Why we shut down a product that was $75,000/year profitable

Background: I'm friends with the owners of Wildbit, and have watched the journey they took that led to shutting down Newsberry. Several times, over a couple bottles of wine, my husband and I advised them to "just shut it down"! Because my husband & I run a very similar business, and we understand what it's like.

Here's the thing about the comments on this article, here on HN: of the people saying it was a mistake, that the article was misleading, etc, etc: How many of them have a profitable business with a team of any size, and multiple products?

That's the hidden problem with HN: with a few notable exceptions, everybody here is an Monday morning quarterback.

There is NOTHING more draining than to keep a product running "because it's just profitable enough." Or worse, because you feel guilty about shutting it down, because you feel like you're going to let down your customers.

There's nothing more divisive than a redheaded stepchild product.

There's nothing more wasteful than a distraction to you & your team.

Running 2 products is not simply double the work than running 1. Running 3 products is not simply 50% more than running 2.

When one runs a successful business oneself, one knows this implicitly.

But when you haven't, then you are likely to look at this kind of story and go "WTF? They just threw away $75k/year? But they could have spent 1 day a week on fixing it and making it more profitable! They could have hired a part-time designer!"

But this is just a lament wrapped up in logical, impartial language - but still a lament, which is really saying "WTF? I could use $75k/year! How could they possibly throw that away? WASTEFUL. SHAMEFUL."

Which is, really, totally understandable. Until you run a business of this scale, it's hard to imagine how $75k/yr in profit could be a millstone around your neck instead of something to celebrate. However, that does not good business advice make, and one must always consider the source & experience of the person dispensing it.

I rather question the customer service aspect of all this.

I'm not sure I'd dig my electric company cutting off my electric service just because they felt they could be more profitable somewhere else and didn't "believe" in my service anymore. Service that I've paid for, come to rely on, and have integrated in to my business.

Selling this or partnering with another company to transition accounts over to them would have been better. Maybe they did that and didn't mention it in the article (or I missed it).

Yeah, I get it. You're entrepreneurs and want to "have passion" about what you do. But.. WTF - people are paying you for something that they obviously want, and you just shut the accounts down - with or without notice, I don't really care. How do I feel now about postmark? Will you still have passion for it in 15 months, or will you decide beanstalk is more profitable, and shutdown postmark? regardless of what is said now, making decision like this is emotional (read the language of the post) - emotions will change next year.

"Selling would have involved a lot of effort and time, and we just needed to focus on our products that were growing. " Don't you think the existing paying customer deserved that bit of respect for you to put the effort in to selling, and ensuring their continued success as well?

Puzzling a best - disconcerting to say the least.

EDIT: http://help.newsberry.com/kb/subscribers/transferring-subscribers-from-newsberry-to-campaign-monitor

There's a help link to transition to campaign monitor. Fine that's there, but the language of the post still seemed to ignore the needs of the existing users, and focused their decision solely on the feelings of the people running the show. Let's hope they always feel positive about postmark, otherwise you'll be seeing 'transition from postmark to xxxxx' in their help pages in the next year or two.

After reading the article I have to question whether it really was profitable. I think one of the mistakes that coders (and most business owners) make is to value a profit solely on the accounting values: (income from the application) - (direct expenses of the application).

However, the true way to value profitability is to take a more financial perspective (financial being different than accounting). A financial perspective would value the opportunity cost of working on this application compared to working on another application. If the team spent 10 hours a week on the application, and those 10 hours a week could grow their other products by more than $75,000 a year, then of course the application isn't profitable. It's actually losing money.

Another way to look at its profitability is to look at it from an operational standpoint. The employees on the team would be consider a fixed cost (yes, they could hire more people, but that just changes the fixed cost). The limited resource for this particular fixed cost is time, and from their article I can assume that their time was maximized (working as many hours a week as they wanted to). Operational theory says when a fixed cost is at its maximum utilization, higher marginal profitability items should be prioritized. Basically, they are better off working on other items if they don't want to work more hours.

This is why at some point in a company's growth, you have to take the tech guys out of the business positions and stick someone who really knows business in charge.

One of my former coworkers helped build a ridiculous iPhone ringtone app a few years ago that STILL generates positive cashflow, and profited several 100k. This was done strictly through marketing. There are plenty of ways to grow a product, but these guys didn't have the know-how or wherewithal to do it for an already profitable product.

A real business person would have taken that $75k/yr and figured out a way to grow it, through marketing, by pounding the pavement, etc. Most startups are cash flow negative, and will die in a year and yet this company generating profits and weren't able to make it grow? They gave up way too easily, and like people said, it's because they got bored of it. That reeks of arrogance, sorry to say, being bored of $75k/yr.

Hopefully your current products are profitable, so that this isn't a lesson that comes back to haunt you later on. But as other people said, I also hope this doesn't mean that your current customers have to look forward to their product being closed down prematurely because your company got bored of it as well.

Profitable or no, profit is really irrelevant in this situation. If my company is making $100K/year and I only spend $25K on myself and I'm the sole employee, then technically my company is "profitable," but it's essentially invisible in the market.

This is what drives me nuts about the "I bootstrapped my company to profitability and success!" blog posts, because in most instances, the owner is making $50K/year and can't afford to hire anyone else.

I'd be interested in seeing what their top line numbers looked like, as that'd give an indicator of their overall market penetration, and true success.

This is why companies that do $750MM in revenue per year, but report an annual loss are still hugely successful, because $750MM is a ton of money!