Analyzing Indie Hacker Products with Verified Revenue

Right, well it's not really by design that they make so little... but the way most of them they run their businesses, is it any wonder?

A lot of people do these as side projects. A way to sort of build a model train in their basement, free from all the complexities and compromises of "real" software development... They are trying to avoid product managers, sales people, designers, testers... countless others... getting a say in what they build.

And, as a result, there's no business plan past a dream of, "If you build it, they will come." Hard to see any "indie hacker" project that wouldn't be improved with more testing, more marketing, more UX design... more customer research... but most of the time, it's just some guy with a boring day job trying to make $5 selling a widget nobody asked him to build in the first place.

Anyway not to be negative... but like, if you're a small indie hacker who is trying to make a buck, remember that all of the software we use today has a village of people involved in the creation and support of it. If you're trying to do it all on your own... man, that's an up-hill battle. Bring in others as soon as you can.

Then make sure you have a business plan that has the capacity to reward everyone, and be patient. A lot of people in tech... we're early-adopters. This means we do things well before a lot of people even know they exist, and by the time an audience has grown we've already moved on thinking our ideas were a flop. Sometimes they just take a little longer to pan out. (=

Marrying this analysis with the FE International valuation spectrum for SaaS businesses under a $2m valuation[1] gives some interesting results:

- ~6% of these founders have built businesses that could likely be sold for > $500k today

- ~4% have built businesses they could likely sell for > $1m

- ~3% have built businesses they could likely sell for > $2m

And for those that want to go bigger, having enough revenue that one could exit for 7 figures makes pitches to investors much stronger. (Some of these companies are doing better financially than VC-backed firms that have raised tons of money. Fast.co, which raised over $100m and produced only $600k in revenue, comes to mind here.)

(I give credence to the FEI valuation spectrum because they were the broker when I sold my last SaaS, and their valuation advice led to a successful sale. I highly recommend them, and will likely use them again in the future.)

Lower-value exits are somewhat harder to value, but I do find it striking that of the analyzed firms, perhaps 10% have built businesses they could sell for $250k or more. (And likely more of the analyzed first simply haven't gotten to that point yet, since this analysis doesn't analyze time-based cohorts. 5-year-old firms are in the same bucket as companies that joined this week.)

1 - https://feinternational.com/blog/saas-metrics-value-saas-business/#valuationspec ↗

Just as a gut feeling I would normally say that much less than 1% of indie projects ever make more than 100K/year in revenue. Their pool is of indie hackers with the caveat of:

"At the time of our analysis, there were total of 937 products with Stripe verified revenue. The information we gathered to make this analysis are revenue and product's categories."

I assume there are 10s of thousands of listings that don't have Stripe verified revenue on Indie Hackers (owned by Stripe).

Just look at Product Hunt and track to see how many of the Product Hunt of the day fail in less than 2 years.

And how much of that revenue gets eaten up by the other services is another story ranging from Google ads to AWS to other SaaS offerings like the scraping fish (the authors of the post). (Please buy more shovels from us for the gold rush.)

I still hope people follow their passion and dreams. Just good to keep in mind that the odds are stacked against you and to try to succeed accordingly.

From following Pieter Levels for years, this article coincides with exactly what Pieter says about his own products: Only 5% of his 70 projects have ever made any real money. Therefore it's a better idea to build a lot of small things fast (to test traction and profitability) instead of focusing on one huge project and hope it takes off.

Obviously this is general advice and there are outliers that will break the mold, but from a lot of this data and indiehacker anecdotes, the more shots you fire the better chances you have of one of them being big. THe key is to spot the losers quick and move on to something different, and then spot the ones that are gaining traction quick and then double down on your efforts for that/those one(s).

Key takeaway: Take lots of chances.

"Business owners rediscover the Pareto distribution! Film at 11!" I genuinely don't understand why this comes as a shock to people. 80% of the results (or revenue or productivity or whatever you're measuring where human output is the foundation of what you are measuring) will come from the top 20% of the producers. This is a normal, predictable phenomenon that continually blows the minds of people who think it's somehow a product of "systemic bias", or who think it should all be a relatively flat, uniform distribution.

Here's the "paradox" that takes this phenomenon even further: the more choices people have, the less uniform the distribution is, and the more it favors the top producers.