Realizing his business was a $1M ARR trap

this hit hard. “$1m arr trap” is real, services can turn into a job real quick

curious: what was the first moment you knew it was golden handcuffs again, like the exact breaking point

also how are you planning to keep icebox product-led without the fractional cto work swallowing all your time

I’ve been developing a premium AI app concept called INNER — The Mirror to Your Mind. It’s designed to help users uncover subconscious patterns through subtle interactive choices and daily micro-interactions.

The goal is to create a deeply engaging and emotionally resonant experience that encourages self-insight, personal growth, and consistent engagement.

I’d love to hear feedback from fellow founders and developers on how to refine the experience and make it even more impactful.

Realizing his business was a $1M ARR trap” refers to a founder discovering that even though the company is generating $1 million in Annual Recurring Revenue, the business itself isn’t truly successful or scalable. It may look impressive from the outside, but margins are thin, growth has stalled, operations are chaotic, customer churn is high, or profits are low. In short, the business earns big revenue but traps the owner with stress, no freedom, and limited long-term value.

That "services funded me but distracted me" line is so true! It’s easy to fall into the trap of making money but not really building anything lasting, because you have to start from scratch each month. That 20% equity deal with your friend for referrals is genius. It's all about setting things up right.

Most people would try to get that number lower or just pay a one-time fee, but you built a system that keeps on giving. Getting clients from referrals beats cold emails any day. I get why you're so strict about deleting things in Icebox. Security stuff fails if it’s too annoying. If it's too hard, people will just go back to simple passwords.

Despite generating $1M ARR, he identified a trap: high costs, low margins, and unsustainable growth. The pursuit of revenue alone without profitability, scalability, or market fit can lead entrepreneurs astray. A business that thrives long-term, not just looks big, isn't just about revenue. It's about sustainable growth, efficient operations, and building a business that thrives over time.

Thanks for sharing this. Did you try any version of this before building fully, or was this the first iteration?

Great story, thanks for sharing!

The idea of a “$1M ARR trap” captures something a lot of founders only see in hindsight: revenue on its own doesn’t equal freedom. Without leverage, it can quietly turn into another set of constraints.

What resonated with me is how similar this is to corporate conditioning — optimizing for delivery, reliability, and client happiness, even after you’ve technically gone independent. Services don’t just pay the bills; they shape how you think, often making product risk feel uncomfortable or even irresponsible.

The shift where internal tools start becoming products feels like the real turning point. That’s when effort begins to compound instead of resetting with each new client. Treating services as a way to surface repeatable pain and language — not as the final destination — seems like the most practical bridge into product.

I’m curious: during the process of aggressively simplifying Icebox, what was harder to cut — features you were personally attached to, or things users claimed they wanted but rarely used?

Hey Torben, this is gold – your journey from corporate $6B projects to $1M ARR services to finally breaking the golden handcuffs and going back to pure building mode hits home hard.

The "services funded me but distracted me" line? Brutally real. And "the best stack is the fastest stack" - 100% agree, vibe coding all the way. Icebox sounds like exactly what the world needs (password fatigue is real). Would love to hear more about how you're stripping down the UX to make it "one-tap forget you're using it"

Any early learnings on that ruthless deletion process? Rooting for you to ship and scale the product side hard. Keep building!

The framing of services as "golden handcuffs you put on yourself" is the most honest description of this trap I have seen. What makes it so insidious is that the metrics look like success from the outside - revenue is up, clients are happy, team is growing - while the founder is quietly losing the optionality they originally left corporate to find.

The /learn folder approach for AI-assisted coding is a genuinely clever hack. Most people use AI to ship faster but miss the compounding benefit of learning the underlying system while building. Teaching yourself against your actual codebase instead of toy examples removes the biggest friction point in self-directed learning.

Question: When you realized the business was a trap, did that recognition come gradually through accumulated frustration, or was there a specific moment where the pattern became undeniable? Curious whether the "breaking point" for service founders tends to be a single event or slow erosion.

This is a sharp illustration of how easily a successful”services business can recreate the same constraints people leave corporate to escape. The distinction between revenue and leverage is the key insight here and why shifting back to product thinking changes everything, even at lower short-term numbers.

That was very helpful to realize that ARR is not reality. Most entrepreneurs are unaware of this issue. Great post! Much appreciated.

Achieving $1M ARR trapped James Fleischmann's business, revealing growth plateaus, hidden operational strain, and the need to reconsider scaling, systems, and strategy to escape sustainable stagnation.

🤖 An automation tool to build apps / tools / websites like Google’s AI Studio — but lighter, faster, and more cost-efficient.

⚡ Runs on Cursor and leverages AI to generate code, build logic, optimize workflows, and dramatically shorten development time.

🧩 Supports the whole journey: idea → MVP → production-ready product. Easy to customize and scale as your needs grow.

💰 Operating cost is only ~500,000 VND/month (≈ $20), ideal for individuals, indie hackers, small startups, or teams that need to experiment fast.

—

(Available on GitHub for download, testing, and demo.)

🤖 An automation tool to build apps / tools / websites like Google’s AI Studio — but lighter, faster, and more cost-efficient.

⚡ Runs on Cursor and leverages AI to generate code, build logic, optimize workflows, and dramatically shorten development time.

🧩 Supports the whole journey: idea → MVP → production-ready product. Easy to customize and scale as your needs grow.

💰 Operating cost is only ~500,000 VND/month (≈ $20), ideal for individuals, indie hackers, small startups, or teams that need to experiment fast.

—

(Available on GitHub for download, testing, and demo.)

github. /onmou/runner

Thanks for sharing and appreciate the honesty.

I kept thinking my funnel wasn’t working because I didn’t know enough.

Turned out the real problem was I was asking users to make too many decisions at once.

Once I reduced everything to a single, clear next step, things finally started moving.

Really appreciate the honesty and depth here — that “$1M ARR trap” lesson hits hard for so many indie builders chasing revenue without clarity on real product value.
One pattern I’ve seen across services → products transitions is that founders often treat the product like a service with code instead of solving the user’s internal process problem. Shifting from “we build for you” to “we solve a recurring workflow” can unlock real scalability.
I’m building an AI meeting assistant focused on turning chaotic meetings into clear action items — and that same lesson rings true: you don’t sell the tech, you sell the outcome.
Thanks for sharing such a grounded perspective!

Really appreciate this honesty. It feels like a common trap to celebrate revenue without checking whether the business will actually sustain itself once the early demand settles.

I’ve seen a few projects plateau hard once they hit that first meaningful number because the foundation wasn’t built around repeatable value. It makes sense that treating the product as work first and revenue second changes how you think about growth.

I’d be interested to hear how you shifted your priorities after realizing that point, and what specific changes felt most impactful.

Thanks for sharing Torben's story. It's interesting how a business can become a trap even at $1M ARR. I appreciate the focus on finding freedom and what he did next.

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Thanks for sharing this interesting perspective.

For blockchain work, most dev is frontend; most people don't know this.

This is definitely surprising. Why is this the case?

I assumed most, if not all, blockchain work is heavily cryptographic and back-end focused.

I checked out your fractional CTO services. The idea of providing CTO services to tech startups is new and a compelling one for founders looking for a good technical leader to scale their product.

This really hits home, especially the “golden handcuffs” insight. A lot of founders escape corporate only to recreate it through services. The shift back to products + recurring is the real unlock.

One growth angle that fits this transition well is Reddit when it’s treated as long-term discovery, not promotion. Threads around security, founder burnout, and “services vs products” already rank on Google, thoughtful replies there compound far beyond word-of-mouth and don’t tie growth to your time.

Curious if Reddit is something you plan to use intentionally as you move deeper into product-led growth, especially for Icebox

If you have the skills, always start businesses that revolve around products.

This story hits a nerve a lot of founders don’t talk about enough: services can look like freedom but quietly recreate employment.

From a growth and positioning standpoint, the “$1M ARR trap” shows up clearly in how services scale revenue grows, but distribution doesn’t. You’re still selling time, just at a higher price point. That’s something I see often when helping service founders shift their narrative and audience toward products.

What stood out to me is the idea of “client fountains.” That’s essentially distribution before product and it mirrors how the most sustainable Reddit and community-led growth works too: trusted nodes > mass exposure.

The transition back to building (and using services as a funding layer, not the end goal) feels like the right long-term play. This is a solid reminder that ARR alone isn’t the metric leverage and ownership matter more.

"This is a great update! From an SEO perspective, I’d suggest focusing on long-tail keywords and optimizing your on-page content early on to build a solid foundation. If you need any specific tips on improving your search rankings, feel free to ask. Happy to help a fellow indie hacker!"

The "services funded me but distracted me" line hits different when youve been in corporate for 14+ years yourself. Its so easy to default to what you know — delivering for clients, managing scope, hitting deadlines. Feels productive but youre just building someone elses thing again.

Currently trying to go straight to product and skip the services trap entirely. But honestly the hardest part isnt building — its the distribution. You mention "client fountains" for services growth, but curious how your thinking about distribution for Icebox? Is it the same referral-based approach or something completely different for a product vs services?

Also that /learn folder hack with Cursor is genius. Never thought about using AI to generate a custom course against the actual codebase im building. Stealing that immediately

This resonated with me a lot. It’s surprising how easy it is to get trapped in a pattern where progress feels real (MRR ticking up) but the underlying fundamentals aren’t there, and it eventually becomes harder to break than it was to start.

It also highlights something I’ve seen in a few founders: the difference between proof of concept and proof of scalability. The former can feel like traction, but without repeatable demand or clear leverage it often plateaus or becomes a burden rather than a growth engine.

I’d be curious to know what your biggest takeaway was — was it a specific moment when you realized it was more of a trap than a business, or did it become obvious only in hindsight?

This touches a nerve. We don't talk about the '$1M ARR trap' nearly enough. ~

This situation arises when the revenue stream outpaces optionality. You have built a solid business. However, as you try to take the next step, things feel ever-heavier. More people, more process, more risk. And the upside never seems worth the stress.

A useful frame that I’ve used is separating income quality from income size.

Revenue of high quality buys you time, energy choice. Although they may appear good on paper, they lock you in.

In the light of information, it makes sense to become a builder again. Less dependency. Greater influence for each choice. Reduced work related to machine assembly.

I'm interested how you recognized the trap in real time.

Was it exhaustion, a decline in learning, or the acknowledgment that growth meant more complexity?

If we could go back in time, is there a sign you would watch for earlier next time to not get stuck in that middle?