Researching apps to help a friend solve a problem with their business, I came across two popular apps and decided to research their founders. I learned some interesting things. Each app does over $100k in monthly revenue, with 80% or higher net profit margins. I know this because both founders talk openly about revenue figures in interviews, and one even shares the revenue figures in his social media bio.

Both founders built their apps and maintain them without the help of a team. And neither is interested in scaling their company. They’re happy to grow revenue but uninterested in recruiting or managing a team. They’re hackers who want to quickly build products others find useful and will pay for. With this philosophy, they’re not focused on B2B customers; they’ve created apps that are B2C oriented. The apps are self-service with low price points ($40). Often, people will pay for one-time usage, so they’re less focused on recurring revenue. I’m assuming this works because their apps appeal to a large global market and they acquire many new customers via word of mouth, which keeps customer acquisition costs low.  

I’m intrigued by both of these indie hacker founders. I want to learn more about their approach to quickly building and launching one-person companies that generate over $1 million in annual revenue.

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

Cumulative metrics (since 4/1/24):

• Total books read: 34
• Total book digests created: 12
• Total blog posts published: 196
• Total audio recordings published: 103

This week’s metrics:

• Books read: 1
• Book digests created: 0
• Blog posts published: 7
• Audio recordings published: 0

What I completed this week (link to last week’s commitments):

• Read a biography about Samuel Irving Newhouse Sr., founder of Advance Publications and owner of famous magazines such as Vogue, Vanity Fair, GQ, and The New Yorker
• Obtained digitized copies of two books I’ve read

What I’ll do next week:

• Read a biography or autobiography
• Create book digests for two books using Google AI Studio
• Explore Google Vertex AI Studio
• Test ways to improve the quality of AI-generated book digests by fine-tuning Google’s Gemini LLM

Asks:

• None

Week two hundred thirty-eight was another week of learning. Looking forward to next week!

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

What I struggled with:

• I was frustrated this week with myself and others. I didn’t get some things done that I’d planned, and that got to me. They were my responsibility, so I was disappointed in myself. But I was also annoyed about the things I didn’t have the power to push through to completion.

What I learned:

• I finished reading another biography about Samuel Irving Newhouse Sr. this week and recognized a pattern among entrepreneurs who achieve outsize success. Many have a photographic memory and make decisions quickly. Their minds make connections between the information they’ve consumed over the years and the problems in front of them, which allows them to make better decisions faster to solve their problems. In other words, their photographic memory prepares their mind to act decisively when a solution is needed.
• Google AI Studio is a “browser-based integrated development environment (IDE) for prototyping with generative models.” This looks like a good way for a nontechnical person like me to fine-tune the output of Google’s models.
• Some public sources provide scans of books, even older, hard-to-locate books.
• I’ve lived with the problem I’m solving with this book project. I understand it deeply. If I build an MVP that solves my problems, it will likely resonate with other entrepreneurs.

Those are my struggles and learnings from the week!

I met with an entrepreneur who’s had early success in a highly competitive industry. The products his company sells are readily available from competitors, so there isn’t much differentiation. His company’s current strategy is to provide products for a low price. Its prices aren’t the absolute lowest, but they’re on the lower end of the spectrum.

As a founder, I operated in a market where price-taking was the strategy. The automotive parts we sold were readily available from multiple retailers, so there was no product differentiation. This led to lots of competition. Since we all sold the same parts, each competitor tried to take the lowest possible margin that allowed it to make a small profit. With small profit margins, the focus was on volume. A little bit of profit per order and a ton of orders can add up to a decent total profit.

This strategy can work, but it often requires scale. Companies like Walmart have proved it’s possible. Winners in this type of market are often hyper-focused on efficiency. The company that can operate with the leanest and most efficient cost structure can afford to sell for less than competitors. Lower prices attract more customers. More customers mean more volume, and more volume makes it possible to negotiate with suppliers for lower costs. If executed well, this strategy can create a flywheel that grows the company.

The entrepreneur I met with doesn’t want to be in a price-taker business forever. The lack of customer loyalty and inability to control margins concern him. He wants to move from being a price taker to being a price maker. And he wants to set prices based on the value created for customers. He’s exploring creating proprietary products and services focused on niche customer problems to accomplish this.

You can build a successful company being either a price taker or price maker. Having built a company that was the former, I want my next company to be the latter.

I set up an introductory lunch for two entrepreneurs in the same industry. I’ve been trying to make this happen for months, and I’m glad that this week, it finally did. One of these entrepreneurs is seasoned, with deep relationships and wisdom accumulated from years of experience and learning about the experiences of others. The other is new to the industry; he’s had early successes and is trying to build upon them to scale.

The lunch was a success. My being there as a trusted party helped each of them build trust with the other. The seasoned entrepreneur readily answered all questions and was transparent. He shared details about lessons learned from painful failures and explained how changing market conditions led to the strategy he’s pursuing going forward. He gave comprehensive answers to questions about the ways he overcame hurdles the newbie is facing now. He also shared his best-kept secrets, including tools he uses to access hard-to-find information.

After the meeting, the newer entrepreneur told me that the things he learned during that lunch will save him months of time and considerable money. Before, he was unsure how to overcome certain hurdles. He now knows exactly what to do and not do and the people to call for help in specific areas. He left confident and excited. If he gets stuck, he now has someone credible he can call who’s been in his shoes and who’s willing to help.

Meetings like this are important, especially for newer entrepreneurs. They can completely change an entrepreneur’s trajectory. I’m excited for both of these people and can’t wait to see what they do. As the newbie becomes more successful, I hope he pays it forward and shares what he learns with the entrepreneurs who come after him.

Last week, I finished reading At Random: The Reminiscences of Bennett Cerf. It’s Bennett Cerf’s autobiography, and it details how Cerf founded and grew book publisher Random House. Cerf was a colorful entrepreneur who lived an exciting life. Being one of the few people who influenced the distribution of knowledge by choosing what books to publish put him in a unique position. If Cerf and other publishers didn’t publish a particular book, the public never had the opportunity to read it. People were attracted to him and his influential knowledge distribution, which allowed him to build relationships with notable people, including U.S. presidents and movie stars.

Cerf founded Random House in 1927, and he died in 1971. Things have changed drastically since then. Companies such as Scribe Media and Amazon’s Kindle Direct Publishing now make it easy for authors to publish their books. More books are being published, but discovery is more challenging for books that don’t have significant marketing resources.

After reading Cerf’s book and thinking about how the industry has changed, it’s clear to me that people who curate and help others discover books can bring immense value to readers. Those who excel at this can build powerful magnets that attract others to them. By attracting others to them, they will likely also attract unique opportunities and build relationships with notable people like Cerf did. Said differently, curation and helping others with discovery is a way to create magnetic luck.

I had a great conversation with someone who archives and preserves documents for a living. A big part of their work involves digitizing documents and publications. A few takeaways from the conversation:

• Commercial-grade book scanners are the way to go. They can generate an image or text file, or both, when they scan a book.
• Discoverability is an important consideration. Tagging and metadata are important to enhancing discoverability.
• Ensuring consistency in the information collected across publications is important. Thinking through the metadata schema is an essential upfront exercise.
• Using distinct identifiers, i.e., authority control, helps keep data clean and enhances discoverability.  
• I need to learn what ontology is and how it relates to my project.  
• Open-source digital repository software programs such as DSpace are popular and have active communities.

The conversation gave me a glimpse of what archivists do and how they think about their work. It was helpful regarding my personal project, which is looking more like a data project.

After writing about the Newhouse family’s estate tax strategy and taxes being a successful entrepreneur’s biggest expense, I wanted to share what I’ve learned about qualified small business stock (QSBS) and the tax strategy around it.

To be clear, I’m not a fan of avoiding taxes or tax scams. You can go to jail for stuff like that, and it’s never worth it. But the tax code is complicated. Many aspects of it are designed to encourage entrepreneurship, but people aren’t aware of them. I know about QSBS only because I have a few friends who sold companies and benefited from it, minimizing their taxes.

Why is QSBS a big deal?

Eligible shareholders of qualified small businesses can get up to a 100% exclusion from capital gains taxes when they sell their company. Translation: you can pay zero taxes on the gains, up to certain level, when you sell your company.

What are the criteria for a business to qualify for the QSBS tax exclusion?

• The business must be incorporated as a C corporation in the United States (LLCs and S corps don’t qualify).
• Company gross assets must be $50 million or less before and at the time the stock was issued.
• Eighty percent of the company’s assets must be used for qualified trade. Businesses such as real estate and farming are excluded.
• Stock must be purchased directly from or issued directly by the company. Secondary purchases and stock transferred from other shareholders don’t qualify.
• Stock must be held for at least five years to get the maximum benefit from QSBS tax exemption.

If a company qualifies for QSBS, how does the tax exemption work?

If the criteria are met, each shareholder is excluded from paying taxes on gains of up to $10 million or ten times their basis. The simplest example is that if you launch a company, meet the QSBS criteria, and sell it, your gains on that sale, up to $10 million, are tax free. Gains above $10 million are taxed at capital gains rates.

More complicated scenarios can result in the exclusion amount being significantly more than $10 million. In this example, the founders converted a company to a C corporation years after launching, when company assets were $40 million. This meant their stock basis was $40 million and they got an exclusion of ten times that cost basis—that is, up to a $400 million exclusion. The entire $400 million isn’t excluded, which the article covers, along with other details, but you get the idea. It can get even more complicated with stacking and other factors.

QSBS is part of the tax law and something all founders should be aware of. If your goal is to build a company and exit after more than five years, QSBS is something to consider in your tax strategy.

This isn’t tax advice, and everyone should do their own research to figure out whether QSBS applies to their situation. I just wanted to make more people aware of the exemption.

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

Cumulative metrics (since 4/1/24):

• Total books read: 33
• Total book digests created: 12
• Total blog posts published: 189
• Total audio recordings published: 103

This week’s metrics:

• Books read: 1
• Book digests created: 0
• Blog posts published: 7
• Audio recordings published: 0

What I completed this week (link to last week’s commitments):

• Read the autobiography of Bennett Cerf, founder of book publisher Random House

What I’ll do next week:

• Read a biography or autobiography
• Locate a second commercial-grade book scanner locally
• Finalize talking points for the next podcast series

Asks:

• None

Week two hundred thirty-seven was another week of learning. Looking forward to next week!

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

What I struggled with:

• Locating a commercial-grade book scanner took some work, and gaining access to one has been more challenging than I expected. I’ll need to get creative and scrappy.

What I learned:

• Large companies store a lot of data, but often it’s not structured or organized. To reap the full potential of AI, companies are realizing the need to structure and organize their data—a massive undertaking.
• Google’s NotebookLM has become very popular in the last two weeks, even though this tool has been out for months. The new feature that sparked this wave of attention is the ability to “listen to a conversation about your sources.” You upload your own documents and NotebookLM creates a podcast conversation between two people. The conversation is an analysis of the content in your uploaded documents. The AI is doing two things. First, it’s synthesizing the content in your documents. But what people are energized about is listening to the synthesis in a storytelling format. Hearing a story is the way most people learn best. This feature leans into that facet of human nature and makes NotebookLM appealing to a broader audience.

Those are my struggles and learnings from the week!