Starting a SaaS business without VC backing is no easy task, but if you use the right strategies, it can be done.
In today’s post, I want to share with you the story of how I’ve (so far) bootstrapped my SaaS business to $10,000 in MRR, mistakes I’ve made along the way, the lessons I have learned, and some of the marketing activities we’ll be testing on our way to our next goal of $100,000 in MRR.
Table of Contents
- How succeeding on Amazon led me earning over $170,000 over a 5 day period, and ultimately to starting a SaaS business
- How I found my technical co-founder
- How we attracted our first 6,000 users
- Niching Down to Gain a Competitive Advantage
- What got us to $10K won’t get us to $100K
- The Amazon Seller Playbook
- Highlights of our 2021 Marketing Plan
Amazon Changed My Life
Prior to Oct of 2017, I’d never earned much more than about $200,000 a year in profit from my business.
But that was about to change….in a pretty significant way.
Here’s how it happened.
In August of 2016, as a result of what I learned in one of my podcast interviews, I started my Amazon reseller business.
I knew right away that growing this new company was going to require consistent execution of a pretty boring set of prospecting-related activities (that I had ZERO interest in doing myself), so one of my first decisions was to focus my efforts on creating standard operating procedures for all the mundane activities that were required to find new supplier accounts.
Armed with these procedures, I then set out to hire a small army of virtual assistants in the Philippines.
Thanks to the combination of these two investments (combined with my previous B2B sales experience), in less than 5 months, we’d landed enough wholesale accounts to propel our monthly revenue to over $100,000 per month.
This result was definitely not an impossible feat, but it was substantially more than most were able to accomplish by doing most/all of the work themselves – which is a very common mistake made by the vast majority of first time founders.
I was now the proud owner of a company that generated consistent profits and it has gone on to rank #254 and #622 on the Inc 5000.
How earning $170,000 in profit over a 5 day period made starting a software company a no-brainer
About a year after I started my Amazon reseller business, thanks to the success that I was having, I was invited to speak at a conference of 500 or so other resellers.
I prefaced my talk by telling the audience that I had nothing to pitch to them and that my sole purpose was to share all the details of how I’d grown my business so quickly.
At the conclusion of my talk, much to my surprise, a very large number of people approached me to ask if they could purchase copies of the standard operating procedures I’d developed.
Given how many people had asked me, the decision to make a copy of my SOPs wasn’t difficult, and the week we launched them, we sold $337,895 worth!
Needless to say, I was blown away by the success of the launch and earning $170,000 in profit over a 5 day period was absolutely nuts!
For the first launch of the Wholesale eCommerce Business Systems (or WEBS), our content lived in someone else’s software application.
Given how successful the launch was, that was when I realized that I needed to build my own software company.
The Best Votes are Backed by a Credit Card
Much has already been written about how to validate your business idea before taking the plunge, so I’m not going to rehash all that here.
What I will say is this, by far the greatest endorsement of your product idea is an endorsement that is backed by an order placed on a credit card.
Surveys are ok…but cash in the bank is MUCH better.
And thanks to the $337,895 worth of orders that we received in the first 5 days, I was pretty darn confident that I had a winner on my hands.
Now all I had to do was find a co-founder with the technical chops to actually build the software.
Finding a Technical Co-Founder
Finding a technical co-founder is no easy task, and in my case, I actually feel like I sort of cheated in this regard because one of my good friends was exactly who I needed.
By the time I pitched Kane on the idea of starting Flowster with me, I’d known him for 10 years and during that time, I watched him build and then sell a SaaS business of his own.
For several of those years, he and I were actually roommates and we’d watch each other working insanely long hours on our respective projects. His project was his software application and my project was launching BrightIdeas.co.
I realize for most people that finding a technical co-founder you would trust with your life isn’t nearly as easy as it was for me.
The only advice I can share is this: find a reason to start making friends now with someone with these skills because when it comes to building trust, ensuring your values are aligned, etc…there is no substitute for time in the saddle.
With all that said, I still had to convince Kane that starting Flowster with me was going to be a good use of his time, and thanks to my $337,895 in sales from my WEBS product, that was fairly easy to do.
Kane was on board, so let the coding begin!
From the day that we decided to start writing code to the day that we released Flowster for public consumption, it was about a year. During that time, my team and I were pretty much the only beta testers.
As head of the sole beta tester team, it was my job to find bugs, and man, did I find a lot of them!
So did my team…but that is pretty normal and to be expected.
How We Attracted Our First 6,000 Users
Over the next two years, I continued to sell WEBS and to date, we’ve sold over $2 million worth of it, which after selling expenses has generated a profit of well over $1 million.
This is the money that I used to pay for my half of the development of Flowster. The co-founder also matched my contributions to cover development costs and he didn’t take a paycheck for the first two years or so.
So how did we attract 6,000 users?
Well, approximately 1,000 of them came from sales of WEBS and the other 5,000-ish came largely from my steadily mentioning Flowster on my Bright Ideas podcast, plus a small amount of blogging.
Thus far, we’ve spent next to nothing on ads.
Niching Down to Gain a Competitive Advantage
In order to have any chance of success competing against SaaS companies backed by millions in VC funding, I knew that we’d have to specialize in a way that they aren’t.
In addition to that, thanks to having already sold a few million worth of WEBS, I also knew that people’s appetite to buy pre-made SOPs was higher than it was to sign up for software where they had to make their own SOPs from scratch.
The reality of being in the process management space is that, while everyone knows they need processes in place to scale, no one wants to invest the huge amount of time needed to create all these processes from scratch – and that is why trying to sell software alone is a very tough slog.
For the reasons mentioned above, combined with my experience in eCommerce, I felt pretty confident that my vision of creating the number one process management platform (filled with pre-made eCommerce playbooks) for the eCommerce industry was about as good of a niche as I could hope to find.
And then Covid happened, and the adoption of eCommerce accelerated by about 5 years.
What Got Us to $10K MRR Won’t Get Us to $100K MRR
As of this writing, our MRR sits at $11,083 and as you can see it has grown slowly and steadily over the last year until December when we saw a big spike.
The spike happened largely because I decided to test offering WEBS on a monthly subscription instead of the one-time fee of $2,495.
I suspect there are some other founders of bootstrapped SaaS companies who would look at these results and think that we are doing well; however, we do have some problems to overcome.
Churn is Too High
The first problem that we have, as do many others I assume, is churn.
At 6.8%, our churn over the last year is far too high, in my opinion, and as you can see, our MRR has actually declined since the spike in December.
I think our churn is this high primarily for two reasons and before I explain these two reasons, allow me to give you some background on our customer base.
So far, our customers come from two different segments.
The first is an aspiring entrepreneur looking to start/grow an Amazon reseller business like mine. Myself and WEBS are well known to this niche and we have a few affiliates that drive a lot of sales for us.
The second type of customer is a non-WEBS customer and I don’t yet know nearly as much as I need to about this customer segment.
What I can say is that they generally find us from Google searches, word of mouth, and my Bright Ideas podcast. I know this because I have set up a zap that sends every new customer an email asking them how they found us.
The reply rate on this email is pretty decent because the zap makes the email look like I manually sent it vs the typical auto-responder email with an “unsubscribe” link at the bottom.
So given that customer background, here are the reasons why I think our churn is higher than it should be.
The first issue is that the failure rate among aspiring entrepreneurs is high.
The reality is that most small businesses (of any kind) fail – and when they fail, the founder isn’t likely to continue paying their Flowster subscription – and that is why, after the big spike in December, that MRR has declined for the first time ever.
A little later in this post, I’m going to share with you how we have launched our Amazon Seller Playbook to an entirely new customer segment in an effort to reduce this form of churn.
The second reason that churn is too high is that our onboarding process and our UX is not where it needs to be.
The reason for this is that when we first started to develop Flowster, the UI was designed by my co-founder and I. Neither one of us are designers….so while it gets the job done, it is FAR from great.
Fortunately, we’ve been working with a design team over the last few months and the development team is now coding a much better UI…which (I hope!) will contribute to a much improved UX…but that is a post for another day (be sure to subscribe if you want to be notified of when it is published).
The Amazon Seller Playbook
In the fall of 2020, I realized that in order to reduce the first major contributor to our above-average churn rate, I was going to need to create a WEBS-like playbook that we could sell to a different customer segment that didn’t consist purely of startups.
Enter the Amazon Seller Playbook (ASP).
Much like WEBS, ASP consists of a large collection of pre-made SOPs all geared towards making it much easier to manage an Amazon Seller Central account, while simultaneously delegating as much of the work as possible to low-cost virtual assistants and entry level employees.
Our target customer for ASP are the brands themselves, as opposed to the Amazon resellers that buy WEBS.
The idea here is to tap into a customer base that is already in business with steady cash flow, so that they are much less likely to churn out of Flowster due to cash flow issues.
Plus, as most new brands these days see Amazon as a D2C sales channel not to be ignored, I have made the assumption that they would be pretty keen to be able to get instant access to a playbook that consists of all the pre-made processes they are going to require to successfully run their Seller Central account.
Getting Proof of Concept and Product Market Fit
Thanks to the success of WEBS, I already know that a lot of folks are quite happy to pay for pre-made SOP content.
What I don’t yet know with 100% confidence is that brands doing $1-10M are going to be equally willing to pay for ASP.
In addition to that, I don’t yet understand the top 3 problems brands are trying to solve (with respect to selling on Amazon) and more importantly, the exact language that they use to describe these problems.
While we do plan to run ads at some point soon-ish to help us spread the word, I don’t think that now is the time to do that. That’s because all ads are good for is amplifying a message, and as you’ll see shortly, we don’t yet have our messaging dialed in, so amplifying it now would only increase our ad spend, and therefore ad losses.
So, in the absence of ads, what does our marketing look like?
Highlights of our 2021 Marketing Plan
In 2021, our marketing plan is broken down into two main phases.
In phase 1, we want to use a more manual approach to generating sales, and more importantly, generating conversations with our target audience so that we can get our messaging dialed in.
Once that has been done, in phase 2 we’ll start to use ads to amplify our message.
As I wrote about at length in my Guide to Outbound Marketing, we have built a fully automated outbound marketing lead generation and appointment setting system and since turning it on, we have generated only moderate results in terms of sales and appointments set.
While the automation works flawlessly, the lack of meaningful results shows that our messaging still sucks.
Over the last 10 years, I have produced a lot of content, with the vast majority of it being via my podcast and YouTube videos.
Sadly, what I’ve not been very good at is promoting my content in a way that will allow me to significantly grow my audience, and therefore generate more lead for Flowster.
Thankfully, I’ve recently learned some pretty killer strategies for repurposing all the content I have, plus the content that I’m yet to produce.
By following these proven strategies, I expect to go from just a handful of social media posts each week, to hundreds of social media posts a week.
As I don’t yet have any results to share, I will save the deep dive on this for a future post. Be sure and subscribe if you don’t want to miss it.
Bright Ideas Podcast
Having been a podcast host for over a decade now, I know first-hand that the easiest way to get a stranger to reply to my email is to send them a podcast invitation, and as you can see below, our podcast guest invitation campaign is killing it.
Check out the open and reply rates!!
So how is the podcast helping me to get my messaging dialed in, you ask?
Simple…in the pre-interview, I asked each guest a series of questions that will help me to better understand their biggest challenges and the specific words they use to describe them.
Once I have enough data from these pre-interviews, I will then update the messaging in my “regular” outbound marketing campaigns.
Then, assuming we are getting great results from these campaigns, we can start to look at amplifying this message with ads.
Prior to then, I’ll be working on Power Pages and Founder’s blog posts.
Never having been much of an “SEO guy”, I never really put a lot of effort into writing content.
Instead, I preferred to publish content on my podcast because it was easier to do!
The problem with that is that with a podcast alone, it is really difficult to build/expand your audience. This is because podcast content, other than the title, isn’t searchable.
One work around for this is to publish a transcription of your podcast, which I have done for some time now.
The problem is that a transcription, compared to a more traditional blog post, doesn’t rank very well in the SERPs.
A power page solves this problem.
Essentially, a power page is a very long, ultra detailed blog post that is written specifically for an audience of what Brian calles Linkreators (the people that own the sites you need to link to your content).
One of the mistakes that most content creators make is that they write primarily for an audience of readers that have little to no power to give you the valuable backlinks you will need to get your content to rank…and that is why they struggle to achieve higher organic rankings for their content.
The first example of one of my power pages is my Guide to Outbound Marketing. It is a whopping 6,500 words and filled with rich detail.
Since publishing it recently, I’ve been studying how to build links and using what I’ve learned to create process templates in Flowster that will allow me to easily assign a member of my team to promote this post and build links that should elevate it in the SERPs.
As I don’t yet have results to share, I will cover this in more detail in a future post.
The other type of blog posts that I’m going to write a lot more of are like the one you are reading now.
In my series of “founder posts”, I’m going to be openly sharing what we are doing to grow Flowster, including all the mistakes we make along the way, and the lessons we learn from these mistakes.
And I can promise you one thing: I will make a lot of mistakes!
Hopefully, I will also have some wins and we’ll continue to make progress to our next goal of $100,000 in MRR.
What Happens Next?
Clearly, my team and I have a lot of work to do if we are going to reach our goal of $100K in MRR.
Here’s a quick summary of what we are working on, and what I’ll be writing about next:
- How to build a content engine that allows me to publish hundreds of social posts per week without having to invest more than a 1/2 per month.
- How to build a funnel that segments and qualifies all our leads and then routes them to the appropriate webinar so they see the right offer
- How to continue to scale our SEO with Power Pages
- How to improve our UI and UX so that we further reduce churn
And so much more!
Sound interesting to you? I’d would love it if you left a comment, shared this post, and/or signed up to receive email alerts of future posts.