puts you in the classic consultancy spiral where you spend so much time working for your business you don't have enough time to work on your business.

that's an interesting way to put it.

My thoughts are, as someone who worked from the consulting end and not management or sales, that when you hire sales people to bring in consulting work, they inevitably bring in commoditized work because sales people have unique incentives and pressures. If you are at the point where you are trying to get sales people to sell specialized consulting work, you aren't doing it correctly. It more or less has to sell itself with a brand as you say. Sales people don't want to spend the time building relationships or learning specialized information to sell to specific targets. So you can't scale up a small consultancy imo.

From the employee side, it is boring and meaningless work that burns you out.

I've seen big consultancies buy up small boutique consultancies and it always turns out badly. My own thought is if you are an IT consultant and you find yourself doing commoditized work, something has gone wrong.

Thanks for taking the time to write that out - totally fair take.

This is peak HN

Is it really? Do you want to understand what I'm saying, or are we here to dunk on each other? I think you have the impression I wrote a drive-by comment about building businesses, and, as I said upthread in response to you, before you wrote this "peak HN" barb, I have a little bit of experience here, too.

What's a little annoying here is that I don't even think the parent commenter is building consulting businesses. I was moved to comment at the incredulity people seemed to have about bootstrapping 7-figure businesses. One way to do that, straightforwardly, is to build a consultancy. But there are others.

> * It's crazy that a series d exit would net a founder 7 million and yet my bootstrapped business returned a 4 million profit for me last tax year.*

I’d be curious which is rarer: a VC-backed business that exits after series D, or a bootstrapper who nets $4M/year?

IMO both are unicorns!

Without question the bootstrapper. You almost never hear about them but there are thousands of them out there. They don't have huge PR VC teams behind them, hence you never hear about them.

> Without question the bootstrapper.

I think you mean the opposite, given the phrasing of the question.

> They don't have huge PR VC teams behind them, hence you never hear about them.

This seems like half an argument. I get that PR teams have an incentive to talk about their company, which is why they are in the news sometimes. But it doesn't explain why non-VC backed companies that are swimming in cash would be so elusive. Would they be in the news? Perhaps not — though they might still want to generate PR for themselves, to grow their business.

But you'd think that people in the startup world, who spend lots of time reading about startup strategies, examples to follow, etc., would have heard of such companies if there were many out there. I've been at this for a number of years, and I rarely hear about bootstrapped startups that are quite so successful. I guess PE folks would have a good sense, since such businesses would presumably make great acquisition targets.

And perhaps that's what keeps them so rare — someone making a couple million a year would rather sell the whole thing for $20M and move onto their next thing (be it a startup or a private beach), and there are plenty of acquirers who are happy to make that trade.

There are thousands and thousands of private bootstrapped business where the founders are banking 1-10M EBITDA every year. You almost never hear about them.

Sorry yes - thank you - I meant bootstrappers are far more common.

My main point is that there's an enormous amount of survivor bias with VC backed companies. Bootstrapped: not so much.

The reason why you don’t hear these stories is because no one making meaningful money as a bootstrapped founder wants to invite unnecessary competition.

Take a look at any sub-reddit related to entrepreneurship. The minute someone even hints they are making a lot of money in some area you see multiple replies asking about the product, niche, etc. People will clone what works. Why would anyone create that kind of exposure if they didn’t need to?

[Edit: just read the rest of this thread and there are three people asking the $4 million guy how he did it, so I guess point proven?]

Yes, there is curiosity. I'm not sure if that proves the point that one would not want to reveal details about the business, or if it indicates that perhaps the commenter's claim strikes many people as somewhat outlandish, or at least rare. I'm sure there are some folks out there clearing $4M/year with their bootstrapped business. But I'm also sure there are folks out there who tell tall tales on the internet.

Also there is a lot of risk and not a lot of benefit to talking loudly in public about how much money you're making as a bootstrapped business.

This thought crossed my mind. But wouldn't there be chatter about this sort of thing within the startup community, as bootstrapped businesses get snapped up? There are podcasts like Built To Sell, which tell the stories of small companies that have been sold. I've noticed that many of them are service businesses, and there aren't as many SaaS companies as I would have expected. Presumably the incentive to keep quiet about your lucrative niche would end after you've sold the business?

Would love to have you write about it. Seems like you have both the experience and the appreciation.

I wrote about it a bit here: https://news.ycombinator.com/threads?id=ilrwbwrkhv#37180387

This. In addition to better outcomes for founders it can be a better outcome for the economy at large including but not limited to customers and employees. As a whole society would be better off with fewer Ubers & WeWorks.

WeWork was a useful way to make SoftBank subsidize office rentals for freelancers and small businesses; it had high social benefit.

Given what WeWork charged, you can't convince me there was much subsidy there, nor much social benefit.

"Cool offices" are something that should never even be talked about by a founding team until they have several spare million sitting in the bank. Until then, rent cheap-ass real estate and buy second-hand office furniture. And that's if you even have offices, which you may not need if you're a software and/or services company. Nice laptops, monitors, chairs, Zoom, GitHub, and Google subscriptions are really cheap compared to real estate!

At its peak, in 2016-2017, WeWork was charging something like $250/mo in Chicago.

Thats impressive. Do you mind sharing some tips that helped you scale your bootstrapped business to 4million profit?

I am not a good writer that's why I do not do blogs and stuff but I will try:

2 fundamental ideas: Distribution & Supply Chains

Distribution:

You need to secure distribution before your company can grow. Which means essentially a lead list or people you can reach in bulk or manually by walking down the street. You need at least 500+ such connections.

The goal of the initial distribution is iterating on your core value proposition. Core value proposition is a binary statement which should be answerable by hell yes or no by your distribution. So iterate on the statement on the first 100 till you get to a hell yes on the binary question. That question should also become the heading of your landing page above the fold.

Supply Chains:

To deliver the product you need to think in supply chains. If you have played factorio or such games this will make more sense to you.

You need a constant supply chain of potential customers (distribution from above). You need a constant supply chain of great employees. You need a constant supply chain of new income streams in your product.

A good product delivers value at first touch. That is through strong UX and clear demarcation. Every feature should exist to deliver the core value. So you need to reject a bunch of designs, product ideas, customer feedback to make sure that you are only delivering value.

Other thoughts:

I can only speak of core technology businesses. If you are selling data, you are not a tech company, stop acting like one. Just put stuff in a spreadsheet and sell that.

Use a strongly typed language like Golang or a highly expressive one like Ruby for your backend. Choose extreme languages such as Imba or Steel Bank Common Lisp (which I built on initially before switching to Golang) for maximum advantage.

Make sure that you have a potential market of at least a $100 million flowing through.

Thank you for your insight- leaving a comment here to come back to later.

Not to detract from an interesting post, but the last point about programming languages is confusing, and seems to give little information.

Use expressive, untyped Ruby or inexpressive, strongly typed Go? Or SBCL ?

Most people would put Ruby and Go on pretty opposite sides of the spectrum.

Maybe you prototyped in SBCL when you needed extreme flexibility/iteration speed at first, and then switched to Go when maintenance became more important? That's a fairly common evolution at big companies.

I just meant using a language which has a core idea that it pushes really well. Basically the anti java.

I still use SBCl now but all new features are being written in Go due to hiring requirements.

Thanks for sharing. Very insightful!

(Not the original poster but have a similar background).

#1 advice for engineer-founders is to always be questioning whether coding is the best leveraged use of your time.

As a bootstrapped engineer founder, I spent way too many months (years?) coding non-stop, even after we got past PMF, despite having the revenue to hire engineers to replace me day-to-day. These days I do zero coding, and am still equally happy and fulfilled. At least for me, spending days coding was a really easy way to feel productive, but it wasn't the best use of time compared to hiring, marketing, sales, company culture, etc.

#2 advice for founder-engineers: after you're able to stop coding, remember that your product is worthless if no one knows about it or if no one is using it. Once you get product market fit into a good place and have revenue traction, it's time to spend your nights thinking about marketing and sales rather than code.

TLDR: always make sure you're spending your time in the most highly leveraged areas. Hiring and delegating. Coding is rarely the highest leveraged area your time can be spent.

Thanks for sharing.

I think the #1 thing most bootstrappers struggle with is finding the right market, idea, validation etc. As much as people say “ideas are overrated” I increasingly think that’s not true, it’s that a good idea has to include things like “can realistically get done by a self-funded tiny team and make revenue soon” which the “idea guys” rarely have.

As far as not coding too much, I’m increasingly finding this true. One thing I’ve noticed is that most non tech founders outsource development and most technical founders don’t even though technical founders can outsource far more efficiently since they can play more of a “tech lead” role rather than hand it to a dev shop. I really regret not hiring designers sooner since I’m bad at it and there’s tons of affordable talented designers on Upwork.

Still, hiring is a little nerve wracking since it eats into your runway. It’s really tough to know when to burn money or time when you have minimal or no revenue. After PMF , hiring makes sense but before then it’s really ambiguous how to make that call.

It's not hard to come up with a highly profitable, but morally bankrupt idea. It's anything that serves those on the top of the food chain: a new creative way to enchance the survelliance machine, etc. But most of the engineers are firmly attached to the ideas of truth and goodness, and so they struggle with ideas that also fit their moral constraints. Big firms understand this, and create a layer of fake goodwill to shield engineers from the reality of what pays their salary. That being said, morally upright and profitable businesses exist, but it takes some nontrivial intuition to invent one.

> Even when I was getting started, I read a ton on VC funded businesses but not a lot on non VC funded businesses.

Any suggested reading for the non VC funded business?

Not a lot that I can find. Essentially businesses are about making bets about what reality will look like in the future. So the better modeling you can do of reality, the more successful you can be. Earnestness is a strong word in my dictionary when it comes to testing ideas these days. I started seeing success when I stopped lying to myself and became earnest after over a decade of failure.

> So the better modeling you can do of reality, the more successful you can be.

How do you approach modeling?

> Earnestness is a strong word in my dictionary when it comes to testing ideas these days. I started seeing success when I stopped lying to myself and became earnest after over a decade of failure.

It sounds like there’s something here, but I’m not sure I understand what you mean. By being earnest do you mean being serious about the idea, or is it something else?

Earnestness is basically intellectual honesty but it takes effort. You think you are being intellectually honest but you are not. You need to peel back the layers.

Regarding modeling multiple models overlap is closest that you can get.

Not a successful self-funded entrepreneur but Im working on it and I’ve studied a lot of the greats.

DHH and Jason Fried blog and books like Rework

Arvid Kahl is a successful software bootstrapper and has a few great books and a bootstrapper newsletter

Everything by Rob Walling is focused on software bootstrappers, and his associates brands / YouTube channel, Microconf community etc

Indie Hackers podcast , interviews, and website

Founders at Work is written by a YC founder but ironically had lots of bootstrapped interviews like Craigslist and Joel Spolsky (Trello)

Patio11 blog is classic

MJ Demarco is non tech and writes more “motivational” style books about bootstrapped entrepreneurship

Once you go down this rabbit hole you’ll discover many more . Especially since bootstrappers love making content about their experiences as it’s marketing and potentially more revenue (what DHH calls “selling your byproducts”)

We have been able to bootstrap Aha! from zero to over $100 million in annual revenue without any external funding. We have written about some of our experiences at https://www.bootstrap.company/ and https://www.aha.io/blog/collection/bootstrap-movement.

I run a bootstrapped software company, not at the $100M scale.

My interest piqued I clicked, had a look at Aha! (having never heard of it before) and immediately thought - hey I could use this. You got me, ka pai, haha.

Any insight on how to navigate inflexion points that seemingly require more capital that cashflow allows? Stay true and spend less? Number 8 wire might not be the same solution today as it once was, that's my worry.

In a business that is more capital intensive than SaaS bootstrapping is likely to be a lot harder. The beauty of SaaS is that expenses scale smoothly with revenue so you never need large capital infusions.

It may be tempting to think "if only I had enough money for a big advertising campaign". But if you are not seeing that small investments in advertising result in corresponding small increases in revenue, then it is very unlikely that a big investment in advertising will result in a big return.

When something is working well it is blindingly obvious. If you are having to look hard for signs of positivity then it is not working. Lots of money can only serve to make things appear successful for a limited period of time.

Zero to Exit Start Small, Stay Small The SaaS Playbook

Startups for the Rest of Us podcast YouTube.com/MicroConf

Indie.vc Tinyseed.com

I’m curious about the nature of your business, $4M in profit in a year is really impressive. What business are you in?

They strap boots.

To be honest I’m amazed there is that amount of money in it but they must be very good at it.

Could you share what market or type of business you are running? I always have a difficult time wrapping my head around starting a business in a large market with clear market winners ($1B+ Rev.)

THIS! I have been a founder and/or CTO for around a dozen startups. Two exited successfully by M&A, but they made only enough money to offset the others I lost my ass on. (One of those was due to being 20 years too early - that product might sell well, now...)

I'm no longer interested in a doing a startup for someone else to own and control. (My biggest startup mistake was hiring an experienced CEO and COO to run my dream startup. The person with the vision and dream needs to be calling the shots, and hired guns are only just that... Passion for the product is really important!)

Although I love startups, they are hard and take a LOT out of you. It's not worth the hit to your life (and your family's!)just to make a pile of equity/money for some ungrateful trust fund kid or a VC partner who thinks their crap doesn't stink just because they happened to be in the right place when their first startup hit big.

VC investment is fundamentally parasitic. If you're building a software/services startup, you almost never really need VC - if you can build a product company without it, do so. I live in Austin, where there are a LOT of startups and startup people. Out of all of them, I know one inventor/technical founder who thinks that taking VC was really worth it, and didn't get screwed over by being liquidated to death. That's not a real good showing for the VC guys. Just sayin'...

I'm really curious about your story. Two years ago your posts were seeking business tips because your efforts weren't working. One year ago you were looking for a way out of web dev. What did your path look like between then and now?

So I had been trying to sell software products that I built for about a decade. 2 years ago things hit rock bottom and I was thinking of switching away from this industry completely. As in most stories I guess when you try and try and hit rock bottom, something changes in your head? Then things started clicking and I hit upon my first offer which worked. Reinvest all profits into social media ads and if your product can be used anywhere it is ridiculous how fast you can grow. I make 3 of those 4 millions in the last 2 months. What is also crazy is how much of a margin there is in a software product. I know of some people who do this in ecommerce but they have profit margins of maybe 20%. I have profit percentages of over 90. But I had to hire more people towards the end of last year and that was a pain and still is. Hiring is not a solved problem.

Would you have any good resources for the non VC route?