

What we have learnt running a bootstrapped startup - nithyad
http://teamblog.supportbee.com/2011/02/02/what-we-have-learnt-running-a-bootstrapped-startup/

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meterplech
I think it's scary when you first realize you have to charge users. (Or to
raise your price on them). But, as long as you talk to them, sometimes it can
surprise you how receptive they are.

When I was an SAT tutor I started charging $20/hour. I was inexperienced and a
bit younger than most of my clients, so I figured I couldn't charge much.
After awhile, I decided I wanted a higher wage if I got new clients. But, how
much? I decided to ask for $30 from new clients. No one argued, or showed any
displeasure. Wow! But, had I not gone high enough?

The next time I decided I wanted more, I made the decision to jump it to
$60/hour just to see if anyone would take it. And... everyone did. Without
question.

In order to get paid you have to ask. And, it's sometimes shocking how much
people will pay you. Don't be afraid to ask for more.

~~~
axod
FWIW, you don't have to charge users. Ad supported/affiliate marketing is a
pretty viable business model and will often fit better than trying to charge
end users.

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wensing
Stormpulse has around 5 million uniques per year and the ad model still isn't
viable without destroying the user experience.

In other words, you need more traffic than most people can fathom.

~~~
axod
It's not the amount of traffic, it's the fit between your users and the
advertising, how targeted they are, intent, etc etc.

Also it totally depends on the service/product. For stormpulse I don't think
advertising supported is probably the right idea unless it's made more
mainstream.

For example I'd start a "enter your email to get local weather reports free".
Build up a massive email list, then start including promotional adverts at the
top/bottom of each mailing. You'd be sending out a large amount of mails, to a
large amount of people... I think it could generate a good revenue.

It's not as simple as slapping up some ads and going home. This is the mistake
I think most people make.

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wensing
Let's boil it down to eCPM. What is your eCPM going to be? Multiple that by
impressions and tell me how you're going to support N employees on that
revenue.

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axod
For what? What website?

One of my websites generates $20 eCPM. Another generates $0.10 eCPM :/

What's your service going to cost? Multiply that by paying users and tell me
how you're going to support N employees...

I don't think arguing over this is useful - making money out of advertising
isn't rocket science, but it does require learning and experience.

~~~
wensing
It's important for bootstrappers to understand the mass traffic that's needed
for advertising to fuel growth.

$20 eCPM means to have just a $200k/yr. business you need 10 million
impressions per year. $0.10 eCPM means you need 2 billion.

~~~
axod
The same could be said for 'paid subscribers'.

If you have a product you're selling for $10/mo you'll need 1,667 subscribers
to make $200k/yr not taking into account churn, customer support overhead, etc

The question is whether you think getting millions/billions of impressions is
easier than getting thousands of paid subscribers or not.

Also, FWIW, 10m impressions a year is nothing - it's 1 impression every 20
minutes on average. 2b impressions a year is more like 60 impressions a
second, but still not ridiculously unattainable.

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rick888
"The same could be said for 'paid subscribers'. If you have a product you're
selling for $10/mo you'll need 1,667 subscribers to make $200k/yr not taking
into account churn, customer support overhead, etc"

1667 customers isn't that difficult if you have a good product that works
well. Free services still have all the same customer support costs (not to
mention the order of magnitude amount of traffic you will have to support).

"The question is whether you think getting millions/billions of impressions is
easier than getting thousands of paid subscribers or not."

In almost all cases, paid subscribers are easier. Most sites that are ad-
supported (unless it's a blog) eventually move to a paid plan (or have both
paid and free accounts).

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wensing
Refreshing, honest, well said.

This part caught my eye, though: _"we were honest with them. We let them know
that implementing that would mean addition cost for us , but would still do it
if they were ready to pay a subscription fee"._

That's a common early feeling, and one that I've had as well. But you need to
completely and forever abandon cost-based pricing if you're going to thrive
(find your best customers) as a subscription web app. The task of figuring out
what your web app is really WORTH to your customers rather than what it costs
you to operate is the key to high profitability and happy customers co-
existing.

The worth/value of your app is a percentage of the surplus of success it
creates for its users, where success is defined by the user.

~~~
MicahWedemeyer
Agree 100%. It's really none of your customers' business how much it costs you
to run or do things. If people are complaining to you that you're charging for
things that are cheap (ie. "that's only a record in a database" or "google
does it for free") then those aren't the customers you want.

Sometimes it's right to charge for something that took you 1 minute to write,
and sometimes it's right to give away a feature that took weeks of
development. It all comes down to what makes the most sense for your business.

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idlewords
Only on the web can 'charge money for a good or service' be considered a
clever contrarian insight.

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middlegeek
"As corny as it may sound, we were particularly impressed with Guy Kawasaki’s
‘Create value and money will follow’ advice when we started up...Had we known
then that he was going to create AllTop in future, we would have probably
introspected a little more before buying his line of advice."

I don't understand this statement, specifically the reference to AllTop. Can
someone offer me some insight?

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sabat
Guy, bless his heart, often preaches voodoo. His quote essentially means that
you don't need to worry about where the revenue will come from -- just create
something cool and the money will get to you somehow.

They're saying: BS. Start a business. Think about a business model. Charge
users.

(AllTop is an RSS aggregator for a variety of interest areas like Museums,
Cigars, and BBQ. There is absolutely no revenue model except for publishing
advertisements. Guy, being Net-famous, was able to sell it after about a
year's work. Your mileage will definitely vary from that.)

~~~
middlegeek
Thanks. Okay, maybe I just slightly disagree with them. I mostly agree with
the "create value, money will come" philosophy. However I would say create
value and if the value is very substantial, the money will come. However
depending on how substantial the value is, you may have to work to make the
money come along.

I am not saying they are wrong, I would just put a little more confidence
behind Guy's statement.

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MicahWedemeyer
I feel that almost all "...and money will come" statements are missing some
words.

"Create value, CHARGE FOR IT, and money will come" or "Do what you love, AND A
LOT OF CRAPPY BUSINESS STUFF, and money will come"

It's very uncommon for revenue to come to you without some work and thought on
your part. It's like the lottery. Sure, some people win, but _you_ won't!

~~~
sabat
Yeah -- something along the lines of "create something of value, and then
never stop working on ways to make money from it until you hit on something
that works well."

Not just "create value and the money will come."

~~~
Dylanlacey
Value is the difference between cost and gain. If your users are getting a
gain, and their cost is 0, then there's value being created.

The trick is to determine what gain is, and how close you can raise cost
before value becomes too low.

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ceslami
I think you could write a whole other blog post about the last paragraph. To
me, the most interesting part about getting started on a new side project is
what I end up learning as a result.

New methods and skills always come out of trying to solve new problems. And
hopefully that will lead you to pursue something even harder/more interesting.

Edit: typo.

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neovive
Has anyone been forced to downgrade or reduce feature sets for free users when
introducing paid plans? Is the generally accepted approach to grandfather in
all existing free users?

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prateekdayal
We have experimented with partitioning features and always grand fathered the
existing users. It has generally worked well. For most B2C services at any
scale, you have a lot of new users signing up everyday so you don't have to
worry about over optimizing on existing users. Its better to just keep them
happy

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JoeAltmaier
I don't think they were reading the right blogs/books. Lots of places to learn
about pricing, target demographics, revenue models. Maybe not ones that music
guys read?

