
Building Your First Profitable Startup - dchuk
http://www.layeredthoughts.com/startups/12-rules-for-building-your-first-profitable-startup
======
ef4
This article is not using a correct definition of "scalable".

A business that needs more staff to service more customers is still scalable,
as long as each staff member generates more revenue than they cost. McDonalds
is awesomely scalable.

If you insist on limiting yourself to zero-touch businesses, you'll find
yourself competing with all the other geeks who are afraid to go out and sell
and build business relationships. On the other hand, if you're willing to
build high-touch relationships, you'll discover opportunities that you would
have never otherwise found.

~~~
inopinatus
I'm afraid to report that you have also abused the term "scalable". You have
instead described something normally called the Marginal Product of Labour
(MPL). I believe the claim in the OP is to the effect that Groupon's MPL is
flat or even declining and have to concur with the assessment that a high-
touch business model requires huge technological support to remain
competitive.

Indeed your own example, McDonalds, is a prime example of this. They are not
particularly notable as a human business, rather they represent a case study
in very high efficiency supply chain management and process optimisation.

I don't disagree that a strong and skilled front line enables enduring
customer relationships and opens many doors. But the recommendation - to do so
with a clear eye for efficient processes & systems - is exceedingly sound.

~~~
joewee
I thought McDonalds was a real estate and leasing company? McDonalds only owns
about 15% of its restaurants, it doesn't have as many employees as you think.

~~~
inopinatus
This simply highlights how efficient they are. The franchise operators are
subject to the same systems & processes irrespective of ownership.

------
superasn
One thing I'd like to add to this from my own experience is: The trick is to
Just do it.

Lately, I've seen this trend when guys are waay to concerned over which
language, platform, etc to use. Will it be Coffeescript or Javascript, CSS or
Less, Apache or nGinx, PHP or Python, Mysql or MemSQL, and on and on.

At least in my own experience it doesn't matter that much, but what matters
most is that you pick something (if it's your first startup it has to be
something fast + easy) and you stick with it with just one goal: you get the
first version out of the door as soon as possible and start collecting leads.

Because funny thing is, your lead does not care how you're inserting him into
the database as long as you do it okay. But if you waste a month deliberating
the perfect tools the time you've lost has been lost forever. The same time
you could have spend converting those leads into paying customers, getting
your site in Google, marketing, etc are all a month behind (even worse
sometimes due to analysis paralysis you get either too busy learning something
or too bored with the idea that you may never finish).

~~~
mgl
And this is 100% correct. Nobody cares about technology while it works from
the customer perspective and gives you enough momentum to evolve your product.

A great set of hints was also given by JHH in his widely known presentation:
<http://www.youtube.com/watch?v=0CDXJ6bMkMY> (but still so valid!)

~~~
godDLL
And as evidence, I present the current contents of the posted link:

Bandwidth Limit Exceeded

The server is temporarily unable to service your request due to the site owner
reaching his/her bandwidth limit. Please try again later.

------
StavrosK
One thing I'm having trouble with (that I haven't seen mentioned anywhere) is
getting alpha testers. I'm building extensible analytics software
(www.instahero.com, not all ready yet), and I need people who could use
something like that, but I haven't been able to find any.

You can't try marketing at this stage (people will expect something that
works) and all the people I know are at least slightly out of the target
market.

Maybe it all comes down to having a good network... If anyone would like to
try Instahero (even for very custom stuff, like hardware sensor tracking), get
in touch with me (info is in my profile) and I'll set you up.

~~~
brittohalloran
You NEED a free forever plan, especially if you're in alpha. Do something like
MailChimp where you get a low number of monthly 'credits', and when websites
gain traffic if they're getting value from your product they will upgrade. The
other thing this does is gets you a lot of 'leads' -- people who are clearly
interested in your product and already have it on their site. You can send a
monthly newsletter reminding them of all the great features that come with the
paid plan and stay in the back of their mind. (You can always kill the free
plan if it's costing you a ton of money)

~~~
bdunn
If you set a precedent that your product is free, no one who's signed up will
ever pay for it.

Charge right away.

~~~
wensing
This is true, except when it's false. Stormpulse was free for years and is now
collecting subscription revenues from customers that used to be free users.
And they are not the slightest bit angry about paying.

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dchuk
Hey I'm the OP: Ran out of bandwidth in the middle of the night (blog is
hosted on a very old hosting account) and am waiting for the host to get back
to me so I can fix the situation. Will be moving to a Linode later today to
prevent these issues in the future.

Here's the Google Cache for the time being:
[http://webcache.googleusercontent.com/search?q=cache:www.lay...](http://webcache.googleusercontent.com/search?q=cache:www.layeredthoughts.com%2Fstartups%2F12-rules-
for-building-your-first-profitable-startup)

------
scott_meade
It's no coincidence that several of the companies which recently found
themselves hurt by being locked out of APIs did not heed:

"Rule #1: Sell something" - several had no evident source of revenue and as
the article says "if your company isn’t selling something, you have a project,
not a product"

"Rule #7: Avoid products that rely on a community to exist". As these projects
found, when the community (or truckload of data) is taken away from you, you
no longer exist.

A good article with pragmatic tips.

------
kodablah
My biggest fear has always been customer service. How does one launch a
startup and still provide ample customer service without the humans there to
serve? Having lots of docs isn't enough for some people, especially in a B2B
setting. Do you have to build a customer base slowly because of this?

~~~
wensing
I've found that there is a lot less customer service work to do in a B2B
setting than B2C.

------
keeptrying
What if you dont want to build a freaking SEO, ecommerce, fashion or other
site but want to do something that really makes a difference?

Most of your rules only allow you to pick the lowest hanging fruit.

~~~
vonmoltke
The rules are intended for "bootstrapping a reliably profitable company". So
yes, they do restrict you to the lowest hanging fruit.

This post isn't directed at people who want to start a company that "really
makes a difference", unless those people are trying to start a profitable
prior company to fund the really big idea.

~~~
keeptrying
What if I want to bootstrap a game changing company? :) ... I understand the
inherent risks but I'be been willing to try so far.

------
isalmon
Strongly disagree with Rule #5: Have a “no-touch sales process”.

That's actually one of the biggest reasons why companies fail. Founders are
afraid to talk to people, they just build something and wait until somebody
comes and buys it. What happens next I guess all of us know.

You have to interact with your prospective customers and having a high-touch
sales process is one way to do that.

~~~
Torrents
I don't think he's saying to be afraid to talk to people. Often when I'm
making purchases for my job though I'll run into a product that doesn't show
any pricing and says to contact their sales staff if you are interested in
making a purchase. I _hate_ that and will pretty much always pass them over
for a site that doesn't _force_ me to contact them and doesn't _restrict_ my
purchase options.

If I can see pricing and purchase at any time but I still have questions, sure
I'll contact them. But don't force me to.

~~~
isalmon
In my previous company we had a solution that cost $1000/mo. When we
advertised it on the website - we had virtually no signups at all. When we
removed it - some people start contacting us and some of them were converted
into customers.

When you don't see the price - in most cases that means that this solution is
strictly B2B, so you're not their target market.

------
getsat
Can anyone post some examples of #3?

The biggest thing I'm struggling with is finding a product idea I can even
test against the potential market.

~~~
dchuk
OP here: I have an ambitious goal of expanding each rule into full posts with
examples so I'll see what I can do for ya

~~~
getsat
Thanks! I'll keep an eye out for it.

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granto
Any reposts? Looks like HN crowd has exceeded his bandwidth...

~~~
d99kris
Try Google Cache:
[http://webcache.googleusercontent.com/search?q=cache%3Awww.l...](http://webcache.googleusercontent.com/search?q=cache%3Awww.layeredthoughts.com/startups/12-rules-
for-building-your-first-profitable-startup)

~~~
asmosoinio
For ctrl-F:ers: mirror

------
raheemm
Would be interested in a followup article on how to find niches/markets. I
like his About page - keeps it real.

------
noahlt
Another name for "no touch sales process" is "self service".

------
nirvana
I know it may be formulaic, but I love these lists of "rules" because I go
down them one by one and say "yep, got that" or "nope, don't have that, now
lets think about it."

I want to talk about rule #3. And lets use DuckDuckGo as an example. DDG is a
competitor to google, and it is safe to say google is a "must have" because
you can't find nothing on the web without it.

But is DDG a "must have" because it is providing the same service as google,
and that service is a must have?

Or is DDG a "nice to have" because it is a slightly better version of the
service Google is providing and thus I don't have to have DDG because if it
disappeared I would switch to google and not feel much pain.

No criticism of DDG is meant here, I admire that business, and it was just the
best example of the area where I'm not sure. For my personal business, there
is an undisputed king of the hill, like google, but I know there is sufficient
business for us to service niches. I just wonder if the king of the hill
existing makes it impossible for your product to be a "must have", or if this
is just a question of the nature of the product/service, and not the market
dynamics of the space.

~~~
wensing
Some people have decided that DDG's privacy is a must-have while others have
decided that (at least for now) it is a nice-to-have. And DDG is of course
betting that more and more people will arrive at the conclusion that DDG's
privacy "feature" is indeed a must-have. I know I'm on the verge.

~~~
nirvana
I switched to DDG, and occasionally I go back to google when DDG doesn't get
me the results I am looking for, or when I want to do an image search.

But you're right, for a segment of the market, the DDG privacy is a feature
that would be a must have.

------
yashchandra
Good read. Nothing will make me happier than creating a profitable
bootstrapped business that sells a product. Once and _if_ I am through that,
may be I will work on the next big viral idea which is not a bad thing to
think about but not for my first shot at webpreneurship.

