Bootstrapped to Profitability

Bootstrapped to Profitability

A repeatable system for founding a company (without VC or angel

investment)

John Rood

• Founded Next Step Test Preparation with $5,000 in personal savings

• In 3 years, to 50+ instructors, 5 marketers, and 15 markets

• Yes, profitable• Before that, 3 years of management

consulting• Teaching online marketing

JohnRood.net

• Why bootstrap?• Identifying a Market• Creating a Product/Service

JohnRood.net

JohnRood.net

The Wantrapreneur*

*Shamelessly stolen from Noah Kagan, appsumo.com

“I WANT to be an entrepreneur but…”• I don’t have any capital• I don’t have an in to any venture capital firms• I need to spend several years learning x skill first• I don’t have technical skills. I need a co-founder• I should work at a big company first to get experience [what?]

None of these are good excuses. An entrepreneur starts a company. A wantrapreneur has 100 excuses for waiting, for getting a corporate job, or for being in “stealth mode” for 5 years (but going to all the meetups)

All around you, your peers are starting businesses designed to be profitable today. They are using these businesses to:

• Avoid corporate work• Travel and work remotely• Support themselves while they work on a larger business or not-for-profit• Make gobs of money

You don’t hear about most of these businesses because they are not on TechCrunch, don’t make the Inc. 500, and aren’t backed by VC firms

JohnRood.net

JohnRood.net

0.02% of new businesses receive venture capital funding.

Most new companies do not get featured on TechCrunch

They are not in sexy industries

You can’t rely on SBA loans, StartUp America, or any other source to reliably secure new business funding

Y Combinator accepts 2% of applications (harder than Harvard or Stanford)

The reality of the venture capital / Tech Crunch / startup accelerator industry:

TechCrunch/VC Un-Cool Small Biz

Sexiness High Low

Chance to change the world

Medium Low

Addresses a Customer Need

Varies High!

Chance of Success Low Medium/High

Chance of paying bills

Low Medium/High

Chance of you actually doing it, starting today

Low ????

JohnRood.net

JohnRood.net

There’s nothing wrong with the VC / accelerator / TechCrunch Route!

They’ve led to GREAT companies.

If your goal is to do whatever it takes to have a famous company in a short time, that might be the right match.

You just need to understand that the vast majority of profitable companies don’t play that game.

1. Fitness and Recreational Sports Centers (71,394)2. Full-Service Restaurants (72,211)3. Homes for the Elderly (62,331)4. All Other Amusement and Recreation Industries (71,399)5. Used Merchandise Stores (45,331)6. Meat Processed from Carcasses (31,161)7. Landscape Architectural Services (54,132)8. Beauty Salons (81,211)9. Carpet and Upholstery Cleaning Services (56,174)10. Child Day Care Service (62,441)

The Unsexy List of Most Popular Small Businesses, 2011

Awesome

What do these businesses have in common?

JohnRood.net

Think there are 56,172 entrepreneurs excited about Carpet and Upholstery

Cleaning Services?

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• The Mindset

• Identifying a Market

• Creating a Product/Service

JohnRood.net

To test his theory, Mr. Zhardanovsky and his co-founder, Joe Speiser, set up a Web page in 2009 with a form that asked customers if they would be interested in signing up for regular deliveries. They then placed a few ads online and waited to see what happened. “We had an overwhelmingly positive response from our customers who wanted to sign up for the service,” said Mr. Zhardanovsky, who lives in New York City and who proceeded to introduce PetFlow in 2010.

http://www.nytimes.com/2012/03/08/business/smallbusiness/selling-online-products-by-subscription-is-all-the-rage.html?_r=2&adxnnl=1&adxnnlx=1331266759-RNaVXgkDRDD+eDZWcEnfjw

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What’s the #1 factor that will determine your level of success if you were to open a Chicago-style hot

dog stand?

Businesses that succeed QUICKLY and RELIABLY meet a demonstrated customer need.

If you have to sell the need, your chances of success go

down.JohnRood.net

Scalability

Value

Online video

Online class

Live Class

Tutoring

Development of the test prep industry

JohnRood.net

JohnRood.net

• Professionalize Mom & Pop operations (1-800-GOT-JUNK)• Dominate a segment with demand that’s a lower priority for a

major company (Next Step Test Preparation)• Solve a pressing problem for a small niche (Paperless Pipeline)• Solve a small problem with a unique solution (Coffee Joulies)

JohnRood.net

Blue ocean strategy for entrepreneurs

What else?

In 2012, where do people go to express their needs?

JohnRood.net

In 2012, where do people go to express their needs?

JohnRood.net

High-probability business owners define their market with quantitative research and testing – not through introducing a world-shattering invention or web app

JohnRood.net

JohnRood.net

Or….find a problem in a high-value market

-- Unearth problems during interviews. What keeps them up at night?

-- Focus on groups willing and able to pay

-- Test before development

-- Ideally, get paid to develop your product

• The Mindset

• Identifying a Market

• Creating a Product/Service

JohnRood.net

Your customers care about them. (Not you.)

Most businesses forget this the second they start product development.

Never forget the problem is more important than the technology.

JohnRood.net

It’s critical that you create a minimally viable product (MVP).

This now has a trendy name….

But entrepreneurs have been using these principles for years

JohnRood.net

Step 1: Minimal viable Product

Most businesses that can make $1,000 can make $100,000+*

Do this as cheaply as possible

You need to figure out if you can sell the product – this step is not about feasibility

JohnRood.net

Step 2: Test market acceptance

*Within reason.

Direct response marketing vs. brand marketing

• Scientific Advertising, Claude Hopkins• Advertising Secrets of the Written Word, Joe

Sugerman• AppSumo (appsumo.com)• I Will Teach You To Be Rich

(iwillteachyoutoberich.com)•Mixergy, www.mixergy.com• Ultimate Guide to Google Adwords

JohnRood.net

If you can sell it 5 times on Craigslist you can probably sell it 50,000 times

Put up a basic website with dedicated landing pages for this product.

If you don’t know how to put up a basic website, you need to either learn how or hire a contractor.

Learn the difference between a home page and a landing page

-- Unbounce

-- Wordpress

JohnRood.net

Step 3: Web Presence

• Easy SEO• AdWords• Facebook Ads• Blog Outreach• Aggressive referral programs

Remember, you’re trying to reach your customers – not your peers. Most customers don’t read the same blogs you do or know what Tech Crunch is.

JohnRood.net

Step 4: Scale (the easy way)

JohnRood.net

Thank you!

Remember that you can start today

Your excuses do not make you a unique snowflake

john@nextsteptestprep.com@johnrood