Conversation with Jason M. Lemkin about building profitable businesses and economies of scale in software. Discusses minimum revenue thresholds ("new minimum needs to be 300 to 400,000"), historical per-employee revenue benchmarks ("made a million dollars in revenue per employee"), and high gross margins in packaged software ("There were 90% margins").
And you said, no, the new minimum needs to be 300 to 400,000. Is that right?
It is. If you're trying to reverse engineer whether your business model makes sense. Like, this is one thing to reverse engineer. Certain business models have economies of scale and some don't. And if you want to go really big, you want a business with economies of scale. And if you step back in the old days of software, the old Adobe's, Microsoft's, intuits made a million dollars in revenue per employee. A million dollars. Okay, you'd have a bunch of engineers, they'd go. They'd go off in their offices. Everyone used to have a private office to code. You'd spend two years building a piece of software, a small team. You'd put it on a DVD ROM that or CD ROM that cost 50 cents, and then you'd package it up, that costs 50 cents for a dollar, and then someone would sell it for you between $50 and $400. This was a really good business. There were 90% margins.
