09
Jan
07

MWI’s 2006 Financials

By Joshua Steimle 19 Comments Categories: MWI

I’ve been inspired once again by SEOmoz’s open attitude and I too feel like sharing. Rand does it because “it fits with our philosophy and with our goals – to be as open as possible about everything that we do” but that’s not necessarily my reasoning. I figure it will be interesting to do, I’d love it if all my competitors did it, I don’t believe it can do much damage, and it could possibly do some good. Sometimes when I give people an idea of what MWI brings in people are surprised at how much we make, whereas I would expect most people to be surprised at how little.

As a disclaimer, let me say that these financials are for a private company, they have not been audited, nor have they undergone their final review by our accountant. They are provided to you, the public, purely for entertainment purposes and cannot be relied upon as anything other than pure fiction. Is that enough to remove me of any liability?


Also, these are not complete financials. There is some information I consider improper to share (employee salaries, how much each client paid us, etc.). I’m really just sharing some of the more interesting tidbits.

One last thing, these financials are presented on a cash basis rather than accrual, simply because I think cash means something and accrual is merely a predictor.

2006 Year-end

Income – $536,280.53
Expense – $549,782.46
Net income – ($14,693.49)

2006 Breakdown

Advertising / marketing – $7,245.19
Bad debt – $8,437.50
Web hosting – $13,052.85
1099 contractors – $157,473.27
Full-time salaries – $242,612.52
Health insurance premiums – $21,618.75
Domain registrar fees – $1,408.75
Rent – $39,725.64
Executive compensation – $0

2006 Other items of interest

Best month (revenue) – Aug, $92,332.03
Best month (net income) – Mar, $13,477.20
Worst month (revenue) – Apr, $20,367.84
Worst month (net income) – Sep, ($18,598.46)

 2005 Year-end Comparison

Income – $403,913.84
Expense – $392,229.96
Net income – $11,683.88

2005 Breakdown Comparison

Advertising / marketing – $11,756.51
Bad debt – $5,475.00
Web hosting – $5,175.10
1099 contractors – $47,319.73
Full-time salaries – $118,921.83
Health insurance premiums – $10,555.62
Domain registrar fees – $2,922.23
Rent – $33,612.81
Executive compensation – $0

What can we learn from this?

Kids, entrepreneurship doesn’t pay. But seriously, we made a lot more revenue in 2006 (up 33%) but it cost us more to get there, enough that we actually had a loss in 2006 as opposed to a profit in 2005. You can easily see where the bulk of our expenses go–people. Employees, both contractors and full-timers, are the most expensive part of this business. Unfortunately as the executive I come pretty cheap.

I’m not sure I learned much during the last year that is new to me, but I’ve had a few lessons pounded more thoroughly into my head, and I’ve made some decisions to change things. The first and major lesson I’ve had repeatedly pounded in is that it’s all about sales. You can have the best product in the world but if you can’t sell it then your product may as well not exist. Second, I’ve learned that sales is partly about how you do it, but it’s more about who you know.

During 2006 we tried our hand at becoming a full-fledged advertising agency, spent a lot of money trying, and decided that wasn’t the route we wanted to take. Instead, we’ve decided to maintain our bread and butter web design and web development services and focus attention on a service we started getting involved with in 2004, namely search engine optimization. In the next few months we hope to launch an SEO offering through a subsidiary brand that will provide high-end SEO services to small business owners on the low end of the market. It could go down in flames or it might make us all ten-thousandairres, but either way we’ll be having fun all along the way.

Related posts:

  1. Some Reflections on MWI’s 2006 Financials
  2. Upgrading Quickbooks Enterprise 2.0 to Pro 2006 – A Nightmare
  3. You’ve earned more than a million dollars but have nothing to show for it.
  • http://www.seomoz.org randfish

    Don,

    I’m thrilled that my inspiration served you well. Your numbers are great to see – we, too, have felt that people are the largest cost in growing our business; if I could, I’d bring aboard two more programmers, but it’s just not possible with the costs.

    Kudos to you for taking the hard route of entrepreneurship; here’s to hoping that 2007 sees both our executive compensation numbers rise :)

    Best Wishes!

  • http://www.mwi.com Joshua Steimle

    I should add that one of the things I was surprised about when I saw SEOMoz’s numbers were how close they were to ours. If SEOmoz had posted revenues of $10M I’m not sure I would have published my own :)

    I suppose one more reason I posted our financials is an effort to communicate to other entrepreneurs out there that the grass isn’t always greener on the other side. You might think you’re struggling and everyone else is having an easy time making money hand over fist, but in reality the majority of us business owners are probably slugging it out, and if we are making good money perhaps it came after years of working in the trenches for little or no pay.

  • http://www.shmula.com Pete Abilla

    J,

    Since you don’t take a salary, what monetary vehicle are you using to support yourself and your family? Quarterly dividends? Other?

    shmula

  • http://www.mwi.com Joshua Steimle

    My wife has been willing to support our family, which consists of just the two of us, on her meager state employee salary for the past four years. I haven’t taken a dime from my business (unless you count reimbursements) since March of 2003. That’s why we live in a small studio apartment, rent out our townhouse, and both drive cars that should rightfully have been layed to rest in peace years ago. Livin’ the dream…

  • http://www.russpage.net Russell Page

    “entrepreneurship doesn’t pay.”

    I know many that are entrepreneurs that would say quite the opposite.

  • http://www.mwi.com Joshua Steimle

    Yes, but you must bear in mind they are lying.

  • http://www.smoothharold.com Blake Snow

    High-fives all around! Though Joshua doesn’t admit it, he clearly is one of Utah’s thought leaders. And entreprenuership DOES pay: Its called flexibility, inexplicable natural highs after closing a deal, and sometimes gettin’ pay’d (or so I’m told of the latter).

  • http://www.nimbleit.squarespace.com jeff barson

    Entrepreneurs always choose opportunity over security.
    Besides, we just can’t work for the man, even if we have to hide it.

    I’m going to have to get you some money somehow.

  • http://www.mwi.com Joshua Steimle

    Maybe I should start The Entrepreneur Fund. A charity that donates lavish steak dinners to entrepreneurs who are down and out and need some reassurance that it will all pay off in the long run.

    “You’ve seen the poor on the street, sleeping in parks, and at freeway exits, but did you know there could be poverty in the office where you work? No, he’s not sitting in the cubicle next to you, he’s not in the breakroom either, and it’s certainly not the guy cleaning the restrooms. He’s in the corner office, and this year he needs your help more than ever. This holiday season, instead of sending meaningless gifts like iPods and 108-inch flat-screen TVs, make a difference in the world by donating to The Entrepreneur Fund on behalf of a loved one. Unlike other charities that siphon funds off the top, 100% of your money will go towards providing a steak and lobster dinner for an entrepreneur who needs to know there is hope and that somebody cares. Go ahead, do the right thing, donate today. In return your loved one will receive a card telling of your charitable and generous nature, and you will receive a photograph of your entrepreneur at dinner. But most importantly, you’ll receive the reassurance that you are a good person and the knowledge that you have made a difference in someone’s life, right when they needed it most.”

  • http://UtahWebServices.com Steve Hansen

    Good luck with your year Joshua and your steak and lobster evening. If your charitable fund grows too slowly call me and I will see if I can share somethig from my lunch box. I look forward to meeting you someday. Perhaps I can attend your seminar next week if you wouldn’t mind.

    Steve Hansen

  • http://www.russpage.net Russell Page

    It was an entrepreneurs Ferrari that I drove last week.
    http://www.russpage.net/driving-a-ferrari/

  • http://www.shmula.com Pete Abilla

    I was in a church meeting a few weeks ago and caugh myself in a moment of self-realization: the four men I was speaking with in the meeting were all entrepreneurs; business owners; self-funded, and incredibly successful.

    One owns Veracity Communications and several Hospice Facilities; the other owns a very successful pesticide company; the other owns a cabinetry mill; and the other owns a home automation company. These men are wealthy, free, and I remain envious of them.

    One interesting thing about all of them: non took outside money; non take a salary, but they all reap huge dividend payments quarterly. Two of them are humble, but live in enourmous homes; one drives a Porshe; the other drives a Ferrari.

    Some entrepreneurs make money; I’d say that most don’t.

  • http://www.russpage.net Russell Page

    @Pete

    So what is the difference? What’s so great about being an entrepreneur if you never make a dime? The glory of saying “I’m an entrepreneur?”

    I have my own (profitable) investment company, and I work for someone else, but I still have flexibility, autonomy, etc…

    So again I ask … What’s so great about being an entrepreneur if you don’t make a dime and still experience much of the same thing? If “most don’t” make money, what does this mean about most entrepreneurs?

    When do the warm fuzzy feelings stop being enough? Want to read a great piece about money? This is the one: http://www.capmag.com/article.asp?ID=1826 (Francisco’s Money Speech) from Atlas Shrugged.

  • http://www.shmula.com Pete Abilla

    @Russell,

    Good question. I imagine that Maslow’s Hierarchy of Needs might be relevant here. Maslow argued that all sentient being need the following, in order of importance:

    (1) Physiological
    (2) Safety
    (3) Belonging
    (4) Esteem
    (5) Self-Actualization

    I think the “wam and fuzzy” feelings to allude to might fall in the camp of (3), (4), and (5). But, if the presence of (3), (4), and (5) presupposes that steps (1) and (2) have been satisfied.

    Suppose that a sentient being has satisfied (1) – (4) through their entrepreneurship endeavours; furthermore, this person is working on (5). Then, later, this person finds (1) to be lacking later. In other words, while an entrepreneur might be happy with their autonomy, flexibility, and freedom, the lack of cold, hard cash that allows them the comforts of life will eventually hold a higher position. That person will be forced to eventually question whether or not entrepreneurship is worth it, if it doesn’t pay.

    I imagine that there is an inflection point, such that the returns from non-sufficiently-paying entrepreneurship is outweighed by the bare facts that the long hours, little or no pay, and herculean efforts just might not be worth it.

    One more thing: the 4 persons I discuss above were all over 50 years old and were lifetime entrepreneurs. Maybe the argument is that intially entrepreneurship doesn’t pay, but it eventually will. Some things just take time.

    @Josh — 1/2 Million in the topline is excellent; that is nothing trivial and you ought to be very, very proud of that. Nice work.

  • http://www.russpage.net Russell Page

    @Pete
    “One more thing: the 4 persons I discuss above were all over 50 years old and were lifetime entrepreneurs. Maybe the argument is that initially entrepreneurship doesn’t pay, but it eventually will. Some things just take time”

    This magnifies my point. I think too many people tell themselves the lie that they have to be old to be successful. They also tell themselves it just takes time, but it isn’t just time. They also tell themselves the lie that flexibility and learning are okay substitutes for lack of profit in a business. If you believe that now, why will you believe anything different later? Flexibility and learning are there to help you get better at creating profit. Too many entrepreneurs (especially in Utah) think about it backwards. I’d never hire someone if their mindset was “someday” we’ll focus on profitability.

    What does it say about a person and his or her willingness to change and adapt if it takes them 30 years to figure out how to be successful or they have a “someday” mentality.

  • http://www.shmula.com Pete Abilla

    @Russ,

    I agree with you that the bottom line is about making money. That’s the core goal. The other benefits of entrepreneurship are only peripheral, but not core. But, the core metric of *any* business is economic profit: [(revenue - costs) = (profit) ].

    If there is a need in the marketplace for your service or product and the plan is executed well, then revenue will come and profit will eventually be realized. That’s basic and common sense, but not common practice.

    A firm can realize economic profits sooner rather than later. But, for some people that run or have founded firms, it takes them longer because they are learning as they go. The fact is that a lot of entrepreneurs are big idea people, but are not that great at execution and, it is at the execution that determines whether a firm will survive or not. For some founders, it takes time to realize economic profits; for others, they realize economic profits sooner.

    By the way, I just moved to Utah 11 months ago, so if you’re bucketizing me in that group, please don’t.

  • http://www.mwi.com Joshua Steimle

    Careful Russ, you’re starting to sound like someone selling something :)

    Successful businesses sometimes spring up overnight, and sometimes they take years to build. Sometimes it’s relatively easy, sometimes it’s hard. Some people choose one type of business, some choose another. Some people choose to stick in it for the long haul, and other people don’t have the patience and prefer to bounce around until they find something that will get them there faster. There are so many variables and without being in someone else’s shoes it’s tough to judge. There are people who have struggled for decades before becoming successful, and I don’t think that necessarily means they were impatient for profits or growth. Maybe they made bad decisions, maybe their industry isn’t the type that allows new entrants to grow quickly, or maybe they were just unlucky, or maybe it’s a combination of those or more factors.

    But to respond directly to the sentence “the lie that flexibility and learning are okay substitutes for lack of profit in a business” I think it’s one thing to say that in retrospect when you’ve done the best you could to make your business profitable, and another thing to say it looking forward to the next year. Someone who can’t get anything positive out of financial failure isn’t going to last long as an entrepreneur, and of course they won’t last long if they don’t learn to stop failing either, but often failure is the catalyst of success or the path to it. Edison tried 10,000 ways to create the light bulb before it worked.

    Personally I think the bigger problem in Utah is that there are too many people who think that building successful companies is easier than it is (after all, if I’m righteous I’ll be blessed financially, right?), which I believe contributes to the success of get rich quick schemes, real estate investing seminars, MLM, and bankruptcy lawyers.

  • http://www.russpage.net Russell Page

    @Josh

    I hope I don’t sound that way . . .

    I just saddens me at times to see certain “this is how it is” lines of thinking when it comes to entrepreneurship. Do I know all situations people are in? Certainly not.

    On the other hand, and I agree with you, I think some folks don’t know how to appropriately manage reality (get rich quick, etc…). Success is not hard as

  • http://www.smoothharold.com Blake Snow

    First off, I don’t consider myself an entrepreneur. I’m a sole-proprietor trying to build something sustainable (read: profitable, value adding, etc). I do find it ironic, however, that those “working for the man” in this very thread are so opinionated on what it takes to be an entrepreneur.

    I don’t advise someone how to schmooze their way up a corporate ladder, so why tell an entrepreneur how he should “stay alive?” Kudos for challenging the conventional wisdom of entrepreneurship, but the one-track thinking voiced here is short-sighted.