Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business – Arvid Kahl
Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business is a book written by Arvid Kahl in 2020. It is a step-by-step guide to starting, running, and selling a bootstrapped business. It covers topics such as developing an idea, creating a product, finding customers, hiring employees, raising capital, and exiting a business.
It provides advice on the key elements of an effective business, such as goal setting, customer service, financial planning, and marketing.
The book offers actionable advice on how to use technology to create a successful business, the importance of customer-centricity and continuous iteration and improvement.
Pricing: Subscriptions, Plans, And Other Money Troubles
The great thing about revenue is that there are many levers that you can move to improve it. The not-so-great thing about revenue in a bootstrapped business is that it’s hard not to move the wrong levers.
Adding more expensive plans might alienate your customers, increasing your prices might upset those who have been with you for a long time.
Some strategies may work well at the beginning of your business, but prove to be fatal further down the road. In the Survival Stage, there is a high chance you’ll settle with non-optimal pricing plans because the ones you have worked well enough. In this section, you’ll find many strategies that will help you find the plans and prices that work best.
How to Do Maximum Customer Service with Minimum Effort
The beautiful thing about SaaS products is that they are so scalable: every customer gets the same product, with little to no customizations. That makes Customer Service straightforward as well, as customers are likely going to have the same problems.
There are a few methods that will let you help many of your customers at the same time.
Synchronous tools such as chat widgets will allow you to be there when people are experiencing real problems that they can’t solve themselves.
Asynchronous tools such as automatic responses and resolution chatbots will help those customers who just need a nudge. Finally, self-help tools like knowledge bases will allow you to distill your 1-on-1 conversations and problem resolutions into articles that can be read and followed by every future customer that runs into trouble.
Using a system like Intercom that interweaves all of these kinds of tools will increase your efficiency: you help a customer, then write the article, and the next time anyone asks, they get a suggestion to read it. Answer once, help a thousand times.
You Probably Have it Backwards: How to Start a Bootstrapped Business
Many businesses start with a product idea. They then try to find a market that’s willing to buy that product. They fail because there were not enough customers. They fail because the product solved the wrong problem. They fail because the product solved the problem the wrong way. And sometimes, they fail even though the product solved the customer’s problems.
That happens because many founders build their businesses with a product-first approach. But audience research, problem analysis, and solution validation should happen before you think about a product.
While this might seem counter-indicative in a world of polished products that we use every day, it is much more likely to build a great business on a validated market, filling a validated need for people who will be able to pay enough for you to sustain your business and your life.
Many successful bootstrapped businesses start with an audience, a specific niche. They find their customer’s critical problems and provide valuable solutions that people gladly pay for. Their product is centered around continuously providing value to new and existing customers. Let’s look into the audience, problem, solution, and product one by one.
How to Sell as a Bootstrapper: Strategies That Work
Sales work differently for bootstrapped founders.
You don’t have time or the resources to sell them what they want. You will need to sell them what they will buy. Big companies with huge R&D budgets can afford to sell their prospective customers a vision and then turn that into reality.
As a bootstrapper, you will need to sell what you already have. Don’t promise the world to customers just to get their money: with limited resources, you run the risk of overcommitting.
Many small businesses have been derailed by selling to just a few big customers, only to turn into their personal custom development shops. If you value your independence, go after a large number of smaller customers instead of just a few big ones.
Underpricing or Overpricing?
Significantly underpricing your product will create a few problems down the road.
While it will likely get you a lot of customers initially, many of them will be very price-sensitive. Once you raise prices later, even a little, those customers might be very vocal about their disappointment. While there are ways to deal with that, like time-limited subscription grandfathering, you’ll be limiting yourself.
Overpricing your product, on the other hand, is not as bad.
You’re communicating that you think your product is worth it, you indicate that it is a professional tool, something for experts, for the people who know what they are doing. With a high-price product, you only need a fraction of the number of customers to become sustainable. And you can always lower your prices if customers disagree with your value proposition.
Finding the Critical Problem: How to Work on The Right Thing
In every industry, there are many problems to be solved. Every day consists of many small issues that we need to deal with in our work. But not all of those problems are important enough for us to look at possible solutions. Sometimes, we just deal with them because we have bigger fish to fry.
Not critical problems. Those problems are so painful that we will jump at solutions when they appear. As a founder of a bootstrapped business, you want to be the one providing the answer to those problems.
The Boring Truth of Successful Products That Survive
Most products that you will see staying on the market have one thing in common: they do one thing very well. And not much else. Weber sells grills that are fantastic at grilling. The furthest they strayed into new territory so far has been by adding an app-readable thermometer.
That and anything else is focussed on making using their grills a great barbequing experience. That’s what it is about: having a barbecue that grills.
In the SaaS space, Stripe is a great example. It provides a clean, well-designed, programmer-friendly service that allows you to charge your customers. While Stripe, as a company, offers a few adjacent services, their focus is always on making getting paid by your customers as comfortable and low-friction as possible. That also means that they won’t offer fancy, complicated products that integrate into your CRM or Marketing tools.
For that, they started a third-party marketplace. Only when it benefits all of their customers will they add new features to their core product. Simple beats complicated.
Build and launch a minimum viable product (MVP)
The author emphasizes the importance of starting small and building an MVP that provides value to your customers. An MVP is the smallest version of your product that can still provide value to customers.
Create an MVP that provides the highest value to your customers while keeping it simple. Launching an MVP is like dipping your toes in the water to test the temperature, allowing you to iterate faster and avoid jumping in the deep end.
Prioritize work-life balance
It’s important to prioritize work-life balance when building and growing a business. This encompasses setting clear boundaries between work and personal life, prioritizing self-care and personal relationships, and recognizing that a healthy and sustainable business is one that allows you to live a fulfilling life outside of work.
By prioritizing work-life balance, you can avoid burnout and maintain your well-being while still working towards your business goals.
Mental Health: It’s Not Optional
You will need to take care of your mental health, first and foremost. Running a company is hard. Running a bootstrapped company is particularly hard. Unlike a company with funding, every decision you make has an impact on the immediate survival of your business.
That can take a toll if you’re not prepared. Learning about how to deal with perfectionism, impostor syndrome, and similar psychological hurdles will make you resilient to self-sabotage.
Understanding that your work as an entrepreneur might also lead to social headaches will allow you to prepare for uncomfortable situations and conversations, and to focus on what matters most: building a life-changing bootstrapped business.
Your Initial Pricing Will Never Be Right, But Try Anyway
At the beginning of your business, revenue serves one purpose before any other: validation. A paying customer is validating multiple things at the same time: they are saying that your product is good enough to solve their problem, they are saying that it provides more value than it costs. They are saying that their problem is painful enough to pay for a solution. With that one payment, they validate the product, value, and problem.
That’s why the price is only secondary. As long as it is not higher than the value of the product, it will be fine. There are two rules to early pricing: it’s never perfect, and it can be changed. So get used to thinking that your price is a very fluid number with a lot of flexibility. It is not set in stone.
The Four Stages of a Bootstrapped Business
In the Preparation stage, the focus will be on finding an audience, their biggest problem, and a solution that solves that problem in a way to make people pay for it. You will find out how to price your product initially and start selling.
In the Survival stage, the focus will be on finding a repeatable way to make money. You will learn how to work on the product, listen to your early customers, and start building out processes and automation to stay on top of your business.
In the Stability stage, you have found your way to generate revenue. At that point, you will look into offering a stable, mature product, hire people to help you run the business, and build long-lasting relationships with your customers.
In the Growth stage, you will find yourself at a crossroads: should you keep running the company, or do you want to sell it? You will discover strategies and step-by-step guidelines that will allow you to do either, as you will learn how to remove yourself from the business.
Create a strong value proposition
To successfully market and sell your product, you need to clearly communicate its value proposition to potential customers.
Grab your customer’s attention with a strong value proposition that showcases the benefits of your product. Your value proposition is the ultimate bait, hook, and sinker that can reel in your target audience and set you apart from your competitors.
Solution Validation Doesn’t Happen In a Vacuum: How to Talk To Your Future Customers
To validate a solution, you will need to talk to customers again, just like you did with the problem. This time, you will want to talk about the solution, in terms of how your proposed change will impact their existing workflow.
Sometimes, tools and services that seem only to have a single purpose are used at multiple stages of solving problems, often without your customer understanding how deeply integrated they are. Only when you try to embed your solution into their existing process will they figure out how much they depend on having that particular tool or service in their business.
The jobs-to-be-done framework is beneficial here. Every product replaces a job that someone or something is currently doing. Your solution might displace a human who’s presently doing an automatable job. It might supplant a piece of software that is integral to a completely unrelated task done by someone else.
Focus on customer acquisition and retention
To scale your product and business, you need to focus on both customer acquisition and retention. This includes providing exceptional customer service and support to keep your customers happy and loyal.
Growth comes from both acquiring new customers and retaining existing ones. A successful business will not only have a steady stream of new customers but will also have the gift of customer loyalty. The combined force of both makes a powerful recipe for success.
Forget Goals, Create Systems: Foundations of a Sustainable Bootstrapped Business
When you’re starting with your business idea, you will be looking at how successful businesses have accomplished their success. You will see a lot of different sizes, markets, and business models. But they all have one thing in common: they’ve built a system that works. Their long-term and short-term goals may have changed through the years, but the system that kept them running never did. That system is the core of every business.
A sustainable bootstrapped business is successful when you have found a repeatable, reliable, and resilient system to continuously provide a value-producing product to paying customers at a profit.
Such a system will need to be continuously refined and improved. Your customers will change their methods. New regulations and requirements will need to be responded to. This is the heart of your operation. It must never stop working. You will never be done making sure it’s working correctly.
Make It Sell Itself: On Referral Systems
Referral systems are meant to support your marketing with an incentivized method of getting new users to try out your product.
In a world of affiliate marketing, referral systems are sometimes perceived as a cheap marketing trick, so you will have to be careful to provide a clear value proposition to the referrer and the referred.
It helps if the audience you’re selling to understands referrals to be something positive. Some communities are more open to exchanging recommendations than others.
Referral systems are best leveraged in communities that trust the recommendations made by outstanding members of their communities.
In a market where there is a lot of cutthroat competition, referrals are not quickly given, lessening the potential virality of a referral system. In communities of frequent and well-intentioned exchange, like among teachers, a referral system will be adopted quickly.
The Power of the Niche
If you have a company that has a multi-million budget for things like company-branded t-shirts, you might be able to sell to a mass market. As a bootstrapped business, you might need to think a bit smaller. Most successful businesses started in a very well-defined niche. They may have eventually grown into other fields, but when they began, they focussed on a small group of more or less similar customers.
This is the main property of a niche audience: they are homogenous in a specific way. They share certain attributes, they have the same problems, and they all crave for a solution that is custom-made for them. Inside a niche, you can find a problem and build a specific solution that makes a difference.
A niche is often defined by what it contains, but it’s interesting to think about what it doesn’t include. By understanding which issues you need to care about and which ones you don’t, you will be able to filter out the noise that makes more general markets so hard to navigate.
You can focus on creating the most value and provide the most impactful solution to your customer’s problems, as people in a niche will have the same pains and problems.
Product Evolution: Controlled Growth and Saying No
Once you have started selling a product, you’ll want to make sure it gets better and better at serving your customers. In theory, that means inventing new features and improving upon the old. In reality, founders that don’t spend a lot of focus on controlling the growth of their product turn it from a slim and focused offer into a bloated monster. Saying “no” to feature requests becomes a necessary skill to learn.
In addition to making sure only the features that genuinely provide more value to the customers make it into the product, you’ll also need to make sure to build them in a way that allows you to change or remove them when needed. What is required today may be obsolete or harmful tomorrow.
Maintaining the product with that thought in mind requires doing things a certain way.
Develop a marketing and sales strategy
Once you have a solid MVP, you need to develop a marketing and sales strategy that reaches your target market and converts them into paying customers. This may include content marketing, social media advertising, email campaigns, and other tactics.
Build a sales engine that works in harmony with your marketing tactics. These two pieces of the puzzle are like a well-oiled machine that helps you reach your target audience, generate buzz, and convert them into paying customers
Define your success metrics
It’s important to have clear success metrics in mind when building and growing your product. These may include revenue goals, customer acquisition targets, retention rates, or other metrics that are important to your business.
By defining your success metrics, you can track your progress and make data-driven decisions about how to optimize your product and business.
Customer research is key
In order to build a product that meets the needs of your target market, you need to thoroughly research your customers.
Dive deep into your customer’s psyche, learn their behavior patterns, and empathize with their pain points. This understanding will be the holy grail that guides the development of a product that solves real-world problems.
Idea validation is critical
Before investing time and resources into building a software product, it’s important to validate your idea. This involves researching your target market, identifying a problem that your product can solve, and testing your idea with potential customers.
Research, test, and validate your software product idea before investing time and resources. Avoid falling into the quicksand of an untested idea and ensure you have a solid foundation to build upon.
Core concepts: Zero to Sold
Idea validation: The importance of validating your product idea before investing time and resources into building it.
Value proposition: The need to create a strong value proposition that clearly communicates the benefits of your product to potential customers.
Customer research: The importance of understanding your target audience and their pain points in order to build a product that meets their needs.
Product development: The process of building and launching a minimum viable product (MVP) that provides value to your customers and allows you to iterate and improve based on their feedback.
Marketing and sales: The importance of developing a marketing and sales strategy that reaches your target audience and converts them into paying customers.
Growth: The process of scaling your product and business through customer acquisition, retention, and optimization.
Embrace a growth mindset
A growth mindset is essential for building a successful software product. This involves having a willingness to learn, experiment, and take risks in order to continuously improve and grow your product and business.
Your willingness to learn, experiment, and take risks is the yeast that makes your business rise. A growth mindset means you are open to new ideas and are willing to go beyond your comfort zone to build a successful business.
Building a Brand
With a growing business comes growing awareness. The more people know about your product, the more they will talk to their peers, increasing your reach, and recruiting new customers.
To benefit from that, you will need to create a brand around your product and business: you need to have a compelling story, ready to be shared by an engaged and passionate audience.
You will need to start selling more than just a service at this point. Once you start partnerships with other businesses and reach out into a less eager segment of your market, your messaging moves from providing problem-solving functionality towards creating superior value and helping customers reach their goals.
But what do you say, and how do you spread the word? A brand takes care of the what, and a tribe will take care of the how.
From Idea to Product
Tech founders focus on products because that is what we use to solve our problems. That often leads to products that are mostly solutions looking for a problem.
Successful businesses are built by solving critical problems for an audience that will pay for a solution to their issues. The Preparation Stage is when you make these foundational choices. Once in motion, a business has certain inertia that makes these decisions hard to change. Even though pivoting your business into new markets is sometimes the right choice, it’s extra effort. That’s why it’s a good idea to spend considerable time on getting it right in the first place.
The Stability Stage
There will be a point when your business starts humming along. You have built a product that works well for your customers. You’ve found a pricing model that generates sufficient revenue to pay for the business.
Maybe you’ve committed to the business full-time, and you can already pay yourself a salary.
The important part is that you’ve built a business that has survived long enough to establish repeatable processes around your product and your business. Now is the time to double down on those and optimize them for scaling. You will need to develop methods and approaches that can deal with much larger numbers of interactions and transactions at this stage.
In this stage, you will work on automating the internal processes of the business and on streamlining these operations into resilient and transferable processes.
You’ll focus on having a well-positioned company that looks good to potential partners and has opportunities for sustainable growth. You will be building long-term relationships with customers and turning the business into a brand with a tribe.
Stay nimble and adapt to change
The business world is like a turbulent ocean, and your ship must be ready to navigate through any storm. Being nimble and adaptable means being open to change, welcoming feedback, and embracing continuous improvement.
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