Jason Cohen – Designing the perfect bootstrapped startup MicroConf 2013

The MicroConf Hub Page with links to all the notes for all the talks can be found here. 

Speaker: Jason Cohen (@asmartbear)

Title of the talk: Designing the perfect bootstrapped business

Goal: $10,000 / month per founder – reliable, recurring revenue business

Watch the video (sorry, but I’m not allowed to embed it here)

Revenue model

• One-Offs never get easier – You need to make new revenue every month
• Recurring Revenue is the only way
• 1,000 Fans
  • has never been true.
  • Really hard to get 1,000 Fans / Customers
• Instead: 150 Fans Customers
  • 50: Scratching and clawing – Get interviews, offer to pay for their time
  • 25: Guest-posts / Social Media
  • 75: Basic Marketing
  • $66 / month average –> $10,000 / month
  • Tier pricing: $49 / $99 / $249 –> $66 average
• “Boutique” approach
  • expensive
  • special
  • works in every profession
• Cash is King, Annual pre-pay is God
  • Gets you cash upfront, which you can spend on growing the business
  • Example: $300 Adwords gives you $50 / month revenue $60,000 Adwords would give you 10,000 / month revenue
  • Realistic: (WPEngine)
    • 25% of signups pre-pay
    • 75% give you 1x month, 25% give you 10x month –> 0.75 x 1 + 0.25 x 10 = 3.25 x
    • Cash in > Cost out —–> infinite budget
  • Annual Hacks (ARPU = Annual Revenue Per User)
    • ARPU most important metric to small SaaS businesses
    • Coupon for “3 months free” (just 1 month more than your normal 2 months free)
    • Raise monthly price + increase annual discount
    • Change “per year” to “per month”
    • just raise prices – double price until CR changes
  • 60-day money-back guarantee (not a free trial)
  • No picking up pennies (no revenue share, CHARGE YOUR CUSTOMERS)

Part Deux: Market Model

• B2C is not worth it, customers complain about costs all the time
• EVERY speaker at MicroConf is in B2B (that should tell you something)
• Bad Market: Point-in-Time / Temporary Pain (Weddings, Events, Code Profilers)
• Good Market: Naturally Recurring
  • On-going actual costs
  • financial cycles (HR, taxes, invoices)
  • pain natural changes over time ( SEO changes, Adwords, Competetive reports, A/B testing)
  • Support (e.g. premium support $100 / month)
• Bad Market: Viralalityness
• Good Market: Not Real-Time
  • value not provided instantaneously (e.g. hosting is instant, sending out invoices is NOT) – takes away pressure
  • Decision support (analytics, metrics, reports, monitoring)
  • Finance
  • Project Management
  • Content
• Bad Market: Marketplace
  • you suddenly have two businesses -> acquire sellers & acquire buyers (chicken and egg problem)
• Good Market: Something that can be “finished”
  • Examples: WinZIP, Freshbooks, Basecamp, Hosting, CRM, bug-tracking, PDF editor, image editor
• Good Market: After-Markets (there is already a well-known market, you just provide add-ons)
  • Examples: Smart Bear, Balsamiq, WooThemes, AlienSkin, QODBC, WPEngine
• Aim for BIG markets
  • Niches abound
  • Room for “me-too”
  • Validated space

 Part Three: Acquire Customers

• Adverts > Social Media
  • Social Media is hard
  • SM is NOT repeatable, Adverts are
  • Jason got 2 customers out of 30,000 of his blog readers
• Backing into CPC
  • CPC = Monthly Recurring Revenue / 25
• To what end?
  • Sell before it’s too big
  • Sell to partners
  • Sell to your biggest customer
  • Raise prices (to reduce the number of new customers)
  • Raise money (go into funded-startup mode)
• As opposed to what?
  • What is the hardest thing? To know thyself – some ancient greek guy
  • What is the easiest thing? To give advice – same ancient greek guy

Jason’s formula to success

Predictable acquisition of recurring revenue with annual prepay in a good market

-Christoph