By 2003, our product commoditized and margins started shrinking fast. All of a sudden the used laptop business turned into the used VCR business. New laptops were cheap and our margins went from 60-70% to 5-10%. Our world was changing and we needed to pivot fast. We had to lay off our entire staff, sell our office building (yea, we bought our own office building) and start over...but not from scratch.
During the good times, we would always throw new ideas around. If we agreed that an idea was solid, we would build it out and let it sit on the back burner. When the time came, we were able to jump into a new project that was already setup and ready to go. We just needed to start executing.
Fast forward to today. Our website (services, subscriptions, advertising) currently does about $400k annually (up from $250k last year) with a substantial profit margin, zero debt and miles of growth in front of it. It has been WAY harder this time around, but we are building something much more substantial.
While my business partner and I whole-heartily believe we are about to enter a hockey stick phase of growth, we do have a couple of ideas built out and simmering on the back burner...just in case.
tl;dr I have been bootstrapping and making my living online since 1999.
If domain knowledge is the main barrier to entry, the competitive advantage is not the fact that it's a niche, but the fact that you know something that your competitors don't about that niche.
I'd highly recommend building something like that (a low-maintenance income generating business) as opposed to the sort of zero income "shorten urls then tweet them from your location on your camera phone" thing that requires 14 billion users and a Google buyout before you see your first dime.
It's a strange niche to be in because it's something people are looking for but there was basically nobody doing it when I started out. It goes squarely against the two most fundamental pieces of business advice you can get: "Never build a business based on a missing feature of a popular software product", and "If there's no competition in the space, be warned: there's probably no market there".
Evidently, there are actually a few good left ideas out there that nobody ever thought of doing before.
First time I see this, is it really a fundamental piece of business advice?
You want to build a business, not a feature. Unless you can come up with more features, it's difficult to grow the business.
Then of course there is the risk that your feature will come standard in the next version of "popular software product." If your audience is niche, then you are likely safe, but if your feature appeals to all users of the product, it's inevitable that it will eventually be included in a future version of the product. You end up doing the R&D for free.
The heavy lifting is done in C# as well, on a pile of EC2 machines that gets spun up each night. Back before EC2 Windows instances came out, it was running under Mono, with the help of a bunch of Ruby scripts to handle everything that Mono let me down on (such as ALL the downloading, uploading, talking to webservices, etc. that require pieces of .NET that is hard to implement and non-sexy and thus didn't get implemented by the Mono team).
Now it's all C#, leveraging a half dozen Amazon Web Services and running on EC2 Windows instances.
I have been living full time on this since I launched paid plans in May this year. My annual revenue goal was surpassed in first two months. But to be honest, I was very scared the week paid plans were launched. Thoughts of what if I don't even make equivalent to my previous salary haunted me (I had left my full time job 2 months before launching paid plans -- so my family and friends thought I was doing nothing for 2 full months). But, it has been profitable (touch wood!) and I am very happy about it. Been approached by investors a couple of times, but the revenue generated is good enough to expand the team by itself so I don't see a reason to take any outside investment.
But before getting to this point, I had toyed with numerous ideas and coded a bulky conversion optimization platform for more than a year. http://www.wingify.com/product/tour.php Showed it to patio11 and others who all said: "you know what it has to be simple". So, redone the whole thing and that's how Visual Website Optimizer came about to be.
I have been lucky to have learnt many great lessons: what to make, how to make and how to get covered in TechCrunch even if you are bootstrapped :)
I quit my job in March, and could survive on my fairly modest revenues indefinitely. (I have done some consulting on the side in the interim, which is nice, because it means I don't have to make any hard choices like "Proceed at maximum speed on the business or go home for Christmas?")
The next product comes out at the end of November or thereabouts. I am cautiously optimistic. I haven't accepted any investment yet.
- Only 1 fulltime employee (um...me) + 3 remote freelancers.
- Works from home.
- Based in Penang island (somewhere between Bangkok and Singapore with its living cost much lower than both of them).
- 2 partners (one of them is me)
- 3 board member who contribute several hours a week gratis
I took some funding at the beginning, but we are now completely self-sustainable. We did this by being hungry. Our burn rate is incredibly low. Our downtown office we rent we got for next to nothing (thank God for karma). The only thing we splurged on is we bought the best tools for our employees. Getting married in 230 days also helps you to keep your foot on the gas.
It's been a lot of fun.
I'm curious to how you got a free office. Would you mind sharing?
I did this by writing a curriculum that covered basic computer office skills. We got about 15 laptops donated from the states and began our mobile lab. Our first 2 class rounds were people that we hand picked to be teachers in later classes.
The next round of classes launched with the teachers that we just trained running the show (we still attended all of these sessions just to help out). The classes were self sustainable (teachers got paid a small amount from students, and the students were then committed to the program).
Jason (the guy who hooked me up with the downtown office) was a part of my team.
Moral of the story: Be nice and help people.
Congrats. Your app looks beautiful.
Now when do we find out what Acorns are for? ;)
Name: Eric Lavigne
Something I made: https://github.com/ericlavigne/island-wari
Acorns are currency.
Nearly 45% of this year's revenue has come from direct advertising.
Another 40% of the revenue comes from contextual job advertising which directs users to a private label job search engine.
About 10% comes from product sales (an online job search course), and the rest comes from various affiliate programs.
I've also been able to get some significant referral credits with a few online clothing retailers. That's enabled me to be well dressed, despite just scraping by for most of the year.
is that an intentional mistake for SEO purposes?
www.sourceguardian.com - encryption software for PHP. Have been running this for around 10 years. This alone would be a very good 'wage' for someone
www.europeantenders.com. This provides leads for european government contracts
www.ukscrap.com. This is a referral site that we created for people who's car is 'end of life'.
www.rubyencoder.com. Similar to SourceGuardian. It's for encrypting Ruby source code. We had a need for this ourselves so created it
I run a few more also. I love the freedom that this has given me and the regular income allows me to play with what I'm interested in
Feel free to message me privately if you want any details or just some advice
Currently working on Djangy.com, hopefully that will "supplement" thathigh :-)
I got lucky with a good name and a ton of early exposure from college humor.
I basically get around a million page views per month, which is the figure I use when I sell ad space.
If so, I talked to you :-)
(I currently use Google DFP)
http://www.facebook.com/amznwishlist was pretty profitable up until about mid-October when Amazon decided to disable some of its Product Advertising API calls for getting Wish List data. If the app still worked and ran through the holidays, it probably would've paid for rent (and then some).
http://www.fatearthmedia.com/ - My browser extension for shopping sites is also profitable. If the Mozilla add-on policy was less strict about affiliates earnings, then it'd probably be paying for rent as well.
If I have a tip for anyone, the consulting/startup pairing works wonderfully well....especially if you're in demand. I can turn paid work on and off as needed depending on what we're working on.
I think it's mostly a case of knowing people. Nearly all of my work is from people who already knew me before they needed the work, or knew someone who I had previously done work for.
Referrals and recommendations are worth more than anything else, and people will pay more for someone they know will do a good job. My two current side projects are for an old client of a company I used to work for and had worked with previously (they referred me), and a friend of a friend of my father. Previous work has all been via referrals from friends or clients. Once you do a job for someone, give them a stack of business cards and ask them to refer you to others. If you've looked after them, they'll be more than happy to do it. Since starting my business 3.5 years ago, I've never once had to actually look for work.
I'd strongly avoid looking for work on any website, you end up competing on price, and that's no way to make a living.
If you're up against low price estimates, they're probably using templates, or reusing stuff they've already done for someone else or maybe even outsourcing it overseas. You can't compete with that when you're starting from scratch on your own time. You just have to accept that some people are cheap and won't pay your price. You should never do a job that loses you money just for the sake of winning the job.
Estimation on any project is a matter of breaking it down to the smallest components. Estimate each component with a high/low bracket (i.e. best case and worst case). Find the average, add some slippage (15%-20%) to allow for when you get it totally wrong, or to give you some room if the scope changes (and you want to be nice and not charge more), and you have your number.
Don't ever budge on your hours estimate.
If your client thinks it's too much you can do a % discount on the overall price, but you make sure they're aware that 200hrs is 200hrs. Too many clients think you can somehow build the exact some thing, but in less hours by "trying harder" or waving a magic wand. They'll ask why the guy on craigslist is cheaper, I'd suggest they give the guy a go and find out, and if they're not happy to give you a call back. It may help to ask them if they'd ask their surgeon for a discount :P
But seriously, give up on craigslist. The only people looking there are ones that are trying to save a buck. We've tried a few online "job markets" and found we were estimating $2000 for jobs others were quoting for under $500. A 15 page website in a day?? No thanks!
We're doing iOS apps and consulting. Finding enough consulting to pay both the bills and the cost of developing our products has been straightforward. I've been working on product #2 this morning and having a lot of fun.
The phone is still operational for all other tasks which is ideal for when you are on an airplane.
I actually started it for my then girlfriend whom I wanted to go snowboarding with me by buying a board to guilt trip her into coming along. We couldn't find a place with a lot of women's snowboards so I pulled up some datafeeds and scraped them just for the women's boards, some friends asked for the list, I got lazy emailing everybody so I made a site, threw up the affiliate links for funsies, and actually started making some money.
It's a seasonal earner which I don't recommend to anyone because my winter makes or breaks my year. It helps a lot that I don't live in the Western world anymore which reduces my cost of living, but Shanghai is getting more expensive by the day so I'm working on other revenue streams.
Completely bootstrapped. The only cash I put down was $100 for some small graphic design work, $500 for an initial Adwords campaign, and $20 for a server.
Did the adwords campaing success?
* Sells advertising.
* Sells physical goods.
* Sells a software product.
* Sells a subscription to software.
... and so on and so forth.
I've learned five lessons.
1. Charge from day 1
2. Focus on business customers (the Average Selling Price is much higher)
3. Pump all your profits back into marketing.
4. Never stop innovating.
5. Put a phone number on your site (it does wonders for trust)
In fact, there are sites that sell wholesale kits for the technical part of the company.
We didn't buy a kit though and took the high road of building all our software in house using hired talent. Most of the work was done through freelancers at under a $3000 budget. (We would not do this again, the code quality on first run was incredibly low and hiring better is definitely worth it).
Getting the marketing working took another few thousands, but all said and done, we got it running with under $10k investment.
What was especially hard for bootstrapping for me was that I'm not a very technical guy. Most bootstrapping ideas here require you to be the engineer, but I didn't have the privilege of that position. I had to pull off a Derek Siver (http://sivers.org/how2hire) to get the idea to work.
Now that it is running though, it's doing great. We're pulling in over $100k of profits on an annualized basis, enough to cover living costs and more for sure.
As an aside, the roadblock we're running into now is that user demands are outstripping my current system of hiring freelancers. I've posted another thread asking for hiring help if anyone has experience: http://news.ycombinator.com/item?id=1932131
Anyway, it's been a really fun ride, and I want to tell everyone that it really can be done. Your idea needs to be creative, and you need to be in a space where bootstrapping is possible (e.g. NOT biotech). The biggest lesson is to have good judgment. While investors are often a burden, they add a lot of experience for real, and with bootstrapping, sometimes you're left completely on your own.
I initially hesitated to reply but as the original post did not differentiate between type of investor I assumed it would be acceptable. I stand corrected.
I signed up for info...
(Did you work on the SketchUp team at Google?)
I think that if you want to differentiate between startups and self-employment, a good litmus test would be to ask yourself whether someone would potentially buy your business. If the answer is yes, then it means that there's something more than the income stream from an individual's labor.
After 5 months developing a fairly complex iOS app for a local cable company (think i.TV + Netflix like vod recommendations) it sure feels that we have created some value as we can go out and create spinoffs or repackage the same solution to other (non local) cable providers.
It's been close to one year since the first people jumped in full-time besides myself, and we've been funded to get the product and early revenues on track.
Also I find it a lot of fun to check out the different startup websites mentioned, because you know a bit of background info.
Thanks all for sharing!
already making enough revenue to keep us up, though (3 people total)
However, most people don't take full advantage of the powerful software I built. One entrepreneur was savvy enough to realize that I had something powerful on my hands, and now he's paying me handsomely to manage and grow his Facebook and Twitter profiles. I use CustomerFind to find people (targeted by geography and keywords) who might be interested in his services, and then one of my employees sends them a personalized direct message to start building the relationship. It's like SalesForce but for Social Media. I'm excited for what the future holds there...
startup living off you: it's costs are being paid out of an account that you personally funded. it is not in the black yet.
you/startup living off investors: it's costs (including possibly paying you a "salary" of some kind) come out of an account which was funded by investors -- other people's money, not from you and not from customers
It's been 5 years though, so I'm not sure one could easily qualify us as a startup any longer.