Designing the Ideal Bootstrapped Business with Jason Cohen

Two cents offered because this post really strikes a chord with me, and I also spent some time chasing down rabbit holes early in my software business: These products do not appear obviously commercializable and multiple years invested into them without materially improving the businesses does not decrease my confidence in that snap judgment. You could probably talk to business owners with problems, launch an (appropriately priced; hundreds to thousands of dollars per year) product against those problems, build contingent on getting 10 commits to buy, and be at +/- $100k in 12 to 18 months. Many people with less technical and writing ability have done this in e.g. the MicroConf community. If you want the best paint-by-numbers approach to it I've seen, c.f. [VIDEO] (I'll note that What Got Done is probably a viable boutique SaaS business if you somehow figured out distribution for it, at price points between $50 and $200 per month. My confidence on this approaches total. HNers skeptical because it is technically trivial should probably reflect for a moment on how much time is spent on standups at a company with 20 or 200 engineers, what one hour of their time is worth, and how likely that company is to put an engineer on this project specifically.) If you run an API-based business in the future: Usage-based billing is a really tricky business model for a solo developer. Note that you can say "Usage-based billing but we have a minimum commitment", and probably should prior to d

Thanks for reading, Patrick! I'm a big fan of your work, and your Indie Hackers interview was one of the big motivators that sent me down the solo developer path. > You could probably talk to business owners with problems, launch an (appropriately priced; hundreds to thousands of dollars per year) product against those problems, build contingent on getting 10 commits to buy, and be at +/- $100k in 12 to 18 months. Many people with less technical and writing ability have done this in e.g. the MicroConf community. If you want the best paint-by-numbers approach to it I've seen, c.f. [VIDEO] Thanks, I'll check out that video! I hear that advice a lot from people I respect, and I put a lot of effort into that over the past year, but I was never successful. The biggest problem I ran into was that there's this "disconnect problem." I know I'm a competent developer and can build niche solutions to $10k problems, but I don't know which companies have $10k problems. I can guess at it, but they sometimes don't even realize their $10k problem has a software solution. The companies also don't have incentive to talk to me to explore the possibility if I'm just a developer off the street. In 2019, I tried to do this with stone quarries[1], sheet metal shops[2], and email copywriters[3], but the first two mostly wouldn't talk to me and the latter didn't seem to have enough opportunity for a niche business. > I would encourage you, to the maximum extent compatible with your sanity, to priorit

In Australia our major commercial banks offer unsecured loans to businesses based upon the business' cash flow. Example eligibility requirements: turnover of at least $75K per year ; have been operating as current registered business for 1 year+ ; you can provide 12 months of business financial data from your accounting software. You'd need to convince the bank that your business is a relatively reliable and sustainable cash generating machine. Example terms: 9% p.a. interest rate, borrow up to $250k, no fees. Another trick you can do, orthogonal to finance, is the annual-prepay trick. Offer the "sign up for 12 months at a X% discount" plan to customers. If you can get some fraction of customers to pay you for a 1 year subscription in advance at e.g. a 30% discount that might really help the business' cash flow. Edit: if your SaaS business is the one linked in your profile then since you are not currently offering your customers an annual prepaid plan then you MUST watch Jason Cohen's talk about optimising SaaS cashflow from his 2013 microconf talk "Designing the Ideal Bootstrapped Business" [VIDEO]

A couple of things need to be balanced, I think, as I'm doing just that with PriceUnlock ( [LINK] ) PriceUnlock will help SaaS owners finds the perfect pricing for their product, with more upside and less downside when trying new prices. Besides, it helps you stop leaving money on the table. * THE THINGS* 1. You can "scratch and claw", as Jason Cohen (founder of WPEngine) puts it. He talks more about this in the YT link below and he also puts out this idea of 150 customers, not "1000 true fans". I highly highly recommend watching the video, regardless of going VC/bootstrapped. He also talks about 2 other ways besides scratching and clawing [VIDEO] 2. Building in public is an upward trend these days. Basically you share as many milestones/ups/downs about your journey of building it. This can be a trap as well: it only works if your audience is A) interested in you sharing that, B) probably hackers/builders etc. I asked PG about this and he pretty much summed it up: [LINK] 3. As I'm building PriceUnlock, you'll also notice that I'm collecting emails (the ol' way) to get people's interest. I don't want to make a mailing list, I want to build my product, so I'll aim to be better doing the second rather than the first. But it doesn't hurt to, as Rob Walling did with Drip, launch with some MRR hopefully... or at least with some interest. [LINK] 4. The usual set of things hackers do when they launch their thing: ProductHunt, Betalist, etc. Don't forget to join my subreddit on [LINK]

This talk is the holy grail on this topic [VIDEO] niche b2b, w/ natural recurring cycles, $99 price point at a minimum, and not needing to be on call is most ideal

Please watch this video at this time stamp: [VIDEO] Jason Cohen goes into why annual prepays are great for bootstrapped SaaS.

A good place to start with pricing is tiers at $49/$99/$249. (As recommended in Jason Cohen’s classic and awesome talk “Designing the Ideal Bootstrapped Business”: [VIDEO] ) Customers at very low price points (such as $9/month) tend to churn quickly, and, counterintuitively, send more customer support interactions per customer than at higher points. You’ll never earn enough from them to cover your customer acquisition costs. Getting rid of the cheap plan also removes the, shall we say, more difficult customer.

The Twitter thread is a summary of this hour-long MicroConf presentation by Jason Cohen from 2013 [VIDEO] (Not intended as a criticism: summarizing an hour long talk into a Twitter thread is super-useful)

There's a MicroConf talk from 2013 that discusses some of general traits of a desirable bootstrapped business: [VIDEO] (Notes here: [LINK] ) Regarding exits, I'd say low technical complexity also helps[1]. If your whole business is built on top of Wordpress it's probably easy for an acquirer to find someone to maintain it. If the product is complex and needs regular updates then they might need to hire an experienced full-time dev, so you need more revenue to make up for that. Obviously there's a trade-off, and a lot of custom tech also allows you to differentiate. Update: you might also find this book/podcast helpful [LINK] [1] applies to the typical bootstrapped business, there are also high-tech businesses that exit pre-revenue

This might be tangential bc it's not about strictly OSS, but this talk is pretty centering: [VIDEO] Patio11's talks at MicroConf too

the annual-prepaid cashflow trick is discussed by Jason Cohen in this ancient 2013 microconf presentation, starting at around the 13:20 mark : [VIDEO]

Jason Cohen is one of my favorite people speaking in this space. Here’s a great, actionable, talk he did at the equally informative Rob Walling’s conference. [VIDEO] (I have followed this advice, and it has brought me a level of success and comfort I didn’t know I could have, as an admittedly run of the mill developer)

Jason Cohen has an amazing talk on bootstrapping, with some very solid advice from his own experiences: [VIDEO] Personally I think there is a lot of “kudos” for getting VC funding, so founders often get lured just for status reasons, joining the competition to become a unicorn. Unless you want to (or need to) “swing for the fences”, why give up ownership? Being a founder is already hella risky, and accepting VC money increases your leverage and your risk, which is just uneconomic for an average individual to do (unless they are already wealthy). Don’t double down on a risky bet. VCs get preferential shares, and they have a lot of different ways of taking control in the clauses of the contracts you sign which disempower you, and in return you get shitty common shares and often lose control for the worst reasons. I helped found a small business, and we retained full ownership which worked out great for us, although we will never get those mystical 7/8/9 figure payouts. The majority of founders only make wages[1]. We were in an incubator during our inception and I saw a lot of businesses get sidetracked by all the funding bullshit, control issues, stress, wasting time chasing investors, trying to follow conflicting or bad advice. If you do want to chase funding, consider applying for [LINK] which will help avoid you getting shafted. Other VC transactions are highly negotiation information asymmetric, because they have done many many transactions and you are doing your first, so

This is tough to give general advice for, because you'll want to tap your personal strengths. Here's a great talk by Jason Cohen, if you're trying to design a bootstrapped business. He even mentions the 1,000 true fans goal as being unrealistic compared to a handful of high-paying customers: [VIDEO] Happy to brainstorm though. Here's a few questions to get the ball rolling: What're 2-3 things that people have come to you to learn? What are the 3 problems that are top-of-mind for the person who signs your paychecks? What are the top 3 sources of revenue for your current employer? How much is from expansion revenue (existing customers paying more over time) vs. new logos? Besides the all-in cost of personnel (salary, payroll taxes, health insurance, etc), what are the top expenses of your current employer? Follow the money! Once you start digging into how a company earns and spends money, you'll find ways to add revenue or reduce spend w/ software.

I think the better version of these ideas is in Jason Cohen's classic "Designing the Ideal Bootstrapped Business" talk.[0, 1] The difference is that Jason Cohen's advice is based on personal experience growing four businesses to over $1M/yr in revenue. I'm not seeing what qualifies this author to give such broad, sweeping advice about bootstrapping. [0] [VIDEO] [1] [LINK]

> We have one client already using our finished parts of the platform. They're paying us $250 monthly. Nice! I hope you realize that you're in a position few attain: someone paying you, and $250 at that. I wouldn't think in terms of the "finished parts" of the platform, more users will bring insights into what's worth implementing and what's not. There's already a user who's getting enough value to pay you $250 monthly. Please watch Gabriel Weinberg's (DuckDuckGo's founder) short videos, starting with this one (Number 10, Leaky Bucket): [LINK] Here's the unordered playlist: [LINK] I also recommend his book, "Traction", in which he goes over several channels you could test to get traction. You proved that you had someone pay. The next step is to have many pay. How did you get your first user? How did they sign-up and how did they pay? Has someone else signed for that purchase/subscription or was it self service? Did you walk them through/onboard them? How much did it cost you? Where did they come from? How can you attract similar users (same sector, same function/role)? Is the user willing to recommend the tool to their network of peers? Does the user go to a conference/events to meet with peers (same role/function or adjacent)? Would it be interesting to target that? I recommend David Skok's resource ' "Zero to 100" for High Growth SaaS – A workshop on how to build your Go-to-Market': [LINK] You're at step 3 (Prove it can be sold), the next step is to "Find repeatable sales m

I looked into that book, looks like it's really for venture backed companies trying to form a founding team. I'd recommend that you instead look up micro-SaaS, where you just target making $10k+ monthly recurring revenue and be set, rather than going on the VC treadmill and trying to raise capital, hire a team, etc which is often overkill for first time founders. Rob Walling coined that term initially through his conference on it called MicroConf, he has a new book called [LINK] which I'd recommend. His older book Start Small Stay Small is also quite good. But to start off with a free resource, Jason Cohen's video on designing a bootstrapped business can't be beat: [VIDEO]

> The sort of skills that would eventually allow me to run my own company/team/org. These are different things. Running your own company more often than not implies you have started the company, and the skills you need to start and run a company are different in and of themselves, let alone the fact they're different from running a team in an established company/organization where you never think about how the power is still on. In smaller companies and startups, the opportunity to learn is yours if you want it and the incentive to do so is survival. The company is small enough that you can, if you're so inclined, be involved in and learn about everything. I answered a few questions on some topics you might find relevant: [LINK] There are a few replies there about communication and alignment. More ( [LINK] [LINK] ) A FAANG is so large that the acronym is just five letters, and procuring whiteboard markers to them could be the biggest contract another company ever had. What you want is to expand the spectrum of your involvement or "ownership". One way of doing that is to learn to sell into the enterprise. Imagine you are a startup and you want to sell your product to [insert your company]. How would you go about it? It teaches you many things: What problem does it solve? For whom is it a problem? Why is it a problem? Why now? Are they aware it is a problem? Have they tried solving that problem? What outcome and why wasn't it solved? What does winning look like (success criteri

I disagree with Matt's actions, but not why he is truly compelled to take action. It's been pretty clear for a long time that WP engine was founded to be a maximally profitable business model to fill in the security/reliability gap, with the founder identifying this as why he went into the business: [VIDEO] (note he doesn't mention Open Source there or extraction of value - he's just rightfuly pointing out good fundamentals of business for bootstrapped developers). He mentions how $50 or $100 a month is much better than $5 or $10 a month - and that leaves a bad taste in your mouth when you realise WP Engine still charges that today, a little. Where this comes to the sleazy part is that: A) WP Engine has kept prices the same or increased over the years B) But WordPress has became more secure and a lot of what WP Engine used to uniquely do they no longer do C) WP Engine contributes significantly more to sponsoring conferences seats, and PR spend, then actual contributions I think the combination of these things is what actually drove Matt to make his move: A) Awareness that the original founder made WP Engine to maximize profit; which Matt naturally feels relatively deprived of as a competitor B) The behavior of sponsoring conferences, but not giving back in WP Engine C) Rumors of suppression/avoiding working on Wordpress Core by WP Engine managemnet, which Matt seems to have genuinely been taken by (perhaps a few true WP engineers did reach out - no evidence that I've seen) D)

> he made a company backed by Private Equity look like a victim Jason Cohen understood the tradeoffs of using private equity versus bootstrapping. He goes into the decision in more depth elsewhere, but at 44s into this video about avoiding private equity he alludes to his decision: [VIDEO]