Why do software engineers make so much?

Because there’s a time from about $5m in ARR to $80m in ARR when It Doesn’t Matter.

When you start off, just trying to get to $1m in ARR … engineers are sooo expensive.  Everything is, really.

But this is software.  An almost unlimited number of customers can use it for almost no cost.

Once you hit say $5m ARR, growing 100% or more YoY, you just can’t find enough engineers, and the cost, within bounds, doesn’t matter.

If you have to add $5m in revenues in the next 12 months, and you need to hire say 8 more engineers to do that … you don’t care that much about costs.   You care about getting those 8 great engineers in place, scaled up, building features, making it happen.

You’ll care almost entirely about quality, about getting it done.  You don’t want 12 crappy, cheap engineers.  You’ll want 8 amazing ones.  Etc. etc.

Then later, you have to start managing for profitability.  Then, you may care again.

But it’s software.  A great engineer should be able to produce $1m+ in features a year in SaaS.  They’re worth it.  And you have no choice.

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Published on August 5, 2015

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