Kevin B. Leigh

Father of 3

Husband of 30 Years




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Kevin B. Leigh

Father of 3

Husband of 30 Years



Blog Post

Why We Choose Profit Over Hope

October 13, 2019 Business Advice
Why We Choose Profit Over Hope

We’re very outspoken about running a profitable company in an industry (software and apps) that so often mistakes potential and speculation for actual profit. Where investors seeking to buy these companies, look for “added shareholder value” over profitability. Profit can be a dirty word when you are seeking investors, where the value is often based on the hope that one day the company will achieve a profit rather than actual results.

Bootstrap vs Dilution:

People ask us all the time, why did we choose to bootstrap our business and only launch profitable divisions, in profitable markets, and only hire people who produce or support our profit? The answer is simple; when a company is profitable, you can pay well, provide epic support and have reduced turnover of both employees and customers. Above all, a profitable company with happy employees, produce raving fans of your products, staff, and company.
Each division of your company should stand alone as a profit center. Because, in my humble opinion, the only true metric of success is profit. How will you know my product is successful? Because it’s profitable. How will I know my product works? Because it takes a small staff to support it.

Having fun doubling profit:

We designed Dealer Simplified, our company and Auction Simplified, our core software, to be profitable as quickly and consistently as possible. Keeping payroll, overhead, and staff low at first, and only ramping up as profit happened. 4.5 years into it, we’ve been profitable for 4 years straight. Being profitable is now a feature of our company (because companies are products too).

To set some perspective, since we launched the company in 2014, our revenues have doubled every year (2018 being our best year yet). And our quality of life is wonderful because we are not worrying about the market or debt, we are having fun, enjoying what we do. We consider our team our personal friends and my partners are families. With profit, there are fewer arguments over money and more agreement in development and plans for the future. It’s a simple formula. We choose happiness over debt.

”Its Hard to Go Broke Earning a Profit.”

Unlike some software companies that take huge rounds cash with the hope that one day they will expand enough to catch the eye of a bigger fish, whether they are profitable or not; we earn our growth with profitable endeavors, without giving up quality, diluting our brand or losing ownership. I am not criticizing these companies who seek VC, because in many cases they will yield a large payout in the end. I just think they are short selling their inventors if they are not producing a profit. It’s just not for me at this point. I am not saying that we would not take on an investor, under the right circumstances, I am just saying I would not offer shares of our company unless the value of those shares are based on profit, not pie in the blue sky. As one of my friends says “Hope is not a strategy.” I think “profit is a strategy for growth” and when you are profitable you have the RIGHT to seek investors if you choose.

What is wrong with creating a product that works right out of the box and producing a financial statement to match?

Profit Buys You Time, Control and Flexibility.

Profit provides the ultimate flexibility because it buys you the ultimate luxury: Time. As long as you remain profitable, you can go in any direction you want and take as much time as you need.

All too often companies that cannot generate enough cash, choose to go outside to borrow or sell off pieces of their company to generate the cash they need to continue, then the people they owe are the ones who own their time. If someone else owns your time, you can’t be flexible.
The thing about profit, or liquid cash is you can take it and used it any time you want. You can give it all to your employees. You can put it back into the business. You can experiment with new product ideas with it since it’s your money.

Valuation vs Profit:

We try not to care about our company valuation, simply because generating revenue can hurt technically hurt our valuation. Strange, isn’t it? Making a profit can turn investors off for some reason. But we couldn’t care less because we like owning our company. Not to say we wouldn’t look at an offer with interest and respect, it’s simply not what drives our day to day thinking. Profit is.
We don’t check our valuation every couple of days like an office worker watches the clock. It’s not a priority for us. Don’t get me wrong, we know our company is extremely valuable it just not our driving force, profit is.

I mean, why worry about things don’t affect your day to day, especially your customer service. In some way, valuation feels hokey anyway, sort of fake-number nonsense. We’ve all seen founders spend countless hours pitching for money, marking up term sheets with lawyers, fixating on cap tables and projecting blue sky like guessing the future is real profit. What a colossal waste of time. Time that could be used to make a profit. My point here, is to be careful what you spend your time on, ask yourself “will this generate profit?”

##Profit is the ultimate shield against bullshit.
When you’re profitable you don’t have to play games, succumb to substitutional metrics, cross your fingers, or grovel for other people’s money, validation, or acceptance.
You simply make more money than you spend — and run a fundamentally sound, economics 101 business. When profit’s a requirement, it becomes a lot harder to step in the bullshit.

Profit is just simpler.

We’re still an LLC at Auction Simplified. The simplest pass-through structure you can have at our size. That means fewer lawyers, fewer accountants, less paperwork, less hoop-jumping. Our books are so silly simple, our operating agreement hasn’t changed in almost 5 years. Keeping your corporate structure this lean means making time for much more interesting things, like building a better product. Having all of the company focused on either making a better product or supporting a better product.
There’s no CFO at Auction Simplified. There’s no accounting department. Our amazing customer service manager Anthony can handle all that in concert with Mariele, our accountant since we founded the company.
Profit help us focus on software that simply works requiring fewer support calls from our customers, which improves profit because we need fewer support reps to manage buggy software.
In this world of Silicon Valley and NYC VC, profits have gotten a bad rep. The word profit has been replaced in some companies with, “improving shareholder value”. I don’t know how shareholder value would ever inspire customers to buy our products or employees to sell and service it.

It’s EASIER to be generous when you’re doing well.

It’s EASIER to be fair when there’s enough. It’s easier to be kind when it’s not tipping you over the edge. It’s easier to build great products when your team enjoys their work life not worrying if the company will exist or be bought outright from under their feet.

One final word, this article was inspired by Jason Fried of Basecamp and his wonderful book ReWork, which I highly recommend. As the person who coined the phrase “Web 2.0”, Jason and his team, simplified business model, inspired our business name Dealer Simplified, and ultimately our core product Auction Simplified. Thanks, Jason, I hope to meet you someday.

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