Jason Fried and two co-founders started Basecamp with $30,000 total ($10,000 each). Their first client, Hewlett-Packard, brought in hundreds of thousands for a website project. By keeping the team tiny and withdrawing most earnings quarterly, they built a consistently profitable business with minimal cash needs.
We each put $10 grand in, so we had $30 grand to start the business. And then our first customer was HP. HP was giving everyone business back then. The gig was a few hundred grand to do some website design for them. From that point on, we were profitable because we only had a few people. We didn't take big salaries. We were able to pull out all the money every year. And because we had ongoing client work that would sort of span the gap of the calendar year, so we just always had money coming in and our costs were so low that we weren't ever starving. So it just was a situation where we always had high margins. And that's how I've always run the business. We pull out everything at the end of the year. First of all, we're an LLC, so we're taxed on everything at a personal level. If I leave money in the business, I'm still paying personal income tax on that money. It doesn't really make sense to do that. We have a recurring revenue model. We have very predictable revenue. So we have a little bit of overlap. We take some money out in quarterly distributions and there's some money left over in January and we kind of wait till April to take it all out. So there's some overlap and you end up operating cash, right?
