Most of the books that I want to read during my Bootstrap MBA experiment focus on just one specific topic. This makes sense because book that cover too many topics usually don’t go deep enough to be useful. However, I thought that it wouldn’t hurt to read at least one “general purpose” book that covers a lot of ground and thus can give me some orientation at the beginning of my journey. Initially, I decided to read Pieter Level’s book MAKE which is subtitled “The Bootstrapper’s Handbook” and has gathered a lot of praise in the maker community.
But since I wasn’t fully satisfied with Pieter’s book, I started looking for alternatives. A book that is often mentioned alongside with Pieter’s book is Start Small, Stay Small by Rob Walling. Thus I decided to give it a shot and, I have to say that this time, I wasn’t disappointed. It’s a great book for aspiring boootstrappers, full of actionable advice that I hadn’t read or heard a dozen of times elsewhere.
Overall, I would rate it at a 9/10. (So far, I’ve only read the first three chapters since the later chapters will only become relevant for me at a later stage.)
Terminology and Mindset
The first chapter of Start Small, Stay Small is devoted to explanations of important terms like “micropreneur”, “bootstrapper”, and to tips regarding the general mindset of successful entrepreneurs.
- A micropreneur is someone owns one or several products but remains solo and has zero employees. Micropreneurs are typically associated with “lifestyle businesses”, i.e. companies that make just enough to sustain the lifestyle of the owner. The goals of a micropreneur are usually not limited to financial gain but also include lifestyle goal (think: digital nomadism.) The poster child of micropreneurship is Pieter Levels.
- A bootstrapper is someone who, like a micropreneur, builds products without any outside funding. However, the vision of a bootstrapper is larger than just a single person venture. A bigger company with typically 5-10 employees is a typical outcome. While bootstrappers seek growth, they do it organically by reinvesting their revenue back into the company. A great example of a bootstrapper is Nathan Barry with his company Convert Kit.
The good news is, of course, that there’s no need to decide in advance whether you want to be a micropreneur or do something bigger. During the early stages both types of entrepreneurship are often indistinguishable and there’s like a 90% overlap in terms of the knowledge (“finding a niche, finding a product, building, launching, marketing”) that you need to succeed.
Lastly, there is a third kind of entrepreneurship:
- A startup founder is someone who tries to build a rapidly growing company by raising capital from outside investors. The goal is typically 100x growth in 5 years or less. Famous examples include Dropbox and Facebook.
A problem with the startup approach is that the funding game “involves a massive investment of time and focus, which distracts you from the important things, like making money and staying in business.” Moreover, “it makes modest success nearly impossible due to the limits it places on the potential markets you can pursue.” Venture capitalists expect rapid growth and thus aren’t interesting in niche businesses.
Once the distinction between the different kinds of entrepreneurship is clear, Rob points out that he’ll focus exclusively on bootstrapping and micropreneurship. Moreover, he assumes that his readers already know how to code and thus dives directly into the business side of things.
In the rest of the chapter he shares “mindset advice” for aspiring entrepreneurs.
Coding is not the Bottleneck
One of the most important things he mentions is that:
“Millions of people in this world can build software. A fractional subset of those can build software and convince people to buy it.”
This little observation immediately makes clear what you should be focusing on. Building products is not the bottleneck. Instead, your success chances primarily depend on your ability to come up with great product ideas and to attract customers.
There are far too many people who still believe that they just have to build something cool and people will magically show up at their (virtual) doorstep with dollar notes in their hands. While there are certainly examples where the “shut up and build” approach worked, these are exceptions rather than the rule. Focusing just on your code and design is like playing the lottery. You might win but your chances are slim.
New developer-entrepreneurs typically assume that the product is 99% of the equation. Instead, Rob summarizes that:
“Market Comes First, Marketing Second, Aesthetic Third, and Functionality a Distant Fourth”
Focus on things that bring you closer to launching
But focusing on your code is just example of a distraction that’s not really moving the needle. Other examples include obvious things like watching TV and playing video games but also things like spending “3 hours searching for and evaluating something you may not need until 6 months down the road” or “spending an evening finding 50 blogs to market” (which is something you can easily outsource). These things are great ways to make you feel productive but they don’t get you any closer to launching.
Another trap is excessive reading.
“It sure seems like Why We Buy, Made to Stick and Outliers are going to help you launch a successful product. But reading books gets you no closer to launching than watching Lost. If reading business books is a hobby, fantastic. But it won’t get you one hour closer to launch.”
Rob recommends an information diet. Limit the time you spend on social media to 30 minutes a day. Set similar limits for your TV consumption and news reading. Moreover, he recommends taking action notes when you’re reading something (not for pleasure but to learn something). An action note is a specific to-do list item that was sparked by the book or article. If you’re not getting actionable items out of a piece of writing, it’s probably a waste of time. Taking action notes is a great way to understand the value of any consumable.
“Anytime you’re on your computer ask yourself “Is this activity getting me closer to my launch date?””
Of course, you shouldn’t work around the clock. Relaxing and re-energizing are important. But without a conscious effort you’ll probably spend your days doing neither work nor relaxing. Fake work like reading business books or doing extensive research are usually a waste of time. The same is true for multitasking like working in front of the TV. A sure sign of fake work is that you feel as if you’ve worked all the time but didn’t get anything done. “Being busy but not productive” is the fitting mantra, I think.
Since reading the book I got much better at avoiding fake work. Whenever I catch myself drifting into fake work, I stop and dedicate 30 minutes to re-energize and refocus.
“Numerous times throughout the day ask yourself: At this very moment am I making progress towards crossing off a to-do, or am I relaxing and re-energizing? If I’m doing neither, evaluate the situation and change it. “
Outsourcing is a skill
There are millions of things you could do each day. Somehow, you have to decide what to pick from this seemingly endless menu. Focusing on activities that bring you closer to your launch date is a good first step. But even within this category there are many things you shouldn’t do yourself.
Ideally, you would focus on just the kind of $10.000 per hour work that truly distinguishes entrepreneurs from traditional employees and outsource all the rest. (See also Nava Ravikant’s advice to “set an aspirational hourly rate”. Rob calls this “dollarizing your time”.)
“If you value your time at $100/hour it makes certain decisions, such as outsourcing work to a $6/hour virtual assistant, a no-brainer. Putting a value on your time is a foundational step in becoming an entrepreneur, and it’s one many entrepreneurs never take.”
No one successfully does this all the time. But it’s important to keep in mind that if you want to be successful, you shouldn’t waste your time with $10 per hour work.
Since reading the book I experimented with outsourcing and I’m now convinced that Rob is absolutely right. Having someone who I can hand all the $10 per hour work for me is incredibly liberating and helps me to focus on things that are truly important.
I find that the biggest obstacle is that when you’re outsourcing you get a real number for the costs of a project. This is scary. Your own time always feels “free” (even though there are, of course, opportunity costs). If your project then fails you’ll always think about the money you wasted.
However, on the other hand, the project would’ve also failed if you did everything yourself. You only would’ve wasted more time. In this sense, the money was well spent since it allowed you to determine much quicker the potential or an idea.
An additional benefit of outsourcing is that it helps to focus your efforts on projects where there is a realistic chance to make the money back.
“It never seems like a good idea to pay someone out of your own pocket for something you can do yourself…until you realize the economics of doing so.”
A great aspect of Start Small, Stay Small is that there is not just high-level advice but also nitty-gritty details. For example, there is a list of 37 tasks that are typically needed to take a (web-based) product from idea to launch:
- ” Niche Brainstorming & Mental Evaluation
- Niche Evaluation
- Niche Selection
- Product Selection
- Product Architecture
- Functional Design
- Database Design
- Graphic Design*
- UI Development (AJAX/JS)*
- Business Tier Development*
- Database Development*
- Creating Unit Tests*
- Creating UI Tests* Manual Testing*
- Fixing Post-Launch Bugs*
- User Documentation
- Installation Documentation
- Sales Website Site Map Creation
- Sales Website Copywriting*
- Sales Website Graphic Design*
- Sales Website HTML/CSS*
- Sales Website Programming*
- Sales Website Payment Integration*
- Product Delivery (via email, link on site, etc…)*
- Setting Up Email List
- Setting Up Domain Name & Web Hosting
- Setting Up Email Accounts & 800 Number
- Setting Up Analytics
- Pre-Launch Search Engine Optimization
- Pre-Launch Pay-Per-Click Set-up
- Initial Social Media /Viral Marketing*
- Pre-Launch Video Marketing
- Pre-Launch Partnerships
- Launch Press Release*
- Pre-Launch Email Marketing
- Pre-Launch Blogging or Podcasting
- And probably a few others”
Rob recommends outsourcing all the tasks that have an asterisks next to them.
Another useful observation is that “outsourcing is a learned skill”. The first few times when you outsource something, you’ll most likely not save much or any time at all. Writing the assignment and finding someone for the job will often take longer than it would take you to do the job yourself. However, once you have a bit of experience and, ideally, a reliable VA on standby, you’ll quickly be able to save a lot of time.
“Outsourcing aspects of your business is the single most powerful approach I’ve seen to increasing your true hourly rate as an entrepreneur. If I didn’t outsource my administrative tasks, my effective hourly rate would plummet.”
Become comfortable with uncertainty
One of the most difficult things developers that want to become entrepreneurs have to learn is to become comfortable with guesswork and uncertainty.
In software development, when you do X it’ll always lead to the same outcome. In entrepreneurship this is no longer true. Your goal is to sell products to humans and human nature is unpredictable.
“That’s a hard pill to swallow when you’re used to making decisions based on fact. Instead, you have to take your best guess; then measure and tweak. And then do it 20 more times until you succeed.”
Beware of project/product confusion
Another important observation by Rob is what he calls project/product confusion.
“A project is a software application that you build as a fun side project. The code is fun to write because you’re not concerned about quality and performance, and the end result is a neat little application that likely isn’t of use to many people. A product is a project that people will pay money for. In other words, it’s a project that has a market (a group of people who want to buy it). Without a market, a software application is just a project.”
Confusing projects with products is, according to Rob, the most common source of failure for entrepreneurs.
I just noticed that my notes are getting ridiculously long, so I’ll try to keep my takeaways from the following chapters a bit shorter.
The second chapter is devoted to what he calls the Market First Approach.
The key idea is to find a market before you have any what you’re going to build. Rob’s advice is that a bootstrapper or micropreneur you should focus on niches. He distinguishes between “warm” and “cold” niches.
- “A “warm” niche is a niche where you have some kind of association.” This means, that either you have some kind of experience that is directly related to the niche or know someone well who does. He recommends making list of persons you know well (including yourself) and list their hobbies and work experiences next to their names. These are your warm niches.
- A “cold” niche is a niche where you don’t have any insider access. Obviously, your chances of launching a successful product for a cold niche are much slimmer. To identify cold niches, nevertheless, he recommends to look at lists of occupations like this one at Wikipedia as a source of inspiration. Another approach is “cheat” by using an idea someone else came up with. He recommends resources like this and this one. (Most of the links he provides are no longer available but can still be accessed through the Wayback Machine.)
Rob further recommends this episode of the Escape from the Cubicle Nation podcast for a useful look at choosing a business idea.
To find underserved niches, you need to do things
If you stick to standard niche research, you’ll only find all the niches that everyone else is finding.
“The best niches are under the radar, and you have to get out and do something before you will find them.”
For example, if you start a Podcast or Youtube Channel, you’ll immediately be able to discover dozens of little problems that you could solve.
Characteristics of a great niche
Once you have a big list of warm and cold niches, you need to evaluate their potential. Rob recommends thinking along the following lines:
- As a micropreneur or bootstrapper you don’t have a big marketing budget. Creating demand is far too expensive. Hence you need to focus on markets with existing demand.
- “Is the market large enough?” The rule of thumb he recommends is that in a great markets for micropreneurs and bootstrappers you can book “a full-page ad in a magazine targeted at your market for less than $5000”. This rule is useful because if there is a magazine, you can be certain that the market exists and is large enough. Moreover, when the price for a full-page ad is below $5000, the market is small enough and you have a realistic chance of reaching it. However, you shouldn’t really book magazine ads as they’re hard to track. Online ads are far more effective for entrepreneurs with limited budgets. The magazine ad exercise is only intended as a way to characterize a market. He also recommends using traditional SEO keyword tools and strategies to evaluate the size of different markets.
- “Is there an inexpensive way to reach them?” Far too often, aspiring entrepreneurs spend months building a product without ever thinking about how the target audience will find out about it. This is a sure way to failure. To maximize your success chances, you should focus on markets where there is an inexpensive, ongoing source of new customers.
Finding product ideas
Once you’ve collected a list of promising niches, it’s time to start thinking about what you can offer them. (Note that this process is exactly the opposite of what most beginners do. Aspiring entrepreneurs typically start with a product and then try to find a market.)
If you have some contact in the niche, Rob recommends giving her a call and “grill her on what pains her in the job or hobby that could be solved with software.” (A great book I’m currently reading that covers this type of conversation in much more detail is The Mom Test by Rob Fitzpatrick.)
“Before we begin, you’ll also want to bring along that secret list of application ideas you keep tucked away. You know the one I’m talking about–we all have it, whether it’s written down or not. The list of apps we’ve been meaning to build for years. Bring these along just for kicks.”
Evaluate your product ideas
To evaluate the potential of your different product ideas, Rob recommends creating a landing page, including a “buy now” button and then test whether or not people are willing to click it. When someone clicks the “buy now” button this should be recorded, for example, using Google Analytics, and the user should be shown a message that the product does not yet exists but she can enter her email to get notified once it’s released.
“The only way you know if someone would try or buy your product is if they think they are really trying or buying it when they visit your sales site.”
Once you’ve created such a site, use paid ads to get 100-200 targeted visitors to your site and track the number of “purchases”.
Sites like Reddit or Tech Crunch may give you numerous visitors. But most likely, only a tiny fraction of these visitors will be in your market. Most of them will spend less than five seconds on your site. From his own experience Rob repots that you can be lucky if 50000 visitors from mainstream outlets convert to five sales.
Instead, the goal is to find website(s) where your real market hangs out and then try to get on the front pages.
While there are hundreds of ways to market a software product, there are just a handful of what he calls “Top shelf approaches” you should focus on.
“The Top Shelf approaches focus on two key areas: building an audience and search engine optimization.”
Additionally, there are what he calls “Second Shelf” approaches, which include
- Building buzz,
- referral traffic,
- joint venture partnerships,
- article marketing.
There is a later chapter that is dedicated solely to marketing. The next chapter, however, is dedicated to various aspects related to the product itself.
Once you’ve identified a market and a problem that you want to solve, you have to decide how exactly you’re going to solve it.
The possibilities include:
- Hosted Web Applications (SaaS)
- Downloadable Web Applications (think: Zoom)
- Desktop Applications (think: Photoshop)
- Mobile Applications (think: iPhone apps)
- Third-Party Plug-ins (think: WordPress plugins)
- Community Websites
If you target consumers, your product should probably be priced in the range $1 to $50. At such a price point, your conversion rate should be between 1% and 4%.
At a higher price point (between $50 and $1,000) or with recurring pricing, you can expect a conversion rate between 0.5% and 2%.
He recommends for standard consumer products a price below $29 fixed-price of $14/month.
If the product will make or save someone a tangible amount of money, you can charge up to around $49 or $19 per month.
If you target small businesses, the upper limit is usually $400 or $99/month, while for large businesses a typical limit is $1,000 or $199/month.
As a general rule of thumb he recommends:
“Lean towards higher pricing. Developers tend to undervalue their software, and think that lower prices will result in higher sales. This is typically not the case.”
The bottom Line
Start Small, Stay Small by Rob Walling is a fantastic book. Each chapter is full of actionable advice and I’ve already implemented several of his recommendations.
As mentioned above, I haven’t finished the book yet since I want to implement what I’ve learned so far before moving on. Moreover, I’m currently mostly interested in methods to come up with and evaluate product ideas, whereas later chapters primarily cover more advanced topics that aren’t that relevant for me right now.
However, I will certainly read them in the coming months and then either update this post or publish a second part.Sign up below to receive short updates on my progress.