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Bootstrapped to Profitability


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Bootstrapped to Profitability

  1. 1. Bootstrapped to ProfitabilityA repeatable system for founding a company (without VC or angel investment) John Rood
  2. 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
  3. 3. • Why bootstrap?• Identifying a Market• Creating a Product/Service
  4. 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 has100 excuses for waiting, for getting a corporate job, or for being in “stealth mode” for 5years (but going to all the meetups)*Shamelessly stolen from Noah Kagan,
  5. 5. All around you, your peers are starting businesses designedto 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
  6. 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 TechCrunchThey are not in sexy industriesYou can’t rely on SBA loans, StartUp America, or any other source toreliably secure new business fundingY Combinator accepts 2% of applications (harder than Harvard orStanford)
  7. 7. TechCrunch/VC Un-Cool Small BizSexiness High LowChance to change Medium Lowthe worldAddresses a Varies High!Customer NeedChance of Success Low Medium/HighChance of paying Low Medium/HighbillsChance of you Low ????actually doing it,starting today
  8. 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 famouscompany in a short time, that might be the right match.You just need to understand that the vast majority ofprofitable companies don’t play that game.
  9. 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?
  10. 10. Think there are 56,172 entrepreneursexcited about Carpet and Upholstery Cleaning Services?
  11. 11. • The Mindset• Identifying a Market• Creating a Product/Service
  12. 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.
  13. 13. What’s the #1 factor thatwill determine your levelof success if you were toopen a Chicago-style hot dog stand?
  14. 14. Businesses that succeedQUICKLY and RELIABLY meet ademonstrated customer need. If you have to sell theneed, your chances of success go down.
  15. 15. Development of the test prep industry TutoringValue Live Class Online class Online video Scalability
  16. 16.
  17. 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?
  18. 18. In 2012, where do people go to express their needs?
  19. 19. In 2012, where do people go to express their needs?
  20. 20. High-probability business owners define their market with quantitativeresearch and testing – not through introducing a world-shatteringinvention or web app
  21. 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
  22. 22. • The Mindset• Identifying a Market• Creating a Product/Service
  23. 23. Your customers care about them. (Not you.)Most businesses forget this the second they startproduct development.Never forget the problem is more importantthan the technology.
  24. 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
  25. 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.
  26. 26. Direct response marketing vs. brandmarketing• Scientific Advertising, Claude Hopkins• Advertising Secrets of the Written Word, Joe Sugerman• AppSumo (• I Will Teach You To Be Rich (• Mixergy,• Ultimate Guide to Google Adwords
  27. 27. If you can sell it 5 times on Craigslist you can probably sell it 50,000times
  28. 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
  29. 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.
  30. 30. Thank you!Remember that you can start todayYour excuses do not make you a