This week, I wrote about Churn, Retention, and Revenue. I often hear founders talking about optimizing their sales funnel to get new customers, but rarely do they share how they keep the ones they already have.
It turns out that appealing to new customers as much as possible was how a business would thrive. And then came the membership economy. Where before, a customer purchasing your good or service was the end of the transaction, it is now the beginning. The beginning of a year-long relationship, in most cases.
All of a sudden, it makes a big difference if 5% of your customers never return or 10%. You can outgrow a 5% churn rate, but a 10% churn means that all of your customers will quit by the end of the year. So keeping them around is very important.
Here are a few ways to keep retention up:
- Reactivation Follow-ups: When someone quits, reach out. Manually in the beginning, automatically at scale. Find out if they leave for preventable reasons, and fix those. Give return discounts to your customers. Hand-hold them back into the product.
- Payment Recovery Messagin: Send actionable messages to customers the moment their credit card gets declined. Give them instructions on how to fix it. Give them a few attempts. Don’t cancel immediately.
- Value Nurturing: Show your customers the value they’re receiving. Remind them of how much they use the product and how effective they have become. Learn from video games: achievements and badges show people their previous investment.
- Annual Plans: Interested in money? Ask for it upfront. Make them commit to the product.
What matters is that you remind your customers that they are in an ongoing relationship with you and your business. Show them that it’s a win-win situation. They’ll stick around as long as they receive more value than what they pay for. Make sure they do.
You can read more about this topic in the article called Churn, Retention, and Revenue: What Makes Customers Stick Around and Why That’s Important.
What Happened in the World of Bootstrapping
Over the last few days, a lot of founders spent a lot of time fighting fires in their businesses instead of spending quality time with their friends and families. I certainly remember the last two Christmas holidays to be split between staring at my laptop screen and anxiously enjoying Christmas, hoping my phone wouldn’t buzz.
Working on holidays and weekends is something you get used to quite quickly when you run a bootstrapped business without employees. But is it really necessary? Are we doing this because we have to? Or do we just do it because others tell us we should?
If you ask many successful founders, they will tell you that working on the weekends is required to run a successful indie business on your own. A few common themes can be found here.
Most often, you’ll hear some variation of “the competition never sleeps.” Some take this quite literally and devote every waking hour of their day to the business. Proponents of this will argue that if the competition can get the upper hand by working more, they will, and that would eventually destroy your business.
The next most common pro-weekend-work sentiment is that customers expect you to be available at all times in an always-on, always-connected world. If you have customers all over the globe, they probably don’t care if you are asleep or not when they run into issues.
Thankfully, there is another side to this argument. Some founders will say that it’s unnecessary to work every single day. They will argue that even in the survival stage of your business, you need time away from your work.
They will point to the risk of burnout, and how being overworked and stressed can ruin a perfectly working business. What’s the point of risking your mental health for gains you then won’t be able to enjoy?
Also, your work does not define you. You may be building your bootstrapped business to accomplish a life of independence and joy, but that does not mean you need to miss your children growing up or grow emotionally distant from your partner.
I almost fell prey to the latter when I ran FeedbackPanda with Danielle. We spent so much time working on the business that we never really took time for ourselves as partners. Only after selling the business did we find time to enjoy our relationship again.
The problem is passion. As founders, we care a bit too much. We have this drive to change the world and think about it all the time. We have ideas and want to make them happen immediately. But we really should try and find a good balance between the business and our personal life.
One kind of founder can struggle with this particularly hard: those of us who moonlight. Having a day job doesn’t leave much time for the side projects, and weekends are usually the only days where focussed work can happen (unless you are one of those gifted few who can be productive before or after work). To some, it feels like if they don’t use the weekend, the project will never get anywhere. Particularly for people who have dependents to support, weekend entrepreneurship is the only possible way to start their journey to a life of independence.
How then can you find this balance with these restrictions? How can you get ahead without getting burned out?
I suggest these three approaches:
Use the Built-to-Sell Methodology. Remove yourself from the business, or at least the tedious day-to-day. Automate, Document, Delegate. Hire someone to do your work for you. Not only will this give you more free time, but it will also allow you to focus on the grand vision, and it makes your company a very juicy-looking target for acquisitions. You’ll definitely have the weekends off once you sell your business for a few million dollars.
Manage Expectations. Enforce boundaries and communicate them. “Customer Service will be responding during EST business hours.” Be available when an outage happens, but don’t deal with customer service tickets until your regular work week starts again. Some customers may quit over this, but you gain a healthy life. This usually works better in enterprise B2B, where your customers understand that the weekend is “scheduled downtime”. In a consumer market, this might not work.
Don’t Play the Game. The nuclear option for the bold. Don’t moonlight at all. Quit your day job and go full-time. This generally works best with businesses that can generate profits early on. Unless you have substantial personal savings, this isn’t recommended, and even with savings, it still is a risk. If your side-project is already making money and you just wish you had more time, you might want to take the plunge and become a full-time entrepreneur. If not, think long and hard before you do this.
What matters is that you work on what you want without losing touch with the people you love.
Bootstrapping Success Stories I Noticed
Sahil Lavingia shares the story of how Gumroad grew from a weekend project into a $350k/month business over ten months ago. Now, it’s at $500k/month. That is just incredibly impressive.
It looks like Exponent, the Interview Prep Course business started by Stephen Cognetta, is on a similar course. Within a year, they grew the company from $0 to $300k. He talks about partnerships, moving into broader markets, and dealing with the challenges of a remote team — a fascinating read.
Links I Found Interesting
Ryan Kulp talked about the shareability of your product as a critical factor in the success of referral systems a while back. The article touches on three essential parts of why some referral systems fail from the perspective of a customer: you don’t want to help the competition, you feel embarrassed about needing help for a skill people expect you to have, and you don’t want to show people that you struggle with something.
Stripe CEO Patrick Collison shared a list called fast: examples of people quickly accomplishing things together, including buildings, airplanes, and core pieces of software we use every day. While Hacker News commenters, as usual, dismantled a few of them, it’s still an impressive list of things that were done under heavy constraints.
Finally, to close out the year, a non-bootstrapping-related link. David Perell shared his learnings of 2019, and they are amazing. Things you always wanted to know, like the relationship of cars and top hats, Baobab trees, insights into friendship, David learned it all. And he is kind enough to share this summary of a great 2019.
I hope you had a great 2019 too. It certainly was a whirlwind for Danielle and me, as selling our business changed our lives quite a bit.
I wish you the very best for the New Year, and may your personal and entrepreneurial ambitions become a reality in 2020.
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.
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See you next week!
Warm Regards from Canada (where Danielle and I spend our Christmas season),