How we decided on our startup's ramen profitability goal 🍜 [behind-the-scenes look]

Senja just hit $2,000 MRR which is awesome and hard-won, but still a long way off 'ramen profitability'.

But before we start working towards ramen profitability we need to understand what it means for us and what our goal is.

In the spirit of build in public, I'll share some of the discussions and decisions that me (Olly) and my co-founder (Wilson) have made about ramen profitability at Senja.

What is ramen profitability?

Ramen profitability is the amount of money we have to make to cover our business and personal expenses. So we can invest all our time into Senja, and don't have to take other work, or outside investment.

What does ramen profitability mean for us?

We want to build a best-in-class product and run a calm and profitable business. For us to fully invest in Senja it needs to be our priority and focus. This means no outside work, and a sense of safety that our business and personal expenses are covered. At ramen profitability we can 'relax'.

Does ramen profitability include revenue from freelance and other work?

No. It needs to be from Senja. I personally struggle with role switching. Navigating across projects and client work has proven to kill my productivity. Ramen profitability means 100% of our time spent on Senja.

Is ramen profitability after expenses?

Yes. After business expenses and tax. It is a profit goal not a revenue one.

How aggressively should we reduce our living standards?

We discussed how a reduced living standard might look for both of us. I currently have a very high disposable income (>$4,000 a month) and am lucky enough to live well. However I believe in Senja and am willing to make significant compromises to my living standards.

Wilson lives with his family in a developing country. His disposable income is much lower. Despite that, he's committed to making any necessary changes to his lifestyle to get us to ramen.

How long can we live at a 'ramen' standard?

It's not just about hitting the ramen goal, but the opportunity cost of not working on other ideas, projects and career goals. For example I charge $300 an hour for my marketing consultancy work. How long can I give up work like that? What might that mean for a mortgage application, or my savings?

We decided: we can make a commitment to a 'ramen' standard of living for 6 months if the signals were strong that we would break past it.

What will we have to sacrifice on both ends for profitability?

I've given up booze, eating out, my gym membership, my personal trainer and my co-work membership, which made up about 80% of my disposable income spending.

Wilson's biggest concern is that he has no savings. When he had a job, he was saving steadily, but he hasn't done that since he started building Senja.

Ramen profitability when the two founders have extremely different costs of living

This is a complex one for us. I live in London and am committed to around $3,000 a month in rent and bills for the next 10 months. Wilson lives in Nigeria, with family, and is currently able to live on around $500 a month.

Is ramen profitability the combination of our individual expenses? Or for fairness, should we both take the higher amount? Keep reading to see what we decided...

Should our ramen goal be based on how we live now, or how we want to live when we hit it?

This was another interesting discussion point. Wilson lives with family and wants to move out. Do we set a goal at where we want to be? Is it fair if one founder lives alone and the other doesn't?

We decided that Wilson's ramen profitability goal should include living on his own. We thought having a similar quality of life was fair, even if the costs to sustain it are very different.

(Note: me and Wilson were able to have open and frank conversations about our lifestyles and spending habits. For some, these discussions may be difficult to navigate as they become quite personal).

What we decided

• At $7000 revenue and $1000 expenses we have $6000 profit
• Olly's ramen profitability is $4500
• Wilson's ramen profitability is $1500

Wilson agreed that I could take 3x more money from the company so that we could both fully commit to its development and growth. It would be easy for Wilson to ask to share profits equally so this is a big commitment to the company.

If Olly is taking more money, how is that fair?

We're co-founders with 50% equity each. We decided our company will pay for Olly's higher living expenses in the short term. But the transactions are recorded and each founder will ultimately receive exactly the same amount from the company.

These are the thoughts and talking points we went through when discussing ramen profitability at Senja. Whether you are a co-founder or solo founder, I hope this help you when it comes to setting your own ramen goal.