Profit-sharing

Profit-sharing is a fun topic, but I want to take a look at a different meaning of the phrase.  Rather than look at the process of distributing a portion of a company's profit to involved parties, I want to look at the idea of publicly, transparently sharing internal company data on profit, revenue, and expenses.

Of course publicly traded companies do so, but there are a different set of considerations for a small, private company.

For starters, there's a generally-accepted rule that you don't share what you don't have to.  Keep your cards close to your chest.  Why hang yourself?  As Aaron Burr says in the hit Broadway show "Hamilton":

I learned this lesson myself at my previous job.  When a rift developed between two factions of management, there were a lot of words expended in accusations, arguments, and attempts to convert employees to their side.  What I quickly discovered was that it didn't matter what someone said--it would be interpreted a predetermined way by their opponent.

Side A: "I love puppies."
Side B: "Did you hear that?!  Side A hates kittens!"

What isn't said, can't be misinterpreted.  Often, the safest course is often to say nothing at all.

However, as both Aaron Burr and Johnny Tightlips discovered, there are repercussions to being opaque, usually involving someone getting shot.  Fortunately we avoided that outcome at my previous job, but it did cause my partner and I to have a deeper conversation about whether we wanted to share our company financials with the broader world.

Would we get robbed?  Would our company be denigrated?  Would a customer or partner refuse to do business with us because our numbers revealed that we were "smaller" than they were comfortable with?  Would our finances or lack thereof give leverage to the opposition in a negotiation scenario?  Would our money-laundering operation be exposed?

When you're a small company, you're already living closed to the edge and anything can tip you over. You don't make many decisions lightly.  In the end, however, we decided to publicly share our revenue because quite frankly, it was data that we would find valuable if provided by someone else.  Honest, live numbers from startups are hard to come by, particularly an unsplashy startup like our own that didn't start with $100M in venture capital and an established PR machine.  We're doing this the hard way: living on cold stewed beets, hunting a niche to work in, slogging through development, painstakingly building a customer base.

Our hope is that our numbers provide context, and maybe even hope for someone else.  "Oh, not every startup strikes it rich or wins the lottery?  Good, then I don't feel so bad.  If they did it, I can keep doing it too."

And if nothing else, maybe our numbers simply provide a little amusement!

Inception

Two and a half years ago, I left my job at a robotics company along with two fellow employees, so we could form our own company.

Boy, was that a big mistake.

The robotics job was enormously interesting: we got to play with a dozen robots from different companies, add intelligent behaviors to them, integrate a wide variety of sensors and controllers, and go out to the testing field and get dirty.

There were also a few downsides, however.  When you're an employee, you aren't master of your own fate.  You aren't at liberty to chase your own interests with as much freedom as you may like, and you may not have as much say as you may like if you disagree with something.

My whole life I've been attracted to small companies because I liked the high level of involvement and freedom, so I supposed forming my own company was the logical next step.  I was extremely fortunate to partner with Curtis and Kevin, two expert software developers who shared many of the same values I had.

Our first project was a 3D mobile puzzle game involving alien drones and mysterious mansions.  Puzzle House: Mystery Rising took us about 8 months of our own time and money, plus $50,000 from (family) investors.

 

I'll admit, we had grand dreams of becoming overnight (well, eight-month) millionaires and making the sequel from our volcano-based computer lair on our private Caribbean island, but shockingly, things didn't turn out that way.  It turns out there's a lot of competition in the mobile game market.  Even though our game was the most awesome one in the app stores^{[citation needed]}, getting it in front of people was a different matter entirely.  People who found it, loved it, according to the good ratings, but it was hard getting people to find it among all the noise.

To date, our app has had about 105K downloads, and made about $39K.  Although it sold for $2.99 a download, there was a large chunk of "free" downloads in there.

As you could imagine, those numbers are pretty crushing.  With 90% of that money divided among the three of us, and 10% going to the investors, it didn't go very far.  Although we had a vocal group of supporters clamoring for the sequel, we had no money to make it.  At this point, we had two choices (three if you count 'start a life of crime,' which we did not consider at all according to any paper trail).

One, we could go back and get a "real" job.  Many failed entrepreneurs do, and there's no shame in that.  You do what you have to do to feed the family.

Two, we could exercise our God-given gift of denial, tighten our belts, start buying spam instead of caviar, and adjust our sights for a more modest private island in Second Life.

I don't mind spam.

The point of this blog is to detail our journey from nothing to filthy-rich, island-owning millionaires.  For better or for worse this won't be a quick trip.  I've come to realize that unlike every news story I've read (confirmation bias much?) we're not going to strike it rich overnight, or get bought for billions of dollars, or invent some magical solution that solves world hunger (or will we...duh duh DUH!).  Instead, this is going to be a slow, steady slog to success.

I can promise you it won't be a boring slog, however.  There will be drama.  There will be excitement.   There will be mistakes.  There will be disagreements, and even the occasional fisticuffs (there will be no fisticuffs).  We'll open our books and show you hard numbers on revenue and expenses.  We'll give you the inside look at our product development and production.  We'll show you every ingredient of our secret sauce once we figure out what it is.  Hopefully we'll amuse you a little as well, although our company balance sheet could probably do that on its own.

So come along for the ride.  Feel free to recommend topics, and we're always open to guest bloggers.  Our initial plan is to post every Monday.  Check back soon!