
Rules to run a software startup with minimum hassle - joisig
https://www.joisig.com/rules-software-startup-minimum-hassle
======
anonsivalley652
Rule #-2. A profitable business will require lots of smart schlepping. There
is no reward for hard work unless it's produces value.

Rule #-1. Build a defensible business, not something that's trivial for
competitors to copy.

Rule #0. Don't make a big, absolutist list of "dating rules". Be flexible and
use good judgement.

Rule #5. Freemium can be good in many situations: when just out of beta,
revenue is plateauing AND marginal user app infrastructure costs are low. You
wouldn't do a cloud backup with unlimited storage like BackBlaze as freemium.
You would with LucidChart because it costs almost nothing (so long as there
aren't huge file attachments). It is smart in certain instances because of
long-term economics, free word-of-mouth advertising, future sales and because
it builds goodwill that enhances the brand. It's vital to steer enterprise
users away from freemium because they have more needs that are better served
with pricier support subscriptions (the "Enterprise" version).

Rule #22. If you're selling a physical product or b2b service through
channels, then trade-shows are a must. It's incredibly foolish to shut the
door on distribution when you don't have it. Then again, physical products are
a PITA.

If it were me, early on, I would corral all the other founders for
brainstorming on the Business Model Generation chart to consider what's needed
right now and in the near future with some sticky notes. Then, revisit it
regularly with periodic founder meetings to make adjustments.

~~~
ncallaway
The article definitely agrees with your rule #0:

> The rules are not meant as absolute rules, but as food for thought: For you
> to think about the tradeoffs, of how and why there will be additional hassle
> and distraction from your core activities, if you decide to “break” one of
> the “rules”.

> For example, if you decide going to trade shows is right for your business,
> you should understand the fully-loaded cost of doing that. Not just the cost
> in money but also the cost in time. Depending on your product, they can
> still be one of the absolute best ways to reach your ideal customers.

------
fxtentacle
Rule #22: My experience is the opposite. For our professional audio software
[0] we met almost all of the initial customers at conferences. They tried out
our software, enjoyed working with it, and then later purchased a few licenses
for trying things out back at home. Some of them later purchased licenses for
every seat in their company. I believe it would have been extremely difficult
to sell audio software without giving people the ability to test-listen.

[0]
[https://newaudiotechnology.com/products/](https://newaudiotechnology.com/products/)

~~~
sky_rw
Trade shows are absolutely critical if you have a niche B2B product.
Especially the smaller ones. The benefits of face to face communication and
feedback cannot be beat.

For startups, there are many ways to hack this process and get in cheap. You
might be able to sublease half a booth from another company. If you have
industry partners see if you can run office hours in their booth space. Reach
out to show organizers and see if they have any educational break out sessions
your could talk at. Or just go without a plan and strike up conversations with
other peers in the space.

I think many of us who spend our lives behind computers in the tech field
don't appreciate how vital these events are to so many industries, or how much
actual work gets done here.

------
mstipetic
I agree with the tone of this article, it ends with "these rules are meant to
be broken," which is great. The only rule I agree with strongly is Don't do
partnerships. Unless you're in a position where people ask you for a
partnership, it never works well.

My company spent a lot of time chasing partnerships which on paper make
perfect sense, but always got stuck in some middle-management layer where
everybody says it's great but nobody really cares.

------
vhiremath4
I really appreciate the caveat at the end that these rules aren't absolutes,
but I thought I'd chime in anyway as someone who is currently running a VC-
backed high-growth startup with all the cliches that come along with that.

> Rule #14: Don’t take in any investors

> They will put a lot of pressure on you to grow fast

I work with Sequoia and Kleiner Perkins. Both told us that we should build a
team of Navy Seals vs. a bloated whale. I think most VCs are starting to turn
around to the idea that growing as fast as humanly possible isn't the way to
go. That being said, putting pressure on a company to grow distribution and
ubiquity fast is a great thing if you're an internet business that has the
ability to monopolize a new category/subspace.

> very often faster than may be compatible with your well-being

If you're taking VC money, you know the ride you're in for. Don't be naive.
And then don't be soft.

> mental health, work/life balance and ability to keep finding your work fun

See the last point.

> Rule #21: Don’t do big launches

I've had a _lot_ of success with well-timed ProductHunt launches. It's a huge
reason we were able to get early traction that led to sustained bottoms-up
growth. I've done multiple 1k+ upvoted PH launches:

[https://www.producthunt.com/@vhmth/made](https://www.producthunt.com/@vhmth/made)

These launches took my co-founders and I no more than a few days and most of
the work was put in upfront on build. You can do it quickly - you just need to
cram more hours in.

~~~
joisig
OP here, thanks for chiming in. Mostly responding to say that I love your
product Loom, use it several times a week.

> If you're taking VC money, you know the ride you're in for. > Don't be
> naive. And then don't be soft.

Exactly. Eyes wide open, make sure you know what you're choosing.

------
jtolmar
In #4 the author suggests using a service like Paddle to outsource billing.
Does anyone here have experience they can share to compare this against
Stripe? Other services?

It's hard to know how cumbersome any of these products are in practice when
their documentation is an endless series of quick start guides that leave
critical details as links to other quick start guides. "Set up a monthly
subscription service in 5 minutes! Please refer to these three other guides if
you want to know which customers have active subscriptions."

~~~
omnimus
Stripe is just payment processor. Paddle is similar to Gumroad they become
reseller of your producs. You get payed once month (you give them invoice
basically) and you dont have to care about invoicing. Your customers get
invoice from paddle. It is for digital products only the system cant be used
with anything that you ship.

Paddle also takes care of figuring out VAT for you which is a headache if you
are based in EU.

I guess to some people 2% more might be worth using Stripe (stripe is 3%
paddle is 5%) but for smaller players it solves real problems.

~~~
axelfontaine
Not only that, but how do you know you are correctly invoicing and declaring
sales tax in South Africa, Canada, Russia or South Korea. Using Paddle or
FastSpring (worked with them for the last 4 years) makes it their problem and
you can relax. Simply raise your prices by 2% and never think about the extra
fee again. Well worth it!

I would go even further. Selling globally and just using Stripe almost by
definition makes you a small criminal in a whole bunch of countries as it is
simply impossible (let alone knowing all the rules!) to file taxes correctly
in each country you do business (in the local language!). Outsource it and
forget about it! 2% is damn cheap!

~~~
omnimus
Good points. I had some pains explaining how it works to local tax authorities
but you do it only once.

------
bisrig
Something that I think is missing in the discussion here with regard to
payment methods is: know your market segmentation. If you are targeting b2B
(i.e. large business), there are going to be a lot of circumstances where
credit card payments are a non-starter.

From personal (F500) experience, I know that I am going to have to move
mountains in order for purchasing to accept a commercial arrangement with
monthly credit card payments, which means I will usually move on to a
competitive solution if one exists. In fact, one of the first questions I
usually ask a vendor is "do you sell through (preferred reseller already
listed as an approved vendor in our purchasing system)" as I know this is
going to make my job of getting the purchase approved 100x easier.

So in conclusion, know your market segmentation and how your potential
customers' expectations for how they will do business with you.

~~~
joisig
This is true and is the reason I break my own rule in this case - because of
large companies that are only willing to pay through an annual PO/invoice
process. None of our customers are quite big enough to require the use of a
preferred reseller, but I've heard of that arrangement as well.

------
fxtentacle
Rule #13: I wholeheartedly agree. One of the nastiest turns in my early days
of entrepreneurship was when my tax advisor stopped returning phone calls.
Shortly afterwards, I was contacted by a government agency that he had not
submitted paperwork on time, that they (the government) couldn't find him
anymore, and that I was fully legally liable to clean up the whole mess and my
company would have to pay a €2500 fine.

------
sexy_seedbox
> Rule #7: Choose simple, boring technology

Depends. For example, as an agency, if we don't try out JAMstack, headless-
CMSes, Gatsby/Gridsome, then as an industry, we'll still be stuck in the
WordPress/PHP ecosystem for years to come.

~~~
cwyers
I don't think he's saying that the industry should stagnate. He's saying it
might be dangerous, you go first. Let someone who had more of a margin of
error figure it out first.

~~~
fyfy18
I read this as sticking to what you know. Maybe you come from a C# background,
it's not hot and sexy (sorry C# developers), but it's still a perfectly good
technology to build a business on. Compare this to your team deciding to learn
the JavaScript flevour of the month and using that - it will probably take you
much longer than building with what you already know.

~~~
TomMarius
What new javascript flavors came out recently?

------
aabhay
Lovely piece, though there is a significant section missing about when in a
business’s lifetime these rules should start applying. Most of the business
functions (like support calls) should not be automated and doors should be
kept open, as long as the key decision maker has bandwidth.

E.g. don’t hire an accountant until you can’t do it yourself. Feel free to
answer random unsolicited messages until you have no more time for it etc.

Running a business is not a matter of defining these principles up front, but
letting efficient process emerge from need.

------
jurgenwerk
The author argues it's better to have monthly subscription plans only and
ditch the yearly plans, but I don't really get it. This goes against one of
the most common cashflow optimizations known in the SaaS world - which is to
push as many users to yearly plans as possible. I think long term subscription
plans should be preferred as they produce lower churn, make the revenue more
predictable and bring more money upfront.

~~~
joisig
OP here. My point is that getting paid yearly, especially if a lot of your
subscribers pay yearly, means you're back to a similar feast-or-famine kind of
cash flow situation as when you're transactional (e.g. an e-commerce shop).
This is more hassle since you now need to be more careful about managing your
cash flow and making sure you put aside for the leaner months. I fully
acknowledge that it is a great hack for customer-funded startups (we do it
ourselves at CrankWheel); as with all the "rules" it's more about becoming
aware of the hassle associated with a given decision.

I also question whether annual billing increases retention, when your
retention is good already (say, 3-5 years projected lifetime). Sure, it lifts
your retention when your average lifetime is less than a year, but does it
really when you have very low churn? Or are those big annual bills going to be
scrutinized more thoroughly than a monthly cost?

~~~
benjaminjosephw
Annual subscriptions are particularly valuable for SaaS companies which are
growing consistently. If I can reinvest the profits from an annual
subscription in my growth engine I've self-funded growth that I would
otherwise not have had. I'd only want to do this if my investment were likely
to produce a higher value over the same period than revenue lost from the
discount I've given my customer.

Regardless of retention benefits, if you've got predictable growth then annual
subscriptions should be well worth the discount.

------
fxtentacle
Rule #11 can be more challenging than you'd think. For my first start-up, we
had to initially sign up with a smaller bank because the bigger ones did not
want to deal with first-time CEOs. After a bit more than a year of waiting, we
were then allowed to create an account at the big boring bank.

~~~
halfmatthalfcat
Interesting, I walked into a local Chase branch and opened a business checking
+ credit card no questions asked.

------
ttul
The title should be amended: “Rules to run a bootstrapped indie startup with
minimum hassle”, perhaps.

For example, take rule 1: prefer recurring revenue. Recurring revenue is the
new hotness, but one time enterprise software licenses provide cash up front
as well as the ability to recognize all that sweet revenue in the year it was
sold. If you’re bootstrapping and properly accruing your revenue, having some
perpetual licenses isn’t a bad thing at all.

------
hyzyla
My favorite rule is "Investment to the marketing, don't spend". I think, if
replace "marketing" to anything else, this rule can be applied to any aspect
of the life.

------
orthecreedence
Regarding fremium, one thing I've had success with is to just not offer
support for unpaid accounts. Need help? Go to the community forum. Want
support? Pay for it.

------
spectramax
Everytime someone offeres top X things to as a startup, I immediately go on
the guard. 9/10 times, this advice is useless; 5/10 times it is harmful. My
mantra is do not follow _any_ advice and prime your brain with it. It turns
out, no one really knows what's going on. They're trying things out and see
what sticks. From Harvard MBA folks to your mom and pop shop that sells craft
supplies.

Please, I plead people on HN to stop listening to advice from people like Sam
Altman, they're akin to "How to become a millionaire" books that you find at
the side of the grocery store aisle. It is tabloid material that fills your
brain with false knowledge. Next time a problem comes up, instead of thinking
it through you immediately line up the dots and remember reading some solution
to it.

On the other hand, read engineering, science and mathematics books. Master
statistics and probability. These are universal constants that will _always_
help you. Learn accounting. I see the irony of me providing advice in this
rebutal, but there is a distinction - learn universally true things that have
data, backed by math and science. Those will always be on your side because
that's how nature really works. Otherwise, you'll get stuck in local optimum
of following the crowd.

No offense to the author, I am glad things worked out for you the way it did.
Remember, they won't work out for others and if I were you, I would not speak
with such confidence and authority - it stands on stilts.

------
redis_mlc
The other rule I've heard from very successful owners is to keep headcount
under 50 employees. Above that, you get into weird administrative requirements
like submitting payroll on tape, large company labor reporting requirements,
etc.

------
miguelmota
I generally agree with most of the points but just because it worked for the
author, it doesn't necessary mean that it'll work for your particular
business. Take it with a grain of salt since not all software startups are the
same.

------
everybodyknows
>#17: No patents … >Having documented prior art related to the patent (e.g. in
your source code repository or as dated documents in Google Docs or similar)
is likely to be as good a defense as having filed a patent at some point.

Has a git repo, privately held and without third-party attestation e.g.
github, ever been successfully cited as evidence of prior art? Timestamps
could be faked, so you'd have to point to the work history, which would be
gibberish to a patent judge and jury.

~~~
redis_mlc
The US, like most countries, is first-to-file now. So "prior art" doesn't
matter as much.

However, in some general legal dispute, timestamps and headers can be very
useful, especially if somebody strips them poorly. Put a header in your files
too with author and company info.

~~~
joisig
Thanks, I will update the post to talk about first-to-file since that changes
the tradeoff one is making by deciding whether to file patents or not.

~~~
redis_mlc
First-to-file in the US started March 16, 2013.

Filing patents is mostly something to do for startups if it's easy for you
(ie. your investor has an IP lawyer, or a relative is one), or your investors
want a patent story.

But even some SF Unicorns don't file patents, or delay it for a decade.

The problem with patents is that most startups can't afford the legal fees and
distraction to defend them, so why pay to file?

However, definitely file trademarks and copyrights (cheap and easy) and renew
your domain names.

Source: have done my own IP for software for 20 years, now looking into music
rights.

------
luord
Not that disagreement matters since he points out at the end that these are
guidelines and not rules, but I particularly disagree on Freemium and
answering services.

The first one not only because the idea I'm working on can't possibly work
without a free tier, but also because I use the free tiers of many services;
I'd feel better about myself by "giving back" so to say.

And the second one simply because I see those services as hassles themselves,
though I might eventually change my mind on that.

------
shostack
SEO is not free traffic. It is time and potentially money invested in creating
an optimized site, producing great content that gets indexed and back links,
and then marketing the hell out of said content so you actually get back
links.

------
hbcondo714
> building on top of long-term stable, multi-vendor platforms like the web, or
> Linux.

For rule #8, is the author recommending to build custom CMS / e-commerce
features for a SaaS? If so, sounds like a lot more work.

~~~
joisig
Good question (OP here). What I mean is that for example, if you build a
Chrome Extension (which is the main way my company's product gets used, so I'm
familiar with the pitfalls), you are now at the mercy of Google and how they
choose to develop their marketplace for extensions, how they choose to enforce
user security, and how they choose to change the platform over time. Single
vendor platform, similar to the other app stores.

I'm not suggesting you rely on nothing else such as 3rd party CMS or
e-commerce features, but I am suggesting that for example if you build a
Shopify plug-in, you are at the mercy of how Shopify chooses to develop their
ecosystem, and there will be potentially existential crises along the way.

As with all the other rules, it's one you can and should break when it makes
sense for your business. There are many thriving startups on top of Shopify's
ecosystem, Apple's ecosystem, Google Chrome's ecosystem, and so on and so
forth - I'm just urging you to be aware of the hassle you are creating for
yourself by choosing such a path, and to balance it wisely against the
benefits.

~~~
hbcondo714
Thank you for your reply and clarifying.

------
t222
This article resonated on so many levels with my experience of running a small
business. I wish I had seen it three years earlier :) A few additions from me:

1\. Monthly subscriptions

I wanted for those to be a success so much. After struggling for a few months
with churn we decided to stop them and only offer annual subscription. We had
people subscribe for a month, (ab)use our customer support for the entire
period and then cancel because the task that needed our product was done with
our help. One could argue that our product doesn't bring enough value or that
we made a mistake providing the support. We have a few times less churn from
annual subscriptions and in general a lot better and happier customers.

The other thing with annual subscriptions is that you get your money upfront.
Monthly subscribers churn for trivialities such as expired credit cards.

2\. No investment

A big hell yeah on this one. We were this close (three times) to get
investment money. God I am so happy we didn't. Our main goal was hiring top
talent. Unfortunately the talent didn't turn out to be that top so we turned
down the investors. The whole experience with building pitch decks made me
disdain the investing process and the people involved. Now I think of
investors (accelerators, angels, VC) as a waste of time. You are better
spending that time on your customers and product. I know a lot of people on HN
would disagree with this ;)

3\. Grow marketing skills and don't pay for anybody to do it for you

Learn how to do marketing. Just do that. And by marketing I mean mostly
content marketing. Learn how to write copy, learn how SEO works, check your
Google search console often to see where you stand for the keywords that
matter.

4\. Ads

We don't do ads (Google, Twitter, Facebook). We tried it and failed. For
example we were the top (only?) merchant bidding for particular keywords and
still reached zero conversions (and paid Google and Twitter a lot of money).
Facebook was even a bigger flop.

5\. Accept only credit card online payments

Hell yeah! Issuing invoices, accepting wired payments and manually hooking up
a "fake" subscription with your licensing software is a mess. God forbid
somebody asks for a refund. I strongly back what the author said about Gumroad
and Paddle (we use the former and are quite happy).

6\. Promos

This was one of our biggest mistakes. Doing holiday (Christmas, end of year,
black Friday, cyber Monday) promotions definitely brings some sales. In our
case though almost all of those new customers (90%+) churned at the end of the
billing period. We have less than 10% churn otherwise.

7\. Discounts

We no longer do discounts for individual requests ("hey I like your product
but it needs feature X - give me $100 off for the tip" or "I have a great idea
I need your product for but can't afford it yet"). We decided we don't need
that kind of people as customers. Always very demanding and the end most of
them (70%+) churn. In the early days we did a lot of those though.

We still do volume discounts. Also we no longer do educational or non-profit
discounts. Education institutions and non-profits often have bigger budgets
than the rest of our customers. It isn't fair to make a discount for a huge
non-profit and to charge regular Joe the shelf price.

8\. Freemium

We do it, it sucks. Probably shouldn't have done it. It is a lot of effort as
the author says. Can't really measure the conversion rate. Probably the only
good use for it is the (somewhat) extended trial - we disable a few features
of the product after the trial ends.

HTH

~~~
Leherenn
Regarding 7., do you feel discounts helped in the early days?

Does it make sense to be really flexible about pricing early on to get as many
users as possible then transition to a more stable pricing? I feel the
transition could be difficult if not done right.

------
jwilliams
> Rule #14: Don’t take in any investors

I know order isn't emphasized in the list, but this should really be #1. Most
of the other rules stem or are dependent on this one.

------
juskrey
Recurring revenue seems a golden cow of IT nowadays.

But remember, while it devoids of volatility, it also makes business much more
fragile. And you see problems too late.

------
raverbashing
Rule #7.1 - Boring technology _will_ bite you. They have sharp corners and
rough edges (usually at the edges) and you can cut yourself with it.

------
naringas
rule #1 implies that your customers must depend on you, it encourages the
service providers to make it difficult (or at least inconvenient) for their
customers to replace (or abandon ) them...

I don't like it. it reminds me of drugs. but I guess food and water also work
like that. it is likely that air will follow this path in the (hopefully very
far) future?

~~~
hinkley
It also isn’t the safety net you think. Several times I’ve worked at a startup
where a customer saw us as a critical or even _the_ critical partner in their
strategic roadmap and yet they were not paying us enough money to keep the
lights on. It made no sense to many of us. Couldn’t they see where this was
headed? (of course if you’ve gotten something for next to nothing you might
really want to keep the provider around)

------
acvny
Very good rules. I went through the point about unsolicited offers. I didn't
know how to say no.

------
epicgiga
Great content, I confirmed all these rules the hard way on my first business
play.

------
mdonahoe
"Rule #5: Don’t do freemium"

Isn't CrankWheel, the author's company, a freemium product?

"Free forever for limited use. No credit card needed"

What experience does the author have with SaaS products that have no free
tier?

I stopped reading here.

~~~
joisig
My company operates on a freemium model. It's a big hassle, as documented in
the section about not doing freemium, but it's also something we decided was
fundamental to our main distribution channel which is the Chrome Web Store
(breaking another of the rules in the article - but maybe check the last
section).

I haven't run a non-freemium SaaS company, but I do see what benefits it would
bring if we were able to operate on a typical 14 or 30-day trial model. The
big ones that would bring are a much shorter sales pipeline and shorter
feedback loop on ad spend.

~~~
adz_6891
Thanks for the clarification here!

Since you are using freemium at the moment do you have some way of quantifying
the hassle that this decision has created? It would be interesting to know
more about how you navigate this kind of tradeoff since this is really what
matters when it comes to detemerning whether a decision like freemium vs no-
freemium is actually a good decision

~~~
joisig
There's some operational cost (for running servers and such), but not that
high.

There's considerable customer support cost.

The main thing that I feel makes life tough is that the pipeline from, say,
doing some paid ads and seeing the results is several months long, and the
feedback loop on changes that can affect conversion rates and monetization is
similarly very long. We've learned to cope with it but it would be nice to
have a one-month feedback loop or shorter.

~~~
adz_6891
Thanks for sharing! Seeking a shorter feedback loop makes total sense.

------
codingdave
Most of those rules are decent, but they all have exceptions. You almost need
a final rule, to think about the reasons the other rules exist, and feel free
to break a rule if appropriate for your own specific situation.

~~~
bruckie
It already has exactly that:

 _A confession, and a caveat_

 _I’ve broken almost every one of the rules above!_

...

 _The rules are not meant as absolute rules, but as food for thought: For you
to think about the tradeoffs, of how and why there will be additional hassle
and distraction from your core activities, if you decide to “break” one of the
“rules”._

(maybe that was missing from an earlier revision or something?)

