Zero to Sold

  • Author: Arvid Kahl
  • Full Title: Zero to Sold
  • Tags: #Inbox #books

Highlights

  • Zero to Sold will show you what the life of a bootstrapped founder will look like. (Location 132)
  • will teach you how to fill all the roles required to run a business and what you need to get done in each stage of your bootstrapped company’s evolution. (Location 132)
  • It was a product that solved one critical problem for a well-defined audience, that allowed me to experience and learn the things that I have compiled into this book. (Location 153)
  • The business will still minimize its expenses, automate as much as possible, and build sustainable, long-term-focused processes. (Location 243)
  • To me, bootstrapping is the act of creating a valuable, sustainable business with little to no funding. (Location 249)
  • It’s a founder mindset, a focus on making fiscally responsible business decisions and looking for sustainable long-term growth, and meaningful relationships with every single customer. (Location 249)
  • The Four Stages of a Bootstrapped Business (Location 252)
  • In the Preparation Stage, the focus will be on finding an audience, their biggest problem, and a solution that solves that problem in a way to make people pay for it. You will find out how to price your product initially and start selling. (Location 256)
  • The Preparation Stage and You (Location 270)
  • This stage ends when you begin selling your product to your audience. (Location 274)
  • you will need to reach the following five goals: Find your niche audience. Find and validate their critical problem. Invent and validate a solution to their problem. Build a product to implement that solution. Build a business that can repeatedly sell that product to your audience. (Location 275)
  • Mostly, this phase will cost you time and focus. (Location 281)
  • From Idea to Product (Location 285)
  • Successful businesses are built by solving critical problems for an audience that will pay for a solution to their issues. (Location 291)
  • But audience research, problem analysis, and solution validation should happen before you think about a product. (Location 305)
  • The questions you should be asking yourself are, in this order: Who am I helping? (Location 311)
  • Why do they need help? (Location 314)
  • How can I help them with that? (Location 315)
  • What can I create to help them that way? (Location 316)
  • homogenous populations with tribe-like structures that can be leveraged by bootstrapped founders in unique ways. (Location 326)
  • The Power of the Niche (Location 333)
  • In a niche, you will encounter less competition. Your customers will be very similar, and your marketing and sales activities can be turned into repeatable processes quite easily. (Location 338)
  • How deep a niche do you need to find a good audience? (Location 341)
  • A niche business will market to its niche and no one else. (Location 353)
  • allow for much better measurement and planning than huge non-specific audiences. (Location 355)
  • People in a niche will also share very similar goals and aspirations. (Location 362)
  • In your marketing communication, you can assume that everyone in the niche has specific knowledge that you can build on. (Location 369)
  • Niche Populations Are Tribal (Location 371)
  • There is room for a lot of leaders in most niche tribes. In (Location 375)
  • If you can place your business in a way that makes your product a thing that “people in our tribe use,” (Location 378)
  • then you will have a guaranteed sales funnel for as long as your niche exists. (Location 378)
  • Niche Populations Are Measurable (Location 379)
  • Within a niche, you can expect much more engagement from your potential customers as soon as they are exposed to your content. (Location 385)
  • Opportunities of a Niche (Location 394)
  • Low-Cost Marketing (Location 395)
  • there is less competition for your audience’s attention. (Location 397)
  • Partnerships in niches become a much more lucrative endeavor. (Location 403)
  • If your product is shareable, spend time on creating a referral system early in the life of your business. If it’s not shareable, defer this kind of system until you have exhausted better, more effective marketing techniques. (Location 418)
  • Lastly, it’s easy to build a unique and differentiated product when the landscape of competitors and competitive alternatives is clear and uncluttered. Fewer competitors means more potential differentiation vectors: you can stand out much more by providing a service that is not yet offered in the niche. (Location 426)
  • If you’ve done your problem validation right, you will see gaps in the market that are not yet served. (Location 429)
  • Look out for non-competitor competitive alternatives: the things people use instead of using an actual product. This can be Post-It notes, an Excel spreadsheet that does not involve numbers, anything that is a general tool applied to a specific problem. (Location 431)
  • In general, a good niche size will allow you room to grow to your Monthly Recurring Revenue goal and still leave space for a few competitors. (Location 438)
  • Your target size should be small enough not to invite large competitors and big enough to sustain your business. (Location 439)
  • Deciding on a Market for Your Business (Location 445)
  • we needed to figure out if our combination of problem and solution had an addressable market. (Location 452)
  • Is the Audience Large Enough? (Location 453)
  • Is the Audience Small Enough? (Location 459)
  • If you find that your audience is too general, try adding constraints. If you’re looking at teachers as your market, for example, make it teachers who teach math. (Location 464)
  • The smaller your audience, the more it has built-in network effects. (Location 466)
  • Can They Pay? Will They Pay? (Location 467)
  • Once previously underserved customers commit to paying, they will be your customers for a long time. You can build a lot of goodwill from serving such a market, and it will create a lot of value for your company. (Location 474)
  • If your market has adjacent product opportunities, that will give you a chance to think about future ancillary products you can sell. (Location 483)
  • Knowing if you need to focus more on sales or on marketing is very important. Some markets require you to reach out to buyers individually. (Location 492)
  • Some markets, where a lot of small deciders with their own budgets make decisions, are very lucrative. These people can be convinced without needing to deploy corporate diplomacy. You can show them a product, and they will try it out, as they have no one telling them not (Location 501)
  • Enterprise markets are hard to sell into for a small company, although it’s not impossible. Purchasing decisions take a long time, there are a lot of requirements even to be considered, and contracts tend to be custom and require a lot of work. (Location 508)
  • Determining the Size of a Market (Location 541)
  • how do you figure out if the audience is big enough to support your business today and five years from now? (Location 543)
  • three different approaches (Location 544)
  • B2B, B2BC, and B2C markets each need different tools to figure out those numbers. (Location 545)
  • You will have an immediate and often critical advantage over those founders who just guess. They usually guess wrong. (Location 562)
  • good rule of thumb is to count the number of deciders and not just the number of buyers in a specific industry. These are sometimes the same people, but if you sell into enterprise industries, those roles will diverge. (Location 565)
  • The easiest way to find out how big your B2B audience is would be by purchasing industry reports from reputable sources. (Location 574)
  • Asking about advertising on podcasts could yield the same kinds of interesting numbers that asking about advertisements in industry magazines would. (Location 585)
  • In B2BC markets, where your customers are freelancers or small businesses, you will have less access to industry reports. (Location 593)
  • One great thing about B2BC markets is that they are often community-based. Many freelancers hang out at the same watercooler, which often is either a social media site or a forum/community that is specific to their craft. (Location 600)
  • Step Two: Their Problem (Location 630)
  • Once you have found a suitable audience, you can start looking for problems. (Location 633)
  • Once you choose a problem to solve, you create a new business to market the solution to that problem. Your unique solution helps your audience deal with a pain they’re feeling. Yet (Location 639)
  • I believe that many bootstrapped businesses only do half the work. They solve a problem, but they don’t address the most critical problem. (Location 642)
  • How to recognize if you are focusing on the critical problem long before turning it into a business is paramount to a successful business. (Location 645)
  • You want to build a “need-to-have” instead of a “nice-to-have.” (Location 655)
  • If you can help a customer with their most critical problem, they will benefit the most. No other tool will provide as much value as yours. (Location 661)
  • Here is how you can tell if a problem is a critical problem. (Location 670)
  • A Critical Problem Is Painful (Location 670)
  • Find the critical problem where ignoring something causes a lower quality of life. (Location 675)
  • A Critical Problem Wastes Time or Money (Location 676)
  • Find the critical problem at the intersection of something mandatory and something wasteful. (Location 683)
  • A Critical Problem Is Not Optional (Location 684)
  • Find the critical problem where people would love to opt out, but can’t. (Location 689)
  • A Critical Problem Occurs Frequently and Repeatedly (Location 690)
  • For them, this critical problem appeared 20 times per day, and they needed to write engaging messages every single time. (Location 695)
  • Find the critical problem where people need to do the same thing over and over again. (Location 696)
  • Find the critical problem where solving a problem takes a long time every time the problem occurs. (Location 705)
  • A Critical Problem Forces People to Solve It Using Their Own System (Location 706)
  • There is the joke that every SaaS is an Excel sheet transformed into business logic. (Location 706)
  • The moment someone uses generic tools like word processors or spreadsheets to solve a problem, it’s an indicator that the problem is valuable enough to build tools. (Location 707)
    • Note: Shared success canvas generatr
  • Find the critical problem where people are solution-aware and have already created their own simple systems to solve the problem. (Location 714)
  • Bonus: A Critical Problem Is Something Companies Hire to Solve (Location 716)
  • If they pay a person thousands of dollars a month to do a job, it must surely be significant. (Location 717)
  • Because a critical problem is so prevalent and has measurable implications, your customers are very capable of calculating the value of a solution that solves (Location 722)
  • They’ll be willing to pay: if the solution saves them time if the solution saves them money if the solution makes them money If it does all three at the same time, it will be a guaranteed hit. (Location 724)
  • With non-critical problems, customers often find alternative ways of solving the problem because they want to save money. (Location 729)
  • If spending the time to find and learn a free alternative solution seems like a better choice to your prospects, then your solution is likely solving the wrong problem, or it’s addressing the right problem the wrong way. (Location 730)
  • Disillusionment, lack of value, giving up, all indicators of a solution to the wrong problem. If this happens to you, reach out and ask what made them cancel and what you could have done to prevent that. (Location 735)
  • there still is no word of mouth happening, you will eventually run out of money. (Location 740)
  • Focus on what you can help them accomplish. Ask what customers want and which state they want to be in when the work is done. Don’t focus too much on the “how it’s done.” That is usually more based on tradition than on an optimized process. (Location 746)
  • As Rob Fitzpatrick suggests in his book The Mom Test, don’t talk about your product. Have them talk about their problems. (Location 750)
  • If you see eyes widening and jaws dropping when you talk about solving their most critical problem, then you have the main ingredient for a great bootstrapped business that can thrive. (Location 757)
  • Identifying the Most Critical Problem in a Market (Location 759)
  • You can help people be more reputable by transferring renown from a trusted source, through certification or credentials. (Location 786)
  • You can help people accomplish more by reliably taking over their tedious work to allow them to be creative and practice their ingenuity. (Location 789)
  • An excellent course of action is to note your perceived intensity for every problem you encounter. (Location 798)
  • The second-best problems to find are tedious. Those are not as urgent, but they are important. A solution to this type of problem will still have high customer retention as long as it makes the job significantly easier. (Location 804)
  • You will want your product to be the main course instead of a side dish. (Location 812)
  • The Prospect Awareness Scale by Eugene Schwartz from his seminal 1966 book Breakthrough Advertising provides an excellent introduction into customer awareness levels. You start with (Location 822)
  • Where do people go out of their way not to do a certain job without describing it as a problem at the same time? Where do people “automate” their jobs with tools that, from your perspective, seem inadequate for the task? Where do they build makeshift solutions? (Location 836)
  • The moment you find people organizing data in Excel without making use of the numerical features of a spreadsheet, you are in the presence of problem avoidance. (Location 838)
  • You will find that Excel and Google sheets are widespread for these “custom solutions” that people build for themselves. If (Location 840)
  • Remember: users avoid, entrepreneurs solve. Find the things that your prospects steer away from. Find the things that make them feel uncomfortable. Discomfort is a very clear indicator of a hidden problem. (Location 843)
  • Find the latest popular books released in your niche. Read reviews and summaries, or read the whole book if you have the time. You’ll find concepts and ideas that might not yet have been implemented as a service. (Location 854)
  • Great products happen at the intersection of your skills and the opportunities of a niche market you care about. (Location 862)
  • Suspend your views of what is “normal” and “ubiquitous” when you engage in problem discovery. (Location 865)
  • What Questions to Ask a Prospect (Location 866)
  • Efficiency What keeps you from being more efficient at work? Why can’t you do more of what you do? Which tasks feel like they are a drag? (Location 869)
  • Effectiveness What limits you from doing your job the right way? Which tasks are the most pointless? What annoys you about working with competitive products? What is your experience like with each of them? (Location 871)
  • Financials Where are you spending too much on tools? Where are you spending too much on consulting? What is your budget for software tools? What is your budget for outsourcing work? (Location 874)
  • Avoidance Detection What part of your job do you loathe? What tasks do you delegate the most? What tasks should not be part of your work? Is there anything that seems utterly needless in your day-to-day work? (Location 887)
  • You will still need to validate the problem with your prospects, which I suggest you do in a follow-up call to a random subset of them. This allows you to verify that the problem is real, they are or have become aware of it, and they are interested in solutions. (Location 899)
  • It’s just as important to speak to the right kinds of customers as it is to ignore the rest. (Location 908)
  • you will have to observe your problem validation conversation with them, discover if they are a good or bad fit, and only act on the interactions that show signs of goal alignment while discarding the others. (Location 916)
  • Keep in mind that it’s a conversation, not an interview. (Location 922)
  • Having skin in the game means having something to gain from using better tools and having something to lose if you don’t. (Location 928)
  • Compliments are a problem. They don’t help you. If compliments happen, ignore them. (Location 952)
  • Avoid People Who Only Tell You Their Ideas (Location 969)
  • But you can get something out of these ideas. Ask your prospect why they thought of them. Have them tell you the steps that led to the idea, note the assumptions, and ignore the idea itself. (Location 973)
  • Avoid People Who Love Complaining (Location 980)
  • If you had a conversation that, in retrospect, seems biased, do not act on it. Write (Location 986)
  • Step Three: Your Solution (Location 995)
  • With a worthwhile audience and a validated problem, you will now need to find a solution. (Location 998)
  • Solution Validation Doesn’t Happen in a Vacuum: Talking to Your Future Customers (Location 1009)
  • Solution validation is best done in direct communication with your prospective customers, just like when you validated that the problem you were going to work on was a critical one for your niche audience. (Location 1015)
  • The main question you want to answer through these calls is, "Will this solution solve the problem as expected, and won't it create more problems along the way?" (Location 1018)
  • Usually, when you look at risks that could come from using a particular service, you'd look at the severity of impact, the likelihood of occurrence, and the probability of detection of each potential risk. (Location 1023)
  • A good question here is, "At what stage of your workflow will you be using this solution?" (Location 1031)
  • People are result-driven, and they use technological solutions, not for their intrinsic quality but to get a job done. (Location 1053)
  • You need to know what or who you are replacing. (Location 1066)
  • Every existing solution has a cost attached. You will need to figure this out for your own pricing. (Location 1066)
  • If you don't ask how far the current solution to the job-to-be-done extends into the operation of their business, you will miss critical friction points that need to be addressed by a solution that is worth switching to. (Location 1077)
  • From your prospective customer's perspective, using your service should remove risk, deal with the jobs-to-be-done more efficiently, and make the overall workflow smoother. (Location 1081)
  • Throughout your solution validation conversations, you want to project a clear interest in solving your customer's problems without causing new ones. (Location 1091)
  • Asking the Right Questions: Focus on Problems not Solutions (Location 1094)
  • questions that always produce meaningful results: where they are now? Where do they want to be? What stands in the way of getting there? (Location 1096)
  • Avoid asking about features. (Location 1107)
  • Avoid asking about things that annoy them. (Location 1109)
  • Avoid asking about their strategies and tactics too much. (Location 1111)
  • Ask about tension and friction during value creation. (Location 1115)
  • It’s about finding the most impactful, most value-producing solution with the least amount of friction and the highest possible chance of adoption into your customers' existing workflow. (Location 1122)
  • Step Four: Your Product (Location 1124)
  • Finally, and only after looking into the audience, problem, and solution, can you arrive at the product. (Location 1128)
  • Only by having spent a lot of time and energy on shaping the idea through the previous stages can you be sure that when you dive into building the product, you can create a sustainable bootstrapped business by selling it to customers who will pay for it. (Location 1129)
  • Your product will never be finished—treat it as an ongoing concern at all times. Allow for quick and safe releases, release early, and release often. The less exciting your tech choices, the better. The fewer things you have to build yourself, the better. (Location 1138)
  • It's a good idea to reflect on your assumptions, your analysis, and its accuracy every now and then. I recommend doing this consciously at least once a quarter, as a form of Continuous Validation of the business, the product, and alignment with your vision. (Location 1162)
  • We dismissed much more than we considered, and it kept the product current without being bloated. We even removed features at times. (Location 1165)
  • The most dangerous kind of change is radical change. Here, both activities and assets are threatened, and everything can change. Have (Location 1226)
  • If a feature of your product turns from lead magnet into a churn multiplier, you need to remove it. If a feature you previously considered to be a bad idea turns into a potential revenue increaser, you need to add it. (Location 1241)
  • While it's every developer's ambition to squash these things before they hit the production systems, some will sneak through, and you will have customers reach out and report them, often in a very agitated state. I've learned to use this as a brand-building exercise. When people reported bugs in the FeedbackPanda interface, I would calmly thank them for the report, tell them that I was right on it, fix the bug right then, and immediately tell them that it was fixed right after deploying the new version of our service. At times, this took less than 30 minutes from the customer service chat until the fixed version was deployed. (Location 1247)
  • Being heard is one thing. Being listened to and finding that something is made better as a result is another. If you can give your customers this feeling, they will feel valued, understood, and will become loyal. (Location 1252)
  • Removing features will do this; it will unearth the hidden outliers, the users deviating from the conventional path. If you have a feature that is damaging to the value of your business, remove it. At (Location 1277)
  • Remove all obstacles and extra steps that keep your customers from engaging in network-building activities. (Location 1284)
  • The only time when your software is actually finished is when it has precisely zero users and no changes to respond to: when your business has failed. That will be the day when you can stop looking at your market and your customers' needs. Any other day is an opportunity to improve your product. (Location 1288)
  • The only antidote to abandonment is to put your work in front of other people, even when it's not perfect yet. (Location 1296)
  • If software can never be truly finished, any stage of it is your best guess at what it should be at the time it's created. (Location 1298)
  • The MVP is your first real contact with your customers. It has two main functions: to allow your early adopters to gauge the value of your service, and to enable you to charge them money to gauge their sincerity. (Location 1301)
  • There are two boxes to tick when it comes to your MVP: it has to be the minimum of what is needed to make your product viable. (Location 1304)
  • What's a minimal product? It's the core functionality only, a simple tool without any fancy additions. (Location 1305)
  • What's a viable product? It's the essence of the solution to your audience's problem, a tool that does exactly what it promises to do, and nothing more. (Location 1306)
  • A minimum viable product should contain a few structural components to make it usable by your audience: your users should be able to sign up and log in, solve their problem, and be able to pay for your product. Anything else is cruft, at least for your MVP. (Location 1309)
  • Don't try and build the very first version of your product for all possible platforms it may be used on and for. (Location 1325)
  • It will always feel like it's not good enough yet. Here is how you can reframe this perspective: all your customers want is to have one less problem in their lives. They are sitting in front of a bowl of soup with a fork. You have a tiny spoon to offer, but you think you could make a much larger spoon. Your customers will be perfectly happy with the small spoon, because no matter what it can do for them in the future, it will already help them with their bowl of soup, right here and now. (Location 1333)
  • as humanly possible. You need your customers to interact with your product at the earliest possible moment. Only then can you find out what works and what doesn't. (Location 1337)
  • If you want it to measure customer commitment, add a rudimentary payment system from the beginning. (Location 1345)
  • don't ingest personally identifiable information more than you need to. Use Identity-as-a-Service solutions like Auth0 from the start, and don't implement your own payment system either. Services like Stripe will handle capturing payment and billing information in a PCI-compliant way for you. (Location 1350)
  • We found one thing to be incredibly useful in the MVP and all later versions of our product: client-side monitoring. By getting notifications for errors immediately after they happened in the browsers or apps of our customers, we could see the stack trace and additional information before the customer even noticed the error. (Location 1355)
  • It’s also important to provide a way for the customer to reach you. Give them an easy-to-use contact form, a real-time chat solution like Intercom (Location 1359)
  • Another way of thinking about your MVP is to make it a Minimum Loveable Product. What is the first version of your product that an early adopter may take a screenshot of and share with their network? (Location 1370)
  • Getting your MVP to the point where your customers have no choice but to talk about it is what the MLP is all about. (Location 1374)
  • here is what is most important about releasing your product in a bootstrapped business: release often, release early, and release safely. (Location 1414)
  • Releasing often prevents horizontal overengineering. (Location 1425)
  • Releasing often allows for feature implementation feedback. (Location 1429)
  • Releasing often allows your product to evolve progressively. (Location 1433)
  • Don't forget to keep your documentation and Standard Operating Procedures up-to-date. For engineers, it's a lot of fun to build, and a great joy to see customers use newly released features. The part where you take new screenshots for your knowledge base and write new step-by-step guides for your Operations Manual may not be as exciting. But those steps, when taken routinely, will make sure your business runs on as much automation and documentation as possible, which will make it more sellable in the future. (Location 1435)
  • Releasing early prevents vertical overengineering. (Location 1446)
  • It will also make your features very succinct. (Location 1448)
  • By releasing when features are just a few days old, you will effectively be releasing MVP versions of individual features. (Location 1449)
  • If you work for months on a feature only to find out that you misunderstood the nature of your customers' problem, that is a month wasted. (Location 1454)
  • Only after a few dozen customers had expressed the need for specific functionality would I implement it and release it. (Location 1468)
  • I only ever implemented these features when it started taking too long to solve these tasks manually. (Location 1469)
  • Release Safely (Location 1470)
  • Never release something you can't roll back. (Location 1483)
  • Three main things are important to create a system capable of automated rollbacks: artifacts, versioning, and bidirectional migrations. (Location 1485)
  • Release when it's a good time. Don't release at the time of day when most of your customers are using the product at the same time. (Location 1509)
  • Consider slow rollouts and feature flags. This may be an advanced approach to releasing, as you will likely not need this for the first few versions of your product. But it makes sense to at least consider building feature toggles into your product: a way for you to activate and deactivate access to certain features for your customers. (Location 1512)
  • Slowly rolling out the new version to our customers instead of just releasing it to all of them at once would also have given me a much less stressful time figuring out the performance issues. (Location 1516)
  • Releasing and TMI: How Much Do You Make Public? (Location 1519)
  • The moment you notice yourself doing something that can be automated, integrate it into your release management system. (Location 1534)
  • Most products that you will see staying on the market have something in common: they do one thing very well—and not much else. (Location 1551)
  • Only when it benefits all of their customers will they add new features to their core product. Simple beats complicated. (Location 1557)
  • Simplicity is achieved by reducing complexity or not introducing it in the first place. (Location 1559)
  • Customers will ask for things. Some of these things will make a lot of sense. But you're still better off not turning those things into features just yet. Every customer sees their own problems and envisions a solution tailored to their needs. Often, this solution conflicts with the perceived solution of another customer, who is fine with the way things are or would stand to be confused by any addition. (Location 1586)
  • Everything you add to your product is a source of potential confusion and friction. Until you can make sure that the vast majority of your customers benefit from a feature, don't add it. (Location 1589)
  • Toward your customers, don't defend or justify your actions. Tell them that you've noted their request, and you will work on making sure you solve their problem. Be appreciative that they brought something to light, even if you don't think it warrants a feature. A customer that reports issues when they happen is better than one that just cancels their subscription silently. (Location 1595)
  • Changes Should Affect as Many Customers as Possible (Location 1597)
  • A small improvement for all of your customers has the same impact as a significant improvement for a few, and it will compound over time. (Location 1601)
  • Make Your Product Extensible Software products can be made extensible in two significant ways: by modularizing them and by making them easy to integrate with. (Location 1605)
  • Modular software has a high separation of concerns, explicit dependencies, and well-defined interfaces. (Location 1608)
  • Don't Build an Authentication System Yourself (Location 1625)
  • Don't Build a Payment System Yourself (Location 1647)
  • Don't Build an Invoicing System Yourself (Location 1654)
  • As developers, we are very likely to think that, "If I build it myself, I'll understand it better," and it's true. We do benefit from learning how to solve these problems, to a degree. The problem is that in a bootstrapped business, learning-on-the-job should always result in something highly beneficial. (Location 1669)
  • Wasting time on building something that others know the complexity of while you are entirely unaware is a foolish thing to do. (Location 1673)
  • The worst part of building things that you don't need to build is that it’s distracting you from the primary mission of your business: creating a self-sustaining value engine that helps your customers solve their critical problem. (Location 1678)
  • Many technical founders see a new startup as an opportunity to figure out a modern tech stack. That is a dangerous move. (Location 1722)
  • The central question of choosing one particular technology over another is this: "Will you be able to use this well for a long time?" (Location 1725)
  • Most of the time, you recognize the generalists by the simplicity of the interface they offer. The more it looks like a collection of simple building blocks, the better. (Location 1751)
  • To be on the safe side, choose popular technology. Many developers using a certain framework or stack will mean that more bugs are discovered over time, and this kind of software is often very well-maintained. The best way to quickly find out if a particular piece of software is popular is to look for documentation and educational resources. If there are a lot of tutorials and the technology seems well-documented at first glance, it will likely be around for quite a while. (Location 1765)
  • for your core technology, boring is better. (Location 1782)
  • In general, I would advise against learning a new technology stack by building a business around it. There are two goals here, and they don't align well: building a stable business that will survive for a long time and learning a technology that may or may not be a passing fad. This extends to the services you use as well. (Location 1782)
  • Guidelines to Pick a Technology (Location 1790)
  • It can be used to solve your problem. (Location 1793)
  • It's popular. You find a lot of resources and opinions about it on the web. (Location 1795)
  • It's surrounded by vibrant communities. (Location 1796)
  • It's reliable. (Location 1797)
  • It's mature. You can find a history of how the technology was adapted to fulfill the real needs of the people using (Location 1800)
  • It's well-maintained. You can find recent and regular updates to the service, either in a changelog or in the source code itself. (Location 1800)
  • It's replaceable. (Location 1802)
  • From Product to Business (Location 1806)
  • A product is not a business—just yet. That's an important thing to understand, particularly when you're a technical founder. It's the reason the book The E-Myth exists: the entrepreneurial myth is that if you build it, they will come. But they won't unless you put in the effort to create a reliable system to sell the product at a profit continuously: a business. (Location 1809)
  • I realized this when I read Built to Sell by John Warrillow: a sellable business is a well-structured business. (Location 1818)
  • Nobody wants to buy a business that isn't easy to run. (Location 1819)
  • Forget Goals, Create Systems: Foundations of a Sustainable Business (Location 1824)
  • A sustainable bootstrapped business is successful when you have found a repeatable, reliable, and resilient system to continuously provide a value-producing product to paying customers at a profit. (Location 1829)
  • This required two kinds of reliability: architectural and operational. Architectural reliability measures how well your service is designed to provide uninterrupted access to your product. Operational reliability measures the effectiveness of your systems to cope with external interruptions. (Location 1859)
  • There are several advanced concepts to help entrepreneurs structure their businesses. While most of them are aimed at larger enterprises, the Entrepreneurial Operating System (EOS) has been used successfully in many bootstrapped companies. It aligns and strengthens the six key components of any business: the alignment between your vision; the real-world data; your people; your critical issues; your processes that systemize consistency; and traction to bring discipline and accountability into your business. It's definitively a good system to look into from the beginning to see how you want your future business to be structured in the future, what needs to be prepared, and what kinds of changes you can expect to encounter. (Location 1887)
  • When you start feeling some friction where there was none before, you're starting to work for the system. Reflect on what has changed, how to respond to it with your current knowledge, and adjust your process. (Location 1898)
  • Your Initial Pricing Will Never Be Right, but Try Anyway (Location 1907)
  • At the beginning of your business, revenue serves one purpose before any other: validation. (Location 1910)
  • Early pricing validates your business and initial product. Later pricing optimizes overall revenue. (Location 1915)
  • There are three rules to early pricing: it’s never perfect, it can be changed, and it should be aspirational. (Location 1916)
  • But your price should reflect the value of your full vision. (Location 1919)
Value Metrics: How to Measure the Value You Provide
  • A good strategy to measure the value you provide to your customers is to determine their central value metric and measuring that. (Location 1936)
  • What is a value metric? It is the most relevant metric that goes up when your customer’s business is doing well. For an image hosting service, it is the number of images uploaded. (Location 1937)
  • Price always communicates value. By pricing a product surprisingly low, you are saying that it is worth very little. That will scare away customers who are looking for high-quality products. Those are the customers you want because they are invested in making the product better and allowing it to thrive. (Location 1962)
  • Overpricing your product, on the other hand, is not as bad. (Location 1964)
  • Don’t be afraid to charge more, particularly in the beginning. You may think that your product isn’t fully finished yet, but that is no reason not to charge the full value that people are ready to pay. For your customers, the result of using your product is what they pay for. (Location 1970)
  • you don’t have any customers yet, be bold with your price. Zero customers paying $20 might as well be zero customers paying $50. See if you can find the early adopters that are looking for a quality product in the future by showing them your sincere attempt to build one through a higher price. (Location 1972)

Do You Need a Co-Founder?

  • Do you need a co-founder? Not necessarily. But your business will benefit immensely from having a co-founder. (Location 1988)
  • Communicators First, Founders Second If you are looking for a co-founder, look for someone who can communicate well with you. (Location 1992)
  • your co-founder does not express any kind of interest in solving real problems but is more interested in “playing startup” or toying around with technology, be very careful. (Location 2008)
  • Follow the approach laid out in Michael E. Gerber’s E-Myth Revisited and create an organizational chart for what you think your business will look like in five years, then add one founder to every position on the chart. That will allow you to pre-determine who has the final say about what. (Location 2028)

The Perils of Being a Solo Founder

  • Just be aware that there is no one to help you when you’re sleeping or sick. As a solo founder, you are the company. Unless (Location 2033)
  • Be prepared to spend significant time on your business when you go at it alone. (Location 2037)
  • You will need to build systems to deal with the high amounts of work much faster than with a co-founder. After (Location 2038)
  • Automating and documenting your internal processes becomes a front-of-mind action that is highly important to staying sane as a solo founder. (Location 2040)

The Survival Stage

  • Releasing a product for the first time is like jumping into a lake: the water might be too cold, and you don't know what to expect. But once you've jumped, you'll get used to the temperature quickly, and you'll be having a great time swimming around. (Location 2082)
  • Usually, founders launch their product way too late. They tinker around for months and months, trying to get things perfectly right. (Location 2084)
  • A business can only be as healthy as its founder. If you're struggling with stress and anxiety, things will start slipping through the cracks, further increasing the chaos. (Location 2086)
  • The Survival Stage is the time to turn your prototype into a quality product by building the right things and building things right. (Location 2088)
  • The moment you have customers, they will start talking to you. You'll learn how to help your users most efficiently without getting distracted from working on your product and business. (Location 2091)
  • You will work on helping customers first to find the product and then to find their way through it. (Location 2095)
  • The perfect business doesn’t exist. (Location 2134)
  • Any business is a dynamic enterprise, a thing that you do, not a thing you have. Nothing in your business will ever be perfect, as there is always room for improvement. (Location 2134)
  • Rephrase this into “I want to build a sustainable business. I want to live a good life, and provide a solution that will help people.” (Location 2136)
  • Usually, the most impactful things are also the hardest things to do. Start with those things. Don’t take the low-hanging fruit. It is usually the first thing your competitors will also pick. (Location 2142)
  • Rephrase this into “I want to provide value to my customers that makes their lives easier.” They don’t expect you to solve all of their problems. (Location 2147)
  • Do one thing really well. (Location 2150)
  • “I feel like I’m not good enough to create something great.” (Location 2161)
  • In a time of life-long learning, we’ll never be finished learning. So, we may as well start creating things sooner rather than later. Just (Location 2162)
  • Rephrase this into “I can start with something that works.” (Location 2164)
  • Start with what you know. Create something that you think is useful. Then go out and talk to the customers. Get their feedback and adjust. Repeat until you have found the solution. Repeat this until you have made something great. (Location 2169)
  • have to be the most knowledgeable expert in the domain.” (Location 2171)
  • Rephrase this into “I need to know enough to help.” (Location 2174)
  • If your business fails, you will now be an expert in the field. (Location 2176)
  • “I have to do everything by myself because I’m a solopreneur, and that is what they do.” (Location 2187)
  • Reframe this as “I can get people to join my cause when I am overwhelmed.” (Location 2191)
  • Any task you don’t want to do is a task that keeps you from taking care of something that you want to accomplish. (Location 2194)
  • I still get PTSD-like symptoms from the Intercom notification sound that indicated a new customer service conversation. The moment we hired a customer support person, and they took that workload off me, my head was clear again within days. (Location 2197)
  • “I have to risk burnout because successful people work hard.” (Location 2201)
  • Reframe this as “I have to take care of my mental health.” (Location 2204)
  • Burnout is not a badge of honor. It is a medical condition. (Location 2207)
  • When you are burned out, you lose your drive. You are exhausted; you lose the joy of your work, and your performance suffers. (Location 2207)
  • Finding the motivation to work is hard when the sound of an email triggers a mild panic attack. (Location 2210)
  • Just be your authentic self, ready, and eager to learn. That is an excellent foundation for a sustainable business that helps real people with their real problems. (Location 2217)

Product Evolution: Controlled Growth and Saying No

  • founders that don't focus much on controlling the growth of their product turn it from a slim and focused offer into a bloated monster. (Location 2224)
  • In addition to making sure only the features that genuinely provide more value to the customers make it into the product, you'll also need to make sure you build them in a way that allows you to change or remove them when needed. (Location 2226)
  • Every product-related decision boils down to whether it adds value to your business, your customers' lives, and your own. (Location 2242)
  • You will learn how to quickly and easily distinguish value-adding features from vanity projects. (Location 2244)

First Things First: Feature Prioritization Frameworks

  • Intercom uses the RICE method, which scores Reach, Impact, Confidence against Effort. Reach is measured directly from product metrics, expressed as a number of people or events over time. "Customers per quarter" or "transactions per month" are the units for this score. It expresses how many users this feature will affect. Impact quantifies how much a given feature enables you to reach a business goal. How much does the feature move the needle? As this is not easily expressed as a continuous number, use normalized figures to represent anything from "massive impact (3)" to "medium (1)" down to "minimal impact (0.25)." Confidence is a percentage that expresses how confident you are in your estimates about this feature. Do you know exactly what awaits you? 100%. Is it a wild guess? 20%. The more you know about the complexity and expectations related to this feature, the higher the score. Effort is the time needed for a feature, measured in "person-months," the time a single person needs to work on the project to complete it. (Location 2268)
  • Demand: On a scale of "High (1)" to "Low (3)," how much pull does the market exhibit? How many customers need this feature? Impact: On a scale of "High (1)" to "Low (3)," how much will this feature move the needle? Effort: On a scale of "XS (1)" through S, M, L, XL to "XXL (6)," how much work will this take? (Location 2284)
  • In almost all systems, scoring usually boils down to comparing the potential gains versus the possible effort in creating the feature, weighted for risk. This is an excellent choice for bootstrapped businesses, as including development effort is a real requirement for a company that doesn’t have funds for extensive R&D exploration. (Location 2291)
  • Feature Prioritization: The Kano Model (Location 2293)
  • The Kano model distinguishes between basic features that your product just needs to be useful, called threshold features, and "excitement features," which are the most desirable outcome. When you invest time into these features, they yield a disproportionate increase in the delight of your customers. Once you have them, your customer's joy of using your product skyrockets ever higher the more work you put into them. (Location 2296)
  • There are many other systems to prioritize features: Affinity Grouping, Opportunity Scoring, "Buy a Feature," "Value vs. Complexity Scoring," and many more. (Location 2313)
  • stick to one system once you have found it to be usable for your business. (Location 2314)
  • Spend a few hours on this task, consistently revisit your choices every few weeks as a form of Continuous Validation, and spend most of your time actually working on your product. Incrementally improving a flawed product is better than not having a product at all. (Location 2320)
  • focus on maximizing the value that your product is capable of producing. Three major approaches should go into any product decision: (Location 2327)
  • It should maximize qualitative impact: "How well does it solve the customer's problem?" (Location 2328)
  • It should maximize quantitative impact: "How many customers are being helped?" (Location 2328)
  • It should provide a minimum of usability: "How easy is it for the customer to get their work done?" (Location 2329)
  • Within your application, hot paths can be found by looking at performance metrics. (Location 2345)
  • Maximal Quantitative Impact (Location 2356)
  • new feature or an improvement, make sure it impacts as many customers as possible at the same time. (Location 2356)
  • Over time, you will likely add a few things that help a few people a lot. But to gain critical mass, you need to start with something that helps a lot of people at least a bit. (Location 2360)
  • The idea here is to turn your earliest customers into evangelists for your product, who will shout it from the rooftops. If you only build things that amaze a few of them, that'll be fewer people to do your marketing for you. (Location 2361)
  • For each feature, count and plot how many of your users actually use that feature over reasonable periods. (Location 2366)
  • Rank by most-used feature, and look into potential improvements there. (Location 2367)
  • For new features, making sure that they will resonate with all of your customers can be checked by adding a mock button for the view/component you don't have yet and present the curious users who click it with a popup promising to implement it. (Location 2367)
  • Measure how often people click on that button, and when a threshold is reached, you can consider building it. (Location 2369)
  • Minimum Usability with Maximum Simplicity (Location 2370)
  • you should release features as soon as they provide the basic functionality they are supposed to perform. (Location 2372)
  • That does not mean your product should be ugly and look scrappy. A usable and clean interface is a valuable feature in itself. (Location 2373)
  • Whenever you can, reduce clutter and complexity. If configuration options can be removed from a view and put into a configuration dialog, move them over. (Location 2378)
  • If something isn't used most of the time, having it linger in the interface could be more of a distraction than it is helpful. (Location 2379)
  • In the Survival Stage of your business, focus your efforts on creating the features that make your service noticeably better for the majority of your users without making the product harder to use. (Location 2384)

Building Things Right

  • The way you deploy your product is one of the most important things to keep flexible, as you never know where your entrepreneurial journey may take you: chances are you'll move your system to another hosting provider after growing to a certain size. Being prepared for that early will save you a lot of hassle. (Location 2398)
  • Here is a general rule for integrating a third-party-service: never integrate the service directly. A service should always be integrated through an abstraction. (Location 2403)

How to Properly Abstract a Third-Party Service

  • Always have a layer of indirection between where a service is used and where it's called. (Location 2430)
  • The Kinds of Services that Should Be Abstracted Away (Location 2437)
  • Make sure you are particularly aware of abstracting away these service categories: Payment providers like Stripe, Chargebee, Paypal: (Location 2437)
  • always keep at least one method to reach out to your customers even if all external services are malfunctioning. (Location 2444)
  • Notifications and chat like Intercom, UserList: (Location 2446)
  • Database connections like MySQL or PostgreSQL: (Location 2449)
  • Metrics collection: Like marketing tools, metrics collection services are notoriously expensive. You might have started out with a cheap tier of such a service only to learn a few months later that, for your current needs, this service has become prohibitively expensive. (Location 2454)
  • This flexibility extends to selling the business as well. An easy-to-run system is an easy-to-sell system—the less specific knowledge your acquirer needs to run your product successfully, the better. If all they need to know is which version number to increase and which command to run to deploy a new version of the software, their perceived deployment complexity is very low. (Location 2491)
  • Every structural decision is a tradeoff between two out of three things: high flexibility, high performance, and low complexity. (Location 2496)
  • In this context, choose the two that will give you the most control as a bootstrapper. In most cases, that will be high flexibility and low complexity. (Location 2497)
  • Finally, think about validating your architectural assumption every now and then. This won't be a weekly task, but every year, you should look through all of the services you use, the structures you have built, and the processes you have established within them. If they still help you reach your goal to create and sustain a business that can operate without you, then you can focus on the operational parts of your service. (Location 2511)

Customers: Building Relationships that Last

  • At FeedbackPanda, I was solely responsible for the technical support of more than 5,000 customers. And, I still had time to develop software. (Location 2533)
  • The good news is that there is a crucial distinction. Customers may expect help immediately. But that does not mean they want to talk to a human. They want to have their problem solved. (Location 2542)
  • Customers also don’t like to be told that they didn’t understand the product. (Location 2544)
  • When you have some unique identifier, you can also use the Intercom addon system to create deep links directly into your admin interface or link up their Stripe accounts directly into the Intercom platform. (Location 2558)
  • You can extract incredible amounts of data from just a single conversation by asking your struggling customers about their goals and motivations. (Location 2563)
  • Some customers will be complaining a lot, asking for features that you don’t intend to ever build, or are generally just very hard to please. When you notice that something is wrong, you can usually trace it back to one or more of your assumptions not being aligned with your audience. (Location 2620)
  • The most fundamental misalignment you can experience is when you're solving a problem that your prospective customers don't have. (Location 2624)
  • Maybe you are not looking at the critical problem at all. Have you adequately validated that the problem you're solving is critical? (Location 2627)
  • Maybe you are not looking at the critical problem anymore (or just yet). (Location 2633)
  • Maybe you are looking at a critical problem, but not theirs. (Location 2638)
  • Maybe your solution is incomplete. (Location 2648)
  • Maybe your solution is too complicated. (Location 2655)
  • Maybe your product operates in the wrong medium. (Location 2662)
  • Maybe your product or your messaging is too technical. (Location 2666)
  • Churn, Retention, and Revenue: What Makes Customers Stick Around and Why That’s Important (Location 2696)
  • On average, a 5% increase in customer retention leads to a 25%–95% increase in profits. (Location 2699)
  • You’ll see which kinds of churn are dangerous and which can actually be beneficial to the bottom line of your business. (Location 2703)
  • Existing customers get used to the value you deliver; in fact, they start expecting it. That makes them appreciate new features and start complaining when the product doesn’t keep up with their critical problem. (Location 2707)
  • The chance of selling to an existing customer is 60%–70%, whereas a new prospect only buys 5%–20% of the time, according to Marketing Metrics. (Location 2710)
  • Payment Churn: How to Recover Failed Charges (Location 2724)
  • When that happens, you can either integrate a recovery solution like ProfitWell Retain or Baremetrics Recover. These dunning solutions reach out to your customers, prompting them to update their credit card information right after the failed charge occurs. (Location 2726)
  • At FeedbackPanda, a large percentage of our customers were new parents. Inevitably, they would go on parental leave and would want to pause their subscriptions for as long as they were not working. Offering a “pause and pick up where you left off” solution was a clear path for us, and something similar could work if your business is in a similar niche with expectable temporary periods of non-use. (Location 2736)
  • Some churn is also welcome. Imagine you have customers who continuously complain or request features you’re not willing to accommodate as they don’t fit into your vision. As Seth Godin says, these people are not the audience for your art. You should not force a relationship with them just to get some money. (Location 2739)
  • Toxic customers should be encouraged to churn. (Location 2743)
  • There is also something you can do to prevent churn before it happens: value nurturing. (Location 2749)
  • It’s all about showing the customer the value they’ve receiving from your product while they are using it. Show them how much time using your product has saved them this week. (Location 2749)
  • The book Farm, Don’t Hunt by Guy Nirpaz describes the concept of value nurturing in great detail. (Location 2752)

Customer Feedback Tools and Public Roadmaps

  • There are a few things you can do immediately that will build customer confidence and trust in the future of your business and your product. (Location 2767)
  • Ask your customers methodically. Using a tool like Canny.io allows your customers to suggest features and vote for the ones they find most relevant. (Location 2768)
  • Sharing that roadmap will then show your customers where the journey is going. (Location 2770)
  • Potential long-term customers that churn quickly after adopting your product are your most significant loss in terms of unrealized customer lifetime value. (Location 2772)
  • Spend some time discovering which metric can be used to find out if a customer will stick around or not, and then optimize your onboarding to get your new customers to that point as quickly as you can. (Location 2774)
  • Sometimes, a thank you note can make a difference. (Location 2779)
  • Particularly at the beginning of your business, when you’re struggling for survival, take the time to reach out to every single customer and say thank you. Thank them for being part of your journey. (Location 2780)
  • Seemingly random acts of kindness, particularly when they’re not aimed at creating a viral sensation, will make a difference, and your customers will feel valued and respected. (Location 2782)

Pricing: Subscriptions, Plans, and Other Financial Challenges

Strategies for Determining Product Value

  • The great thing about revenue is that there are many levers that you can move to improve it. The not-so-great thing about revenue in a bootstrapped business is that it's hard not to move the wrong levers. (Location 2791)
  • Some strategies may work well at the beginning of your business, but prove to be fatal further down the road. (Location 2797)
  • Don’t hesitate to change the prices of your plans just because you picked an arbitrary number of dollars when you first launched the business. (Location 2803)
  • Honest Pricing and the Perception of Value (Location 2805)
  • Always be transparent about changing prices. Inform every customer who will be affected by this change. (Location 2805)
  • If you raise prices for existing customers, inform them in advance, so they have a chance to commit or complain. (Location 2807)
  • With enough value nurturing, customers will understand that a continuously maintained and updated SaaS product warrants a price increase. (Location 2809)
  • Early adopters buy the product that your service will provide once it's finished; mainstream customers buy the product you sell right now. (Location 2817)
  • Early bootstrapped pricing is often too low. Don't discount yourself. Just because you're starting a new business doesn't mean you'll have to scrape the bottom of the barrel. (Location 2821)
  • Pricing Is Always Conversational and Influenced by Expectations (Location 2828)
  • In general, pricing in a vacuum is a questionable approach. In the beginning, you likely don't have much customer data to anchor on. (Location 2828)
  • Customer conversations will help you understand what could work and what could not. (Location 2830)
  • Talking to your customers allows you to find out if they are genuinely committed to buying your product. (Location 2831)
  • You should price the way people are used to. If they pay per seat for other tools, you're likely to get more conversions offering that, too. If you introduce an unusual pricing model like API-call-based prices in an industry that usually pays a flat fee for services, you will have to spend more time explaining to your prospects why this is better suited to their use cases. (Location 2834)
  • The same goes for your price levels. Your customers will compare your solution to the tools they already use and will evaluate you against the tool, position, or team that your service is supposed to replace. (Location 2837)
  • Moving up-market is a common strategy for SaaS businesses: go after bigger and bigger customers. Find the bigger budgets and get your cut. (Location 2840)
  • it is not recommended while you are struggling to survive. There (Location 2842)
  • Enterprise customers are dangerous beasts: their purchasing processes are opaque, take a long time, and involve levels of commitment you may not be able to make. (Location 2843)
  • At this early stage of your business, ask yourself this question: what is your price supposed to do? (Location 2867)
  • Your very first customers are validation and multiplication opportunities. You'll price differently for those customers than for later customers. Deliver custom prices to the early ones, then reevaluate later. (Location 2868)
  • At FeedbackPanda, we increased our prices by 50% a year after going to market. (Location 2873)
  • We had great success in two ways: our monthly revenue grew as customers agreed to pay more for their monthly plans, and we received a large influx of cash from the customer who chose to lock in their prior pricing by committing to a discounted yearly plan before the deadline. (Location 2874)

Not All Subscribers Are Equal: Dealing With Plans That No Longer Work

  • The voices of those who are bothered will always be much louder than the silence of those who don't mind. We saw in our numbers that our conversion rate didn't suffer from this change. (Location 2886)
  • If you remove a plan, you have a choice: you either upgrade all users to one of the remaining plans, or you "grandfather in" their subscription, which means they get to keep their old plan even though it is no longer offered to new customers. (Location 2888)
  • Your best chance to increase your MRR immediately is to upgrade all of the customers on the plan that you intend to remove. This will also cause a lot of trouble if you're not giving your customers enough time and options to react to the announcement before an additional dollar changes hands. Inform your customers far ahead of time. Give them a month or more if you can. (Location 2890)
  • Grandfathering can be great to keep your early customers around, but there is a risk of underselling your product significantly. (Location 2901)
  • An excellent way to allow grandfathering is making it conditional and temporary: allow them to keep the lower price for a year if they upgrade to a yearly subscription. (Location 2904)
  • Else, force them to upgrade to the new price. Understand that they should pay for the product they receive today, not the product they signed up for years ago. (Location 2905)
  • We grandfathered our customers indefinitely, which is something I would not recommend. Give your customers a high but finite amount of time to enjoy their old subscription plan. (Location 2910)
  • Yearly subscriptions allow you to lock in a portion of your revenue in a much more reliable way, while providing something valuable beyond dollars: validation. (Location 2919)
  • Yearly Subscriptions and Validation (Location 2920)
  • Not only do they pay up to 12 times as much as a monthly subscriber, but they also communicate something powerful to you. They trust your business to be around in a year, they trust your product to provide value for at least another year, and they’re sure that they won’t find anything better until then. (Location 2921)
  • It also gives you access to a very interesting subset of your early customers: your future evangelists. (Location 2924)
  • Look at it like this: early adopters are already betting on your product for the foreseeable future. If some of them actually commit to paying you for a year, then you can be sure that they will go above and beyond to make sure your business succeeds. They will be the people who talk about your service on social media, introduce it to their peers and the members of the communities they frequent. Leverage that, particularly in the beginning. (Location 2925)
  • You should also discount your yearly subscriptions, for two reasons. First, a cheaper subscription will incentivize customers who like to save on purchases they would make anyway. Second, and this is a much more critical reason, a discounted plan can come with a (clearly visible and communicated) non-refundable clause. (Location 2934)
  • Most customers will understand that discounted plans are not refundable. Make absolutely sure that your refund policy is clearly visible to your customers before they purchase, and have it easily visible in your account settings as well as in your knowledge base and Terms & Conditions. (Location 2938)
  • At FeedbackPanda, we sometimes refunded yearly subscriptions even though we had a no-refund policy. For a handful of hard cases like people who had suddenly lost their jobs or had medical emergencies, we quickly refunded the money. (Location 2940)
  • To our knowledge, no one ever abused this system, and the loss in revenue was worth all the feedback and gratitude we got from our customers. (Location 2944)
  • Pricing Models That Can Break Your Business (Location 2946)
  • Two pricing models can be hazardous if not implemented carefully: freemium accounts and lifetime accounts. (Location 2948)
  • If you try to attract customers using the freemium model, make it hard for them to earn money without paying you. At least that way, once a user derives meaningful value from your service, they have to start paying. You can accomplish that by turning key features into paid-only options or instituting limits that are hard to reach for an amateur but easily reached by a professional. (Location 2957)
  • Be advised that many third-party services charge according to the number of active users. Unless your paying users can offset that cost, using the freemium model can be very prohibitive to choosing the right integrations for your service due to the very high number of non-paying customers. (Location 2964)
  • Lifetime accounts also attract less-than-desirable customers. (Location 2977)
  • Both companies treat their free users as valuable customers, because they know that conversion rates are high, and a single user who works for an organization with 50,000 employees can turn into a lead catalyst. (Location 2988)
  • Some businesses that desperately need cash up front can sell a few lifetime accounts to their earliest customers, and that will give them the funds they need to jumpstart a business that can survive long enough for recurring revenue to establish recurring revenue. But lifetime accounts are just that: a temporary cash injection that, after a while, may turn into a drain on your resources. (Location 2989)
  • When in doubt, stick with monthly and yearly subscriptions after an extensive trial phase. That way, you'll see if customers are with your business because you continuously provide them enough value. If you're not, they will cancel. (Location 2998)
  • Make the Product Sell Itself: Referral Systems (Location 3004)
  • It worked like this: for every three customers you referred, you would get a free month of the service. It would be automatically credited to your account the moment the third referred customer purchased a subscription. All referred customers would get a 50% lifetime discount on their subscription. After increasing our prices, this brought their monthly cost right back to where it was before but made the price so much more attractive compared to a non-referred subscription. (Location 3015)
  • The second significant advocate benefit is reputational. If you show to your peers and your community that you use an expert tool to do your job expertly, what will your peers think you are? An expert, of course. (Location 3048)
  • What Benefits Does a Referral System Provide to New Users? (Location 3055)
  • Referrals are the duct-tape for your leaky funnel. (Location 3057)
  • How Does a Referral System Help Your Business? (Location 3060)
  • you can significantly reduce the workload of your customer service department. (Location 3066)
  • We built such a journey-tracking component into the FeedbackPanda referral system. Advocates could see if their referred users accomplished certain milestones, and where they struggled. (Location 3068)
  • Customers would lose their edge if they shared your service. (Location 3084)
  • Customers would admit to being a beginner if they shared your service. People rarely admit they’re not good at something. (Location 3085)
  • Customers would admit needing the savings from the referral system. (Location 3086)
  • Conversely, a referral system will work best for these reasons: (Location 3088)
  • Customers can show that they are doing well using your service. (Location 3090)
  • Best wait until your product is stable enough for your user-facing documentation not to change every week. (Location 3117)
  • Services like ReferralCandy, ReferralRock, SaaSquatch, or Ambassador offer tools that are easy to integrate and allow you to manage not just referrals, but also affiliates and partnerships. (Location 3120)
  • We chose that kind of communication over active recruiting. We didn’t reach out to people directly, but we put it in front of them wherever we could. A referral system should be optional, and only if a customer really wants to support the service should they do it. (Location 3144)

Surviving a Recession as a Bootstrapped Business

  • how bootstrappers can approach setting up their businesses to withstand the up and downs of increasingly interconnected global economies. I've compiled this into the AAAH!-Framework, short for Awareness, Anticipation, Adaptation, Healthy Optimism, and Action!: actionable steps to make sure you meet the challenges of a recession. (Location 3171)
Awareness: Accepting that Change Is Happening
  • Reframe the chilling word "recession" as "things that impact your business that you need to react to like anything else," and you’ll know what to do. (Location 3182)
  • If you have employees, you will need to make sure they also operate from that perspective. It won't do your business any good if you're working on making the business recession-proof when your customer service agents dismiss your customers' worries and questions. Team alignment will be more important than ever, and it starts with operating in the same economic reality. (Location 3183)
Anticipation: Thinking About the Implications
  • Your customers will be more stressed than usual, and less forgiving when it comes to issues, which will impact your customer service load and the intensity of the work involved. (Location 3192)
  • Operational capabilities will change all over the place. In your business, you could experience this in the shape of the team being less effective. Employees may look for safer jobs, and contractors could stop freelancing altogether. (Location 3195)
  • Services you depend on may make radical changes. Some could go out of business. (Location 3196)
Adaptation: Implementing a Response
  • Short-Term Adaptations (Location 3221)
  • The best antidote against money drying up is having it before it stops moving. (Location 3221)
  • Your immediate goal when entering a recession should be to have, or at least quickly build, reserve. (Location 3222)
  • Even if you need to discount them heavily, offer and advertise yearly subscription plans. Give your customers a pay-ahead-of-time offer that they can't refuse. (Location 3223)
  • Try having at least three months of cash as if you had no revenue on hand. That should be the minimum to aim for in order to buy yourself time for impactful changes. If you're not yet profitable, double this to six months of cash. In this case, turn on your revenue engine as soon as you can. (Location 3225)
  • If you can get your revenue working while people are spending less and less, it's a testament to your entrepreneurial skill, and it can only improve from there. (Location 3227)
  • If you position yourself as someone who began diligently preparing before they even considered the economic change a problem, you will be regarded as a shining beacon of perceptiveness and preparation. Later on, clear communication will be an important indicator of you staying the course: if you're consistent and understandable in your words and actions, you will build relationships of trust with your team and customers. (Location 3243)
  • Being straightforward with your team can mean that they don't start looking for other job openings elsewhere. (Location 3246)
Long-Term Adaptations
  • Problems are the things we're most concerned with when a recession hits. But opportunities will appear as well, and they will be the antidote to your problems most of the time. (Location 3249)
  • Look into your customer base to find which industries and customer cohorts generate the most revenue for your business. Then, trace their funding source and assess the risk of that drying up. (Location 3255)
  • After that, reach out to customers who are in the groups that are most likely to continue to support your business. In those calls, you find out how you can serve them even better, and then focus on the learnings from those conversations. During (Location 3256)
  • If you have already helped a prospect with a valuable piece of content or a free tool, they will be much more likely to do business with you. (Location 3261)
  • What are your strengths? Do you have any unfair advantages you could capitalize on? How can you protect your upside? (Location 3264)
  • Which category are you in? Which category should you be in? Has there been a category shift? Will there be? Is your market still in the Goldilocks zone: small enough to escape the competition but big enough to support your business? (Location 3265)
  • How can your offer be more compelling? Is lowering prices an option? What can you do beyond that to make purchasers feel safe when choosing to buy your product? (Location 3268)

Marketing and Sales

  • Spreading the Word: Marketing on a Shoestring Budget (Location 3311)
  • Contribute before you advertise. Better, don’t advertise at all, create meaningful content around your product, and share that in a way that is helpful to people even without engaging with the product directly. (Location 3322)
  • Three components are essential to spreading the word efficiently, and they all interact with each other: tribes, water coolers, and word of mouth. (Location 3323)
  • The Power of Tribes (Location 3325)
  • Water coolers are wonderful for your content marketing in two ways. Initially, you will have the opportunity to see what your audience is interested in because that's the content with which they share and engage. Once you've understood what works for them and what does not, you can create content that you can be sure your audience will enjoy. Since you've already been a member of the community for a bit, you can provide quality content and market your product at the same time. (Location 3340)
  • Word of mouth works mostly for low-touch businesses. Because these companies have a large number of customers and prospects that can take a look at a product through easy and self-service signups, word of mouth can happen without your intervention or encouragement. (Location 3346)
  • a well-executed social media strategy can outperform pay-per-click ads significantly—it definitely did for us at FeedbackPanda. (Location 3357)
  • it's not about pushing a message into an audience of receivers, and hoping for signups conversions. It's about fostering a community that is eager to spread your messages, building your brand, and gaining recognition and reputation. (Location 3360)
  • Facilitate communication. Allow for more connections between the people in your niche. Enable existing communities or build one yourself using community software like Circle.so or Tribe.so. (Location 3365)
  • Interview leaders in the community on your blog, giving them more reach and their voices more impact. Interview members of your community, showcasing both their uniqueness and their belonging to the tribe at the same time. (Location 3366)
  • Facilitate exchange. From day one, envision your product to have a component where your users can share something. It can be data, insights, best practices, support, frankly anything. Give your users a chance to empower each other, and they will be sure to increase their impact radius by carrying your service to their peers. (Location 3368)
  • Produce and syndicate valuable content. No matter if you're producing a podcast, regular blog posts, a video series, or you write articles with ratings, reviews, and testimonials: as long as you provide helpful and meaningful content for your niche, you will have followers that spread it. (Location 3371)
  • Selling as a Bootstrapper: Beware of the Whales (Location 3380)
  • There are many useful resources out there like the SalesForFounders Course by Louis Nicholls, and often, effective sales can be condensed into a few main points. (Location 3381)
  • You don't have time or the resources to sell prospective customers what they want. You will need to sell them what they will buy. (Location 3384)
  • As a bootstrapper, you will need to sell what you already have. (Location 3386)
  • If you value your independence, go after a large number of smaller customers instead of just a few big ones. (Location 3393)
  • Getting a "no" is great: here goes a customer that would not get enough value from your product if they had said "yes." (Location 3402)
  • Every "no" shows you what people need that you don't yet provide. (Location 3403)
  • Being Small Is a Benefit: Leveraging Size as a Bootstrapper (Location 3407)
  • Bootstrapped founders and their businesses are different from other enterprises in a few key ways, and each of those can be used to your maximum advantage. (Location 3416)
  • Bootstrappers have skin in the game. (Location 3417)
  • Reputation is important to them and the success of their businesses. (Location 3418)
  • If you explain from the beginning that you are a solopreneur and that may mean that the service can be shaky when you're not there to fix it, you will allow your prospects to pre-sort themselves. (Location 3421)
  • Leverage having skin in the game like this: (Location 3424)
  • clear about being a bootstrapper. Don't go for sympathy; go for comprehension. (Location 3424)
  • tell them that you'll personally get on it right after the conversation. Convey that their direct feedback matters. (Location 3426)
  • Appeal to early adopters by using their language. In the early stages of your journey, using labels like "pre-release," "beta," and "prototype" will attract innovators and early adopters while it will keep mainstream customers at bay. (Location 3427)
  • Be public about your journey. Talk to other founders, no matter if they are your audience or not. (Location 3428)
  • Bootstrappers have nothing to lose. We don't have insane amounts of capital. We don't have hordes of employees we need to employ securely. We are flexible and can adapt to changing circumstances in the industry we serve much faster than established companies that cling to the status quo. (Location 3432)
  • Show the journey of your product proudly. Document and publish the evolution of your product, your business, and your entrepreneurial perspective. (Location 3435)
  • Celebrate features, pivots, and improvements. Blog about things that make a difference in your customers' lives, and be proud of it. Your agility is your advantage. Communicate this with your prospects. (Location 3436)
  • Celebrate your challenges. Don't hide the bad and only talk about the good. Share what worked and what didn't with the founder community. (Location 3443)
  • Share your struggles and growth as an entrepreneur. You don't have a gigantic safety cushion and utopian exit bonuses when you leave the business. If your business fails, so will you. By showing how you deal with problems and reliably overcome them, you're projecting confidence and that you're in it for the long run. (Location 3445)
  • Bootstrappers are laser-focused experts. One consequence of having access to very little capital and no employees in the beginning is that a bootstrapped business usually solves one thing really well and nothing else. (Location 3447)
  • Leverage being a laser-focused expert like this: (Location 3452)
  • Show your expertise by writing. Have a blog, write regularly, and write about what you know. Be a voice in your niche audience that people will follow. (Location 3452)
  • Get interviewed on podcasts. Nothing shows your expertise level more than a fruitful discussion with another expert in the industry you serve. Promote the episodes when they get released with your audience. (Location 3454)
  • Bootstrappers are steering the ship. (Location 3455)
  • You can use your direct connection with customers to turn a stressful customer service chat into a delightful trust-building opportunity. (Location 3459)
  • Be present and empathetic every time. (Location 3460)
  • Follow through on promises. (Location 3461)
  • Bootstrappers are relatable. In most families, you can find an entrepreneur. (Location 3464)
  • Leverage this level of relatability like this: (Location 3470)
  • Prominently show the person behind the business, directly on your landing page or in an About page. (Location 3470)
  • Share the origin story of the business both through your business communication and outside of it, in interviews and on social media. People love narratives, and nothing is more attractive than a rags-to-riches underdog story in the making. When interacting with your customers, use a real-life picture for your user avatar and use your full name. (Location 3471)
  • Too Many Eyes: Why Bootstrapped Companies Stop Being Transparent (Eventually) (Location 3478)
  • With all these benefits, what then would cause a business to stop sharing? Wherever you look, it seems to be one unifying problem: competition. (Location 3511)
  • The public MRR was enough for us to attract interested parties. However, any would-be competition didn’t have any additional insight. (Location 3529)
  • I recommend being transparent but in a measured way. Share your Stripe-verified revenue on IndieHackers, and regularly communicate what’s going on in your business. (Location 3541)
  • Create a narrative that gives context to the numbers. Share successes and failures. Keep people who are interested in the business updated with regular summaries. (Location 3542)
  • Make sure having those numbers out there does not detract from your overall goal of building a sustainable, life-changing business. Because in the end, transparency is not the goal. It is secondary to you achieving a life of independence and control. (Location 3544)

The Stability Stage

  • The Stability Stage and You (Location 3551)
  • by implementing processes and Standard Operating Procedures, you will turn your business into a more flexible, less mistake-prone, and altogether more sellable company. (Location 3558)
  • In this stage, you will work on automating the internal processes of the business. (Location 3559)
  • You will need to implement systems that will allow you to stay in touch with your customers in a meaningful way without distracting you from growing your business. Customer service, customer success, and customer retention are very important to get right during this stage. (Location 3571)
  • At FeedbackPanda, we made a point of turning answers to questions that could be answered with step-by-step instructions into knowledge base articles immediately after the conversations were over. (Location 3587)
  • You can learn this customer-side language fairly quickly by doing a customer interview in which you ask them to use your software and explain what they are doing. Complete a couple of interviews, and you'll see overlaps in how certain actions are described, what words are used, and how processes are conceptualized. (Location 3596)
  • It is essential to hire a customer service representative eventually. (Location 3604)
  • Find the time of day that statistically has the most incoming tickets, find a person whose working hours fall into the that time zone. (Location 3604)
  • I recommend setting aside some time every few months to do some customer exploration. Consider it to be Continuous Validation of the customer-facing properties of your service. (Location 3618)
  • What to Ask During a Customer Exploration Call (Location 3634)
  • Set expectations. The first thing you should tell your customers after thanking them for joining is that this is a space where they can be as critical as they want to be. (Location 3636)
  • Ask for an unbiased walkthrough. Make your customers use the product to solve their problem under your observation, best through screen sharing. (Location 3640)
  • Ask them to explain to you what they're doing. Act as if you were someone who is seeing the product for the first time. (Location 3641)
  • After the walkthrough, ask what pains them. Which needs are not fulfilled? Where are costs too high? Where do they spend more time than they'd like? This is an excellent opportunity for them to reflect on the actions they just took and discover where reality was disconnected from the expectations they might have had. (Location 3644)
  • Ask for alternatives. Are there alternative products that offer a solution to their problems? If so, how do they differ from your product? If your product didn't exist, how would your customer solve their problem right now? You're (Location 3646)
  • Ask for missing critical features. Most of the time, customers will be content with the scope of your product. But then there are the times when everything changes. A new law requires providing a new report or document, and your current solution doesn't yet offer it. (Location 3650)
  • Ask for nice-to-haves last. Often, those features are quickly built or already in the works. (Location 3654)
  • Your goal is to confirm again, over and over, your customers' belief that choosing your service was a smart choice. Not only does it have to feel right, but it should also clearly be a good economic decision, both on their first day and right now. (Location 3677)
  • This is best accomplished by creating voluntary dependency: offer something on which your customers want to depend. Provide so much value compared to the alternatives that they willingly take the risks inherent in every choice of using an external product. (Location 3686)
  • Convince them to stay if they’re about to leave. The hard part is to figure out who is about to cancel. You can track people clicking the button that starts the cancellation process and trigger a customer service conversation. Tag this customer as someone who should receive a follow-up email asking what you can do for them. You can track other things than clear cancellation intent: do they stop using the product for a long time? Stay clear of acting too quickly, as this is often a result of vacation, maternal leave, or just other priorities. But it is worth measuring so that you have an indicator you can use to inform your communication strategy. (Location 3712)
  • Convince them to come back after they leave. This is your last chance to retain them as a customer. After someone cancels, give them a grace period of a few days or hours, but re-engage them. Depending on how shameless you want to be, ask them to return with a free month, (Location 3717)
  • Staying in touch with your customers will keep them engaged. Offering a weekly newsletter to expose them to things that have happened in their industry (Location 3726)
  • first, it will associate your business with a trusted source of information, (Location 3727)
  • will also show that you know what you're talking about. Building (Location 3728)
  • Tighten and focus your onboarding. (Location 3729)
  • There is nothing better than a customer telling their peers that your service is "a no-brainer." (Location 3731)
  • Do things that don't scale. Send a postcard. Delight your customers (Location 3732)
  • Host a meetup in the city where most of them live. Surprise them in ways that other businesses can't—and wouldn't. (Location 3733)
  • When we had our first 100 customers, we sent out postcards to all of them. (Location 3735)
  • Ask your customers for testimonials. Use them on your marketing site, in app-stores, (Location 3736)
  • In every interaction, focus on building a respectful relationship with your customer. It's the one currency that is worth more than the money they pay you every month. (Location 3740)

Building a Mature Business

  • validation is always a temporary state. (Location 3748)
  • In the SaaS world, we have Continuous Integration. I think we should also have the concept of Continuous Validation. (Location 3750)
  • Check for Problem/Solution Alignment (Location 3762)
  • Talk to your customers and see if they find friction where there was none before: Do they still deal with the problem frequently? Does the product provide as much value as it used to a few months ago? Have they noticed that your product has become harder to use for certain tasks? (Location 3765)
  • Are there other tools that they use before and after using your product to get to their results? (Location 3768)
  • I would recommend direct conversations with a few select customers instead of blasting everyone with surveys, but both methods have their benefits. (Location 3779)
  • Every few months, look inside yourself to see if you are still feeling passionate about your vision. (Location 3791)
  • When you reflect on founder alignment, envision where you want to be in a few years. From that perspective, take a look at your business. Is it a vehicle that will get you there? Or is it a barrier on the path to where you want to go? Adjust how you run your business accordingly. (Location 3797)
  • validate not only the choices you made but also the underlying concepts. (Location 3819)
  • The purpose of this roadmap is two-fold: to give you a clear plan for the future, and to help your customer trust that your service will be useful to them for a long time. (Location 3830)
  • I think that a workable solution is somewhere in the middle: have an internal roadmap with all the details, and show a slightly redacted version to the public. (Location 3836)
  • for the external roadmap, use generalized date ranges and fewer details. The customer-facing map should always be a limited view of the original. (Location 3837)
  • A warning about public roadmaps: they become a commitment once you show them to your customers. (Location 3867)

Building a Sellable Business

What Makes a Business Sellable?
  • A Sellable Business Is Focused (Location 3893)
  • A Sellable Business Can Run without You (Location 3903)
  • The trick is to structure the business for a successful acquisition from the beginning. Both the formal shell of the business and the actual services and offerings can be optimized to be made easy and lucrative to sell. (Location 3908)
  • A Sellable Business Is Independent (Location 3914)
  • If you have a lot of customers, you will distribute the risk of cancellations. (Location 3915)
  • Acquirers will not buy a business that will implode if a particular customer should cancel. (Location 3917)
  • A Sellable Business Does Not Have to Be Sold (Location 3920)
  • as long as you like, and see its value grow. As long as you enjoy running your business, you can ignore or defer the acquisition offers. (Location 3921)

Building a Mature Product

  • It won’t take long before customers start asking for one particular kind of feature: integrating into other tools that they use all the time. (Location 3998)
  • your customers will value it much higher if it comes with two kinds of integrations: input integration and output integration. (Location 4002)
  • To provide a basic level of both, build your product to accept and return data in commonly used data formats (such as the eternally requested CSV format). (Location 4003)
  • Whenever you work with data imports, here are a few basic ideas: (Location 4013)
  • Integrate the industry-standard format. (Location 4014)
  • Integrate comma-separated values. (Location 4016)
  • Integrate JSON and/or XML. (Location 4019)
  • Facilitate reporting. Whatever problem your service solves, it's likely that someone has to report what they have been doing and how well they've done it. (Location 4036)
  • There is a risk of relying too much on these kinds of integrations, which is platform dependence. If integrating with another tool is the only way your product is usable, then any change to that product will be something you have to deal with immediately. (Location 4072)
  • Whenever possible, aim to integrate with multiple competing solutions. (Location 4075)
  • The Power of Omission: Killing Features for Fun and Profit (Location 4104)
  • How Customers React When You Remove Features (Location 4108)
  • Here’s the thing with change: there will always be people who hate it, with or without reason. (Location 4109)
  • When to Remove a Feature (Location 4115)
  • Remove unused features. (Location 4117)
  • Remove features that distract from product focus. (Location 4125)
  • Remove features that make the product too complex. (Location 4128)
  • Remove features that are expensive to maintain. (Location 4130)
  • Removing a Feature the Empathetic Way (Location 4164)
  • If you want to remove a feature, sunset it. Make a public announcement about the removal close to when people who use the feature would read it. (Location 4164)
  • Then, turn it into an optional feature, using a configuration toggle. (Location 4165)
  • Change that toggle to default to an "off" state, and measure how many people react to it. (Location 4166)
  • Inform them how to re-enable it and how to work with your product without that feature. (Location 4166)
  • If you feel confident that removing the feature won't impact a significant amount of your target customers, remove it. (Location 4167)
  • No matter what speed you choose, the most important thing to remember is to communicate the changes to your users before and after you remove anything. (Location 4169)

Building a Team

  • Think of hiring as an opportunity to accelerate the growth of your business, at any level. (Location 4197)
  • But once you see that you’re stuck doing work you don’t enjoy that others could do for you, hire quickly. (Location 4221)
  • Hire someone for the work that annoys you most. Repeat until you enjoy all the work you do. (Location 4229)
  • And after all, that's what you want for your business: everyone should love all the work they're doing. (Location 4249)
Building a Brand
  • Once you start partnerships with other businesses and reach out into a less eager segment of your market (than the early adopters you were talking to before), your messaging moves from providing problem-solving functionality toward creating superior value and helping customers reach their goals. (Location 4257)
  • You Want a Tribe (Location 4261)
  • tribe is a group of people that are connected to each other, an idea, and a leader. (Location 4263)
  • Play the long game here. Better yet, don't play any game at all: be in it for the (Location 4307)
  • people, not for the money. Even if your business should fail, you will still be in an excellent spot to try something else as a leader of a tribe of passionate people centered around an idea. (Location 4308)
  • Many first-time founders make the mistake of iterating on their product (Location 4316)
  • but keeping their positioning the same. (Location 4317)
  • Going narrow could feel like you're excluding parts of the market that could be your customers, but it's an illusion. By making your positioning so compelling that your best-fitting customers "get it" completely, you allow them to rephrase it most fittingly when they talk to their peers. (Location 4346)
  • In the mission and vision document, the most important topic to cover is your relationship with your customers. Are you a friend? A colleague? Do you teach them? Do you help them with work that they would otherwise have to do themselves? (Location 4394)

The Growth Stage

Should You Sell Your Company?

  • Once you can comfortably run your business without needing to pivot, hire employees, and expand into new segments of the market, you have arrived at the Growth Stage. (Location 4412)
  • For many founders, this turns out to be quite a dull phase of the business, as things tend to slow down. (Location 4414)
  • Your MRR is likely in the high five figures, (Location 4418)
  • Capable people who can operate at scale will need to fill positions that were previously held by quick learners who thrive on solving small-scale problems. (Location 4428)

Selling Your Company

  • There are three main reasons for wanting to sell a company: you've hit a skill ceiling, you want to de-risk yourself, or you want to move on to another project. (Location 4434)
  • Companies get acquired for a few reasons: they’re interesting economically, they’re interesting strategically, their employees are attractive, or they are a thorn in the eye of the acquirer, a foe to be vanquished. (Location 4449)
  • Be aware that there will be work, discussions, and decisions that may be contrary to your beliefs, while large amounts of your compensation could be locked up in the requirement that you stick around for a long time. (Location 4475)
  • Write an extensive Operations Manual from day one. If you do something more than once in your business, write a Standard Operating Procedure for (Location 4544)
Priming Your Business for Due Diligence
  • One of the first things any interested party will expect you to provide is a Profit & Loss Sheet, often called the P&L. In its most basic form, it's a spreadsheet outlining your expenses and revenue history, month over month. (Location 4557)
  • It is good business hygiene to have such a document from the beginning and to update it with the latest numbers once every month. (Location 4563)
  • For the internal metrics of your business, I recommend using tools like ProfitWell or Baremetrics. (Location 4566)
  • Where analysis tools look into your past, forecasting tools look into your future. A tool like Summit will hook into your payment processor's data as well, and then give you projections and forecasts into the future of your business. (Location 4583)
  • I recommend reaching out to other founders who have sold to your potential acquirer before and ask them for their experience and recommendations. (Location 4642)
  • Good actors will have a track record of successfully buying businesses. Bad actors will not. (Location 4648)
  • To find the most interesting people to talk to, take your list, take their list, and make a shortlist with the founders that are on your list, but not theirs. Your chances of finding potential red flags and problems are highest here. (Location 4678)
  • Question 2: Do You Feel the Acquirer Served Your Business Well? Are Their Goals Similar to Yours? (Location 4690)
  • Question 4: Did They Take Care of the Team? (Location 4698)
  • Question 5: Do They Understand the Businesses They Run? What Is Their Ultimate Goal with Them? (Location 4701)
  • Question 6: Figure Out If They Acquired for Financial or Strategic Reasons (Location 4705)
  • Here are several things that should raise the alarm in your mind when doing your own due diligence on your potential acquirer: (Location 4715)
  • Red Flag 1: There Is No Public Information About the Acquirer (Location 4716)
  • Red Flag 2: You Ask for a Specific Reference, and They Ignore that Request or Try and Dissuade You If there is a person that someone (Location 4721)
  • Red Flag 3: They Ask You to Sign Extensive NDA Constructs Before Talking to You (Location 4724)
  • Red Flag 4: They Demand Access to Very Sensitive Data (Location 4730)
  • Red Flag 5: They Want to See the Real Data (Instead of Just Reports) (Location 4733)
  • Red Flag 6: They Decline to Sign Your NDA But Still Want to See the Real Data (Location 4738)
  • It’s safe to say that no acquirer with good intentions ever wants you to feel uneasy about any part of your interaction. (Location 4743)
  • Red Flag 7: They Are Not a Culture Fit (Location 4744)
How to Prepare for Your Due Diligence
  • Follow the scene. Listen to podcasts and read blog posts by the funds and Private Equity companies and brokers in your industry. That way, you will understand not only what multiples businesses are selling at, but you will also get to know the people who are involved in those businesses. (Location 4755)
  • Always have a Profit & Loss sheet ready, and keep it current. (Location 4758)
  • I recommend reading Built to Sell and listen to the Built to Sell Radio podcast. (Location 4762)
What’s Next? The Surprising Consequences of Having Sold a Business
  • Now we could direct our attention to new and exciting things. And then, out of nowhere, despair. From one moment to another, I got a sinking feeling in the pit of my stomach. (Location 4818)
  • We don't talk about the valley of despair that you are likely to fall into the moment you hand over the keys to your business. (Location 4820)
  • all of a sudden, I was wandering around without anything to do. (Location 4823)
  • So, instead of continuing to grumble about how hard the change was, let me share what I did to avoid the post-sale emptiness. (Location 4839)
  • First off, Danielle and I took a vacation. (Location 4840)
  • That worked really well, as a change of scenery opens up your mind, and seeing how everyone just goes through their own lives doing what they want to do will make you think about your own future. (Location 4841)
  • Reflect on where you built a dirty quick fix to get things done and see if that points at a critical problem for other founders as well. (Location 4855)
  • If you follow the methodology in Michael E. Gerber's book E-Myth Revisited, you will have created a fictional organizational chart before you started your business. Over time, you will have hired people into the positions on that chart, and your name will have moved more and more to the top. (Location 4879)
  • I sold FeedbackPanda because, among other reasons, I felt the need to diversify my assets. Having the biggest fraction of my wealth locked up in one business seemed more and more dangerous, and it kept me from experimenting and taking certain risks. (Location 4892)

Beyond Bootstrapping

  • There seems to be a common belief that once you're bootstrapped, you have to be bootstrapped forever. Why is that? (Location 4954)
  • In all of my writing, I have always imagined my reader to be myself, just five years ago. (Location 4979)
  • Entrepreneurialism is also about choosing which advice you follow. (Location 4985)
  • What life do I want to lead five years from now? (Location 4991)
  • What will give me traction toward this future state? (Location 4993)