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Bootstrapped to
     Profitability
A repeatable system for founding a
  company (without VC or angel
           investment)

           John Rood
• Founded Next Step Test Preparation with
  $5,000 in personal savings
• In 3 years, to 50+ instructors, 5
  marketers, and 15 markets
• Yes, profitable
• Before that, 3 years of management
  consulting
• Teaching online marketing




                      JohnRood.net
• Why bootstrap?
• Identifying a Market
• Creating a Product/Service




                          JohnRood.net
The Wantrapreneur*
“I WANT to be an entrepreneur but…”
• I don’t have any capital
• I don’t have an in to any venture capital firms
• I need to spend several years learning x skill first
• I don’t have technical skills. I need a co-founder
• I should work at a big company first to get experience [what?]


None of these are good excuses. An entrepreneur starts a company. A wantrapreneur has
100 excuses for waiting, for getting a corporate job, or for being in “stealth mode” for 5
years (but going to all the meetups)




*Shamelessly stolen from Noah Kagan, appsumo.com
                                                                      JohnRood.net
All around you, your peers are starting businesses designed
to be profitable today. They are using these businesses to:
   •   Avoid corporate work
   •   Travel and work remotely
   •   Support themselves while they work on a larger business or not-for-profit
   •   Make gobs of money


  You don’t hear about most of these
  businesses because they are not on
  TechCrunch, don’t make the Inc.
  500, and aren’t backed by VC firms


                                                                      JohnRood.net
The reality of the venture capital / Tech
  Crunch / startup accelerator industry:
0.02% of new businesses receive venture capital funding.

Most new companies do not get featured on TechCrunch

They are not in sexy industries

You can’t rely on SBA loans, StartUp America, or any other source to
reliably secure new business funding

Y Combinator accepts 2% of applications (harder than Harvard or
Stanford)



                                                    JohnRood.net
TechCrunch/VC   Un-Cool Small Biz
Sexiness             High            Low
Chance to change     Medium          Low
the world
Addresses a          Varies          High!
Customer Need
Chance of Success    Low             Medium/High
Chance of paying     Low             Medium/High
bills
Chance of you        Low             ????
actually doing it,
starting today




                                                JohnRood.net
There’s nothing wrong with the VC / accelerator /
TechCrunch Route!

They’ve led to GREAT companies.

If your goal is to do whatever it takes to have a famous
company in a short time, that might be the right match.

You just need to understand that the vast majority of
profitable companies don’t play that game.



                                             JohnRood.net
The Unsexy List of Most Popular Small
          Businesses, 2011
          1. Fitness and Recreational Sports Centers (71,394)
          2. Full-Service Restaurants (72,211)
          3. Homes for the Elderly (62,331)
          4. All Other Amusement and Recreation Industries (71,399)
          5. Used Merchandise Stores (45,331)
Awesome   6. Meat Processed from Carcasses (31,161)
          7. Landscape Architectural Services (54,132)
          8. Beauty Salons (81,211)
          9. Carpet and Upholstery Cleaning Services (56,174)
          10. Child Day Care Service (62,441)



              What do these businesses have in common?




                                                          JohnRood.net
Think there are 56,172 entrepreneurs
excited about Carpet and Upholstery
         Cleaning Services?




                            JohnRood.net
• The Mindset

• Identifying a Market

• Creating a Product/Service




                               JohnRood.net
To test his theory, Mr. Zhardanovsky and his co-founder, Joe Speiser, set up a
       Web page in 2009 with a form that asked customers if they would be
       interested in signing up for regular deliveries. They then placed a few ads
       online and waited to see what happened. “We had an overwhelmingly
       positive response from our customers who wanted to sign up for the service,”
       said Mr. Zhardanovsky, who lives in New York City and who proceeded to
       introduce PetFlow in 2010.


http://www.nytimes.com/2012/03/08/business/smallbusiness/selling-online-products-
by-subscription-is-all-the-rage.html?_r=2&adxnnl=1&adxnnlx=1331266759-
RNaVXgkDRDD+eDZWcEnfjw


                                                                   JohnRood.net
What’s the #1 factor that
will determine your level
of success if you were to
open a Chicago-style hot
       dog stand?
Businesses that succeed
QUICKLY and RELIABLY meet a
demonstrated customer need.

   If you have to sell the
need, your chances of success
          go down.
                       JohnRood.net
Development of the test prep industry



         Tutoring

Value           Live Class


                             Online class


                                            Online video



                              Scalability



                                                           JohnRood.net
JohnRood.net
Blue ocean strategy for entrepreneurs
• Professionalize Mom & Pop operations (1-800-GOT-JUNK)
• Dominate a segment with demand that’s a lower priority for a
  major company (Next Step Test Preparation)
• Solve a pressing problem for a small niche (Paperless Pipeline)
• Solve a small problem with a unique solution (Coffee Joulies)


                           What else?




                                                   JohnRood.net
In 2012, where do people go to
     express their needs?




                         JohnRood.net
In 2012, where do people go to express their needs?




                                                      JohnRood.net
High-probability business owners define their market with quantitative
research and testing – not through introducing a world-shattering
invention or web app




                                                      JohnRood.net
Or….find a problem in a high-value market



   -- Unearth problems during interviews. What keeps them up at
   night?

   -- Focus on groups willing and able to pay

   -- Test before development

   -- Ideally, get paid to develop your product




                                                   JohnRood.net
• The Mindset

• Identifying a Market

• Creating a Product/Service




                               JohnRood.net
Your customers care about them. (Not you.)

Most businesses forget this the second they start
product development.

Never forget the problem is more important
than the technology.




                                      JohnRood.net
Step 1: Minimal viable Product
  It’s critical that you create a minimally viable
  product (MVP).

  This now has a trendy name….

  But entrepreneurs have been using these
  principles for years




                                           JohnRood.net
Step 2: Test market acceptance
  Most businesses that can make $1,000 can make
  $100,000+*

  Do this as cheaply as possible

  You need to figure out if you can sell the product
  – this step is not about feasibility




  *Within reason.
                                         JohnRood.net
Direct response marketing vs. brand
marketing
• Scientific Advertising, Claude Hopkins
• Advertising Secrets of the Written Word, Joe
  Sugerman
• AppSumo (appsumo.com)
• I Will Teach You To Be Rich
  (iwillteachyoutoberich.com)
• Mixergy, www.mixergy.com
• Ultimate Guide to Google Adwords

                                      JohnRood.net
If you can sell it 5 times on Craigslist you can probably sell it 50,000
times
Step 3: Web Presence
  Put up a basic website with dedicated landing pages for this
  product.

  If you don’t know how to put up a basic website, you need to
  either learn how or hire a contractor.

  Learn the difference between a home page and a landing page


  -- Unbounce

  -- Wordpress



                                                     JohnRood.net
Step 4: Scale (the easy way)
  • Easy SEO
  • AdWords
  • Facebook Ads
  • Blog Outreach
  • Aggressive referral programs

  Remember, you’re trying to reach your customers – not
  your peers. Most customers don’t read the same blogs
  you do or know what Tech Crunch is.




                                           JohnRood.net
Thank you!

Remember that you can start today

Your excuses do not make you a unique
snowflake

john@nextsteptestprep.com
@johnrood

                               JohnRood.net

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Bootstrapped to Profitability

  • 1. Bootstrapped to Profitability A repeatable system for founding a company (without VC or angel investment) John Rood
  • 2. • Founded Next Step Test Preparation with $5,000 in personal savings • In 3 years, to 50+ instructors, 5 marketers, and 15 markets • Yes, profitable • Before that, 3 years of management consulting • Teaching online marketing JohnRood.net
  • 3. • Why bootstrap? • Identifying a Market • Creating a Product/Service JohnRood.net
  • 4. The Wantrapreneur* “I WANT to be an entrepreneur but…” • I don’t have any capital • I don’t have an in to any venture capital firms • I need to spend several years learning x skill first • I don’t have technical skills. I need a co-founder • I should work at a big company first to get experience [what?] None of these are good excuses. An entrepreneur starts a company. A wantrapreneur has 100 excuses for waiting, for getting a corporate job, or for being in “stealth mode” for 5 years (but going to all the meetups) *Shamelessly stolen from Noah Kagan, appsumo.com JohnRood.net
  • 5. All around you, your peers are starting businesses designed to be profitable today. They are using these businesses to: • Avoid corporate work • Travel and work remotely • Support themselves while they work on a larger business or not-for-profit • Make gobs of money You don’t hear about most of these businesses because they are not on TechCrunch, don’t make the Inc. 500, and aren’t backed by VC firms JohnRood.net
  • 6. The reality of the venture capital / Tech Crunch / startup accelerator industry: 0.02% of new businesses receive venture capital funding. Most new companies do not get featured on TechCrunch They are not in sexy industries You can’t rely on SBA loans, StartUp America, or any other source to reliably secure new business funding Y Combinator accepts 2% of applications (harder than Harvard or Stanford) JohnRood.net
  • 7. TechCrunch/VC Un-Cool Small Biz Sexiness High Low Chance to change Medium Low the world Addresses a Varies High! Customer Need Chance of Success Low Medium/High Chance of paying Low Medium/High bills Chance of you Low ???? actually doing it, starting today JohnRood.net
  • 8. There’s nothing wrong with the VC / accelerator / TechCrunch Route! They’ve led to GREAT companies. If your goal is to do whatever it takes to have a famous company in a short time, that might be the right match. You just need to understand that the vast majority of profitable companies don’t play that game. JohnRood.net
  • 9. The Unsexy List of Most Popular Small Businesses, 2011 1. Fitness and Recreational Sports Centers (71,394) 2. Full-Service Restaurants (72,211) 3. Homes for the Elderly (62,331) 4. All Other Amusement and Recreation Industries (71,399) 5. Used Merchandise Stores (45,331) Awesome 6. Meat Processed from Carcasses (31,161) 7. Landscape Architectural Services (54,132) 8. Beauty Salons (81,211) 9. Carpet and Upholstery Cleaning Services (56,174) 10. Child Day Care Service (62,441) What do these businesses have in common? JohnRood.net
  • 10. Think there are 56,172 entrepreneurs excited about Carpet and Upholstery Cleaning Services? JohnRood.net
  • 11. • The Mindset • Identifying a Market • Creating a Product/Service JohnRood.net
  • 12. To test his theory, Mr. Zhardanovsky and his co-founder, Joe Speiser, set up a Web page in 2009 with a form that asked customers if they would be interested in signing up for regular deliveries. They then placed a few ads online and waited to see what happened. “We had an overwhelmingly positive response from our customers who wanted to sign up for the service,” said Mr. Zhardanovsky, who lives in New York City and who proceeded to introduce PetFlow in 2010. http://www.nytimes.com/2012/03/08/business/smallbusiness/selling-online-products- by-subscription-is-all-the-rage.html?_r=2&adxnnl=1&adxnnlx=1331266759- RNaVXgkDRDD+eDZWcEnfjw JohnRood.net
  • 13. What’s the #1 factor that will determine your level of success if you were to open a Chicago-style hot dog stand?
  • 14. Businesses that succeed QUICKLY and RELIABLY meet a demonstrated customer need. If you have to sell the need, your chances of success go down. JohnRood.net
  • 15. Development of the test prep industry Tutoring Value Live Class Online class Online video Scalability JohnRood.net
  • 17. Blue ocean strategy for entrepreneurs • Professionalize Mom & Pop operations (1-800-GOT-JUNK) • Dominate a segment with demand that’s a lower priority for a major company (Next Step Test Preparation) • Solve a pressing problem for a small niche (Paperless Pipeline) • Solve a small problem with a unique solution (Coffee Joulies) What else? JohnRood.net
  • 18. In 2012, where do people go to express their needs? JohnRood.net
  • 19. In 2012, where do people go to express their needs? JohnRood.net
  • 20. High-probability business owners define their market with quantitative research and testing – not through introducing a world-shattering invention or web app JohnRood.net
  • 21. Or….find a problem in a high-value market -- Unearth problems during interviews. What keeps them up at night? -- Focus on groups willing and able to pay -- Test before development -- Ideally, get paid to develop your product JohnRood.net
  • 22. • The Mindset • Identifying a Market • Creating a Product/Service JohnRood.net
  • 23. Your customers care about them. (Not you.) Most businesses forget this the second they start product development. Never forget the problem is more important than the technology. JohnRood.net
  • 24. Step 1: Minimal viable Product It’s critical that you create a minimally viable product (MVP). This now has a trendy name…. But entrepreneurs have been using these principles for years JohnRood.net
  • 25. Step 2: Test market acceptance Most businesses that can make $1,000 can make $100,000+* Do this as cheaply as possible You need to figure out if you can sell the product – this step is not about feasibility *Within reason. JohnRood.net
  • 26. Direct response marketing vs. brand marketing • Scientific Advertising, Claude Hopkins • Advertising Secrets of the Written Word, Joe Sugerman • AppSumo (appsumo.com) • I Will Teach You To Be Rich (iwillteachyoutoberich.com) • Mixergy, www.mixergy.com • Ultimate Guide to Google Adwords JohnRood.net
  • 27. If you can sell it 5 times on Craigslist you can probably sell it 50,000 times
  • 28. Step 3: Web Presence Put up a basic website with dedicated landing pages for this product. If you don’t know how to put up a basic website, you need to either learn how or hire a contractor. Learn the difference between a home page and a landing page -- Unbounce -- Wordpress JohnRood.net
  • 29. Step 4: Scale (the easy way) • Easy SEO • AdWords • Facebook Ads • Blog Outreach • Aggressive referral programs Remember, you’re trying to reach your customers – not your peers. Most customers don’t read the same blogs you do or know what Tech Crunch is. JohnRood.net
  • 30. Thank you! Remember that you can start today Your excuses do not make you a unique snowflake john@nextsteptestprep.com @johnrood JohnRood.net