Costs and margins

About 112 episodes discuss costs, usually answering ‘what does it cost to run and what are the margins?’. The dominant picture is that small software businesses are cheap to run: tool stacks of tens to a few hundred dollars a month and self-reported margins of 70–95% are the norm for solo SaaS and apps. Margins fall when a business buys growth: paid ads, UGC creators and salaries are the big costs, and founders running heavy ad spend report 25–50% margins. The main variable cost for AI products is inference or third-party APIs (OpenAI, GPUs, the X API, Twilio, WhatsApp). Most AI founders say it is manageable, but in some products it eats close to half of revenue. App-store and billing fees (Apple 15–33%, RevenueCat ~1%, Stripe ~3%) are a recurring line. Lean habits recur: negotiating SaaS prices, staying on free plans, and cutting personal living costs to extend runway. Services and physical products run at clearly lower margins. The split is between staying lean and spending (even at a loss) for growth.

Key points

• Small software businesses report very high margins, typically 70–95% — 18 episodes. (Adrian Horning · Adrian Horning (Oct 2025) ▶ 11:06) (Fernando Pessagno · Fernando Pessagno (Dec 2024) ▶ 11:32) (Lukas Hermann · Lukas Hermann (Jun 2025) ▶ 10:14) +15 more
• AI inference and third-party APIs are the main variable cost and can squeeze margins hard — 12 episodes. (Nicolai Klemke · Nicolai Klemke (Jul 2025) ▶ 10:25) (John Rush · John Rush (May 2025) ▶ 12:41) (CJ Zafir · CJ Zafir (May 2025) ▶ 14:08) +9 more
• Keep the stack lean: cheap tools, free plans, negotiated prices, few or no employees — 11 episodes. (Sabba Keynejad · Sabba Keynejad (May 2025) ▶ 04:49) (Justin Welsh · Justin Welsh (Apr 2023) ▶ 05:18) (Erikas Malisauskas · Erikas Malisauskas (Apr 2025) ▶ 15:05) +8 more
• Marketing, ads and people are the biggest costs; buying growth pulls margins down — 10 episodes. (Blake Anderson · Blake Anderson (Dec 2024) ▶ 14:17) (Timo Koehler · Timo Koehler (Jul 2026) ▶ 06:00) (Julian Gargicevich · Julian Gargicevich (Nov 2025) ▶ 12:58) +7 more
• Platform and billing fees are a fixed tax: Apple 15–33%, RevenueCat ~1%, Stripe ~3% — 6 episodes. (Presh · Presh (Dec 2025) ▶ 12:17) (Julian Gargicevich · Julian Gargicevich (Nov 2025) ▶ 13:28) (Blake Anderson · Blake Anderson (Dec 2024) ▶ 13:46) +3 more
• Services and physical products run at clearly lower margins than software — 4 episodes. (Scott Millard · Scott Millard (Mar 2023) ▶ 10:05) (Alex Lieberman · Alex Lieberman (Nov 2023) ▶ 09:48) (Marcos Ruiz · Marcos Ruiz (Jun 2024) ▶ 08:30) +1 more
• Cut personal living costs (move home, relocate, stop spending) to extend runway — 4 episodes. (Bhanu · Bhanu (Jan 2026) ▶ 04:06) (Shervin Shares · Shervin Shares (Apr 2023) ▶ 03:38) (David Park · David Park (Jan 2024) ▶ 06:38) +1 more

Where guests agree

• Infrastructure and tooling are cheap for a small software business; the costs that matter are acquisition, people and (for AI) inference. (Ben Bozzay · Ben Bozzay (Jul 2025) ▶ 12:38) (Lukas Hermann · Lukas Hermann (Jun 2025) ▶ 09:56) (Blake Anderson · Blake Anderson (Dec 2024) ▶ 14:05) +1 more

Where guests disagree

Minimise costs, or spend for growth? ⚠️

• Keep operating costs as low as possible; avoid paid ads and employees. (Sabba Keynejad · Sabba Keynejad (May 2025) ▶ 04:55) (Justin Welsh · Justin Welsh (Apr 2023) ▶ 05:44) (Erikas Malisauskas · Erikas Malisauskas (Apr 2025) ▶ 15:05)
• Invest in growth even at lower margins, or run some activity at a loss. (Pauline · Pauline (Oct 2024) ▶ 10:11) (unnamed guest · Henry Belcaster & Dylan Jardon (Oct 2023) ▶ 09:35) (Anton · Anton (Nov 2025) ▶ 11:36)

How big a share of revenue do AI costs take? ⚠️

• Small — usually under 3% for AI consumer apps; marketing and staff dominate. (Blake Anderson · Blake Anderson (Dec 2024) ▶ 14:05)
• Large for compute-heavy products — GPU/API spend near half of revenue, or 30K of 100K a month. (Nicolai Klemke · Nicolai Klemke (Jul 2025) ▶ 10:25) (John Rush · John Rush (May 2025) ▶ 12:44)

Frameworks

• Zero-marginal-cost one-time-purchase AI app — How Praneeth restructured the app so a one-time price is sustainable. (Praneeth Pike · Praneeth Pike (Oct 2025) ▶ 04:03)
  • Step 1: bring your own keys - users pay AI usage
  • Step 2: no server costs - run on users’ computers via a desktop app
  • Sell once as a lifetime/one-time purchase
  • Raise price with user milestones ($29 under 100 users, $49 after)

Tactics

• Negotiate SaaS prices down when broke — They emailed a chat vendor saying they couldn’t afford 100 a month; it agreed to $20. (Sabba Keynejad · Sabba Keynejad (May 2025) ▶ 04:49)
• Save on tools via open-source and partial plans — Uses only the Ahrefs dashboard ($20/month), and free-for-open-source GitHub Copilot, Sentry and GitHub Actions; Discord for support at $0. (Nevo · Nevo (Jan 2026) ▶ 20:18)
• Use analytics tools on free plans only — Get the data you need from Mixpanel/Amplitude, act on it, then get out. (Steven Cravotta · Steven Cravotta (Sep 2024) ▶ 12:37)
• Relocate to a cheaper country to extend runway — After their first cheque the co-founders moved to Malaysia to cut burn by a quarter. (David Park · David Park (Jan 2024) ▶ 06:38)
• Run the company on Google Sheets and a slim tool stack — Dashboards in Google Sheets, G Suite and Google Classroom; popular providers (Notion, Stripe) only for what those can’t do. (Ian Myers · Ian Myers (Mar 2025) ▶ 12:56)
• Apply to analytics startup programmes for credits — He got $50,000 in PostHog credits, which funded A/B testing. (Maddox · Maddox (Mar 2026) ▶ 11:13)
• Watch AI costs against price — Continuously track spend on LLMs and transcription to keep margin on a usage-capped subscription. (unnamed guest · Ramon Berrios & Blaine (Jun 2024) ▶ 07:01)
• Raise average order value with a range of low-priced products — Five or six products under 20 bucks lead to bigger baskets with lower shipping and processing cost per order. (Jeremy · Jeremy (Mar 2024) ▶ 07:34)
• Cut living costs to build full-time — He moved back to his parents’ house after quitting so he had no expenses. (Bhanu · Bhanu (Jan 2026) ▶ 04:06)

Stories & examples

• $5,000 OpenAI bill after going viral: After the Reddit virality he checked OpenAI billing and found he had spent about $5,000 in API costs in days; donations and sponsorships gave him the motivation not to shut it down. Lesson: Viral free usage of an AI app can create large costs before revenue; monetise early. (David Bressler · David Bressler (Feb 2024) ▶ 07:59)
• Bible Buddy on WhatsApp: Launched as an emotional AI therapist for Christians on WhatsApp via a third party because he lacked technical skills; WhatsApp’s per-conversation fees pushed costs to about 15k a month, so he moved to his own infrastructure on iOS and Android with an Upwork engineer, then sold it to a buyer met through the My First Million Facebook community. Lesson: Check platform per-use costs before launching on them. (Lotts Ezeike · Lotts Ezeike (Nov 2025) ▶ 03:08)

Numbers

• Profit 2024: 2500000 USD / 2024 (self-reported, approx.) (Lane Wagner · Lane Wagner (Apr 2025) ▶ 13:22)
• Typical profit margins by marketing method: internal UGC / influencer / paid ads: 50-80% / 25-70% / 0-30% % profit margin (self-reported, approx.) (Blake Anderson · Blake Anderson (Dec 2024) ▶ 14:17)
• April revenue, ad spend, profit and margin: $43,700 revenue; ~$20,000 ad spend; ~11,500 profit; ~25% margin USD / April (self-reported, approx.) (Timo Koehler · Timo Koehler (Jul 2026) ▶ 06:00)
• Total costs, monthly revenue and margin: 5,300 costs; 25,000 revenue; ~80% margin USD per month; % / month (self-reported, approx.) (Alex Finn · Alex Finn (Jun 2025) ▶ 11:00)
• GPU and text-to-video API spend: 45000 USD/month / month (self-reported, approx.) (Nicolai Klemke · Nicolai Klemke (Jul 2025) ▶ 09:59)
• Total business running cost: 620 USD/month (self-reported, approx.) (Justin Welsh · Justin Welsh (Apr 2023) ▶ 05:33)
• Cost of a full-time hire from Lebanon vs the US: 1,000–2,000 vs 5,000–8,000 USD/month / month (self-reported, approx.) (Andre Haykal Jr. · Andre Haykal Jr. (Jul 2024) ▶ 11:27)
• Burn reduction from moving to Malaysia: 1/4 fraction of burn (self-reported, approx.) (David Park · David Park (Jan 2024) ▶ 06:39)
• Monthly costs and margin: 5-6 grand/month; about 50% margin currency unstated per month; % (self-reported, approx., currency unstated) (unnamed guest · Jack Sweeney & Nick Sweeney (Nov 2025) ▶ 11:30)
• SEObot margin, monthly revenue and monthly API cost: 70% margin; 100K revenue; 30K APIs percent; currency unstated per month / month (self-reported, approx., currency unstated) (John Rush · John Rush (May 2025) ▶ 12:44)

Caveats & warnings

• Running costs exclude the cost of the team’s time. (unnamed guest · Nikita & Evgeniy (Sep 2025) ▶ 10:06)
• Ad cost of a third excludes making the ads. (Julian Gargicevich · Julian Gargicevich (Nov 2025) ▶ 13:02)
• Costs and margins depend on user usage. (Louis · Louis (Dec 2025) ▶ 10:44)
• Drop Magic’s margins are currently lower because they are testing a lot. (Loïc Berthelot · Loïc Berthelot (Nov 2025) ▶ 12:10)
• His $30,000 start may not be typical; he thinks an MVP could cost about 10 grand. (Oliver Brocato · Oliver Brocato (Jun 2023) ▶ 09:38)
• A good editor is likely to be one of the biggest expenses. (Paul Millerd · Paul Millerd (Dec 2023) ▶ 08:22)
• Digital products like these cost nearly nothing to create (host view). (presenter · Thomas Frank (Apr 2024) ▶ 15:03)

How much to trust this

• Evidence: 112 episodes, 113 independent speakers (repeat guests counted once; Pat and Gus counted as one voice).