Dear founder,
Danielle and I recently returned from our first vacation in over two years. Running a bootstrapped company without employees made it impossible to spend any time away from the business. So the first thing we did after selling FeedbackPanda was to schedule a trip to South Africa.
While we had a great time going on Safari and seeing a beautiful country, we encountered a society mired in problems. For that reason, I want to focus this week’s newsletter on “problems,” big and small.
Let’s start with the small one.
Every business exists to solve a problem. In essence, a business is a system that helps people deal with a problem for a fee. Customers are only willing to pay that fee if the value they receive is worth more to them than the amount they have to pay for it.
So you better solve the right problem. The problem that keeps your customers from receiving the highest value possible. Solve that, and you will have customers who love to pay for your product.
How would you go about finding that problem? What makes it different from all the other problems your customers have?
You will have to make sure it’s their critical problem. Critical problems have a few properties that make them unique. A problem is critical when:
- it’s painful and wastes time or money
- it’s non-optional and people can’t opt-out
- it occurs frequently and repeatedly
- it takes some time to be solved each time
- it makes people build their own crude solutions with basic tools
When you have found a problem that fits these, you are looking at a problem, around which you can create a business. Find out more about what makes a problem critical and what happens if it’s not in my latest article called Finding the Critical Problem: How to Work on The Right Things.
What Happened in the Bootstrapped World
So what’s the bigger problem? While driving through South Africa for our vacation, we saw townships surrounding every larger city: millions of people living in informal settlements, experiencing infrastructure problems from sewage treatment to access to electricity.
Sitting in the car, I suddenly became aware of how exclusionary the SaaS world is, particularly when it comes to payment. We charge our customers in US Dollars, we expect people to have a bank account and a credit card, and we charge the same prices for every customer.
That last one got me thinking the most. Paying $10 a month might be nothing to a bootstrapped business from Germany or the United States, but it can be prohibitively expensive if you’re a South African or Malaysian founder.
It may come as a surprise, but I am a former student of Political Science and Philosophy. Back then, I studied macro-economic concepts, and I remembered a lecture on global inequality and the systems in place to help reduce it. So I started researching the idea of Purchasing Power Parity in SaaS.
And I tweeted about my realization and asked if people knew interesting examples. Those conversations sparked a few insights:
- A handful of creators and companies use Purchasing Power Parity-weighed pricing. Wes Bos offers country-specific discount codes for his JavaScript courses. Depending on where you’re from, you are free to apply those codes if you need to. FunRetro, a sprint retrospective SaaS, shows adjusted prices depending on from where you purchase. AdventureMachine segments its customers into four pricing tiers that are selected by looking at Purchasing Power Parity.
- The biggest concern people have is fraud. Preventing customers from using spoofed location information is on people’s minds. I believe that a simple verification process post-purchase can deal with that efficiently, but it is additional work.
- There is an API. Purchasing-Power-Parity.com, made by Robin Wieruch, offers both an endpoint and a JavaScript library to connect to it. Integrating $USD to any other currency is very easy with this.
- There is still room for improvement. While the existing APIs provide enough service to get started, I see so much potential for a fully-featured SaaS solution that allows people to customize their prices on a level of granularity that goes beyond per-country pricing.
- App Stores have this built-in. As you can select prices for each locale, you can price according to the purchasing power that is prevalent in those countries.
It’s fantastic to see businesses being more inclusive. Reducing your prices by just a few percents can open up your audience to giant markets that you may never have thought of before. You can enable people building sustainable businesses that will make a real difference in their economically hamstrung communities.
The discussion around looking into localized pricing turned a fascinating corner: a fellow founder asked about how to do this while struggling himself, which resulted in him looking into his audience distribution. He had guessed 80% percent of his audience to be from the US only to find it to be 20%. Consequentially, adjusting the pricing for the remaining 80% of his audience could make a big difference in how many people he could get to subscribe. The things you learn when you think about global inequality!
I would love to encourage you to think about who your current pricing might be excluding and how impactful it could be to adjust your pricing to their purchasing power: both as an impact on their economic survival and your bottom line.
Links and Podcasts I Found Interesting
Know Your Team, in their quest to turn managers into better leaders, has raised half a million dollars from Indie.vc after being bootstrapped for five years. While there is always alignment risk in raising money, CEO Claire Lew puts the cards on the table: they need to scale their own time. Founder time is valuable time. The funds will pay for people to take over the work so that the founders can do what they’re destined to do: lead. And it could not be more fitting that this happens for a company that focusses on helping people be better leaders.
April Dunford talked about evolving B2B Sales from founder-led sales to a sales team. She was also on Brian Rhea‘s excellent Bright&Early podcast recently and delivered a great episode on product positioning from which I learned a lot. I always enjoy her insight into B2B activities from the humble beginnings to strategies at scale. Both the article and the podcast are worth your time.
On Bootstrapping Saas this week, Val Sopi had a wonderful conversation with his very fist guest, Louis Nicholls, who offers a course called Sales for Founders. They talk about the nuances of Sales and Marketing for bootstrapped founders and how to turn the things you learned from your sales efforts into marketing later. From jobs-to-be-done to Social Proof, they talk about getting your product into the hands of paying customers.
Bootstrapping Success Stories I Noticed
Zayne from UseHoney had a bittersweet victory this week. For the first time, a customer put their credit card info down to check out his product but ultimately churned. The discussion on his Indie Hackers milestone is particularly interesting, as it contains a lot of good advice on how to use following up on a churned customer to gain insight into the lackings of your product.
Thank you for reading this week’s edition of The Bootstrapped Founder. If you like what I wrote about, please forward the newsletter to anyone you think would enjoy it too.
If you want to help me share my thoughts and ideas with the world, please share this episode of newsletter on Twitter or wherever you like, engage on Hacker News, or reach out on Twitter at @arvidkahl.
See you next week!
Warm Regards from Canada (where Danielle and I spend our Christmas season),
Arvid