Leveling Up

Leveling Up

How entrepreneurship effectively has a career ladder, where what you learn doing one company can be used to help jumpstart the next.

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Patrick McKenzie

April 16, 2015
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Transcript

  1. LEVELING UP Patrick McKenzie, Starfighter

  2. What It’s All About

  3. Flying Geese

  4. Flying Geeks

  5. (Make much better mistakes!) Don’t Make Our Mistakes

  6. The Tutorial Mission: Your First Business ¨  Ship it. Ship

    it. Ship it. Ship it. Ship it. Ship it. ¨  Optimize for learning over perfection. ¨  Start accumulating unfair advantages for later businesses. ¨  Cover “minimum viable financial goal.”
  7. How You Know It’s An Advantage? ¨  People tell you

    you’re anomalously good. ¨  Watch other people around you in the community. Note where you’re doing particularly good on something useful. ¨  Use your growing understanding of your business to project what X would do in another, larger business, or a business with advantages you lack.
  8. The Case Against SaaS For Biz #1 ¨  Huge barriers

    to shipping and keeping it in the market. ¨  Hard to sell and market without any pre-existing foothold in industry. ¨  Long slow SaaS ramp of death.
  9. The SaaS Grind $0.00 $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00

    $1,400.00 Appointment Reminder revenue (first 18 months)
  10. The Glide Path To SaaS ¨  Plant a flag on

    the market with an e-book, WordPress plugin, etc. ¨  Start collecting email addresses. ¨  Launch a productized consulting business. ¨  Gradually titrate up the amount of software offered.
  11. Typical Bootstrapped SaaS Pricing ¨  $29 ~ $49 – Tier

    1, some foozles ¨  $99 – Tier 2, even more foozles, maybe a special feature ¨  $249 – Tier 3, lots and lots of foozles
  12. Productized Consulting Base Offering ¨  $99 a month: SaaS application

    to do pricing pages ¨  $500 a month: Savvy pricing pages as a service ¤  3 A/B tests to run a month ¤  We’ll implement them ¤  Nice PDF report to make you look good to boss ¨  $2.5k to $10k++ a month: Chief Revenue Officer ¤  I’ll own your pricing strategy and physically manage it. ¤  I’ll implement all your upsell/etc lifecycle emails. ¤  I’ll do all the analysis/reporting for management.
  13. Founder / product / market fit is one of the

    best advantages you can possibly have. “The Peldi Rule”: Love What You Do
  14. A Missed Opportunity BCC AR Consulting Starfighter Productized Consulting

  15. Level Up In… ¨  Scale of problem you’re attacking. ¨ 

    Engineering acumen brought to bear on target. ¨  Sales/marketing techniques. ¨  Sophistication of business operation.
  16. AR Revenue Curve Was Depressing $0.00 $1,000.00 $2,000.00 $3,000.00 $4,000.00

    $5,000.00 $6,000.00 $7,000.00 $8,000.00 $9,000.00 12/2010 1/2011 2/2011 3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/2011 10/2011 11/2011 12/2011 1/2012 2/2012 3/2012 4/2012 5/2012 6/2012 7/2012 8/2012 9/2012 10/2012 11/2012 12/2012 1/2013 2/2013 3/2013 4/2013 5/2013 6/2013 7/2013 8/2013 9/2013 10/2013 11/2013 12/2013 1/2014 2/2014 3/2014 4/2014 5/2014 6/2014 7/2014 8/2014 9/2014 10/2014 11/2014 12/2014 1/2015 2/2015 3/2015
  17. Those Interminable Middle Years $0.00 $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00

    $12,000.00 7/2006 9/2006 11/2006 1/2007 3/2007 5/2007 7/2007 9/2007 11/2007 1/2008 3/2008 5/2008 7/2008 9/2008 11/2008 1/2009 3/2009 5/2009 7/2009 9/2009 11/2009 1/2010 3/2010 5/2010 7/2010 9/2010 11/2010 1/2011 3/2011 5/2011 7/2011 9/2011 11/2011 1/2012 3/2012 5/2012 7/2012 9/2012 11/2012 1/2013 3/2013 5/2013 7/2013 9/2013 11/2013 1/2014 3/2014 5/2014 7/2014 9/2014 11/2014 1/2015 3/2015 AR BCC
  18. Ending A Chapter

  19. Deciding When It’s Time To Move On ¨ Business not helping

    you achieve goals. ¤ Live / Love / Learn ¨ You’ve stopped accumulating marginal advantages. ¨ It’s “clearly time to go.”
  20. Options For Pruning Portfolio Projects ¨ Shut it down. ¨ Put it

    into maintenance mode. ¨ Sell it.
  21. What Does Maintenance Mode Mean?

  22. Anatomy Of A Saleable Business ¨  Goldilocks zone for revenue

    / price. ¨  Low ongoing time involvement from founder. ¨  Low-risk that present revenue evaporates. ¨  Growth in market. ¨  Technical risk mitigated.
  23. Early Decisions Make Selling Easier ¨  Business opportunity: enduring and

    stable/increasing ¨  Technology stack: something simple and well understood ¨  Business model: fat margins, ideally recurring revenue ¨  Traffic sources: diversity and defensible ¨  Founder involvement: variable as desired
  24. SaaS businesses typically get 24X to 36X of average month’s

    seller discretionary cashflow (SDC) Let’s Talk Numbers
  25. Substantial One-Off Money = ?

  26. Solo Founder -> CEO

  27. Starfighter ¨  Online games (CTFs) engineers play, for fun, by

    programming. ¨  We passively identify skilled engineers. ¨  We contact them and ask about background/goals. ¨  If appropriate, introduce them to hiring managers. ¨  If they take a job, we earn a commission.
  28. What does a CTF look like?

  29. What does a CTF look like?

  30. Why was this impossible before? ¨  Co-founders: met them as

    a direct consequence of doing things on my own. ¨  Starfighter is tremendously technically ambitious. ¨  We used reputational capital to bootstrap sales cycle. ¨  Self-investment required; would have been painful before.
  31. Does Starfighter Pass The Peldi Test?

  32. Rule #1 at Kalzumeus Software was, literally, “We never, ever,

    ever crunch.” Guess what happened the last three months. Remember To Be True To Yourself
  33. Thanks for listening ¨  patrick@kalzumeus.com or @patio11 ¨  https://training.kalzumeus.com (mailing

    list) ¨  Software Conversion Optimization course upcoming – send me an email when it launches and it’s yours. ¨  http://starfighters.io ß seeking players and clients, launching early May two weeks!
  34. Optional Sidebar About Selling

  35. Pre-requisites For Sale ¨  Understand your numbers cold and be

    able to document them all. ¨  Isolate assets to be sold from the rest of your business. ¨  Minimize founder ongoing time commitments. ¨  Block off a few months.
  36. Short answer: yes. Should You Use A Broker?

  37. Process and Timeline ¨  January / February: Lay technical and

    organizational groundwork. ¨  March: Start working with broker in earnest. ¨  Late March: Buyer identified. ¨  April 2nd: Contract executed. ¨  April 8th: Wire transfer hits bank account. ¨  May 3rd: I’m freeeeeeeeeeeee.
  38. Process Drill Down ¨  Gather data on everything. Answer ~100

    questions. ¨  Broker prepares prospectus. ¨  Broker locates, vets buyer. LOI signed. ¨  Due diligence to verify all material facts. Answer ~10 questions. ¨  Contract signed. Buyer escrows. ¨  Transfer domain names & accounts. ¨  Escrow released after inspection period ends. ¨  Aftercare for negotiated period.
  39. Making Your Buyer Happy ¨  Spend extra time improving backend.

    ¨  Find ongoing technical help for them (huuuuuge). ¤  Retainer agreement a good option. ¨  Process documents for day-to-day and next ~6 months. In particular, marketing plan of attack. ¨  Go overboard on training.
  40. How (Not) To Time A Sale $0.00 $1,000.00 $2,000.00 $3,000.00

    $4,000.00 $5,000.00 $6,000.00 $7,000.00 $8,000.00 $9,000.00 7/2006 9/2006 11/2006 1/2007 3/2007 5/2007 7/2007 9/2007 11/2007 1/2008 3/2008 5/2008 7/2008 9/2008 11/2008 1/2009 3/2009 5/2009 7/2009 9/2009 11/2009 1/2010 3/2010 5/2010 7/2010 9/2010 11/2010 1/2011 3/2011 5/2011 7/2011 9/2011 11/2011 1/2012 3/2012 5/2012 7/2012 9/2012 11/2012 1/2013 3/2013 5/2013 7/2013 9/2013 11/2013 1/2014 3/2014 5/2014 7/2014 9/2014 11/2014 1/2015 3/2015 BCC Monthly Revenue