Lately I’ve been thinking about the various hurdles that a bootstrapped web business has to leap.
When you’re creating something from nothing, there are various barriers you have to get over. Let’s go through them: I think it’s a helpful way to think about bootstrapped companies in general, but specifically web or app based product companies. The ‘holy grail’, after all is having a business that provides an income without requiring you to put in an eight hour day. Now, that income can be a pretty normal income: it doesn’t need to be dot-com “set for the rest of your life” cash; just enough to let you go about doing more things while you have steady money coming in.
There’s a lot leading up even to this point, but it’s a pretty clear dividing line. Have you found a niche, done the marketing research, and then actually put together a product that someone out there on the internet was willing to buy? Note that for a lot of people, the sensible way to approach this is marketing first: before you write code, attempt to determine if there is a market. If there’s not… it’s a disappointment, but at least you can give up before you wasted a lot of time building a product that no one wants to buy. That’s the theory, at least; in practice, things are never quite so cut and dried. The famous Henry Ford quote is: “If I had asked people what they wanted, they would have said faster horses.” In any event though, you’ve found something you think is worthwhile, and someone has given you their money for it! That’s a pretty big deal, and worth congratulating yourself for, if you’ve reached that point. One thing I hate about a lot of business books is that they completely gloss over this part of things when you’re just getting started. But making something that someone will spend money on is nothing to sneeze at.
Once you’ve sold a few, that probably gets you some feedback that you can utilize your offering, and if things go well, you’ll make more sales, and have a more or less steady rate of cash coming in. This may bounce around a lot initially, but you start to get an idea of where things are going financially, and how much it costs to provide them and how it impacts your time. Getting that feedback is important, because most of us don’t get it right the first time. Charging money for what you’re doing is conveniently a good way to get feedback, though: if you give something away for free, and people don’t like it, they’ll think “ah, oh well, forget it” and move on. If they’ve given you their money, and it’s not working, you are going to be hearing about it! This is a tricky phase because a lot of us will likely be so euphoric that we actually managed to sell something to someone, that we’ll go implement the first thing anyone mentions. That’s not necessarily a good idea – some customer suggestions are going to be winners, but not all of them. Try sitting on them for a while to see what many people request – those are probably worth paying attention to. The one-off requests can probably be ignored or dealt with on a case-by-case basis depending on how much out of your way you want to go to help out your customers.
Are you making enough to pay all your expenses, like hosting, virtual assistants, and things like that? For the sake of simplicity, we won’t include your own time in the expenses yet. If you work with software, it’s likely companies value your time fairly highly, so even for some relatively successful products, reasoning in strictly economic terms, you might be better off not striking out on your own, since at any given point you could conceivably be making more working for someone else. Even someone like Patrick McKenzie who seems to have been very successful with the products he’s done so far could earn a lot more by only doing consulting for other people. So ultimately your own time is an investment towards the kind of business you want to have.
Making a Living
Unless you’re young and living with your parents, or have some money set aside and few financial needs, you’re probably doing bootstrapping work on nights and weekends. That’s where I’m at right now, and … it’s difficult. The business pulls in money regularly, and ticks over some of the time without my involvement, but it’s not enough to live off of (and right now I have a day job I like a lot too). I have way more ideas of things to do with it than free time to implement them. The trick right now is finding things to do to increase money coming in without taking more of my time, and things to do that themselves don’t take a lot of time, since nights and weekends don’t offer a lot of scope for big, involved changes. Like I said, I also have a contracting thing I really enjoy at the moment, so I’m in no hurry to move on from that, but having the option to be able to work from anywhere, and the freedom a developed business provides, is something I really believe in.
I’m sure there are other big hurdles after these, but if you get to making a living and you’ve built a business that to some degree “runs itself”, you have more free time to either start developing other products or sink some serious development time into your current project to improve it, attract more customers, or simply enjoy the extra freedom.