How realistic is the "micro-business" lifestyle?
I've read a lot of articles that've said that the failure rate for startups is around 90%. Sometimes higher.
That's just for the startups that get to the stage of having a public face and approaching investors/accelerators etc. Supposedly if you include the failures that never even reached that point the figure comes perilously close to 100%.
Open question: Do you all think the odds are likely to be any better or worse when aiming simply for one person/family's comfortable survival rather than trying to conquer the world?
My 2c: the cost of attempting is low, and randomness is not a real thing. In math/physics, "random" simply means that a parameter can't be predicted from inside a given system (rolling dice is 100% deterministic and 100% random).
Usually it's pedantic to point that out, but I'd wager every single business success is 100% deterministic but the result of complex social factors more than a simple formula.
When the cost of attempting a micro-business in earnest is weeks to months of labor and $30 worth of hosting, you may as well keep trying until you hit on something.
Business is not actually deterministic in my view. In part because it hinges on popularity to a degree and popularity is distributed following a power law. Interestingly there is actually a large degree of randomness in popularity. There was a great bit of research where researchers made a site where you could vote on music and up voted stuff went to the top. All the songs were made up and they actually served up 8 different versions of the site to let 8 cohorts start from the same place and determine what became popular. The results were pretty interesting. The power law stuff plays out such that things that become popular quickly maintain and compound their advantage but the rankings were different for all 8 cohorts. Quality factored into it run that the worst songs never wound up at the top and the best never at the bottom but it wasn't solely the quality of the songs that determined the popularity.
Interestingly for businesses that has some ramifications. You might have great execution and not pop just cos of the timing. You might have mediocre execution and become a hit because you gain some early traction and the power law dynamics start to kick in.
If you want an answer to your original question a lot of datapoints can be gathered from the Stripe Verified Revenue numbers on the products section of this site. You could calculate the average (mean) forum members revenue numbers. I don't dare to run the math. I dare to dream instead.
Neat experiment. Using that line of thinking, couldn't you just relaunch the same project like the referenced experiment did 8 different times? You could change just 1 variable (time) or many. Of course, this only addresses the randomness part of making a business and not all of the other skill based components but that's what the original post was about.
Yeah, that's pretty much my point. Couldn't you just try that??? Haha...maybe some brave IHer will try this experiment and report back.
"What I learned from launching my business 8 times"
Here's 2 times! https://www.indiehackers.com/@vbordo/from-failed-launch-to-going-viral-on-hacker-news-bdd734e742
@from_30_to_greatness I'd be curious to try out an experiment like that. Maybe the third time's the charm 😉
Thanks for your thoughts!
Regarding the last point -- I imagine the overwhelming majority of forum members do not have revenue numbers to speak of (prove me wrong! I'd love to be wrong on that one). So it's tricky to estimate the overall success rate.
Just scroll through and have a look at the data that is there. And to your point if the majority don't even have revenue then well... that's data too! Haha.
Building even a small business is an order of magnitude more difficult than being employed. So there's an economics to it. You need an order of magnitude more tenacity. It pays to have an order of magnitude more curiosity about the way the world works. It really pays to have an order of magnitude bigger sized 'why' than normal.
Part of the economics of building a business are very internal, emotional things. Imagine you had no fear and no fucks to give. Would be way easier because you could literally go to the busiest place you could find, stop everyone on the street and ask them "what do you need and how can I help you get it?" and if you did that for long enough you'd eventually wind up astronomically better off. Socially that's just too tough for even one in a million people. Though certain people have a natural degree of tendency towards doing things similar to that although not as extreme and they call that 'hustle'. It's a key component of why some people win. A lot of nerds just don't have it (well most people even). The tech world is filled with stories where the tech won and we get tricked by it. Same reason people buy lotto tickets and hate sharks. The math doesn't work but the perception of likelihood due to frequency of exposure of such a statistically rare event says 'yes'. So there's a lot of weaknesses and blindspots around business that developers have and they have a tendency to ignore the fundamentals and paper over the cracks.
With that said part of the key is covering all your bases on a team. Hipster (ideas), Hacker (bringing the idea to life), Hustler (distributing the idea). If you're missing one of those elements you are at a severe disadvantage. Not saying it's impossible to win, it's just far less likely. That is to say, if you are missing one or two of those elements you could be playing a better strategy.
It seems to me the rest is up to actually doing the things that 90% of people know they should do it and don't. The 10% that actually do it often go on to win. Even if they don't win this time they just try again and again. What's an example of that? Imagine you talked to 5000 (or even 500) people about a given problem vs. you talked to 50.
I guess my point is... numbers and statistics and averages don't tell the real story. The actual data lies in the action and inaction, the nanoeconomics of the individual's emotions and the picoeconomics of the moment-to-moment thought processes. It's the sum total of all of that (in tandem with stochastic processes and the power law dynamics at play in the popularity game) that leads to the success/failure rate. You gotta figure out the root causes.
Sorry, that kind of turned into a mini-essay.
Don't apologise, that's an awesome writeup :)
"...literally go to the busiest place you could find, stop everyone on the street and ask them "what do you need and how can I help you get it?" and if you did that for long enough you'd eventually wind up astronomically better off."
That's a really interesting point. A lot of aspiring entrepreneurs think of themselves as developers first (indie hackers) and treat business as an independent discipline that you have to get good at.
Business is an inherently social activity. Of course it is. It has to be. You are solving the needs of humans. Your job revolves around said humans. That's more important than any technical skill you could ever have.
Going full time on it really laser focused my attention on that fact. Never even crossed my mind when I was just hacking away nights and weekends.
That story about asking everyone on the street is a real story by the way. Wish I could remember the guys name but it was relayed by a guy running an entrepreneurship event at University that knew the guy and he said he went on to build a 7 figure business in the following 3 or 4 years later. He also asked everyone for a pretty long time... a period of a few months if I remember correctly.
I wonder if you could think of it as a constraint problem. Hard work * good idea * market fit = n% chance of success. Any of those being 0% means the output is 0% chance of success.
Pretty much is how I think about it. So, just do your best and keep rolling the dice. Eventually you roll a six if all the other pieces are in place.
My suspicion is that there are several large hurdles to a successful business that need to be overcome for a real chance at success and a lot of times those are not overcome; I'd love to get some more input on these. I'm wondering what the percentage of companies that are profitable that overcome these:
Number 4 terrifies me. Over the past 4 months my subscriber growth is only at a 5.7% weekly rate. I'm sure I'm blind to a number of better strategies I've been missing.
Nice one.
I think number three and four are the most prevalent. I mean, this stuff ain’t easy and there’s a massive amount to learn.
How can you learn the intricacies of the law in a year when people went to school for five years and then practiced for another ten before they were considered competent.
It’s easy to quit. Your circle says quit. Your spouse says quit. Your family says quit. Why not just quit?
Entrepreneurship can be extremely lonely, that’s why meetups and forums like this are so important. Most people honestly don’t get it.
Why are you sacrificing your time, energy, and health for a company that’s not even paying you yet?
Go get a job.
The math the OP put forth is simple on paper. It’s deterministic - yes - I agree. But what are those determining factors?
It’s different for every business so I’d argue that it’s random.
What works for SaaS won’t work for a hotdog stand. What works for Coke won’t work for Amazon. Etc etc
Your job as a founder is to tame the randomness in the equation. To bend it to your iron will.
If you ain’t got an iron will then get out the game now. If you do then embrace testing. It ain’t cheap, it ain’t easy, it’s sure as hell worth it.
I suspect the weird relationship between determinism and randomness comes in here.
It's not like you're playing slot machines at short odds. You can't just keep trying the same thing over and over again until you win. Probably not, anyway.
I think if you continually try new things, but give each new thing 100% -- which is harder than it sounds -- you can come closer to being able to tame the odds.
"you can't just keep trying the same thing over and over again until you win"
I've actually reversed my position on this one somewhat. Obviously if the idea and execution are shitty then yes, the premise is correct. But what's always been an extremely curious phenomenon to me is why are certain people not famous when they are so insanely talented. It's because famous people are already famous and so they keep on being famous and the little guy gets drowned out. But what I meant when I said I partially reversed my thinking is... sometimes even though you got the execution right and the idea was good and you don't win you give up because it didn't pop or the timing was wrong. What if that was a huge mistake and you just needed to keep pushing it again and again until you got an order of magnitude more traction (which might be from 10 to 100 users even) and with each magnitude you are able to increase you now have more of the mindshare and people start mentioning your solution in conversation and now your advantage you have managed to gain begins to perpetuate itself. Like... how many times might it have ever been the case that someone actually had it right and they gave up because the market told them 'no' when it really meant 'not yet' but they listened to that initial 'no'?
Again, if it's actually shitty then move on, but this is something I've been pondering lately.
Man, harder than it sounds is the understatement of the year.
It’s the most challenging thing most people will do in their lives.
Hold up! You're begging the question: DO 90% of new businesses fail? No they do not; that's a BS statistic. 20% of new businesses survive their first year.
https://www.usatoday.com/story/money/business/small-business-central/2017/05/21/what-percentage-of-businesses-fail-in-their-first-year/101260716/
While it may sound like I'm being pedantic, this is crucial: People repeat Instagrammable folk wisdom as if it's truth, when in fact it is untrue. It's pointless to discuss "The Odds™" when all around you are people and businesses succeeding doing exactly what you're asking about. The Odds™ (such as they are; totally in dispute) do not change the fact that those people exist.
I agree that it's largely but not entirely deterministic; people do stuff all the time that is practically doomed to failure. My whole schtick is about achieving success by eliminating the big causes of failure, then doing what will work, over and over until it does. This approach works.
Here's an interview with one of my students who started off "poorly" and turned it around:
https://stackingthebricks.com/podcast/ep13-justin-weisss-shift-from-side-projects-to-successful-product-launches/
I think the odds are much higher when doing something less are competing for, but I don't think the "micro business lifestyle" is realistic. Everyone I know who's tried has either failed or grown past a micro business. Things that are working tend to grow. Even when the thing that's working is in a pretty constrained market (e.g. @patio11 's bingo cards) the Matthew effect is real. Succeeding in one thing brings resources and connections that help in the next thing.
Also fwiw, I think the Bingo Card business could probably support a mid six-figures / year income for someone who had some email/webinar-foo
I believe the micro-business lifestyle is realistic, but with a few caveats or disclaimers.
Don't confuse high-growth startups with software product/service based "small businesses." Not every software product or service can be a billion dollar business, needing to raise money to get there, and that's fine.
IMO, a profitable small business is a very attainable scenario, but requires work and shouldn't be confused with a "get rich" or immediate "4 hour work week" scenario where you can completely replace your existing incoming.
It may be worth some very broad calculations on how you are going to execute (build the product service/gross margins/distribution channel). See if the math works at that level as a basic sanity check.
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