Ask HN: Bootstrapped business is good but slow growth. Should I raise money?

https://news.ycombinator.com/item?id=8625562

by newpreneur • 12 years ago

25 40 12 years ago

news.ycombinator.com

hi all. I run a 100% bootstrapped SAAS business and I am solo. Part time right now and I have a fulltime job as well. I literally built it on top of wordpress (dont't ask) to validate the idea and before I realize, I have 35 payinng customers and revenue averaging $7000/month. Cost is about $1500 for servers and ocassional freelancer work.

Here is the issue. The application is not a very simple thing and a lot of potential clients want demo or discuss things over phone. I am getting a lot of interest from potential clients but being solo, I don't have much time to entertain all queries. So in short, I am growing but very slow and not able to yet quit my fulltime job because I have high family expenses (2 kids,mortgage etc). And just to confirm, the profits from this business is not yet enough for me to do it fulltime and support my family.

I have a potential Angel investor who I could talk to and may be get some funding so that I could quit my job (which i really want to quit) and do this fulltime ? That way, I could scale it faster and may be hire an employee or two as well. I also have plans to revamp the entire app by getting rid of wordpress and building it properly now that I have validated the idea.

Technically, the platform being wordpress is very limiting and I have plans to revamp it but again, need a good team for that.

What would you do ? I know everyone's situation is different but really want some advice here.

kayhi• 12 years ago

How long did it take to reach that revenue?

newpreneur9• 12 years ago

Well When I started, it took me abouta year to get first 20 clients. But since then, on an average, just with inbound marketing, I am getting about 6-8 clients per month (this includes clients leaving on an average as well). My motivation to do this fulltime has many reasons:

1) Quit my job (very high paying btw)

2) I love this business and really want to spend all my professional time only on it for next few years.

3) Really scale this business because I have seen the potential. i could be delusional but based on my experience so far , I think this could be a $10 Million business in 7-10 years if done right with scale.

partisan3• 12 years ago

First, congratulations. And good on you for not putting the cart before the horse (quitting before having revenue).

Could you hire an employee, part-time, using the revenue you are currently bringing in?

newpreneur9• 12 years ago

Thx. Very difficult to hire someone locally. I am in NYC area and with my profits before taxes being 5K (give or take), I doubt I can find someone even part time here in the US. I could go offshore but I dont' want to because of timezone and communication gap issues. I know this because my current freelancer even though good, is offshore and I am not able to drive things forward with him as smoothly as I want to. Btw, I noticed on your profile that You do C# .NET MVC. I am revamping the app in exactly that :)

notahacker• 12 years ago

$3k plus commission surely isn't out of the question for a part time salary, even in NYC? Not everyone is stuck with your costs of living.

A salesperson with connections in the relevant industry might even consider doing it for commission plus vesting equity only with those numbers.

If you feel that it's a business that needs a big development investment or push by a sales team to fully realise its potential or stave off competition then by all means go for a significant level of funding, but it would be a shame to give up control of your business for just enough angel money to look after your living costs after you've done the hard bit of getting nearly there

simplyinfinity• 12 years ago

Hey, I'm a C# mvc dev looking for cool stuff to build. Email me erasrz at Google's mail if you need help with this thing. Cheers

partisan3• 12 years ago

I understand. I guess it depends on the level you are hiring at. If you need someone who has specific knowledge then they are probably too expensive, but if you can train someone, then you can probably hire someone with very limited experience and willing to grow with a company.

Good luck on your venture. Exciting times ahead for you and it's inspirational for the rest of us. Feel free to shoot me an email if you'd like to discuss the C#/MVC aspect.

davismwfl2• 12 years ago

Why not hire and train a part time person (or friend) that can help cover demo's and help you grow a little faster and stay bootstrapped. It would mean that you would need to add more customers before you can go full time but it is a way to stay bootstrapped and not take others money. You could even pay this person per lead closure, so for every client they get signed up you pay them $200 (or $400 whatever).

You could also work to simplify/automate the on-boarding, spend some of your monthly revenue on creating some videos that cover the features/questions people seem to ask the most about. You can make a few videos, 45 seconds or less, and have those on the site for users to view without registering. Then record a full demo that is say 5-10 minutes and if someone registers for more information then send them a link to that video and then follow up with them. You may help shorten your need to be involved in every sale, and decrease on-boarding time. This doesn't mean you can necessarily make a sale without jumping on the phone, but it does mean you may be able to minimize those conversations more and therefore make them more scalable and even possibly easier for you to train others to help you close deals.

In the end, raising money takes way more time and effort than you initially think, and even with friendly investors it can change your ability to go the direction you want. Lastly, remember a lot of investors try and minimize founder salaries, and if you need 10-14k a month to survive then you may struggle to find an investor that will commit when 85% of his investment is just paying for you. If you are thinking you just need 50k to make it for 3-5 months, you might be able to get that more through friends/family/bank to help bridge the gap until you get more signups.

newpreneur9• 12 years ago

Excellent points. I already have a detailed video demo of the app and quite a few marketing materials. In fact, the videos are the reasons I get a lot of inquiries because people love it. For existing clients, I have a lot of training materials in the form of videos and FAQs as well that they can go through. In fact, that is the first thing I ask them to do when they signup. That keeps the number of support tickets much smaller.

But overall, I can only give it so much time. There is support tickets, presales inquiries and a bunch of other things (billing/accounting). So I am always choosing (and struggling) on what to do when.

You nailed it perfectly about my financial situation. I need about 10K cash per month for family expenses (dont judge, my kids daycare costs 3K total and my mortgage+taxes is 3K being in the East Coast).

I could always sell my house and scale back but I really don't wanna do that because I wont save much in rent anyway.

Knowing that this business model is solid and if I had the right team and time/money, I could scale it a lot faster, I am leaning towards the funding option but want to be very very careful of course.

davismwfl2• 12 years ago

No judgement here, I am right there with you. I live on the east coast and have a wife, 3 kids and all the expenses that go with the family too. So I get it. And you should really be thrilled you have done so well, that is totally awesome.

Video's are awesome and seem to really help. Glad they are already working well for you.

To your other point, I have trained my wife to handle our non-automated billed clients and I have outsourced all the other details like Accounting etc. It is amazing how much that frees up time and really does not cost much at all. I also use an online accounting system that is integrated to our products/services so that when a client purchases it is automatically added to the accounting system and so it removes the need to do bookings etc. The accountant than picks it up from there and does their thing and keeps everything straight for me. If you haven't already done that it may be worth your while to go there. Since you are using Wordpress there are existing integrations to QuickBooks, even if you don't use it for accounting today it might be worth moving to it and buying one of the plug-ins for like $100.

We just built a subscription service website for a client (they do online training with videos and quizzes) and they wanted it in Wordpress, so we utilized Woocommerce, Paid Membership Pro and a QuickBooks plugin that basically allowed us to write a very small amount of code (for that part) but let them have a fully integrated solution from signup to purchase to accounting. Just a point, not an endorsement for any of those products, but damn it works and it was way cheaper than a fully custom solution for them.

Lastly as to hiring someone, since you are in a more expensive part of the country, you could train/hire someone in say the Southeast or mid-west where salaries are a bit lower. Also, if you don't need a developer type to do the demo's, then you can likely find someone for a pretty reasonable rate to help you get people signed up.

bengali32• 12 years ago

In the end, raising money takes way more time and effort than you initially think

agreed. Some investors can be needier than your neediest customer, and worst case, you can always fire a needy customer...

tbrooks3• 12 years ago

Are you me?!

Wow this described my situation exactly.

Same revenue, same costs, same lifestage (2 kids, mtg), same high paying job, etc.

I've found some ways to make the process even more self-serve than it already is, maybe we can compare notes?

newpreneur9• 12 years ago

wow. That is a coincidence. But every word is true :) How long you been doing this ? And yes, would love to share notes. How to contact you ?

tbrooks3• 12 years ago

2.5 years. Yeah I think I could be at $1mm ARR in 3-4 years if I was full-time. I'm just too risk averse to make the jump from my current gig.

I've tried hiring a full-time salesperson to grow the business, but it's just really hard to find the right person.

[edit] email me at my HNusername at google's mail service.

saluki• 12 years ago

I wouldn't take funding . . . stay bootstrapped . . . sounds like you're growing things nicely . . .

You're making enough you could hire an assistant to handle some of the support, inquiries, billing/accounting so you can focus on demo's and growing . . . support would probably be the first thing to outsource . . . setup a google doc outlining typical questions/responses . . . so it's pretty straight forward and have them send something more complex on to you to handle . . .

That will free up some time for demos, etc.

You might get a bump from conversion optimization, reducing churn, etc . . .

Could you go to 4 days per week at your day job . . .

Start doing one demo call over lunch a few times per week . . .

I think there are lots of less expensive ways to gain more time/revenue vs. losing equity.

Good luck scaling your SaaS.

bengali32• 12 years ago

pertinant quote from Mike Taber of singlefounder.com

Great, I’ve built a bunch of systems… Now What?
You have one job left: Fire yourself.
That’s right. Once you’ve built the process and have tested it to be sure a) it’s doing what it’s supposed to and b) has a feedback loop that lets you monitor it’s progress, you need to fire yourself from executing that process. Outsource it, hire someone part-time, hire an employee, use a virtual assistant, automate it with code, etc. Whatever the case may be.
If a process you’ve developed is functioning properly, then as the business owner, you probably shouldn’t be doing it.
Your job is not to build products. Your job is to build systems.
That’s how profitable companies are built.

newpreneur9• 12 years ago

thx for your answer. Makes sense.

gyardley• 12 years ago

Not sure if you're talking about scaling to a $10MM exit or $10MM in annual revenue or what exactly in 7-10 years, but that sounds to me like too little too long for a knowledgeable SaaS investor to invest in - they're looking for something that has the potential to be at least an order of magnitude larger.

That suggests to me that either a) you're not going to be able to raise in the end, which is bad because you're wasting time, or b) you are going to be able to raise but only from unsophisticated investors with unrealistic expectations, which is a hell of a lot worse.

It would be a real shame to give up a lot of control and attach yourself permanently to unsophisticated investors with unrealistic expectations - just so you can quit your job a few months sooner.

If I were you, and if I really thought my business' potential was $10MM in revenue in 7-10 years, I'd gut it out and do what I needed to in order to continue to bootstrap until I could safely quit. You've got the potential for a great personal outcome - if you can just keep it personal.

jbverschoor• 12 years ago

How about getting a loan from a bank? That way you don't have an angel breathing down your neck, so have some air to scale the business, which then should be big enough to pay for your salary

schutzsmith• 12 years ago

You don't happen to be in the Hudson Valley do you? We've got the Hudson Valley Tech Meetup second week of December and there's several folks just like you at that. Several now have distributed workforces.

Happy to introduce you.

PS. I'm totally intrigued now to find out what your WP app is!

newpreneur9• 12 years ago

sure where exactly is the meetup ? I will try to make it. How do I signup ?

rxm• 12 years ago

In general it is not a choice, but a question of numbers. Software businesses tend to benefit from having many customers, which requires growth and capital. A consultancy that develops and uses software tools might go the bootstrap route. Do the numbers and then decide. What does it cost to add and maintain a customer? Would you get more customers with a better feature set? How smooth is the API, interface, and documentation?

I have a nice consultancy that developed many unique software products. Over the years I have not been able to maintain them. If I had taken outside money I could have taken those tools to market and probably grown beyond my current stagnation point.

rajacombinator• 12 years ago

If you have to ask others, you're probably not ready to jump ship and go 100% on this business. I don't mean to discourage you because in your place I would probably do it, but it will be very stressful especially with your family situation. If you already have doubts going in it will be very hard on you.

debacle• 12 years ago

I would recommend you contact patio11 or read up on some of his materials about passive marketing. Why not provide a free/demo tier of your software that is rate or context limited (or returns junk data). If they want to discuss over the phone, do it, for now, but work aggressively on a comprehensive FAQ.

That said, if you're clearing $5500 a month from your side project and working fulltime, why can't you save up for 6 months then quit your job? That should give you close to 6 months of runway for your project, which should be enough to allow you to extricate yourself from WordPress and hone your marketing strategy.

Finally, I mean if the angel is someone you trust who is offering fantastic terms and isn't looking for a huge chunk of your business, there's no reason not to go for it.

fananta• 12 years ago

i'm curious, what is the business (if you don't mind sharing)

infinii• 12 years ago

See if your company allows for a sabbatical. If they do, save the side revenue for a few months to prep for the sabbatical. Then devote yourself 100% to it to push it to the next step. Afterwards, you have a job waiting for you and you should have done enough work to see whether the future of your business is viable.

Employees and/or partners is also a good idea.

seanccox2• 12 years ago

I'm looking to relocate to NYC/DC and I have a passive income stream that supports me. I've been looking for jobs that would utilize my journalism/sales experience, but with a focus on technology.

Care to chat?

newpreneur9• 12 years ago

Hi sure. how can I get in touch with you ?

seanccox2• 12 years ago

You can reach me with an email to this address: mr.sean.cox@gmail.com

mrfusion• 12 years ago

I'd be happy to help with moving it away from WP into something stable/scalable. Feel free to drop me an email if you're interested.

zackmorris• 12 years ago

Gut feeling: that's a high revenue for one person. It can be easy to take for granted if the growth took a long time. But just wanted to offer another data point, that my old partner and I only managed about $1500 a month on our best month selling shareware games 15 years ago (this was before app stores, we were high on sites like download.com, but never saw anything approaching exponential growth).

It’s straightforward to make more than that consulting. The catch is that consulting businesses generally have no intrinsic value. Their value is in the workers, so if there are N people and one of them leaves, they’re worth about 1/N less. In other words, the have less resale value than product businesses.

So I would say, if you want your business to be worth something, consider streamlining it to the point where it no longer needs you. The catch to that is that it isn’t something you do while you are still working on your minimum viable product (MVP). So ask yourself:

1) are you still getting established? - then bootstrap, nobody will lend you money other than credit card companies

2) or are you at a point where you have some breathing room? - consider funding from family and friends because even long tail decline can pay them back

3) or is everything in place to the point where you are ready for exponential growth? - raise big money

I started writing a big spiel about brick and mortar stores and getting loans in exchange for a stake in the business but it wasn’t something that couldn’t be gleaned from watching a few episodes of Shark Tank.

The way I see it is, you’re probably still a consultancy, still in phase 1, but on the threshold of phase 2. But congats, because most people never make it that far. So are you familiar enough with promotion and branding to get new business on your own? Or can you find a partner somewhere who is as established as you in some way (having either skills or cash), who will help you rather than hinder you? Or do you have a family friend who has experience running a business and more importantly, has the cash you get you to phase 2 in a short amount of time?

Concretely, it sounds like you need money so you can give your full attention to refactoring and hiring for growth, and you know an angel investor. Don’t hold onto the job. But don’t go and borrow more money than you need either. You’re in a unique position where you could borrow 6 months or a year’s wages without having to work for and save that money yourself (which takes 10 times longer - so if you wanted to save $10,000, you would have to earn $100,000, which most people don’t have the means to do, and that’s the actual thing that stops people from starting their own businesses, not dedication or talent or the things that hackers tell themselves to feel special). As a general rule, a bank might lend you what you have in savings. But an angel investor might lend you a lot more for some percentage of the business. A partner would want half, but maybe there’s a sweet spot where you could borrow more and give up less, because you have enough cashflow to survive on your own without the money. I made the choice to give up my job and go it alone a couple of years ago, but I don’t have 2 kids to support, and now it’s not so much about the money as missing the interaction with smart people. So now ironically having a great team and a sustainable income would be more attractive to me than any amount of money, because the sky would be the limit. Maybe thinking about what you really want, and accepting that you’re being given a special opportunity rather than merely weighing risks, will help you decide how to proceed. Good luck!

helen842000• 12 years ago

If it were me I would rather be bootstrapped but take a little longer to get there. To me there's no point in swapping a boss for an investor.

I see you mentioned that you already have videos & training materials for users. I would start to document how you do the onboarding in person so you can teach it to someone else. Don't underestimate the value of high-touch sales. It shows that it's working for you.

With you currently having a job, you could invest your current income into rebuilding a new (non-WordPress) version. If your current version is on WP - do you really need a team to create your new version - or just someone contracted for a few months & then on retainer.

Once the new version is up to the same feature set as the current version - migrate users over. Then pour your income into streamlining your business, hiring employees etc.

raminassemi• 12 years ago

Here's a great podcast on high-touch sales http://www.kalzumeus.com/2014/07/24/kalzumeus-podcast-episod...

Ask HN: Bootstrapped business is good but slow growth. Should I raise money?

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