The Secret to Two Big Businesses Generating Over $500 Million a Year in Revenue With A Tiny Team
Ever hear the story of the tiny team that’s generating $1 billion a year with only 50 employees? How about the dating site that sold for $575 million with only 75 employees while the founder worked 10 hours a week?
These stories might seem like outliers, but there are more of them than we think.
As entrepreneurs, we often forget that small teams can, and often do, accomplish big things. People mistakenly believe big, successful companies come with lots of complexity, large workforces and big venture backing.
Two of my favorite examples challenging that notion are Craigslist and Plenty of Fish. These tiny teams built big businesses while staying true to their values. They contradicted all of the rules on how to build and fund a big business, focusing on simplicity with a ruthless prioritization mindset.
Craigslist: 50 Employees Generate $1 Billion a Year
One of the mightiest automation engines ever built, Craigslist, continues to awe venture capitalists who attempt to study the business. Starting out in 1995 as an email list of local events sent to friends, it’s now the biggest global site for classified ads on the Internet.
Five years after founding the company, Craig Newmark’s team remained tiny with only nine employees working out of his apartment. As the company expanded into 700 countries across the globe, it slowly increased its number of employees. Twenty-six years after its founding, Craigslist currently sits at about 50 employees, generating an estimated $1 billion a year in revenue.
Craigslist generates revenue by charging small fees in the $5 - $25 range to a small number of users for posting ads. So out of the billions of people per month using Craigslist, only a small percentage pay to use it.
Why? Well, Craigslist remains committed to its early values to make the internet accessible and free for the majority of people. A rarity in its simplistic business model, Craigslist proves that a business does not need to sacrifice their values to scale.
But how does this team stay so small while generating billions in revenue at a global scale? They don’t mind being the ugly duckling. Actually, being the ugly duckling is the secret to their success.
Craigslist is the definition of an “ugly” website. The site is stuck in the year 2006 with its bare bones design crammed with links using the same old school fonts it started out with. The ugly website has not scared users away, though. Instead they continue to show up, year after year.
With a strong user loyalty, Craigslist has never had to adapt to anything outside of what it began as.
The simplicity and self-service model of Craigslist has never changed. It continues to be dead simple to use, and run. Craigslist relies on automation to reduce the need for customer support. Instead, the business focuses its resources on security, stability and accessibility.
The ugly duckling powerhouse site is so simple that no other company, venture funded or otherwise, has been able to swallow it up.
Plenty of Fish: Solo Founder Keeps 100% of $575 Million Acquisition
In 2008, the little known dating site Plenty of Fish generated $10 million a year in net profits with a single employee — its founder. Markus Frind worked on the business for about 10 hours a week as a side project. After a few years, the website started to generate more traffic than he could handle, requiring the solo founder to add employees.
Imagine reaching $10 million a year in net profits all on your own to finally say to yourself, “I think it’s time I hire some help.”
Similar to Craigslist, Plenty of Fish’s success came from automating the business to run itself. Customer support was non-existent at the company. Instead, Plenty of Fish pushed users to use forums to ask and answer questions from each other.
The site was ugly by the most generous of standards, but it was able to compete with larger and well funded dating sites simply due to its lack of subscription fees. Users didn’t mind that the site was wonky or that images appeared in varying sizes, as long as they had free access to profiles. Frind focused only on the site's functionality, disregarding design fixes as “trivial” and inconsequential.
The company generated revenue by serving up affiliate ads to its users, sometimes ads for its very own competitors. Plenty of Fish was acquired by one of its biggest competitors, Match.com, for $575 million with a tiny team of 75 employees.
One of the best parts of Plenty of Fish's story is the company’s funding path. Frind never knew about venture capital, and with a profitable company from the very beginning, he never even considered it. When the company was acquired, Frind kept 100% of the $575 million.
The Prioritization Mindset of Tiny Billion Dollar Teams
I know what you’re thinking. There’s no way a tiny team can build that big of a business without chaos, burning out, and working long hours, right? Nope.
The secret to keeping teams small while scaling revenue rapidly is actually quite boring.
You simply say “no” to most things.
Saying “no” often is ingrained deep down into the core of the company culture. Time is not wasted trying to do too many things at once. Instead it is deliberately spent only on the highest priorities of the business. The business, not just the team, solves one important problem at a time.
Companies who do this well are obsessed with what NOT to do.
Don’t waste time obsessing on competitors. Obsess on customers.
Don’t design the business to raise venture capital. Design it to function as a machine serving as many customers as possible, with as little human input as possible.
Don’t over-design or over-think. Find the simplest way to do something.
Tiny teams constantly ask themselves what is the best use of their time, often leading to finding ways to outsource or automate processes. They are ruthlessly cutting out fat. Anything that falls outside of keeping the simplest design or functionality gets cut.
They’re obsessed with removing the urgent items off their plate so they can spend a luxurious amount of time on the highest priorities of the business.
Their prioritization mindset leads to working significantly less hours than other teams. They constantly move between two modes of work: ruthlessly cutting out the fat and spending an inordinate amount of time working on the highest priorities of the business.
Focus Your Tiny Team On One Thing
Craigslist and Plenty of Fish are great examples of true unicorn businesses. They focused their tiny team on doing one thing really well while becoming profitable early in their journey. Both businesses stayed true to their values, focusing on their customer above anything else.
I imagine the founders wearing horse blinders and an invisibility cloak as they built their companies.
The horse blinders keep them focused solely on their customers without expending energy on things that are unnecessary. What everyone else is doing doesn’t distract them.
The invisibility cloak is worn as they quietly scale without anyone noticing them, until the cloak comes off, and then you can’t help but stare.
Special thanks to Chris Wong, Nick deWilde, Tommy Lee, John Nicholas, Peter Skaronis, Christine Cauthen, and Ali Qasnaqvi for help editing this piece.