Ask HN: How long before we're profitable?

10 pointsby ajessup15 lat temu5 comments

One mistake that I, and I suspect a lot of first-time entrepreneurs building SaaS businesses make is just HOW LONG it will take before we will make a profit. Not 'first revenue' but actual profit - enough so that you can stop burning savings or other people's money to pay yourself or your employees. This means successfully and repeatably finding potential customers, and getting them all the way down the line to 'paying customer', and enough of them (say 2000) to be actually paying you money.

I think most of us follow DHH or Tom Preston-Werner and convince ourselves that we can build a real business overnight while consulting/juggling on the side. While clearly this has worked for them, it seems to me now that stories like this are the exception not the rule. The rule is closer to a long, slow grind to eventual success that can take years.

Obviously "How long before we're profitable" is a very subjective question, especially when we're talking about an idea which is sufficiently novel that the size of the market (and therefore the cost of reaching it) is unknown. It's almost pointless to even guess in the early stages.

But at the same time, getting the figure right is the difference between success and failure for most startups. Having some good idea of your distance to profit informs if you need to raise cash, and how much, and from whom (and on what terms).

Rather than try and build complicated models to try and predict profitability on essentially unknown quantities, I would much rather just see more data points from existing companies to help make an informed decision. Frustratingly, this is the one thing that already successful entrepreneurs seems reluctant to talk about.

My actual question then is a bit simpler - who can provide examples of how long it took for a number of SaaS businesses - such as those that frequently come out of HN - to become profitable? What was their revenue at that point (eg. did they have 2 staff or 200), and most importantly how long did it take?

Share examples, if you have 'em, here.

4 comments

polyfractal15 lat temu

Not all of the replies in this thread were SaaS, but some were. Interesting read regardless:

http://news.ycombinator.com/item?id=2646047

Joakal15 lat temu

For me: The basic marketing advice is, is anyone you don't know is willing to pay for it?

Try to do surveys with the targeted demographic not you or related people. You may have an idea how much you or coworkers would pay for it, but that is biased and anecdotal.

If you're selling to business, go to network functions and ask what they think they'll pay for to use it (Open q) or would they pay for this with $$$ (Closed q) [0][1].

When you have an idea of how many people will pay, determining profitability will become much easier. Asking for data points from successful entrepreneurs for comparison with an unknown market is pretty silly to me and shows lack of understanding of your own value [2].

An example of value would be a Ferrari. Although a Ferrari costs more to make then the average car, the sale price is far higher. Why? Because the average consumer associates high sale price with premium value. That's a pretty basic explanation.

Disclaimer: I'm not doing SaaS or experienced with it.

[0] https://secure.wikimedia.org/wikipedia/en/wiki/Closed-ended_...

[1] https://secure.wikimedia.org/wikipedia/en/wiki/Self-report_s...

[2] https://secure.wikimedia.org/wikipedia/en/wiki/Value_%28econ...

keiferski15 lat temu

Completely dependent on your market and product. As the other response noted, data points from other SaaS companies are useless unless said companies are identical to yours.

SaaS is just a type of business model, not a type of market or product.

ajessup15 lat temu

Agreed, averages are meaningless for trying to figure out how long a startup will take. But it would be great to hear a few more case studies other than the "We hacked over the weekend, shipped on tuesday, were profitable in a month" hero-stories that seem to get bandied around.

steventruong15 lat temu

I've seen an extremely wide range of timeframe depending on the business and market. Some as quick as a couple months to some being longer than a year. I don't think I can give an average that would be meaningful base on the number of companies I know of.

That said, it helps to work on a cashflow project first to sustain living before diving into a startup like project that may take awhile to bring in enough profits to do the same. This is why some people recommend working on your startup on the side even though I know most would prefer diving into their startup overtime from day one. The problem is this isn't realistic for many people and underestimating things doesn't just go for estimates of when profit or funding will come in. It's in all areas.