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. 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.”
  2. 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.
  3. 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.
  4. 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)
  5. 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.
  6. 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
  7. 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.
  8. 13.

    Founder / product / market fit is one of the

    best advantages you can possibly have. “The Peldi Rule”: Love What You Do
  9. 15.

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

    Engineering acumen brought to bear on target. ¨  Sales/marketing techniques. ¨  Sophistication of business operation.
  10. 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
  11. 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
  12. 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.”
  13. 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.
  14. 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
  15. 24.

    SaaS businesses typically get 24X to 36X of average month’s

    seller discretionary cashflow (SDC) Let’s Talk Numbers
  16. 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.
  17. 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.
  18. 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
  19. 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!
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. 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