*standard caveat that the word “bootstrapped” is misleading and wildly overused
Jason Cohen gave a fantastic talk at Microconf 2013 on the perfect bootstrapped business.
Here is the Vimeo link.
Here are some other notes I found.
Here are my notes with
- most companies don’t build something people want
- most companies don’t build themselves in a way that allows for bootstrapping
- JC built 4 cos, all made or are making $1M+/year, all bootstrapped
- now swinging for fences with WPEngine
- lifestyle and bootstrapped are pejorative terms, Hiten Shah: “let’s call it self-funded”
- goal: predictable profit every month, $10K+ income per month per founder
- revenue models
recurring revenue is the best way - Kevin Kelly’s 1000 True Fans – he actually redacted, after getting feedback from musicians and artists that getting 1000 fans is REALLY hard
- Jason: get 150 customers; for WPEngine, asked 50 WordPress consultants on LinkedIn for an hour of their time, said he was building something for them, and since they were consultants and time was valuable, he was happy to pay for an hour at their current rate, 48 of them responded positively and NONE of them charged him!
goal is to get 50 people to agree to give you $50/mo to solve their problem — even before you’ve built the product!!- if you get 150 people paying $100/mo, you’re past $10K/mo
- cashflow: annual prepaid is key!! (more on annual prepaid here)
- “2 months free if you sign up for a year”
- 1/4 of WPEngine signups choose pre-pay
infinite marketing budget because cash-in exceeds all marketing spend - in general, raise prices
- hack: have 3-4 price tiers, highlight middle one, have highest one be crazy high;
call middle one the “business plan” so people w/ businesses will purchase that one switched from 15 day free trial to 60 day moneyback guarantee ; sales went up and people appreciated they “had more time” (Jason doesn’t believe in free trials; in both, a credit card was required)
- market models
- almost all Microconf speakers sell b2b
- don’t do:
- b2c…app users complain about $1.99 (versus $0.99), Gmail only charges $5/mo, just can’t make money
- anything real-time – you always need to stay current
- anything that relies on virality for growth
don’t solve a problem that only occurs once in someone’s life — e.g., weddings, events
- do:
- focus on naturally recurring problems
finance, e.g., invoicing, reporting, billing ; asked app developers how much they made – 30% made none; IT-focused apps made $1.5K/mo, finance-focused apps made $6K/mo- problems that change over time, e.g. digital marketing like SEO and Adwords, a/b testing
- customer and technical support
- build aftermarkets – eg, Apple App Store, Salesforce, Heroku
- be in a big market
- not for same reasons as VC, but proof that market exists
- niches abound
- can be a “me too” product and not have to be #1
- have more room to change product, pricing
- customer acquisition
social media sucks – isn’t repeatable, always changing - his blog has 40K readers, launch of WP-Engine led to only 2 sign-ups
- cos like Buffer can do it, have to be really good at it and spend a lot of time on it
- pay for visits
- CPC = MRR/25 (if avg $50/month in revenue, pay $2/click) – here’s his blog post on why
- things are going well ($30-40K in monthly revenues), what happens next?
- you can sell it
- his second co, IT Watchdog, built product as contractor, client was making millions more, afraid they were gonna build and sell to other clients (no exclusivity), so client bought them
- raise prices – but can change clientele
- Thales – Greek businessman/philosopher, Aristotle regarded him as the first Greek philosopher
- what is hardest thing? to know thyself
what is easiest thing? to give advice
Thanks for reading, y’all!
Jason’s definition of the perfect bootstrapped business: PREDICTABLE ACQUISITION OF RECURRING REVENUE WITH ANNUAL PREPAY IN A GOOD MARKET CREATES A CASH MACHINE