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When I started out my career as a bootstrapped software entrepreneur, I wish there would have been something like The Bootstrapper’s Bookshelf. All I knew is that there were a lot of books about the wild world of Venture Capital and how to structure your startup so you could get some of that juicy venture funding.
I didn’t want venture funding. I wanted to keep control of my business. I wanted to build a sustainable business, grow slowly, build something that would last. No hyper-growth fantasies, no unicorn aspirations. Just a bootstrapped business that would allow me to spend my life doing what I wanted to do.
So I began listening to podcasts and reading blogs. I sought the people that were giving useful and comprehensive advice, and I found them in communities like IndieHackers and on Twitter. Those people recommended books from time to time, so I would take notes whenever a book was mentioned and praised for being particularly insightful.
Two years later, I have sold the bootstrapped SaaS company I co-founded with Danielle in 2017. Reading those books and following their advice sure has helped with that.
Here is the list that I would present to my past self if he asked me which books a bootstrapped founder should read when starting a business.
The 4-Hour Workweek
In a way, my entrepreneurial journey started with Tim Ferriss. I started looking for interesting podcasts, and I quickly found the Tim Ferriss Show. It wasn’t long into listening to the spectacular and insightful interviews that I picked up Tim’s book, The 4-Hour Workweek. I remember finishing the book within two days. I emerged from reading this book with a new perspective on what was possible, on what I could accomplish.
The book makes an ambitions claim in the title: it talks of escaping the 9-5, living anywhere, and joining the new rich. Being in total control of my life sounded enticing to me. Why postponing a life of joy and fulfillment right into a late retirement when you can have it right now? You definitely won’t have to work for 40 years in 40-hour workweeks to get to a life of flexibility and mobility.
Ferriss essentially tells his own success story, and he is quite practical about the advice he gives. The book is full of examples and URLs that are updated and revised in each edition. The book is aimed at liberating the reader from the chains of gainful employment and all the limitations that come with a regular full-time office job.
The foundation of The 4-Hour Workweek is the DEAL formula, short for Definition/Elimination/Automation/Liberation. You need to define your own rules, eliminate distractions and roadblocks, automate your business as much as possible, and then liberate yourself by escaping the office. Each step is described in great detail in a chapter.
Ferriss makes sure to explain the “why” behind the DEAL concepts as well as giving you strategies on how to apply them while still being locked into your 9-5 job. That is the magic of the book: it’s a guide not just to a new life, but also a transition manual to get there from where you are right now.
If you follow the steps and advice in The 4-Hour Workweek, you will end up with a fully automated business that you can work on for a few hours a week, from wherever you are. That is the promise.
And for me, it worked out. Reading the book lead me down a path of learning more about becoming a bootstrapped entrepreneur. I started thinking of a business as something to be automated from the beginning, and every effort that I put into building FeedbackPanda with my partner Danielle was aimed at making it a business that worked for us instead of us working for it. When we sold the company in July 2019 just after two years of running and growing it, we had almost everything completely automated and could run the business from wherever we were.
If you need proof that The 4-Hour Workweek is real and can be achieved, FeedbackPanda would be a prime example. It definitely can be done. I recommend reading this book as the first step into your bootstrapped entrepreneurial journey. It’s eye-opening.
Built to Sell
If The 4-Hour Workweek inspired me to start a bootstrapped business, Built to Sell inspired me to think of eventually selling it. John Warrillow is an expert when it comes to building sellable businesses. He even runs a podcast called Built to Sell Radio, with hundreds of interviews of people who sold their businesses talking about their experiences.
There is so much value in stories told by the people who have sold their businesses before – and the book is precisely that: a narrative of someone willing to sell their business, getting the helpful advice of a mentor who has done this many times before. Filled with quotes and aphorisms, the book delivers sound and actionable information on how to prepare your business for being eventually acquired.
The trick is to structure it for a successful acquisition from the beginning. Both the formal shell of the business as well as the actual services and offerings can be optimized to be made easy and lucrative to sell.
Warrillow suggests focussing the core business efforts on providing one service exceptionally well. Specializing is the name of the game. Pick something that you can become better at than anyone else. Build expertise, either through learning or by hiring experts.
A business that can run without you is sellable. When you are still needed for the day-to-day operations of your company, potential buyers will be scared away. What if you won’t stay onboard? What if they can’t find someone to replace you? That’s why you want to be come replaceable, or better yet, replace yourself while running the business already.
If you have a lot of customers, you will distribute the risk of cancellations. If you only have a few big clients, not only does a single client quitting take .a big chunk out of your revenue, it also puts you at the mercy of their internal processes and politics. Don’t be dependent.
The most attractive businesses have standardized offerings. Most modern SaaS businesses already do that, as standardizing is the only means to achieve economies of scale. For a buyer, “bespoke” is not an indicator of quality; it’s a source of trouble. By delivering the same service to all of your customers, any improvement for a single customer will be an improvement for all of them. That will net the business a premium when it is sold.
Having read this book early in my entrepreneurial career, I was fortunate to build FeedbackPanda with selling it in mind. Danielle and I never really wanted to sell it, but we structured it as a highly automated, heavily standardized, and extremely focussed enterprise. We weighed all decisions about product and infrastructure choices as to how they would affect sellability. This paid off, literally, when we finally sold the company. Everything was in order, clearly documented, highly automated, ready to hand over because we removed ourselves as much as we could.
For anyone who wonders how their existing business can be made more sellable, the book gives excellent advice on how to retroactively implement these concepts. Built to Sell will show exactly how to take care of this from the very first day for anyone who has yet to start their business.
I should send Nir Eyal a bottle of Champagne. His book Hooked has been the most instrumental book of my professional life. After reading Hooked while we were just starting to build the FeedbackPanda prototype, we switched gears and implemented Eyal’s recommendations. Just days later, we saw the effects of a self-supporting growth engine built on collaboration and building healthy habits. It was marvelous. It drove user growth and adoption ever since, ending in us selling the business in under two years. All thanks to the Hook model.
But first things first. Hooked is all about habits and habit-forming products. In podcast interviews, Eyal talks about how Hooked is an attempt to democratize the knowledge that was an industry secret until then: products that encourage building habits are incredibly sticky. Heavily abused by some industries to make people addicted to their products, Eyal wanted to remove the stigma and show how habit-forming products can be used for good. If you take a look at all the education-focused products that successfully employ the Hook model, I would argue that he has been quite successful.
So why do we respond so well to habit-forming products? It seems to be the nature of the human mind to look for shortcuts, for opportunities to save time. Whenever something time-saving is found to be repeatable, our mind starts forming a habit; a brain automation. Established habits are hard to change once they are internalized. So it’s an automatic process that has a hard-to-change outcome.
That does sound like a good retention mechanism. In business terms, this will generate long-term revenue and is hard to compete with. It attracts long-term customers that will try to spread their habits, thus doing the marketing for you. And as they are habitual customers, they won’t be as sensitive to price changes as sporadic customers.
So how is this accomplished? Your customers have to go through the Hook cycle repeatedly. Over and over again.
The Hook cycle works like this. It starts with a Trigger that makes you take an Action, resulting in a Reward that causes you to Invest in the product, thus triggering another instance of the Hook cycle.
Need an example? Imagine you get a notification from Facebook on your phone. That’s the Trigger. Is it someone commenting on a post? Is it a direct message? You want to know what it is, so you click on the notification. That’s the Action. The application opens up. The message screen loads. Your anticipation builds. Who sent you a message? Finally, it shows who it is from: an old friend who you haven’t talked to in years. That is the Reward. You read their message and eagerly start typing your response. You hit “Send”. That is your Investment. Your message triggers a notification on your friend’s phone. Another round of the Hook cycle follows.
The power of the Hook cycle is obvious: it makes us invest in products in expectation of rewards. The book is full of wonderful insight into each phase of the cycle.
I want to point out the Investment phase because understanding this has been the most illuminating moment of my professional life. Facebook, in the example above, wants you to write as many messages that trigger other people to write their responses then, as every iteration of the cycle keeps people engaged in their advertising platform. Every piece of user-generated content, even if it is just a single like, has the potential to get hundreds of people to re-engage with their product.
Once I understood this mighty potential, I looked for ways to build this into our product. How could we get our users to invest something into the product that would trigger other people to invest in the platform themselves? We found the answer in a collaborative feature we called the FeedbackPandaCloud. Our customers would share their student feedback templates among each other, and whenever a teacher would share their own work, it would immediately become usable by all other customers. This led to a self-driving network effect that resulted in hundreds of thousands of templates being shared, imported, and collaborated on. This collaborative effort became the core value proposition of the product: come and find what you need, share what you create so that others can find what they need.
The successful implementation of the Hook model into our SaaS allowed us to have constant growth, almost entirely hands-off marketing as word-of-mouth took over most of that, and a self-selling product.
If reading Hooked could work this miracle for our SaaS, imagine what it could do for yours.
The E-Myth Revisited
Before I started reading the E-Myth, I thought I was equipped to run a software business. After reading the first chapter, I found myself understanding that I was equipped to build software, but not a software business. There is more to that, and Michael E. Gerber can teach you precisely what that is.
It starts with becoming aware that the entrepreneurial myth is just that: thinking you can build a technical business from having a technical skill. So many businesses fail because someone skilled at a certain thing fails at turning it into a viable business. That takes a few more things, particularly leading with vision and learning the skill of management.
You need to build a well-structured business. Gerber shows that there is a very clear-cut method to this, which he calls the Turnkey Revolution. It boils down to treating your business as if it was a franchise. Make it repeatable, build processes, build structures that allow for growth instead of impeding it.
One example we used at FeedbackPanda is the fictional Organisational Chart. Imagine how your company would look a few years in the future after it has grown to a sizeable business. Plot out the org chart of that company, every single role, and assign everyone on your current team to all of the positions. Danielle and I came up with 47 different positions we envisioned to exist in the company, and we split them between the two of us. This exercise had two great results: we knew exactly what we were responsible for and it showed us which jobs we both really didn’t want to do and had to find someone for: Taxes, bookkeeping, those kinds of things.
The second significant learning was to keep a thorough Operations Manual, resembling something that would be used in a franchise like McDonald’s. Have a process for everything that needs to be done a certain way: document thoroughly, both for other people and for your future self. Doing that allowed us to hand over our company within a day. There was no further training needed, as we had documented everything in great detail.
That is what I like so much about the E-Myth: practical advice and focus on organizational and mental structure. Gerber explains how to build a great company and keep your mind, goals, and processes well-structured. If you’re looking for a guide to clarity and a great structural foundation, read this book.
The Mom Test
Rob Fitzpatrick’s core point is this: don’t ask friends and family about your product. Just don’t. They will try to protect you from both success and failure. They will tell you it’s great when it’s not, and they will tell you it won’t work when it might. So don’t ask your Mom.
But who should you ask then? Fitzpatrick suggests talking to people with a vested interest in their own success: your potential customers. That can mean people you want to sell your product to, investors you need money from, or any other party that – unlike your Mom – would suffer if your product were terrible.
Another problem is that we often ask the wrong questions. Leading questions, limited questions, questions with answers and expectations baked in. The solution? Stop talking about your ideas. Ask your potential customers about their problems. Open up, explore their reality instead of pushing your own limited perspective into their narrative.
This takes some work, as we’re usually so excited to talk about our own ideas as entrepreneurs. But it is incredibly eye-opening to ask a customer about how they solve their problems before you introduce your solution.
Fitzpatrick suggests to look for commitment and ignore compliments. Compliments indicate disinterest, even when cloaked in very flattering words. Wanting to learn more is a sign of genuine interest. Committing to another meeting, to signing up, now that is a sign of progress. The book teaches you how to recognize disinterest and move on quickly.
Focus on talking to a small group of target customers. Don’t aim too big. Go after specific groups to get meaningful data. You could ask a hundred random people, but would this really get you close to solving your problem for your niche? Be specific and intentional.
And most of all, be casual and relaxed. Make your meetings comfortable and enjoyable. No one wants to feel pressured or waste their time in an uncomfortable environment. Show genuine interest in your customer, and they will open up, giving you access to real, useful, and meaningful information.
During running FeedbackPanda, we conducted a lot of customer interviews. We made sure to be personable, to be curious, and to just let our customers talk. This lead to fascinating and enjoyable conversations. It even resulted in one of the people we interviewed to come visit us in Berlin, and we spent a wonderful afternoon just getting to know them.
Good things can come from being genuinely interested in the people you work with. The Mom Test will show you how to avoid wasting your customers’ and your own time and how to get meaningful feedback quickly.
These are the five books that I recommend reading in preparation to building a bootstrapped business. Of course, there are many more insightful book. I’ve listed many of those on the Bootstrapper’s Bookshelf.