Why More Revenue Can Mean Less Profit: Yarin Gaon on Growth by Subtraction

Right About Now - Legendary Business Advice

Yarin Gaon shares his journey from founding a SaaS company at age 14 to building and selling an e-commerce platform for military goods in Is

Key takeaways

• Profitability should be prioritized over revenue growth; a smaller, highly profitable business is more valuable than a larger one with low margins.
• Building proprietary technology can become a liability in acquisition if it's not scalable or maintainable by others.

Main topics

• Bootstrapping and self-funding
• Profitability vs. revenue growth

Notable quotes

You don't win by following the playbook. You win by rewriting it.

Conclusion

Yarin Gaon's story underscores that sustainable success comes not from chasing scale or external

Transcript preview

Speaker 3 (0:00) I am a firm believer of bootstrapping and having self-funding. Build a machine that is so profitable that funds its own growth. You don't need to be a behemoth. I will take a $50 million business or a $25 million business at a 20 % EBITDA, then a $100 million business at 5 % EBITDA any day. That's just a completely different mindset. I favor, if you can postpone getting external equity, do it. Speaker 1 (0:27) You don't win by following the playbook. You win by rewriting it. 700 episodes deep with the people who actually built something real. No theory, no fluff, no shortcuts. This is Right About Now with Ryan Alford. Speaker 2 (0:48) What's up, Yarn? Welcome to Right About Now. What's happening, brother? I'm happy to be here. Thank you for having me, Ryan. Hey, man. I was looking at the child prodigy because I read your story before I watched your story. Fourteen, you're doing stuff that a lot of people weren't doing. You've come a long way, my friend. Speaker 3 (1:03) I appreciate it. Thank you. Learned a lot along the way, too. Where Speaker 2 (1:06) does that come from? I mean, I have four boys I consider to be good kids, further along than the average bear, but they weren't fourteen and doing what you were doing. Speaker 3 (1:15) 14, I started my first SaaS company. How does it happen? It's a mixture of enabling parents. My father was an accountant. My father was also an entrepreneur himself. So he enabled me, because at 14, I couldn't even open a bank account. I had to transact for my father's bank account. Enabling parents, an interesting problem, and a lot of spare time, Speaker 1 (1:32) and a love for money, really. Those mixtures, Speaker 3 (1:34) that mix, led me on in my path. Speaker 2 (1:37) I know how many things I have going on that aren't business, and I do a lot with business. I go, man, I don't know what clicks for 14s, 13s. I mean, if you're into sports, and we keep ours into it so they stay active and not on their computers the whole time. Speaker 1 (1:48) But Speaker 2 (1:48) you Speaker 1 (1:49) have more Speaker 2 (1:49) free time at that age. So if you can put it together, you do have a lot of opportunity. That's the balance, though, of not wanting to take away their child. You got plenty of time to work. But at the same time, you can do both or get ahead. It's all about balance, I guess. Speaker 3 (2:02) I loved it. It wasn't really work. It was building cool shit. I was able to monetize it, build cool shit, get money. Sounds like a no-brainer. I remember I was in high school, and I remember I had clients, users that were my classmates. It was a really interesting experience. Speaker 2 (2:17) What made you get largest e-commerce platform for military goods in Israel? On the surface, that could sound really big or really small. I think I know an alternative that's probably bigger than I think it would be. But why military goods? And what was the secret to success? Speaker 3 (2:31) That was a little later in my journey, not at 14. In Israel, there's a mandatory military service for guys about three years. I served for three years in the military. I was a soldier. I found a really interesting problem. Two problems. One, as you go, we have a mandatory draft, but the army doesn't provide you with enough equipment. There's a whole secondary market of parents really shopping for their kids as they're going. going into the military for socks and shirts and flashlights and watches and all that peripheral equipment. The second problem was Israel observes the Shabbos, the Shabbat, meaning that on Saturday, everything is closed. So if you are a combat soldier, you get to go home every about two to three weeks for 48 hours. You go home Friday, Saturday, everything is closed. Sunday, you're back at the base. This is really very short time window to purchase equipment. When I was ending my mandatory service, I thought to myself, okay, something here is not clicking. One, why can't I just buy stuff online and get it shipped to the base? It seems so simple these days, but there wasn't anything like this before. Why can't I just, while I'm in the base, shop on my mobile app, on my phone, and just have it shipped? Problem number one. Problem number two is that there wasn't any specialty stores. Military equipment were sold by hiking stores, like REI type. No niche. Nobody owned the niche. As I finished my service, I was like, okay. I had a little bit of coding background from my previous businesses. I had a little bit of... Passion. Let's see. Let's see what happened. I started by selling strings, actually. And he caught. I just grew it and grew it and grew it. And we opened a brick and mortar store too. I sold it for seven years. That's my story. Speaker 2 (4:00) How old were you then? Were you still a teenager? Speaker 3 (4:02) I started it at 22. I finished my service at 21. Played around with it a little bit. 22, I really put my effort into this. And 22 to 29, I grew it. At 29, I sold it. I moved to the States. Finished my MBA. I had to sell it. I didn't have to, but I didn't want to keep it while I was here. Speaker 2 (4:18) Is selling econ... Is e-commerce in Israel that much different than selling e-commerce anywhere else in the world? Speaker 3 (4:22) My biggest challenge was that Shopify didn't exist in Israel back then. I had to build my website. I built the e-com website. I built the e-com. When we opened the brick and mortar store, I built the POS system and I built the ERP. And a really interesting point came out of it is I was about to sell it. I thought to myself, yo, I'm so differentiated. I have my own tech stack. I have my own systems. I'm so much better than anybody else because they were all using shitty Magento. Speaker 2 (4:46) Yeah, WordPress with WooCommerce. And Speaker 3 (4:48) they're all shit. And Hebrew is a right to left language. So there's Speaker 2 (4:52) a Speaker 3 (4:52) whole component to this. And I learned when I sold my business that my tax stack actually became debt. That's great that I developed it, but I'm the only one that can actually maintain it. When I sold it, the person who bought it or the company that bought it basically had to migrate my website into one of the magenta bullshit. I actually took a major price cut or a discount because what I thought is a differentiator is actually not. It cost me. It cost me quite a little bit of dollars. That's Speaker 2 (5:18) an interesting learning lesson. I've seen this both in practice and in the real world where we think certain things create value, especially in acquisition and sales and things that actually don't. And that would be one. And then Shopify would have neutralized most of it because it's just the universal platform now for e-commerce. Love it or hate it, it is actually more lover than anything else. It sort of gets a lot of things out of the way. Speaker 3 (5:41) It creates a baseline that a major operation is already streamlined. And now you can differentiate on the brand. branding on the product and the offer on the micro optimization. Everybody's playing in the same sandbox. Speaker 2 (5:53) When you're building a business, the idea is only the starting point. The real work is turning that idea into something customers can actually find, trust, and buy from. We use Shopify for our card shop. And from a business standpoint, that matters. It gives us one place to manage the storefront, products, inventory, payments, checkout, analytics, and customer orders. When you're trying to grow, you do not want your system slowing you down. For us, Shopify helps make the buying experience feel professional. Whether someone is purchasing cards, sealed product, or merch, and when a customer is ready to check out, that process needs to be smooth. Less friction means fewer missed opportunities. And when that order comes through and you hear the Shopify, it's a reminder that the business is moving. Shopify powers millions of businesses around the world, from major brands to entrepreneurs just getting started. It gives you the tools to launch, sell, market, and grow in one place. With Shopify, nothing stands between your idea and a real business. So get out there and make it one. Go to Shopify.com slash Ryan, R-Y-A-N. That's Shopify.com slash R-Y-A-N. Speaker 2 (7:13) What made you get into investments and fractional ownership? And what guided you into this area? Speaker 3 (7:20) I did my first business at 14, opened my second one at 16. Then I drafted. Then I did my military website, the Army Goods website for seven years. Then I sold it. When I sold it, I moved to the States. And I finished my MBA, did my last semester at Kellogg as an exchange student. Then I joined a VC and I saw something really interesting. I joined a VC as an entrepreneur in residence. Basically, I was the in-house entrepreneur. And my job was to take all... the startups that the fund invested in and kind of usually ran out of money and to turn them around. That's what I did. But as I was doing this, I was also volunteering as a