

Don't bootstrap yourself to death - mijustin
http://saastr.wordpress.com/2012/12/10/dont-accidentally-bootstrap-yourself-to-death/

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patio11
_Now if you can get [to $1 to $2 million inn run rate] in 12-18 months, that’s
great. 24 months is probably OK, but at the edge for most people. Or if it’s a
semi-mythical lifestyle business, maybe it’s OK._

You know what you call semi-mythical things with existence proofs? Empirically
observable facts. As contrary to, say, unnamed $1 MM run rate SaaS businesses
killed by competition. I'm having great difficulty thinking of one. Granted, I
don't know the histories of all the _hundreds_ of companies that fit the
terrible nightmare of selling millions of dollars of software at 90% gross
margins, so it's possible you could come up with an anecdote or three...

Also, if you sell a million a year in software, and you need help, _you buy
help_. People who are additive to revenue aren't cheap but they are, well,
additive to revenue. Support folks? Very inexpensive - a plumbing firm with
30% gross margins at the same scale can trivially hire them.

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BobWarfield
Keep in mind Jason is very much talking about a VC-funded SaaS company rather
than a bootstrapped SaaS company. A boostrapped company may take quite a lot
longer than 24 months to hit $1M and no harm no foul. Many of the famous
bootstraps took 24 mos to be big enough for 3 founders to quit their day jobs.

The difference is the $1M VC funded SaaS company will have been wildly
unprofitable while the bootstrap will have been profitable every step. The VC
world rightly regards SaaS as a landgrab and some of Jason's other posts
approach it that way. Hence the companies are run unprofitably so they can be
grown faster.

My impression from his posts is he doesn't have a lot of experience with the
bootstrap world or doesn't think much of it. I frequently write counterpoints
to his posts on my Smoothspan blog.

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soundlab
If you have a high margin, recurring revenue SaaS business doing $1-2MM and
are looking for growth capital, you do not need to dilute your equity with VCs
expecting an exit on their terms (not always yours)- you need bank debt. One
of the perks of bootstrapping is once you get to profitability and have a
business built on good fundamentals (versus vanity metrics/eyeballs/"scale")
you can walk into a bank and obtain lines of credit or debt finance to help
you add those customer service folks or incremental sales help in other
territories or whatever overhead you need to take on for the next stage of
growth. The reason for all the VC hoopla in the first place is the
overwhelming risk associated with your pre-revenue, pre-profitability
business- traditional commercial bank financing is vastly superior if you can
get it on decent terms, which you should be able to if you've bootstrapped
your way to $2MM

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petercooper
I can identify with this. Bootstrapped and profitable enough to hire other
people to grow faster. But as I'm doing almost everything solo and the
business needs to keep running on a day to day basis, the time to formalize
processes, hire, on-board and/or train people, let alone look for funding,
barely exists. My current idea is to gradually bring on freelancers so I don't
overstretch my time or resources. Long term, I'd like to acquihire people
already familiar with the business or have saved up enough profits that money
can be more easily thrown at the problem.

I imagine this is one of the reasons folks like pg are keen on multiple
founders since one founder could more easily be 'spared' to handle things like
recruitment, process, and other things important to growth that are separate
from sales or product development. I can do all the sales and production and
do it well, but then that leaves little time for anything else.

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dasil003
I thought this was going to be about over-reliance on Twitter Bootstrap.

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asc76
Same here

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swombat
At the same time, if this $1-2m/y company has the typical 80% profit margin, I
think it makes a great basis for starting the next company. Just hire a couple
of people to keep the lights on, and get working on the next idea, now safe in
the knowledge that you have the cash to pay for most things you want already,
and you're doing the new idea for the fun and extra profit of it, not to put
bread in your mouth.

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kyle_t
The problem with this is some companies want to remain small. They don't want
to be the next instagram or pinterest. They are perfectly happy pulling in
$1-2MM and supporting a healthy lifestyle for the few employees it employs.

I'm not necessarily saying I disagree with the premise of this article, but
the owners need to make a choice about what kind of company they are running
and take the necessary steps to achieve that.

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akurilin
A fine balance between PG's "Just try not to die and eventually smart people
figure out a way" and "don't be a zombie company forever or it will become
your grave". Sounds reasonable.

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seunosewa
... but will it work?

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madaxe
But do bootstrap yourself to _the_ death.

If you're bootstrapping, like we did, you absolutely have to take each step up
_as soon as you can_ , and push as hard as you can, as otherwise you'll find
yourself in the time-trap described, where you bootstrap growth while
neglecting organisational development.

We haven't cashed out for £800,000,000,000,000, but we've taken (small)
investment after 6 years of growth and operation in order to open up
opportunities (investor's customer base nom nom nom).

Ultimately, I think the main issue in startups is expectations. You probably
won't make a billion dollars. You probably won't make a million. You probably
won't even make $100k. But you might.

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alimoeeny
and who are you? I mean what is the company that you bootstrapped?

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madaxe
SaaS eCommerce provider. Platform turns over ~£3bn/yr. Small fry. You almost
certainly haven't heard of us.

