MRR graph

Hey there!

I didn’t have time to blog lately (too much work), but here is a graph of our MRR growth over the past couple of years. Enjoy! Some quick notes on this graph:

  • This graph shows the growth in net passive monthly income
  • Anyone can achieve this…
  • …with tons of hard work and perseverance…
  • …and working in a smart way (=solve a real problem for a niche, be pragmatic, sell before you build, …)

I’ll pick up blogging again in a couple of weeks from now, when our major next release of our product http://archisnapper.com/ is done.

The more you have, the more you have to…

I see it all the time. Overkill. Complexity. Waste. Owning too much stuff. Adding things without double checking if they are really needed. Putting the most difficult and complex systems in place to solve easy things. Onboarding everyone and everything, without questioning if they will add value to your business or project. Working on the extras and nice to haves before nailing the basics.

This is so wrong.

Every time you add something to your business, project or startup, you have one more thing to manage, to maintain, to take care of, to handle, to pay and to carry in your bag of things. This can go from either introducing a fancy new technology like Node.js (do you really need this? why? what value does it add to your project?) to introducing a new company policy for using the office printer (is that really what you want everyone to read and judge? who will maintain it? isn’t it more easy to just talk to that one person using the office printer for private stuff?) to buying a big house with a swimming pool, way too much rooms and a huge garden (who will clean and maintain all that? you? think twice!).

There is a hidden (and often quite big) cost in owning and adding stuff. You are less flexible, you have to spent time in managing and maintaining your stuff, you have less freedom and more constraints.The more you have, the more you have to. I know people who are slave of their stuff. The leaner you are, the more easy it is to change direction and choose what you want to do.

I run my business on a 4y old Macbook and an internet connection. That’s it. I even don’t have an official “desk” or so, I work from anywhere. My Macbook could even crash or get stolen, I can continue the next day, as everything is in the cloud: Google Drive, Gmail, Flickr and so on.

Here is what typically increases mass:

  • company policies
  • long term plannings
  • your own in house set of servers
  • long term contracts
  • suits and ties
  • policies
  • extra technology layers
  • meetings
  • CC-ing everyone in your emails
  • big teams and extra staff
  • more and complex code
  • more features
  • deviations from standard patterns
  • big, long and slow feedback cycles or communication moments

And this typically reduces mass and will free you from many overhead:

  • small teams
  • cloud software/backups/solutions
  • less code
  • standard code and patterns
  • less technology stacks (and so less point of failures)
  • simplicity
  • open communication, radical honesty
  • short and very regular interaction moments and communication

Before adding stuff, think twice.

How working less hours will make me more productive (and a better saxophone player)

During a holiday break, you often realize certain things about your way of working that you don’t see at all while you are in your day to day stream of work. A complete break of a few days will power off your working brain completely, and will give your mind the opportunity to think in a different and creative way.

One of the conclusions I made during the last Christmas and New Year holidays was that the last few weeks of 2013 I working always, everywhere, and on everything at the same time. But in reality I was never really working and never taking a real break, and because I worked on everything at the same time, I was working on nothing for real. Working very hard from early in the morning until late at night and always jumping on the next small urgency is a perfect way to look very busy – and a perfect way to be very unproductive.

There were mainly 2 problems…

First problem: there was no clear cut between work and play.

I often had my laptop next to me during dinner, just in case an urgency would pop up (not the best way to enjoy your dinner and family time). I checked my emails on my smartphone late at night right before going to sleep (not the best way to relax and get 8h of sleep). I would take my iPad everywhere with me so I could work from anywhere, just in case.

This is so wrong. Working all the time and everywhere is not a sign of efficiency or effectiveness. It’s a weakness. If the only way to run your business is by working 16h a day, you are in the wrong business. There are plenty of industries where working 8h,  6h or 4h per day (or per week!) is enough to run a very profitable business – that is, if you work smart. On average, my business does not require me to work more than 8h per day… given one works efficient, effective, to the point, dedicated, well rested and full of energy and focus.

The more time to you have to finish a task, the more time you will waste on unnecessary details, fine-tuning, procrastination, Twitter, emails, jokes, cleaning your office, trying out a new app, and all kind of distractions that have nothing to do with the real work.

So here is a very simple thing that I will try to do from today on. Each morning, I’ll spend 10 minutes setting up a very simple “work / play scheme” for that day. It looks more or less like this (and will probably be slightly different each day):

The day has a very clear separation between “work” and “play” blocks, and comes with one very simple rule:

ONE SHALL NOT WORK DURING THE PLAY BLOCKS

“Uh…but what if I have a lot of work?! 8 hours is not enough!”
Well, then make sure you get it done during the working blocks. Skip the non essential stuff to finish your task. You can do it. If you know you only have 2 hours to answer that RFP, then you’ll make it in 2 hours. Without a time limit, you’ll probably work 4 or even 6 hours on it – half of your time distracted by Facebook, reading blogposts and checking your mailbox every 10 minutes.

The exact start and stop time and the length of the time block do not really matter. For me they’ll be different each day – one day I’ll start sooner, the other day later, depending on some personal things like if I have to bring my daughter to the kindergarten in the morning or not, if I have saxophone classes or not in the evening, if I’ll cook for dinner or not that day. Probably I’ll end up with an “early” variation, and a “late” variation of this day scheme.

It’s mind relaxing and stress reducing to define clearly in advance which hours you’ll work and which hours you’ll play. I’m sure it results in much more focus and attention during the work blocks. As well as much more joy, fun and pleasure during the play blocks. A clear cut between both work and play time ensures work will feel like work, and play will be like play. Actually printing out the work schedule each day and visualizing it in front of you on your desk will give even more structure to your day, since you will really feel obliged to follow your commitments and stick to the schedule.

Second problem: working on everything at the same time

The other problem was the difficulty to get into a highly productive and efficient working flow. Checking your email, tweeting, answering a phone call, reading a blogpost, writing some code and correcting a typo on your website are all very useful tasks. But not if you do them in the same 30 minutes, since there is way to much context switching. It’s so much more efficient to code for 2 hours, then spend an hour or 2 on writing a blogpost, and then cleaning your mailbox for another hour. That’s 5 hours of well oriented and focussed work. If you’d jump on every task that is thrown at you (and if you run a business or you are freelancer, there are whole lot of todo’s thrown at you all the time, everywhere, 24/7), you are switching context all day long, and you’ll never get into a deep, relaxed, focussed and dedicated working flow.

You all know how it feels to be “in the zone” or “in the flow”. Time and place disappear, you are in the now, working very dedicated on one single thing that has all your attention. It does not feel like working. But you all know as well how a hectic, disoriented, chaotic day full of urgencies screaming for attention feels like. It’s depressing. You feel like nothing has been done, although a lot of energy has been spilled and you feel very tired at the end of the day.

In order to force myself into flow, every morning – when defining my “work” and my “play” blocks – I’ll pick a set of tasks I want to get done that day, and I’ll assign them to the work blocks for that day. Today, the tasks are:

  • write a blogpost and have it published, as well as some online marketing and content sharing (content marketing is our main marketing strategy for Zorros and ArchiSnapper)
  • do a meeting with client XYZ (was already decided so I did’t actually choose this one)
  • work 1 hour for client XYZ
  • do some technical things (feature analysis, planning next release, …) for ArchiSnapper
  • set up 1 drip email for ArchiSnapper
  • review and work on our ArchiSnapper blog structure, layout, and see how I can make it convert better

Then I will assign these tasks over the different working blocks for that day, and I’ll try to get them done. Again, by being allowed to work during PLAY time blocks, I’ll have to focus purely on these tasks during the work blocks. I know upfront that if I’m too distracted with other todo’s popping up, I’m not going to make my todo list of the day. My every day goal is then to finish my little todo list for that day during the work blocks, and then disappear from work for the rest of the day.

I’m sure I’ll work less hours, more relaxed, and I’ll have more done at the end of the day.

2 birds, 1 stone: my saxophone playing and sound will get so much better!

As you have probably noticed, there is 1.5h in the play blocks foreseen for practicing saxophone. I love playing jazz and funk saxophone. Playing an instrument (just like doing sport or any other kind of complete distraction) obliges you to be only in that moment and forget about everything else. It’s a very good way to completely relax and enjoy life. During a jazz concert, you better not worry about work or your empty fridge, or your next solo might sound not so cool :-)

As with anything, if you want to become better, you’ll have to work on it. Nobody was born as a good saxophone monster. Charlie Parker practiced 14h per day during years. My teacher says that 1h of saxophone practice per day is the absolute minimum to get better, play the horn more natural, make it sound exactly what you want it to sound like and construct a nice solo. And studies have shown that you need 10.000 hours of practice to master anything like a pro. By planning in 1h to 1.5h of dedicated saxophone practice in my daily schedule, I’m sure I’ll become a better saxophone player day after day, and I’ll enjoy at least 1h per day of complete distraction from work. 2 birds, 1 stone!

Hear it yourself!
Below are 2 samples. Try to guess who is the guy who has a serious practice routine and who is the one playing the sax every now and then.

Sax1

Sax2

Did you hear it?
I’m sure you did notice a difference in sound, quality, feeling, expression and swing. If not, I’m sorry but then by all means don’t go for a career in the music industry :-)

Thoughts?

Looking back after 1 year of productizing our service business

As you might remember, beginning of this year I announced that we would switch our Ruby on Rails consulting and development business Zorros from a service business into a products business.

Our primary goal was to be break even on recurring revenue (bootstrapped of course). This means that the automated stream of (products) revenue should equal the cost of running our business (paying all the wages, hosting, bills, …), so that we wouldn’t have to worry any longer on getting one off deals month after month.

Did we succeed?
No, we are not yet break even purely on recurring revenue. So, theoretically spoken, we did not succeed our challenge.

Do we consider 2013 as a year of success?
Hell yes we do! Here is why…

Money money money, must be funny

First of all, we have built up around $6K in automated monthly recurring revenue, which will continue to flow in during 2014, and is still growing month after month. Purely money wise, this means that we already have 72K (=12*6K) of revenue settled for 2014. That’s 72K less of worries, sales and sweat. A great way to start the new year I would say :-)

The first 100 paying users

But more important than the actual money, we got our first couple of 100 paying SaaS users, starting from nothing. We gained A LOT of insight into how to market and launch SaaS products, how to convert users, how to optimize the sales funnel, the website copy, drip campaigns, content marketing and so much more. When you do something for the first time, you make mistakes. Plenty of smaller mistakes and bigger mistakes. Launching your first SaaS product has a huge learning cost. We did pay a lot of learning fees in 2013. As from 2014 and every single year after, it will be cheaper, faster and somehow more straightforward and natural for us to launch other products or grow our current product suite. The first 100 paying users are more difficult to get than the next 100. SaaS entrepreneurship is definitely something that can be learned and one can become better and better at it.

We have an audience

Next to that, we did build up an audience. Beginning 2013 we had no audience, right now we have several 100 of paying users and we have built up a mailing list in the architects and construction industry for our product http://archisnapper.com/. Building up an audience is really not easy and takes time. It’s a marathon, not a sprint. But once you have an audience, you have a set of people putting trust in you, getting real value out of your product in exchange for their hard earned money. It’s so much more easy to launch and sell a second product, an extra feature or an eBook for the same audience than building up another audience from scratch. You are not a stranger to your existing audience. You have passed the entrance exam. Tap into the same audience! Our audience of architects, construction companies and safety coordinators is worth a lot to us, and we’ll keep on building up a bigger audience via blogging (see our blog with tips and tricks for architects), content marketing, personal interaction, product improvements, interviews, guest blogging and word of mouth.

A “productizing” mindset – or how everything in your service business can become a product

2013 gave us a different mindset. Before you try your first SaaS product launch, thoughts go like:

“Well, we’ll build a simple piece of software for [doctors | architects | developers | freelancers | …] that will [save them stress | boost their revenue | save them time | …], we will sell it at $49 per month, and then we just need to find 1000 paying users to make 50K per month. Let’s get rich and drink piña coladas in Hawaii !!!”

When you already launched a SaaS (successfully or not), you know this process takes years of effort, sweat and tears. There is no such thing as an overnight SaaS success. Prepare yourself for a long marathon (or 10 in a row). And instead of betting everything on that one SaaS, productize your entire service business little by little. Every cent of recurring revenue helps.

While on the long term a pure SaaS business is the ultimate goal, our mindset is on “productizing” our entire service company. There are more easy “products like things” that are somehow scalable and repeatable, be it not as scalable and passive as a pure SaaS. It’s not OR a service business OR a SaaS business. Everything between a “fixed price, one time consulting/development project” and a “SaaS product that is making 50K a month purely on auto pilot while you are traveling the world” deserves attention.

Trainings, eBooks, courses, affiliate links, code snippets, master classes and retainer packages are just a few ways to make money in a semi-product mode. They are maybe not as perfect, scalable, passive and profitable as an established SaaS product, but they are certainly different (better) than the “trade your time for money” business model of a pure service business. And most of them are less risky, more easy and less costly to set up than launching a SaaS. During 2014, we will continue productizing our business with some (or all) of the above revenue streams. Every extra percentage of revenue that is NOT earned via “time for money” is welcome.

In a pure consulting business, all the revenue is coming in via trading your time for money. This can be frustrating and not comfortable, as every month you have to ensure to make enough one time deals, there is no way to grow or scale (without working more hours or growing your staff), and there is no passive income as every dollar earned requires labour. Your business is not predictable, as income streams are rather random. Pure service is a stressful business to run.

An (relatively) easy way to cut the direct link between your earnings and time spent is by productizing your service business little by little. Trainings, eBooks, code snippets, icon sets, affiliate links, WordPress themes and recurring monthly retainer packages are all ways to cover a certain percentage of your monthly costs by (semi-)automated revenue streams. With dedicated focus, time and perseverance on productizing your service business, you can easily get 35% of your revenues from productized services. The experience and lessons learned from productizing your service business (selling 500 copies of your eBook is a good preparation to sell your SaaS product later on), together with the extra time you have bought yourself (you have 40% of passive revenue so you have to accept less consulting work) will make it much more easy to grow towards a pure SaaS product business in the future.

The ultimate goal is to grow towards a pure SaaS product business over several years (you should be prepared for 2 – 4 years of hard work before SaaS pays all the bills), where most or even all of your revenue is automated, passive and scalable revenue.

During 2013 we got our mindset into productization mode. Of course we still depend on and enjoy service and consulting work, and we will keep on doing service work. Especially for clients who are serious, collaborative, have a realistic budget, are looking for high quality consulting/development and share our values (simplicity, pragmatism, quality, solving problems, no-nonsense). But at the same time everything in our business is questioned, turned around and looked at from different angles, with a strong focus on all kind of PRODUCTS.

Up to another year of bootstrapping products!

How to pick a name for your new startup?

How to choose the right name for your brand new company, product or one person freelance business? Here is now to NOT do it: organize a brainstorm sessions with 10 friends, putting 100 proposals in an excel file, talking with lots of people and asking lots of feedback to everyone. That’s just a big waste of time. Since…your company name doesn’t matter at all!

You did read this right. I’ll write it once more.

Your company name does not really matter!

Whether you call your brand new startup Foo, Bar, Banana, Apple or Google, at this moment you are just a startup and nobody cares about you! PEOPLE CARE EVEN LESS ABOUT YOUR HOW YOU CALL YOUR STARTUP.

Now it’s easy to say that “Apple” and “Google” are genius names. But do you think there was one single person on this earth who did care about the name “Google” when they were just a startup? “Woooow…Google, a startup with such a name will become huuuuge!” Nope. People started caring when “Google” was more than just a startup. “Apple” was just a piece of fruit before people knew about the company. “37 Signals” still sounds weird for me today.

People care about you solving their problems, not about your company name.

When choosing a name, the actual name you pick does not matter, as long as it follows this simple rule:

Your name shall be simple & easy to remember.

The name you pick must be simple, easy to spell, easy to remember, write and pronounce. If people hear your startup name for the first time, they shouldn’t look like eating a lemon because they are trying to figure out how the hell they should write it. “Anderungsschneiderei” is rather difficult to remember, to write and to pronounce. (Did you try it?!)

And nothing else matters!

(Uh, did I just quote Metallica?!)

Here some names I came up with in the past:

  • Zorros (http://zorros.be – our Ruby on Rails development company) – lots of people laugh at this name, but no one forgets it or has difficulties typing it.
  • Fikket (http://fikket.com – a SaaS product that is actually making 0$ MRR since it’s free, but soon or late we’ll monetize it, meanwhile it’s just growing and growing) – easy to remember the name, but a pity about the “kk” instead of “ck” in the name. The “ck” domain (from ficket) was not free anymore.
  • ArchiSnapper (http://archisnapper.com – the SaaS product that I’m bootstrapping right now, in the range of 1K – 10K MRR per month right now) – a bit more difficult to remember than the other 2 names, but still easy enough, simple enough, easy to spell and write and so on.

That’s it folks!

Short blogpost this time, as bootstrapping ArchiSnapper needs my time.

Conversion optimization – where to start?

Conversion optimization is a HUGE thing. There are like a billion things you could do to convert someone-that-does-not-know-your-product into paying-user tomorrow. Targeted emails, writing blogposts, SEO, adding video’s to your homepage, tweeting, testimonials, include a picture of yourself in the about us page, analyze your heat maps and see where users click most, improve the copy, re-organize your call to actions, A/B test, google analytics, fine-tune your paid advertising, and the list goes on and on and on.

That overwhelming list of things to do is the reason why most people don’t act upon it. It feels a bit scary & a chaos. Where and when do you start with all of this? The key is: start with the low hanging fruit and ignore all the rest. It’s important to ignore the details when your basics are not yet nailed.

And what are the basics of any conversion funnel? The spots in the funnel that EVERYONE will pass by. Most obvious places are the homepage, the pricing page and the sign up page (the page where you create your account). Soon or late, every conversion will go via those pages. If you completely mess it up here, then every dollar spend to paid advertising is a dollar flushed away.

Do you want to flush lovely dollars down the toilet? Stop reading. In the other case, read on my friend.

Marketing and conversion optimizing deserve the same #hours and attention as the actual product development. And maybe that’s even an understatement. You absolutely need to reserve a couple of hours / week for marketing and conversion optimization for your product. What’s the value of adding features to your product, if your conversion funnel is not working?

Of all the time that we devote to ArchiSnapper, 50% goes to marketing effort, and 50% to product development. Don’t get me wrong, the 50% marketing equals NOT driving in a suit towards target users and doing PowerPoint presentations in order to convince them. The 50% of marketing is devoted to building a scalable automated marketing machine. More on the automated marketing engine in a later blogpost.

Can you show us some sample quick wins you recently did in ArchiSnapper?

Sure. Glad you asked. :-)

Last week(s), I started fine-tuning the section on our home page above the field (the section that everyone sees when they arrive on your homepage without any scrolling – so the very first impression).

Here is the old homepage (was still live a couple of days ago). Click on it for a full view.

And here is the new one:

This page is the very first thing that most of all new users will see. It would be plain stupid to not optimize it as the very first thing! So I focussed on the quick wins on the section above the field (which is by the way something that you should ALWAYS do and EVERYWHERE – focus on the next small thing that requires the least effort/money/time for the biggest ROI on money/time/effort).

What did we do:

  1. I wanted to start collecting emails of interested people. Building up a targeted mailing list of an interested audience is pure gold for your marketing engine (as said, more on that marketing engine in a later blogpost). Just imagine what you could do with 10K email addresses of people that are interested in what you offer. So, I replaced the primary call to action to “Download Your Sample Report Now” (in exchange for an email address), in stead of the “Free Trial” button. People are more likely to fill in their email address to get a sample report, than they would take the time and effort to make an account. The barrier is lower. Result? We collect now 2 – 10 email addresses per day, while before we collected 0 / day.
  2. I wanted to put the value / outcome of the product in the spotlight. Not the actual technics, mechanics or features behind the product matter. People are interested in what value your product brings them. Why would they pull our their credit card and pay you? What can you do for them? Does your product save them time, generates them money, brings joy? That’s what interests people. Nothing else. What’s in for them? So, I did focus more on the outcome and the result of using our product.
    – I replaced the iPad screenshot (which is not the outcome but the mechanics or the how-to) with a screenshot of a report (which IS the actual outcome)
    – I did replace our old video with a brand new video, that is focussing a lot on the value we create for them (saving time and administration). Check out the new video on our home page. It starts with mentioning a huge pain point they should recognize (if they don’t, they are not our target audience), then how our product can reduce that pain a lot, and how this will bring them rest, save them time, and save them money.
  3. I wanted real faces of real people on the homepage. Why? Since it has been proven over and over again that real pictures convert. Basecamp and so many others did tons of A/B testing on that subject. And it works. People love to connect with other people. Adding pictures to your web pages helps converting. So I replaced the reference logo’s with 2 real users testimonials and pictures.

Except for the video (I will explain in a future blogpost how I made our home page video for less than $120), this literally took me a couple of hours maximum. And it is already paying off (cfr. the emails we collect every day from the “download sample report” – a goldmine). And yes, I know, it’s not yet perfect, and there is so much more to do. But done is better than perfect. Looking back at the old version of our homepage, it does not look really nice and it was not really optimized for conversion. But it was good enough to build up > $2K MRR!!! So it would have been plain stupid to not have gone live with that first version a couple of months ago. Key again is to do some small improvements, and put them online. Then go for the next batch of small changes, deploy and so on. 

Don’t make the mistake of over-finetuning. When I started making those changes, I obliged myself to stick to a couple of hours and then push it on production. It forced me to focus and to stick to the essence and the quick wins. The whole goal was to have some improvements online in a short amount of time. Time box yourself, and then deploy.

The goal of this blogpost was not really to give you some conversation optimizing tips and tricks (there are a million on Google), but rather stress the fact that conversion optimizing is an ongoing process that requires weekly some hours of work, always focussing on the next most important thing / lowest hanging fruit. Not more and not less than that. Make it a weekly routing to spend half a day on conversion optimizing, and in 1 year from now you have a VERY good funnel.

Later more on conversion optimization and concrete tips and tricks, including:

  • what emails convert best
  • drip campaigns
  • an automated marketing machine
  • optimize the pricing page and the sign up page

I’ll try to be down to earth, so you have concrete and actionable to do’s that will give you better conversions for just a couple of hours of effort per week.

Cheers,

Pieter

(btw, tweet, share and like this if you loved this article, it is a motivator to write more often)

The Nr 1 Goal Of Every Product Bootstrapper: Break-Even On Recurring Revenue

The absolute number 1 goal of every product bootstrapper should be to become break-even purely on recurring revenue.

This means: what automatically comes in every month covers all your monthly costs (servers, support, software, your wage, phone bills, …).

MRR (monthly recurring revenue) = MRC (monthly recurring costs)

Why is this so important?

Since it’s a milestone. It’s a turning point. It’s the moment where your time and income are 100% decoupled. So you can put all your time and effort into growing and scaling your product business. As from that moment, can say “no” to any consulting / service work. Remember, time is the #1 asset for everyone in this world. Without time & when you have to work 20h a day, even millions on your bank account won’t make you happy. Everyone has just 24h a day, and you can’t buy yourself more time. That is why time is worth so much more than money. You can work your ass off to earn more money, but you’ll never have > 24h a day. So just imagine how rich you are when all your time is yours.

Note that you don’t make any profit yet when MRR = MRC. But making profit is not the primary goal. Running on auto pilot and decoupling time and income is the primary goal. When you run break even purely on product revenue without any consulting work, you have all the time in the world to invest into your product, marketing, and support, so you can scale further and profits are near.

As long as MRR < MRC, you have to accept consulting or service work in order to not make loss (or you need to raise capital to fill the gap). In other words:

MRR + MAR (monthly active revenue) = MRC

MAR or active income is the opposite of passive income. It is income that requires direct action from you in order to get paid, and it is directly related to your time spent.

The proportion between MRR and MAR is important here.

If you own a pure service business running break even, then…

MRR (0%) + MAR (100%) = MRC (100%)

…or you are trading all of your hours for money. The quickest and most obvious way to make profit is by putting more hours into your business. For each extra hour you work, MAR grows a little over MRC, and it’s extra profit. Hooray! Except that it does not scale and you’ll have to do this month after month.

The less obvious (but long term more rewarding) solution is to start growing some MRR. Building MRR is something that takes time. A LOT of upfront time investment to grow a little MRR. But the good thing is: it’s recurring. Once you have built up some MRR, it requires almost nothing to have the same MRR next month. While it requires all your time, sweat and tears to keep your level of MAR the same each month. In order words: the value of MRR is way higher than the value of MAR, because of the astonishing high value value of time.

We (zorros.be – RoR service business) decided about one year ago to focus on building up some MRR, to decouple our hours spent from our income stream.

Our equation (I’m ignoring profits here) is now something like

MRR (50%) + MAR (50%) = MRC (100%)

That means that 50% of our monthly revenue is streaming in passively! All the efforts have been done upfront. For the other 50% of our revenue, we are still trading our time for money for software projects we like.

Here is the nice thing: the more % of MRR you have in your equation, the more time you have to build up even more MRR. We can now spend up to 50% of our time building up more MRR, without loosing a single dollar. Building up your first 1% of MRR is the hardest: it requires a lot of upfront time, but is not paying off yet. But from there on, it can start scaling slowly. Once you have your first 10% of MRR, your monthly trading-time-for-money can be lowered to 90%, so you have 10% or 2 days per month you can spend on your product without any cut in revenue, which will grow your MRR. This is a snowball effect. The more MRR you have built, the more time you have in building up even more MRR.

The day you are running a pure product business in break even mode:

MRR (100%) + MAR (0%) = MRC (100%)

This means you are not trading hours for money anymore. Theoretically spoken, you could take months of holiday and travel the world without loosing any single dollar on your bank account. Yay :-)

This does not mean you HAVE to stop any service or consulting work (MAR). It just means that you could refuse any consulting work if you would like to. But you could very well accept interesting consulting and service work, which will be pure gold since all your costs are covered already with MRR. How great is that! For now, we are not planning to give up our RoR custom development business zorros.be, but we do want to become break even asap on MRR (mainly our product ArchiSnapper is contributing to this goal), so we can actually choose in what we spend our time.

The idea of freedom to dedicate your time to anything you would like to without any income loss is just awesome. The #1 goal of any product bootstrapper should be to become break even on MRR.

What’s the next single thing to focus on when starting a product business? A concrete action list to get your first paying customer.

So you want to bootstrap your product business. Where to start? There is so much great content online. But lack of information is never the issue.

Things often go wrong because:

1. People don’t act upon information. They passively consume, but they don’t act. “It’s not yet the perfect moment”, “I can do this later”, “In 10 years from now I will do ABC”, “I will first read those 241 business books”.
2. People act, but they do not know what to focus on or focus on the wrong things. There is so much information. Where do you start? What is the next single thing to focus on? What makes sense, for you, right now, to do next? By focussing on the right things first, you can win months of time, save ten thousands of dollars, and sleep much more.

The first point I can’t solve for you. Just realize that nobody pays you for genius ideas if you don’t act upon them. Actions speak louder than words.  A good plan violently executed now is better than a perfect plan executed next week. Like people who say for years they will stop smoking, but never do it. If you still need someone else to tell the same, read this “JUST DO IT” article.

The second point is something that I might help with. Why? Because in the past, I have done things in the wrong order. Developing an application (for months!) before calling potential customers is a very bad idea. Translating your app into 10 languages is not the smartest thing to do if you don’t have paying customers yet.

I lost months of time and thousands of dollars. You don’t have to! Read on, my friend…

If you do things in the right order, you reduce the bootstrapping risk a lot. Start with the most risk full and difficult parts, and nail them. If you can fix the most difficult parts, then the rest is peanuts, no? Then move on to the next – more easy and less risky – thing. Hiring a logo designer and printing business cards is not difficult at all. Don’t do it first!

By doing things in the right order, focussing on one thing at a time, over less than a year I bootstrapped a product from nothing to $3K MRR. That’s not a million dollar business, but I’m quite happy with it. I know we can scale, and we actually do grow every day. How and why? Because the focus has been always on the right thing – one thing at a time.

Below the order of things to focus on, one by one, from day 1 until you have your first paying customer(s). This covers a couple of months (between 3 and 6 I would say). The very first paying customer is the hardest to get. Once you learned how to get 1 customer, you can get a second customer, you can get 10, and eventually 100 or 1000 of customers. (Note: I’m now getting into the 100erds range.)

From this list, handle one topic at a time. You can keep an eye on what’s next, but not more than that. FOCUS step by step on the right thing. The most risk full and difficult things first, so you don’t spend time, energy, money and frustration into easy things.

Here you go…

PHASE #1 – FINDING THE PAIN & TESTING IF YOU CAN SELL THE SOLUTION

Step 1.1 – Get the mindset of “product people”, “bootstrappers” and “scalable thinking”. Read some of the books I recommend. I’d suggest to read them all over a couple of years, but don’t wait acting! Go to step 1.2 while you read the first book. Just reading books won’t help you any further!

Step 1.2 – Find a PAIN for a NICHE. This is the most “risky” part. If you don’t nail this, every further step becomes more difficult or even impossible. The bigger the pain you solve, the more easy to find customers, have them paying, have the word spreading, … Calling niches is the single best way to achieve this.

Step 1.3 – Check and test if you can actually reach your audience / sell your solution / market your product (without having built it!). Can you set up a website and drive traffic to it & have people sign up? Use whatever technique: Google ads, calling, blogging, leave replies on forums, send out emails, … If you can’t reach your audience now, you won’t be able to do it later. You should be able to get a few 100 people (email addresses) on your list.

PHASE #2 – BUILDING THE MVP AND GETTING YOU FIRST PAYING CUSTOMER(S).

Step 2.1 – Build the very minimal solution / product & ship it (or ask someone to build it), even if it is not shiny, has bugs, and does not contain all the features you think are necessary. Focus on the core functionality only. Don’t spend too much attention on the name and the logo. Weeks of brainstorming about them is a common pitfall. Please, don’t even think on printing business cards.

Step 2.2 – Build GREAT (no average) content that interests your audience / niche. Post this on a blog so google starts loving you. Don’t spend too much time on the look and feel, just make sure the actual content is great. Also send this content to your pre-subscribers to keep them warm. If you do this good, you build a lot of trust with your audience, and you start getting traffic through Google searches. This content is a goldmine: it can be reused later for drip campaigns, making a free ebook for your audience (in exchange for email address), guest posts, comments on forums, and so on. It can be used to scale and automated your marketing. It deserves the same investment and energy as the actual product, coding and software!

Step 2.3 – Once you have the MVP and you did send some content to build trust, send out a launch email to a first small batch of people that signed up. You should see some conversions and your first paying customer should be a fact! The first few paying customers are the hardest to get. You have done a lot of work upfront, but once you have that first payment notification in your mailbox, it finally starts to pay off.

Champagne (or coffee or beer)!

There is much more in product business. A/B testing, SEO, paid advertising, conversion optimizing, automating your marketing, good support, scaling, drip campaigns, blogging, and so on. Those topics will be covered later on this blog in future articles. But as long as you don’t have your first paying customer, don’t worry about all of this. Focus on achieving that first paying customer.

Hey, pssst…btw. Do me a favour and tweet and share this blogpost if you like it. It encourages me to write more :-)

Ah, and if you like this article, don’t forget to subscribe to the RSS feed or add yourself to my mailing list for more exclusive content.

Building your product is so much more fun if you have a waiting queue of future clients

September 2012 we had no product. Even not an idea. Today our SaaS product for architects is making almost $3K automated monthly revenue. And growing. How did I do this? You can read it in the “from service to products” blogpost series.

In September 2012, I decided that in a few years form now I wanted to be out of the hamster-wheel of a typical service business. Doing custom software projects is fun, but it is not scalable and is a lot of work for a medium return. The only way to earn more in a service business is by putting more hours into your business. I wanted to get off this hamster-wheel. I didn’t want to trade my time for money anymore. I decided to transform my service business into a product business. If others can do it, I can do it! And so you can if you just want it badly enough.

I can not describe how happy I was when we identified a burning pain in a niche market (architects wanted to get rid of the administration for site reports) after a lot of cold calling. It was even more exciting when were able to collect 1000 email addresses of people interested in a product that was not yet built! Even if we didn’t earn one single dollar and invested quite some time into the challenge, it felt great. And that’s because I knew we were on to something. Proof and evidence was there. I mean… 1000 email adresses collected via our coming soon page…how awesome is that? ALLRIGHTY!

How nice can life of a developer/bootstrapper be when you know that there are people out there waiting for your piece of software? It is so much more fun building something you know will be actually used.

There are way to much people on this earth who risk their reputation, spend all their evenings and weekends or loose their health building something whitout knowing if it will ever be used by someone or if people would pay them for their software. I mean…they didn’t even call potential customers to understand the problem before building the solution. Or they don’t know yet if people would actually pay for their software, aka “I’ll get 10 million users and then I’ll figure out how to make money…“. Ask Foursquare how that feels.

This is sad. And easily avoidable!

You know you can build software, you know you can figure out how to build it, or you know you can hire people to build it for you. So don’t do that first. Building software is the easy part (unless you are building software to reproduce a human brain or to launch rockets to the moon, but then you shouldn’t bootstrap). Start with the uncertain part, and eliminate risks one by one. Before opening up your favorite development environment, photoshop, your FTP server or the terminal, make sure you can answer those 2 questions very clearly and honestly for yourself:

  1. Do I solve a clearly defined problem for a niche market? Is that market willing to pay for my solution? Do you really solve a pain? Although we were sure that we hit a pain point after our many calls, I really didn’t want to take the risk building something that could fail. So I picked up the phone again and called another 40 random architects. I wanted to hear them saying: “yes, I would pay for this software“. It took me 2 hours extra calling, but potentially could have saved me months of development, frustration and hair loss.
  2. Can I reach my target market in a cost effective way? Even the best pain solving piece of software is worthless if you can not reach your target market. Make sure you are able to identify your niche market, make sure there are sites for your audience on which you can buy ads, there are LinkedIn groups where your targets are hanging around, there are forums for your market, you have interesting blog content for your audience, there are mailing lists, and so on. Those are all good signs that you are able to market them. “Spanish expats in the USA that play ping pong” is for example a very difficult niche to reach. Good luck finding a LinkedIn group with such members.

We decided to start building ArchiSnapper once we felt confident it would not fail. Maybe it would not become the next Basecamp, but we knew it would not be a complete disaster. We had already a small queue of interested people asking us when our product would be ready. Some people called us every two weeks to ask if there was any progress. We were quite sure that we would get a few K’s of monthly recurring revenue out of this.

When we invited our very first batch of 20 beta users (the most enthusiastic people, asking us weekly when it would be ready), we were a bit embarrassed. There were still bugs, unpolished layouts, and typos everywhere. We invited them on our testing environment to play and test the app. Like in a sandbox, not ment to be used for real. But most of them just started to use our app right away to send out construction site reports to their clients. From our buggy test server! Without any evidence or proof that the app would work. They didn’t even try it out first, they just start using it for real, from day one. And kept on using it. Also after the free beta trial was over. We actually had already 1K MRR (virtually) before being live!

This is great! Why? Because if people are using your app even if it’s buggy and ugly, it means you do solve a huge pain. The bugs and the non sexy interface is completely irrelevant for your users if they save hours of painless time and administration per week with your software! You don’t have to sell your software with tricks like the newest UI trends. It sells itself. And just imagine how much more users you will be able to get once the bugs are removed and the UI is really looking sexy.

This is why you should not focus on your logo, name, perfect code, ajax, autocompletion, and optimizing your code for performance just in case you hit 1M users. Focus on solving a pain and make sure you build up a waiting queue of clients before and during your developments. That makes it more fun to build and launch your software. Really.

 

Oh wait…before leaving. Writing this blogpost took quite some time, but tweeting, sharing and liking it will just take you a second. It would be great if you could hit the buttons below :-)

 .

Why You Should Start Marketing Before Writing Any Single Line Of Code

This blogpost is part of the series: ‘My Challenge: From Service Business to Product Business in 1 Year‘. You can read the full series here, or you can read this as a stand alone post.

Last blogpost was about “finding a pain“. I described why it is important to start from an existing pain point in a market and solve that, instead of starting from your own “next great idea”. I also described how I did cold call many people from different niche markets to come up with a very concrete list of pain points that people would like to get rid of in exchange for $$$.

But once you have identified a pain point worth solving, how do you know for sure that you will be able to market your product? How can you reach your market?

Even the best product in the world that is saving your customers hours of time per week or making them an extra thousand dollars per month is worth NOTHING if you can not reach your market in an easy and a cost effective way.

Let’s say that a typical price for a SaaS product is 20$ per month. Then obviously, we need a lot of users if we want to live from it. Ideally, we need a scalable marketing. We don’t want to go knock the door of our customers and ask if we can give them a demo of our product, in the hope that they would sign up. That is half a day of effort per potential customer. That’s not scalable. Even more: it would cost us money. If 1/10 customers we visit would eventually sign up, then we would need to spend 5 full days of effort for 1 customer, worth 20$ per month (1/10 customers * 2/day = 0,2 customers / day => 1 customer / 5 days)! Not so profitable…

So our challenge: given a pain point that a niche market wants to get rid of in return for $$$, are we able to reach that market in a cheap and easy way?

As always, the key is the same: don’t invest tons of time and effort into building your product before having a proof in hand that you will succeed. That also means: succeeding in marketing your (future) product. There is a great blogpost by Rob Walling, a bootstrapper I look up to, called “Why You Should Start Marketing The Day You Start Coding“. I would change this to: “Why You Should Start Marketing Before Writing Any Single Line Of Code“.

We want to measure and proof that we can reach a lot of people in our market with reasonable effort. We want some evidence that within a few days, we could easily reach about 100 very interested people.

Coming soon.

The typical way to do this is to set up a “coming soon page” where interested people can leave their email adres. This is a page announcing your product, what pain it will solve and giving people the option to leave their email adress in case they want to stay informed.

Such a landing page is a wonderful thing! It allows you to invest barely nothing, but measure demand and lets you test if you can actually market your (future) product. People have to get their kids from school, answer emails, go to the fitness, cook, shop, work, pick up phones or visit their grandma. If – despite all of this – they take the time and effort to read your page and leave their email adress to a total stranger, then they are interested in your product, no?

Our coming soon page as an example.

I want to share our landing page with you. So I actually need to reveal our product/niche/pain solver right now :-)

Finally” I hear you thinking.

Here we go…

One of the niche markets we have been calling are architects. Why? They are traveling a lot between construction sites, so web and mobile technology could come in handy for them. We can easily identify, isolate and target them, so that means easy to market (e.g. there are blogs for architects, email lists of architects, LinkedIn groups for architects, …). A typical architect has a decent profit margin, on average they don’t make loss, so they have some money to invest to improve their workflow (transport business for example is much less profitable). They sell their time (per hour, or fixed price per project), so time is money for them. If we can save them a few hours per week or per month, that is worth a lot for them.

(Note: there are tons of niche markets with the same characteristics. Pick one and start calling today if you are serious about starting a business!)

So we called a lot of architects asking what pain points they have. What is irritating them on a daily basis?

It turned out that the administrative duties, the time lost and the headaches related to making and sending out site reports keep them busy at night. Architects have to visit all of their construction sites on a weekly basis. They look for mistakes during construction, the status of the construction site, if we are on schedule or not, improvements since last time, and so on. Then they take pictures with their camera, they make notes on paper, they sketch on their plans. Sometimes they visit 4 sites per day. When they arrive at the office, they open MS Word (which is a pain point on its own), and start typing out all the notes (again!), importing the related pictures from their camera via USB (!) and scanning the plans and sketches in order to import them in MS Word. Eventually, after some hours spent, they have their reports ready and can send them out.

A lot of them told us literally that they would pay for a solution to get rid of this administration.

I smell a pain to be solved ;-)

And so, we did come up with the name “ArchiSnapper”, and we did build our coming soon page. There you are:

http://beta.archisnapper.com/

Some facts:

  • The coming soon page is hosted for free on Heroku. Cost: $0.
  • The page uses the free and open source front end framework Bootstrap. Cost: $0.
  • Even the icon and the logo come from Bootstrap as well. Cost: $0. Time spent on the logo: 15 minutes
  • Time spent on the page: between half a day and a day.
  • Time spent on finding a name: 30 minutes.

=> REMEMBER, WE ARE JUST MEASURING OUR CHANCES TO SUCCESS. NO NEED TO SPEND MORE TIME, MONEY AND EFFORT FOR NOW! We do this by attaching the most difficult parts of a startup FIRST. Building a product is easy. Designing a logo is easy. Marketing it and getting paid for something really not, so do that first. You know you can manage the easy and fun part later on!

Then, we did send out this coming soon page to about 200 architects by email asking their feedback, we did set up some Adwords and we left some comments on some blogs, forums or LinkedIn groups for architects with a back link.

And guess what?

Within reasonable amount of time (24 hours) and with little effort, we had 10 sign ups already. And counting!

10 sign ups on a coming soon page sounds like worth nothing compared to Facebook, Twitter, Instagram and the next hype. But actually it is worth A LOT. It means so much. Given the little time and effort spent, 10 sign ups is huuuuuuge. If with little effort and no product in hand we can get 10 sign ups, then just imagine how much sign ups we could get with decent marketing effort and a well developed product.

We continued our marketing efforts for a little more, to get some more evidence of success. Once we did hit 100 sign ups, we decided to start building a first prototype. Today, we have over 1,000 architects signed up to our beta page.

Hey…one more thing….if you like this blog and you want to say thanks in return, just tweet or like or share this blogpost. Or follow me on http://twitter.com/pietereer for more updates or for occasional nonsense like a picture of my dinner via Instagram.