Happy New Year! May your MRR grow sustainably, and your churn turn negative this year!
Last year at this time, we had just increased our prices for FeedbackPanda by 50% and were checking our metrics every few minutes to see if we had killed our company or not. It turned out we didn’t! As the results came in, we learned that we had underpriced our product significantly for a whole year, and the perceived value for our customers was much higher than we expected.
I’ve condensed our learnings about pricing into an article called Your Initial Pricing Will Never Be Right, So Try Anyway. I chose that name because our pricing wasn’t right, but it was right enough.
Initial pricing will always be hard because it lacks insight into your customer’s value perception. Here are a few steps to make sure it won’t hinder the growth of your business:
- In the Survival Stage, Your Revenue Is Validation. You’re not (yet) trying to optimize your revenue to capture as much of the market as you can. You are trying to figure out if this business is going anywhere. Don’t overthink price just now; just make a few solid choices and be flexible throughout the journey.
- Price for Early Adopters Initially, Price Aspirationally. Your first customers will be innovators and early adopters, buying into your vision. Price your MVP as if it was already the fully-featured version of itself. Early adopters buy for the future, not for today.
- Don’t Underprice. A low price suggests low quality. You don’t want customers who only buy when it’s cheap. Those are trouble.
- Don’t Overprice (too much). A high price suggests ambition and quality. It also contains a promise: the product will provide at least this much value. When in doubt, price your product just a little bit higher than what you’re comfortable with. It will keep you focussed on providing as much value as possible.
Generally, you want to find a price that allows you to validate that there are people who have a problem that your product can solve and that they are willing to pay for it. Keep it aligned with what you want the product to grow into, don’t undersell yourself.
And of course, adjust your prices if you feel like it. A business is a giant ongoing experiment. Nothing is set in stone.
What Happened in the Bootstrapped World
What appears to be set in stone is that every year around the Christmas holidays, we re-heat the same discussions. The bootstrapper and startup community is still experiencing the aftershocks of the Great Hustle wars of 2019, where everyone and their grandmother commented on how many hours people should work. I’m no exception, as last week’s newsletter shows.
A few other big debates this year were centered around the existence of the mythical 10x Engineer and the ever-unsolved issue if you should take VC money or not late into your bootstrapped journey. All in all, it was a fun year on Twitter.
The one thing I found interesting is that none of the debates were resolved. The final consensus was always a version of “it depends” in various shapes of eloquent expression. Discussions were usually highly polarized between incumbents trying to defend their top-of-the-foodchain position in the status-quo institutions and change-seeking rebels trying to break traditional paradigms to make them more accessible for newcomers and underrepresented groups.
With that in mind, what paradigm shifts will we see publicly debated in the bootstrapper and indie hacker sphere in 2020? Here are a few of my predictions for this year.
- Remote Work and the Trough of Sorrow: Adoption of remote work will soar, while the tools to support it will lag behind, leaving many adopters disillusioned and conflicted. Calls for the stability of the traditional office will clash with the positive experiences of those who built their businesses remote-first. Small-company best practices will collide with big-business requirements.
- Forecasting Will Join Metrics as Must-Haves: Business analytics tools like ProfitWell and Baremetrics are now a staple of running a startup. They’re also integral parts of selling a business. We will see prediction, forecasting, and simulation tools like Summit become equally important, providing a glimpse of the future of the company in addition to insights into its past. There will be a debate around accuracy, which models work, and what to do with that information.
- Authentication Will Become Human-Centric (from Platform-Centric). Authenticating yourself will rely more and more on biometrics and real humans and less on passwords and semi-anonymous logins. The Web Authentication standard, already implemented and usable in Auth-as-a-Service solutions, new passwordless approaches like Fast, will supplement the authentication market that is already profoundly moving towards standards like OAuth2. The goal will be to make sure you know who is logging into your service without being exposed to their personally identifiable information. The public debate will be yet another round of who should be the trusted institutions followed by a rendition of “Quis custodiet ipsos custodes.”
Links I Found Interesting
Do you need new ideas to start a business? Want to make a difference for real people with real issues? Find a problem to be solved in these tasks: 20,000 Startup Ideas. Good practice to find an audience, find their critical problem and design a solution. Even if you don’t plan to start a new business, use this as a training ground to invent solutions and, even more important, imagine how you would validate them. Do a few exercises, and you’ll see your own business idea through fresh eyes.
As bootstrappers, we have almost no resources. In particular, we have no time to waste on things we don’t yet need in our products or businesses. Amy Hoy has coined the excellent term of “flintstoning” those things, and she describes how in her article called The Fine Art of Flintstoning. Do you really need to have a fully automated data import/export logic in your product before you have your first customer? I don’t think so, and Amy doesn’t either. Doing this manually will do for a long time, and it will give you insight into what you need to build to do this at scale later. That’s what flintstoning is all about.
If you need some evidence why you should stick to the tools you know, read The Eternal Novice Trap by Chris Patti. It describes how taking the advice of “learn lots of programming languages” too literally can lead to a paralysis that can keep you from making any progress at all. Jumping at shiny new ways of solving problems when you have a perfectly workable toolset ready for action is one big reason why bootstrapped startups fail. A painter succeeds through the quality of the painting she creates, not the novelty of the brush she is using to paint it. In addition to the article, the Hacker News discussion is full of fascinating insight as well.
Bootstrapping Success Stories I Noticed
Last week, Channing from IndieHackers asked several founders what it’s like to bootstrap a business before it can financially support you, boasting responses from Rob Fitzpatrick and Matt Verlaque, among others. The Hacker News discussion for this post is particularly interesting as well. Overall, the reactions are either “take only ideas with upfront revenue opportunities,” “go full time using your savings,” or “moonlight.” It turns out that it’s yet another version of “it depends.”
I’ve been following Pete from No CS OK and No CS Degree for a while. This month, he finally made over $2k. As the founder who introduced me to the term “pesto profitability,” this seems to be plenty of pesto. He also has a lot of other things working out for him, including an IndieHackers interview that will soon be released and having successfully searched for and found sponsors for his newsletter. This sure sounds like a success to me!
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See you next week!
Warm Regards from Canada,