One-person startups are leaning on their strengths to weather the recession

I spent some time this week reaching out to individual indie hackers about their businesses, and the pattern that really jumped out at me was how uniquely resilient one-person companies have been in this recession.

These companies are resilient because they run lean: their operating expenses are tremendously low.

My friend Lynne Tye runs a company called Key Values, where she helps tech companies hire engineers with matching cultural values. (She also happens to be one of our most popular IH podcast guests.) Lynne told me she was spooked at first by the pandemic's impact on her business.

Incredibly, the US economy is facing a second round of mass layoffs despite the fact that 22 million Americans have already filed for unemployment benefits in the last four weeks. This economic chaos has affected Lynne's sales:

Several companies who were considering signing ended up saying no as a result of COVID-19, and for sure, some of my existing customers who would normally renew cannot. (At this point, everyone knows someone who has been laid off or furloughed.)

But outside of her own salary, Lynne is basically only spending money on the subscription services that keep her site running. And when you couple these minuscule operating expenses with the fact that many tech industries (e.g. remote-work tooling, telehealth, gaming, etc.) are seeing an upswing in revenue and are happy to post job listings, the long-term profitability of Lynne's "company of one" isn't actually threatened. She will survive.

In fact, plenty of one-person startups seem to have dodged the negative effects of the recession entirely. They're seeing their revenue go up right now, not merely stay the same. In such cases, low operating expenses can mean life-changing profits.

Dave Kiss is the founder of a WordPress business called Vimeography. He sent me a breakdown of his Q1 revenue:

• January: $12,289 (+15% YOY)
• February: $9,371 (-4% YOY; sales were quite low, not entirely sure why, very atypical)
• March: $16,450 +24% YOY

This kind of revenue growth is obviously great during a recession, but it's even greater when you consider Dave's expenses. He's got no office and of course no employees, so he's only spending money on his tech stack: Stripe merchant fees, email and support software, domain renewals, web hosting, phone and internet services, etc.

He told me he actually feels somewhat bad about how well he's doing:

To be honest, my day-to-day hasn't changed much throughout all of this. I'm pretty introverted and WFH to begin with. What has surfaced is this looming, gnawing, unpalatable sense of guilt in the air, knowing that I simply got lucky. I'm watching businesses around me laying off some of their best employees, taking on debt, trying to do everything they can to keep their heads above the water, and I'm over here seeing some of my best solo numbers yet.

Ramy Khuffash, the founder of Page Flows, told me a similar story. His revenue jumped 55% from February to March. And his profit margins are 90%!

Here's how his expenses break down:

• Digital Ocean (web services): $250 for all of my projects
• Accountant: $100 per month
• All of the other expenses are less significant (other than my salary)

But the real test of any company's resilience comes when it's under pressure.

Here's some bad news that Harry Dry, the founder of Marketing Examples, delivered to me yesterday:

My last sponsor decided not to extend, citing coronavirus uncertainty. So my revenue went from $2,500/mo to $0.

But Harry's operating expenses, like the other one-person companies I've talked about, are the bare minimum: no office and no staff, just the services his software is built on. Additionally, Harry's always buttressed his revenue with contract work, which he can easily ramp up while continuing to run his main business. In Harry's words:

I'm not too bad financially. The site brings in contract work offers ... So I've got that safety cushion. … One side effect of the project is that my day rate went up a fair bit. Making it much easier for me to “escape”. I currently do work 1 day every 2 weeks.

Compared to Vox and other large media companies facing furloughs and closures due to lost sponsorships, Harry's lean operation gives him some financial breathing room. He even views this as an opportunity:

Part of my mindset is it's “good” if the sponsors fall through. Gives me the kick to monetise my site in a more sustainable / reliable way anyway. Chasing sponsors isn't the best use of time.

To be honest, "low expenses" is a bit of an oversimplification for why these companies are so resilient. The full story is that, like all bootstrapped companies, they had no choice but to find a way to make money from day one. If they weren't generating enough revenue to break even, they had to find other ways to cover their expenses. These constraints have forced them to run tight ships and to learn how to do more with less.

In good times this may have seemed like a curse, but in bad times it's revealing itself to be a blessing.