This article is part of The Preparation Stage section of 📕 Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business.
When you’re starting with your business idea, you will be looking at how successful businesses have accomplished their success. You will see a lot of different sizes, markets, and business models. But they all have one thing in common: they’ve built a system that works. Their long-term and short-term goals may have changed through the years, but the system that kept them running never did. That system is the core of every business.
A sustainable bootstrapped business is successful when you have found a repeatable, reliable, and resilient system to continuously provide a value-producing product to paying customers at a profit.
Since “system” is such an abstract term: look at it as a set of rules and guidelines, like a recipe. To make a tasty omelet, you will need to mix the right ingredients and cook them for the right time, at the right temperature, using a specific technique. A business is the same thing. Having a recipe in place will make the transition from the Preparation Stage towards the Survival Stage less chaotic. No plan survives the first contact with the enemy, but it’s still important to think of the core growth engine of your business before you start selling your product to your audience.
A quick remark about goals: of course, you should have goals. A business without goals is an aimless venture. But goals are reached and overcome. New goals arrive in their place, and they often change shape mid-operation. A goal is meant to become obsolete. A system is intended to endure and allow you to reach your goals in the first place.
Let’s take a look into each of the properties such a system will need to have.
Building a Repeatable System
When you’re building a bootstrapped business, it will usually be just you in the beginning. Maybe you have a co-founder or two, but you won’t have an army of salespeople that you can unleash on your audience. Your business needs to be a one-person-show, and that means you will need to sell your product to your customers over and over again yourself. For that, generating revenue needs to be an easily repeatable process.
At best, you’re building a way to capture a never-ending stream of recurring revenue. The optimal situation is when you grow every month, and your revenue consistently increases. You will have reached that state when you create a subscription business with negative churn.
In a subscription-based business, churn is the percentage of customers that discontinue their subscriptions month over month. Churn hurts your growth twice. For each churned customer, you need to find a new customer just to get back to a net-zero. To grow, you effectively need two new customers. Negative churn happens when the customers who stay with your business spend more time on upgrades than you lose from customers canceling. That is the holy grail of subscription businesses: when your churn is negative, you don’t even need to add more customers to grow. Every new customer is a bonus!
But before you can get there, a lot of work needs to be done. You’ll figure out a starting point for your pricing and tweak it over time. At some point, you will need to offer ways for your customers to upgrade their subscriptions. You’ll need to keep your retention as high as possible and maximize the influx of new prospects.
All of this is so much easier if the process you need to acquire a new customer is straightforward and repeatable. That usually means automated and self-serve. If not, you’ll need to make sales manually, which takes away attention from building your product and creating an automated and well-documented business that is built to sell.
The fewer steps there are to your process of acquiring a new customer, the better. Optimally, they come to your marketing content, sign up to your product, have their a-ha moment, and subscribe. Of course, each of these steps is incredibly hard to pull off, and that’s the entrepreneurial challenge. Fewer steps mean fewer chances of losing your prospect, so keep the process slim.
Building a Reliable System
Providing a reliable service sounds easier than it is. You might have set up everything to be well-tested and highly available only to find that your payment provider has a small glitch that is affecting customers in a particular state. Or your email service is being flagged as spam by Google Mail so that all those emails you sent out yesterday never arrived in your customer’s inboxes. These things happened to us at FeedbackPanda, and we had to find ways to circumvent these issues.
Being reliable doesn’t mean being perfect. But it does mean that your product is built with maximizing availability and performance in mind. No customer wants to use a sluggish or unreliable product.
This required two kinds of reliability: architectural and operational. Architectural reliability measures how well your service is designed to provide uninterrupted access to your product. Operational reliability measures the effectiveness of your systems to cope with external interruptions.
For every external service you use, do some research in their support forums, their status page, or on social media. Find previous occurrences of service outages, and check how quickly they were resolved. Pay particular attention to people complaining about not receiving help on social media, and reach out to them. Ask about how they handled that situation. You will learn a lot about what you will need to prepare for that way.
In any case, create a process for reaching out to your customers when something goes wrong, because it will. Prepare a message stating that you’re working on it, with an apology and the promise to get back to them as quickly as you can. Keep this message in a note where you can quickly copy it. It has two purposes: reduce the cognitive effort of responding to customers during an emergency and allow your customers to spread a comprehensive message to their peers, reducing the number of incoming messages. Nothing is more distracting when you’re trying to restore your production system than hundreds of customers reaching out about your product not working.
You can hope that you will never have a fatal outage. Or, you can prepare and build a reliable product and business. It might take some work, but having the bases covered will give you peace of mind both when everything works fine and when things are a bit rough.
Building a Resilient System
Resiliency is different from reliability in that it looks at your business over a long time instead of being focused on mere moments. A resilient business is capable of surviving in an ever-changing market. Today, you might have hundreds of customers, but some regulations might make 90% of them cancel tomorrow. If you set up your business to be resilient, you will be able to survive situations like this.
A resilient business is independent. If you have 500 customers, one of them quitting is not a big deal. If you have five customers, a single cancellation can cost you twenty percent or more of your revenue. It’s hard to diversify when you’re in a very homogenous niche. You can build resiliency into your niche product by offering yearly subscriptions, as this will capture advance revenue that allows you to make the necessary changes to adapt to different circumstances.
A resilient business is adaptive. If your payment processor shuts off down your account or freezes your fund, your system should be able to integrate an alternative processor quickly. You have enough data in your database to restore your revenue: you know which plans your users were on and when they were supposed to renew. They might need to re-enter their payment data, but at least the continuity of their subscription is guaranteed that way. The same is true for authentication. Always have their email address in your database, even if you use an Identity-as-a-Service solution. In case that breaks, you can still reach your customers.
A resilient business is extensible. If you can be integrated easily, your service will become part of the broader ecosystem of tools in your niche. More and more other services will interact with you, bringing with them a steady flow of new leads and reputation within the community. If your processes allow you to quickly build integrations into new and exciting services in your niche as well, your product will provide your customers with additional ways of making their lives easier.
Your business and your product should be around for a long time. Processes and architectural decisions that increase resilience will make sure it has a chance to endure.
There are several advanced concepts to help entrepreneurs structure their businesses. While most of them are aimed at larger enterprises, the Entrepreneurial Operating System (EOS) has been used successfully in many bootstrapped companies. It aligns and strengthens the six key components of any business: the alignment on your vision, the real-world data, your people, your critical issues, your processes that systemizes consistency, and traction to bring discipline and accountability into your business. It’s definitively a good system to look into from the beginning to see how you want your future business to be structured and what needs to be prepared and what kinds of changes you can expect to encounter.
The Evolution of a System
A repeatable, reliable, and resilient system will need to be continuously refined and improved. Your customers will change their methods. New regulations and requirements will need to be responded to. This is the heart of your operation. It must never stop working. Every day, it must deliver as much or more than the day before.
It will take some fine-tuning. You will never be done making sure it’s working correctly. Every time something inside or outside your business changes, you might need to adjust your system. It doesn’t always have to be bad: sometimes, you will be able to remove a step because a new technology enables you to automate a previously manual action fully.
As long as you regularly check in with your processes and assumptions, your system will work for you. When you start feeling some friction where there was none before, you’re starting to work for the system. Reflect on what changed, how to respond to it with your current knowledge, and adjust your process. You’ve been doing your marketing on Facebook, but customers come through Instagram more and more? Adjust. Extend your Facebook campaigns also to be shown on Instagram, or engage a test audience with visual content that you made particularly for their platform. If that works, you will slowly shift your focus to that new platform, and adjust your content processes to fit that one best.
Over time, the number and complexity of your processes will likely grow. At the beginning of your business, you want to be flexible, but don’t mistake that for winging it. Write down what you do, why you do it, so that you can eventually turn your evolving system into a collection of Standard Operating Procedures. Having everything documented that way will make your company a well-oiled machine, and that will make it more sellable, even if you don’t intend to sell.