Entries Tagged 'Startups' ↓

The Stairstep Approach to Bootstrapping


Between this blog, my podcastMicroConf and the Micropreneur Academy, I’ve had the privilege of watching hundreds of entrepreneurs launch products over the past decade (even into the thousands, depending on how you count).

After a while, I started to notice a pattern emerging among the pool of bootstrappers who were able to successfully replace their income, buy back their time, and quit their jobs.

I first captured this pattern in my notebook in early 2009, but I didn’t have enough data to be confident in the theory. I started embracing it as a framework on my podcast around 2010, and in 2013 I gave it a name.

I call it The Stairstep Approach. After fully fleshing it out in my talks at DCBKK and MicroConf Europe last fall, I’ve been struck repeatedly by how many successful bootstrappers have followed, or are currently following, this trajectory.

The interesting part is that my own path moving from consulting to products followed the same steps, as you can see in my product revenue chart from the past decade:

Screen Shot 2015-02-27 at 10.42.07 PM

Each revenue jump is when I made the move to the next step of the Stairstep Approach.

I decided it was time to put pen to paper and lay out what I see as a repeatable path with a higher-than-normal success rate, to bootstrapping yourself to the point of quitting your job.

Here’s how it works:

Step 1: Your First Product
Everyone knows how difficult it can be to launch your first product, and frankly, a lot of the startup advice out there just makes it harder. From validating an idea, to testing message-to-market match, coming up with a marketing plan, and actually building the product, it’s a miracle anything gets launched at all.

With that in mind, how do you give yourself the best chance of avoiding failure?

In my experience, the biggest pitfall that trips up first-time product people is trying to create something too complex.

The strategy that seems to give people the best chance of success is creating a simple product, with a simple marketing plan – that means a one-time sale product, with a single traffic channel.

Specifically, I’m suggesting that you don’t get started with a subscription SAAS model. Recurring revenue is the holy grail for bootstrappers, as we’ll discuss later in this post, but it can also be a major obstacle to making a sale.

It’s much easier to sell a standalone product like a WordPress plugin or a Magento add-on – they’re relatively inexpensive and the customers “owns” them forever, so they don’t have to worry about mounting costs over time or “throwing money away” on something they can’t keep.

Other examples of one-time-sale products might be a Shopify app, a Drupal add-on, a Photoshop plugin, or an ebook.

These smaller projects might not be as “sexy” as trying to disrupt marketing automation, and they probably won’t land you on TechCrunch, but they will help you become profitable much, much earlier.

A project like my most recent effort, Drip, is a serious undertaking, and while I’m happy with its growth, I’m pretty confident I would not have been able to make it work 13 years ago when I first started building products.

As for a single traffic source, focus on figuring out one way of generating customers, instead of trying to master all the different traffic channels at once.

Getting those initial early sales is a big win.

In my case, that meant getting good at SEO with my first project, instead of trying to learn SEO, Adwords, Facebook ads, etc. all at once. I’ve seen many other people focus specifically on generating free downloads from WordPress.org and then up-selling premium plugins, selling physical products like vitamins on Amazon, or generating profitable how-to channels on YouTube.

This focus will help you start generating revenue without worrying about becoming a master marketer, and let you develop new skills one-by-one as you need them.

Step 2: Rinse and Repeat
Step 2 is doubling-down on the model that worked in Step 1 and repeating it until you own your time.

In essence, once you’ve launched your first successful product and it’s making a bit of money, take a look at what made that product a success and repeat it.

One of the biggest mistakes I see founders make is abandoning what already works and trying to take on a bigger challenge before they’re making enough money to develop products full-time.

Instead, focus on replicating the same type of product with another angle or in another market, maybe more than once.

Obviously most WordPress plugins won’t pay you enough to quit your job, but three might – that’s exactly what worked for Dave Rodenbaugh. Once he figured out how to successfully sell premium add-ons to users of his free plugin, he developed two more plugins with premium options, instead of jumping to SAAS or trying to figure out how to promote his plugins with Facebook.

Phil Derksen is another example with 2 WordPress plugins: Pinterest Pin it Pro and Stripe Checkout Pro for WP. He quit his job last month by stacking their combined revenue into a full-time income.

Richard Chen of PHP Grid recently made the jump from one-time sales to leaving his job, and is working on climbing to the next step.

David from FatCatApps is doing great with his easy pricing tables and easy opt-in plugins.

And Fri Davies from the Dynamite Circle has done this with his Magento add-ons.

When I first started moving out of consulting in 2005, I acquired a product called DotNetInvoice, a straightforward piece of invoicing software that I promoted almost exclusively through SEO.

The revenue from that product grew incrementally until 2008 when I started acquiring and building more products instead of trying to optimize what I was already working on.

Those were still simple projects, like a job board for electrical linemen, an e-commerce store for beach towels, and a couple of ebooks – all one-time sales promoted that relied on SEO traffic or AdWords to make sales.

So why did that grow my business faster than testing and tweaking each of these products individually?

Lifetime value. The lifetime value (LTV) of nearly all of these products was not enough to warrant anything except “free” traffic from an organic source like Google or the WordPress plugin repository.

But I didn’t know that at that time, which lead to me wasting more than a year trying to scale my beach towel store. But when you’re selling something that has an LTV of $10-15 dollars, you just can’t make paid advertising work. Or content marketing. Or any of the other approaches I would use to grow an app with a higher LTV ($150+).

So in Steps 1 and 2 I see people succeeding by sticking to free traffic channels (typically organic or viral), sticking to the first one that works for you, growing it until it plateaus, and focusing on replacing your income by repeating this with multiple products.

None of my early projects were particularly glamorous, but when I stacked them together I built enough product income to buy out 100% of my time and quit consulting.

That let me move to step 3, where I was able to start focusing on bigger projects, with higher LTVs that gave me room to experiment.

Step 3: Recurring Revenue
Now that you’re generating enough income to justify going out on your own, and you have the experience and the mindset of someone with a few successes under their belt, it’s time to level up and take a bigger risk by going after recurring revenue.

Recurring sales are the holy grail for bootstrappers for a reason – instead of repeating the painstaking process of selling new product month after month, every customer increases revenue for this month, next month, and beyond.

While some percentage of your customers will churn, this model gives you incredible leverage to grow your business – if you’re providing a good product, you will retain the vast majority of your sales month over month.

That’s a big part of the reason why SaaS is so popular with bootstrappers (with productized services and membership sites also on the rise.)

But the other side of the SaaS coin is that there’s along onramp to any kind of substantial revenue, which is why I recommend you complete steps 1 and 2 before moving to recurring revenue.

Aside from the fact that recurring revenue tends to yield much higher lifetime values – think about how much you’ve paid Basecamp or your hosting company over time – the high dollar value that a new customer is worth to your company opens up a world of new marketing approaches you can attempt, such as: PPC, display ads, content marketing, integration marketing, etc.

When I bought HitTail and optimized its sales funnel, it more than doubled my annual revenue, even though the average purchase per customer was barely into the double digits.

But because it’s relatively inexpensive on a monthly basis, customers stay with us long enough to create a nice LTV which gave me the flexibility in ad spending to figure out a profitable Facebook ad campaign that brought more than a thousand new customers over the course of about 6 months.

That kind of growth is the promise that drives a lot of new founders to dive headfirst into SaaS projects. But frankly, I hope this post has made your reconsider that it’s probably the wrong place to start due to the technical and marketing complexities (not to mention the competition) that go along with SaaS.

I don’t think HitTail or Drip would have taken off if they were my first projects – I don’t know that I would have had the time, money, skills, or confidence to give them what they needed to succeed.

The tech media likes to focus on moonshots because they’re exciting, but their focus on the 1-in-10,000 that work means they ignore the hoards of people who have tried and failed because they try to play in the NFL before they’ve learned basic blocking and tackling.

There is no guarantee that The Stairstep Approach will help you launch a successful product right out of the gate, but based on patterns I’m seeing in the bootstrapper community it’s a nice, low-risk path to a successful software company.

If this idea tracks with your experience, or if you have more examples of someone who has climbed the stairs, ping me on Twitter at @robwalling.

How I Created 4 Startup Explainer Videos for $11


When I was writing the copy for the home page of Drip, I ran into a bit of a challenge: the idea of marketing automation is still new to a lot of people, so not everyone is aware of how email marketing (much less marketing automation) can help them.

One of the easiest ways I’ve found to explain the value of Drip has been making screencasts, walking people through the product and pointing our very specifically how Drip can help in their particular use case.

But making a personalized screencasts for every trial customer isn’t realistic, so I put my mind to finding a way to make this a little more scalable. After discussing with Derrick we came up with the idea of creating a few explainer videos to walk visitors through how I would tag, segment, and structure a Drip account for a few different business types. 

Normally, I prefer to use contractors (typically those who offer productized services) for basic marketing elements so I can focus on higher-level tasks, but in this situation there was a catch…

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Launch: The 2-Hour Audio Documentary of a Startup


I’ve just released a 2-hour audio documentary chronicling the story of building and launching my latest startup, Drip.

Launch. A Startup Documentary was compiled and edited from 9 months of Skype calls between myself and my software developer, with an epilogue recorded 1-year later (about 2 weeks ago).

From the honeymoon period of “green field” development to the sleepless nights of database failures, Launch captures the real-life angst of building a startup.

The goal of this documentary is to fight the press-portrayed startup myth by pulling back the curtain as a company is being built. There is no champagne-popping, no hockey stick growth, and no overnight success.

Only a couple years of hard work and uncertainty documented  for your listening pleasure.

Listen in your browser or iTunes.


SketchNotes of My 2014 DCBKK Talk: “Optimizing Lifetime Value: How to Make More Money from Your Business”

In October I spoke at Dan & Ian’s DCBKK event in Bangkok, Thailand about how to make more money from your business.

Through the mad illustration skills of one Maggie Appleton, here are SketchNotes summarizing my entire talk in a single image (click the image for a hi-res version).

SketchNotes of Rob Walling's Talk at DCBKK 2014

The Biggest Gamble of Your Career

pocker aces in hand

I’m in the midst of the biggest gamble of my career. The thing is, every chance you take feels like your biggest gamble while you’re taking it.

When I left salaried employment for consulting in 2006 it felt like a big gamble.

When I left consulting for product in 2008 with a wife, kid and a mortgage, it felt like a huge gamble.

When I spent most of the money I had in the bank on a broken-down SaaS app few people had heard of, called HitTail, I was downright scared. It’s hard to put years of work and savings on the line, based on nothing more than confidence that you will execute.

But every one of the above gambles worked out, and I wound up far better off than if I’d never taken them.

And here’s the thing…

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Buy Yourself Time by Systematizing Your SaaS With Trello


This is a guest post by Kyle Brown, author of the upcoming book Systematize.

Are you spending a lot of time explaining how to perform tasks to your employee(s)?

Do you have documents scattered all over the cloud, various emails, and computers?

Do you struggle to find documentation when you need it?

If you answered yes to any or all of these questions, then hope is not lost and there is something that you can do.

You’re running a SaaS business and likely don’t have the resources or the desire to hire an individual or management company to run the operations of your business and you cannot be everywhere all of the time. Spending your time repeating endless cycles of q and a are not the answer to growing your business.

Image if you had more time to market your business or work on a new feature for your SaaS to increase the profits? What if you could consolidate all of your methods for performing tasks into a clean organized manner so that you could easily find and share information required to run your company?

In this post I outline how you can take your mind share and knowledge required to perform tasks in your business and document them so that your team can execute in your place. The method is also known as systematizing. Also referred to as standard operating procedures and business process management.

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Building a SaaS Business You Can Sell

This is a guest post by Thomas Smale from FE International, a website brokerage with an emphasis on SaaS apps.

At FE International we speak to website owners on a daily basis who are looking to sell their businesses. Unfortunately, many of these businesses are not sellable for a number of very avoidable reasons. Planning your exit in advance (even if you have no intention of selling now) is always the sensible thing to do and will put you in good stead, saving you headaches when you do decide it’s time to move on.

SaaS products have always proven to be very popular with buyers over the years. Last year we sold 78 web-based businesses, so reflecting on these we’ve pooled together our collective experience to show you what really improves the saleability and the value of a SaaS business in the eyes of a new potential buyer. A combination of these factors could be the difference between selling for 1x EBITDA (if done badly) and 3x (if you follow these rules).

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Reaching Escape Velocity as a Bootstrapper

Escape Velocity

This article was a guest post by Bronson Taylor who is the host and co-founder of Growth Hacker TV, where the experts on startup growth reveal their secrets.

Escape velocity, in physics, is basically the speed needed to break free from gravity. The idea of escape velocity also surfaces in regard to startups; David Cummings says that, “For startups, escape velocity has to do with becoming the dominant vendor and growing indefinitely.”

I agree with David, if we are referring to VC backed startups, but bootstrappers have a very different notion of escape velocity. After almost 100 interviews on Growth Hacker TV, I have come to realize that a self-funded startup is not trying to reach a 10x return on a multi-million dollar investment.

Escape velocity for a bootstrapper might be freedom from the monthly bills, or freedom from a full-time job outside of their startup. Bootstrappers don’t need to escape from competition and become the “dominant vendor.” They require much less velocity because they are escaping a different kind of gravity.

This is an extremely important distinction because most of the growth advice online makes the assumption that everyone has venture capital. However, if you are self-funding your startup, here are four rules for reaching escape velocity as a bootstrapper:

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Growth Hacking Without Venture Capital


This article is a guest post from Bronson Taylor. Bronson is a co-founder and host of Growth Hacker TV, the only educational platform focused exclusively on helping startups grow by acquiring, retaining, and monetizing users. They have over 60 episodes, with guests from Twitter, Facebook, LinkedIn, DropBox, and many more. Image above from Toban Black.

Founders sometimes assume that they need an influx of cash to truly grow a product. Luckily, this isn’t true. The confusion arises because we fail to make a distinction between the growth strategies that are relevant to venture backed startups as opposed to the strategies that are relevant to bootstrapped startups. These strategies overlap, but the differences are immense.

You can grow without money, but only if you stop imitating the startups that have closed a round of financing. As the host of Growth Hacker TV I have become keenly aware of these two parallel worlds, and this article is my attempt to outline the primary ways to think about growth when you are building a product without investment capital. There are plenty of blog posts for the funded so let’s even the score a bit.

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How I Grew My Startup’s Revenue 50% And Saved $60k Through Partnerships

Photo by b1ue5ky

This article is a guest post from Eric Tarn. Eric is a co-founder of Onepager, a simple website builder which helps individuals and small businesses get beautiful sites up quickly and easily.

When you’re part of a startup, you’re usually working with a smaller team and budget to reach big goals. While it’s tempting to try to do it all by yourself (after all, isn’t that the go-getter startup way?) there may come a time when it’s most beneficial to work with another company to reach your goals.

It’s very likely that another company has developed a product or solution that you don’t have time to, and vice versa. Like the symbiosis between egrets and hippos, partnerships allow two parties to mutually benefit from each other’s work.

At Onepager, we’ve formed two very different partnerships. In our first, we incorporated fellow startup Gumroad’s e-commerce platform into our own; in the second, domain registrar Namecheap.com offered our services to their huge user base. In both cases, the other companies approached us with an initial proposal.

While luck is always part of business, I also think that by communicating our values honestly, both internally and externally, we attracted like-minded companies who were natural partnership fits. And throughout both negotiations, we made sure we were crystal clear on how the partnership would benefit each side.

Here’s how I’ve found working with both a small and large company beneficial to my own, and the reasons why any startup should be open to the idea.

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