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Rules to run a software startup with minimum hassle

554 points by joisig 7y ago

codingdave 7y ago
Most of those rules are decent, but they all have exceptions. You almost need a final rule, to think about the reasons the other rules exist, and feel free to break a rule if appropriate for your own specific situation.
- bruckie 7y ago
  It already has exactly that: A confession, and a caveat I’ve broken almost every one of the rules above! ... The rules are not meant as absolute rules, but as food for thought: For you to think about the tradeoffs, of how and why there will be additional hassle and distraction from your core activities, if you decide to “break” one of the “rules”. (maybe that was missing from an earlier revision or something?)
acvny 7y ago
Very good rules. I went through the point about unsolicited offers. I didn't know how to say no.
hyzyla 7y ago
My favorite rule is "Investment to the marketing, don't spend". I think, if replace "marketing" to anything else, this rule can be applied to any aspect of the life.
hbcondo714 7y ago
> building on top of long-term stable, multi-vendor platforms like the web, or Linux. For rule #8, is the author recommending to build custom CMS / e-commerce features for a SaaS? If so, sounds like a lot more work.
- fxtentacle 7y ago
  I think he's suggesting to avoid the vendor lock-in that would come from renting the official hosted WordPress. But I would guess that installing the open source WordPress on your own dedicated Linux server is just fine, because there's no way someone could force you to change something.
- joisig 7y ago
  Good question (OP here). What I mean is that for example, if you build a Chrome Extension (which is the main way my company's product gets used, so I'm familiar with the pitfalls), you are now at the mercy of Google and how they choose to develop their marketplace for extensions, how they choose to enforce user security, and how they choose to change the platform over time. Single vendor platform, similar to the other app stores. I'm not suggesting you rely on nothing else such as 3rd party CMS or e-commerce features, but I am suggesting that for example if you build a Shopify plug-in, you are at the mercy of how Shopify chooses to develop their ecosystem, and there will be potentially existential crises along the way. As with all the other rules, it's one you can and should break when it makes sense for your business. There are many thriving startups on top of Shopify's ecosystem, Apple's ecosystem, Google Chrome's ecosystem, and so on and so forth - I'm just urging you to be aware of the hassle you are creating for yourself by choosing such a path, and to balance it wisely against the benefits.
  - hbcondo714 7y ago
    Thank you for your reply and clarifying.
fxtentacle 7y ago
Rule #11 can be more challenging than you'd think. For my first start-up, we had to initially sign up with a smaller bank because the bigger ones did not want to deal with first-time CEOs. After a bit more than a year of waiting, we were then allowed to create an account at the big boring bank.
- halfmatthalfcat 7y ago
  Interesting, I walked into a local Chase branch and opened a business checking + credit card no questions asked.
mdonahoe 7y ago
"Rule #5: Don’t do freemium" Isn't CrankWheel, the author's company, a freemium product? "Free forever for limited use. No credit card needed" What experience does the author have with SaaS products that have no free tier? I stopped reading here.
- joisig 7y ago
  My company operates on a freemium model. It's a big hassle, as documented in the section about not doing freemium, but it's also something we decided was fundamental to our main distribution channel which is the Chrome Web Store (breaking another of the rules in the article - but maybe check the last section). I haven't run a non-freemium SaaS company, but I do see what benefits it would bring if we were able to operate on a typical 14 or 30-day trial model. The big ones that would bring are a much shorter sales pipeline and shorter feedback loop on ad spend.
  - adz_6891 7y ago
    Thanks for the clarification here! Since you are using freemium at the moment do you have some way of quantifying the hassle that this decision has created? It would be interesting to know more about how you navigate this kind of tradeoff since this is really what matters when it comes to detemerning whether a decision like freemium vs no-freemium is actually a good decision
    - joisig 7y ago
      There's some operational cost (for running servers and such), but not that high. There's considerable customer support cost. The main thing that I feel makes life tough is that the pipeline from, say, doing some paid ads and seeing the results is several months long, and the feedback loop on changes that can affect conversion rates and monetization is similarly very long. We've learned to cope with it but it would be nice to have a one-month feedback loop or shorter.
      - adz_6891 7y ago
fxtentacle 7y ago
Rule #13: I wholeheartedly agree. One of the nastiest turns in my early days of entrepreneurship was when my tax advisor stopped returning phone calls. Shortly afterwards, I was contacted by a government agency that he had not submitted paperwork on time, that they (the government) couldn't find him anymore, and that I was fully legally liable to clean up the whole mess and my company would have to pay a €2500 fine.
fxtentacle 7y ago
Rule #22: My experience is the opposite. For our professional audio software [0] we met almost all of the initial customers at conferences. They tried out our software, enjoyed working with it, and then later purchased a few licenses for trying things out back at home. Some of them later purchased licenses for every seat in their company. I believe it would have been extremely difficult to sell audio software without giving people the ability to test-listen. [0] https://newaudiotechnology.com/products/ https://newaudiotechnology.com/products/
- sky_rw 7y ago
  Trade shows are absolutely critical if you have a niche B2B product. Especially the smaller ones. The benefits of face to face communication and feedback cannot be beat. For startups, there are many ways to hack this process and get in cheap. You might be able to sublease half a booth from another company. If you have industry partners see if you can run office hours in their booth space. Reach out to show organizers and see if they have any educational break out sessions your could talk at. Or just go without a plan and strike up conversations with other peers in the space. I think many of us who spend our lives behind computers in the tech field don't appreciate how vital these events are to so many industries, or how much actual work gets done here.
- PaulDavisThe1st 7y ago
  I built a pro-audio software business without ever having a stand/booth at any conference. I went to the conferences early on, and was almost jealous of the startups I saw there. Almost without exception, they've all vanished without a trace and 20 years later, I'm still doing what I do. So in short ... not necessarily.
ttul 7y ago
The title should be amended: “Rules to run a bootstrapped indie startup with minimum hassle”, perhaps. For example, take rule 1: prefer recurring revenue. Recurring revenue is the new hotness, but one time enterprise software licenses provide cash up front as well as the ability to recognize all that sweet revenue in the year it was sold. If you’re bootstrapping and properly accruing your revenue, having some perpetual licenses isn’t a bad thing at all.
jurgenwerk 7y ago
The author argues it's better to have monthly subscription plans only and ditch the yearly plans, but I don't really get it. This goes against one of the most common cashflow optimizations known in the SaaS world - which is to push as many users to yearly plans as possible. I think long term subscription plans should be preferred as they produce lower churn, make the revenue more predictable and bring more money upfront.
- ianandrich 7y ago
  I thought he was arguing "Monthly vs. Transactional" rather than "Monthly vs. Yearly". I strongly agree with your assessment that Yearly is better than Monthly.
  - Silhouette 7y ago
    Rule #1 is monthly vs. transactional, but then rule #2 is monthly vs. annual.
- Silhouette 7y ago
  I think long term subscription plans should be preferred as they produce lower churn So the received wisdom says, but particularly with card payments, churn rates due to random charge failures are insane. On top of that, the services that handle the payments and subscription management are often relatively new and prone to making changes up to and including things like dumping their whole API or doubling/trebling their prices overnight, making them terrible business partners to rely on. Literally every such service we have ever used has done something like that to us at some point. We are seriously considering dumping any form of recurring subscription, and all the baggage that goes with them, at one of my businesses. The proposed alternative is a simple tiered pricing model where customers have a choice of periods, with the longer ones being more cost-effective for them, but all payments are single, one-off charges only. This would be combined with something I'm seeing a lot lately, which is saving the customer's payment details so that extending for a further period can be done with just a click or two. The alternative we've been considering is one of the services that goes further, outsourcing our entire payment and sales tax infrastructure to them as merchant of record. Given how prohibitively complicated sales taxes are becoming on international transactions if you want to stay compliant, I wonder if this might soon become the only viable operating method for small businesses and startups anyway. However, these services all seem to be really cagey about telling you what using them will really cost and how legally robust their strategy for sales tax management really is, and I have no reason to believe they will be any more reliable as long term partners than the billing/subscription services, so right now we're hesitant to pursue this idea. I'd be very interested in the results if anyone else has tried either of these changes recently and is willing to share their experience.
aabhay 7y ago
Lovely piece, though there is a significant section missing about when in a business’s lifetime these rules should start applying. Most of the business functions (like support calls) should not be automated and doors should be kept open, as long as the key decision maker has bandwidth. E.g. don’t hire an accountant until you can’t do it yourself. Feel free to answer random unsolicited messages until you have no more time for it etc. Running a business is not a matter of defining these principles up front, but letting efficient process emerge from need.
mstipetic 7y ago
I agree with the tone of this article, it ends with "these rules are meant to be broken," which is great. The only rule I agree with strongly is Don't do partnerships. Unless you're in a position where people ask you for a partnership, it never works well. My company spent a lot of time chasing partnerships which on paper make perfect sense, but always got stuck in some middle-management layer where everybody says it's great but nobody really cares.
orthecreedence 7y ago
Regarding fremium, one thing I've had success with is to just not offer support for unpaid accounts. Need help? Go to the community forum. Want support? Pay for it.
anonsivalley652 7y ago
Rule #-2. A profitable business will require lots of smart schlepping. There is no reward for hard work unless it's produces value. Rule #-1. Build a defensible business, not something that's trivial for competitors to copy. Rule #0. Don't make a big, absolutist list of "dating rules". Be flexible and use good judgement. Rule #5. Freemium can be good in many situations: when just out of beta, revenue is plateauing AND marginal user app infrastructure costs are low. You wouldn't do a cloud backup with unlimited storage like BackBlaze as freemium. You would with LucidChart because it costs almost nothing (so long as there aren't huge file attachments). It is smart in certain instances because of long-term economics, free word-of-mouth advertising, future sales and because it builds goodwill that enhances the brand. It's vital to steer enterprise users away from freemium because they have more needs that are better served with pricier support subscriptions (the "Enterprise" version). Rule #22. If you're selling a physical product or b2b service through channels, then trade-shows are a must. It's incredibly foolish to shut the door on distribution when you don't have it. Then again, physical products are a PITA. If it were me, early on, I would corral all the other founders for brainstorming on the Business Model Generation chart to consider what's needed right now and in the near future with some sticky notes. Then, revisit it regularly with periodic founder meetings to make adjustments.
- flyingbutt 7y ago
  Your rule #0 is a bit ironic, isn't it?
- ncallaway 7y ago
  The article definitely agrees with your rule #0: > The rules are not meant as absolute rules, but as food for thought: For you to think about the tradeoffs, of how and why there will be additional hassle and distraction from your core activities, if you decide to “break” one of the “rules”. > For example, if you decide going to trade shows is right for your business, you should understand the fully-loaded cost of doing that. Not just the cost in money but also the cost in time. Depending on your product, they can still be one of the absolute best ways to reach your ideal customers.
spectramax 7y ago
Everytime someone offeres top X things to as a startup, I immediately go on the guard. 9/10 times, this advice is useless; 5/10 times it is harmful. My mantra is do not follow any advice and prime your brain with it. It turns out, no one really knows what's going on. They're trying things out and see what sticks. From Harvard MBA folks to your mom and pop shop that sells craft supplies. Please, I plead people on HN to stop listening to advice from people like Sam Altman, they're akin to "How to become a millionaire" books that you find at the side of the grocery store aisle. It is tabloid material that fills your brain with false knowledge. Next time a problem comes up, instead of thinking it through you immediately line up the dots and remember reading some solution to it. On the other hand, read engineering, science and mathematics books. Master statistics and probability. These are universal constants that will always help you. Learn accounting. I see the irony of me providing advice in this rebutal, but there is a distinction - learn universally true things that have data, backed by math and science. Those will always be on your side because that's how nature really works. Otherwise, you'll get stuck in local optimum of following the crowd. No offense to the author, I am glad things worked out for you the way it did. Remember, they won't work out for others and if I were you, I would not speak with such confidence and authority - it stands on stilts.
jtolmar 7y ago
In #4 the author suggests using a service like Paddle to outsource billing. Does anyone here have experience they can share to compare this against Stripe? Other services? It's hard to know how cumbersome any of these products are in practice when their documentation is an endless series of quick start guides that leave critical details as links to other quick start guides. "Set up a monthly subscription service in 5 minutes! Please refer to these three other guides if you want to know which customers have active subscriptions."
- rickpmg 7y ago
  My concern with #4 would be with this: "You don’t have to fight back against chargebacks, they do that for you;" No way would I delegate this customer satisfaction issue to another company to handle; much less one who doesn't want chargebacks (at any cost.)
  - joisig 7y ago
    I don't have direct experience with Paddle so I don't know whether it's that black and white. Having however experienced a months-long hold on our payment processor account at one point because of an abnormally large charge (a fairly large customer that wanted to pay annually by credit card), I think it could be worth leaving that kind of hassle to somebody else, and have that somebody else be a bigger player that more likely has a better relationship with their payment processors.
- omnimus 7y ago
  Stripe is just payment processor. Paddle is similar to Gumroad they become reseller of your producs. You get payed once month (you give them invoice basically) and you dont have to care about invoicing. Your customers get invoice from paddle. It is for digital products only the system cant be used with anything that you ship. Paddle also takes care of figuring out VAT for you which is a headache if you are based in EU. I guess to some people 2% more might be worth using Stripe (stripe is 3% paddle is 5%) but for smaller players it solves real problems.
  - 7y ago
sexy_seedbox 7y ago
> Rule #7: Choose simple, boring technology Depends. For example, as an agency, if we don't try out JAMstack, headless-CMSes, Gatsby/Gridsome, then as an industry, we'll still be stuck in the WordPress/PHP ecosystem for years to come.
- cwyers 7y ago
  I don't think he's saying that the industry should stagnate. He's saying it might be dangerous, you go first. Let someone who had more of a margin of error figure it out first.
  - fyfy18 7y ago
    I read this as sticking to what you know. Maybe you come from a C# background, it's not hot and sexy (sorry C# developers), but it's still a perfectly good technology to build a business on. Compare this to your team deciding to learn the JavaScript flevour of the month and using that - it will probably take you much longer than building with what you already know.
    - TomMarius 7y ago
      What new javascript flavors came out recently?
- ganstyles 7y ago
  I think _you_ should try out the newer stuff and smooth out the hard edges. I'll stick to stuff that's not bleeding edge, but reliable and battle tested thanks to pioneers like yourself, while I still get to build my business without worrying about the tech flavor of the month. i.e. our front end is built in React, not bleeding edge, but modern, well supported, and stable. But I wouldn't have chosen it without people like you pioneering it first. Thank you!
miguelmota 7y ago
I generally agree with most of the points but just because it worked for the author, it doesn't necessary mean that it'll work for your particular business. Take it with a grain of salt since not all software startups are the same.
luord 7y ago
Not that disagreement matters since he points out at the end that these are guidelines and not rules, but I particularly disagree on Freemium and answering services. The first one not only because the idea I'm working on can't possibly work without a free tier, but also because I use the free tiers of many services; I'd feel better about myself by "giving back" so to say. And the second one simply because I see those services as hassles themselves, though I might eventually change my mind on that.
naringas 7y ago
rule #1 implies that your customers must depend on you, it encourages the service providers to make it difficult (or at least inconvenient) for their customers to replace (or abandon ) them... I don't like it. it reminds me of drugs. but I guess food and water also work like that. it is likely that air will follow this path in the (hopefully very far) future?
- hinkley 7y ago
  It also isn’t the safety net you think. Several times I’ve worked at a startup where a customer saw us as a critical or even the critical partner in their strategic roadmap and yet they were not paying us enough money to keep the lights on. It made no sense to many of us. Couldn’t they see where this was headed? (of course if you’ve gotten something for next to nothing you might really want to keep the provider around)
epicgiga 7y ago
Great content, I confirmed all these rules the hard way on my first business play.
jwilliams 7y ago
> Rule #14: Don’t take in any investors I know order isn't emphasized in the list, but this should really be #1. Most of the other rules stem or are dependent on this one.
juskrey 7y ago
Recurring revenue seems a golden cow of IT nowadays. But remember, while it devoids of volatility, it also makes business much more fragile. And you see problems too late.
vhiremath4 7y ago
I really appreciate the caveat at the end that these rules aren't absolutes, but I thought I'd chime in anyway as someone who is currently running a VC-backed high-growth startup with all the cliches that come along with that. > Rule #14: Don’t take in any investors > They will put a lot of pressure on you to grow fast I work with Sequoia and Kleiner Perkins. Both told us that we should build a team of Navy Seals vs. a bloated whale. I think most VCs are starting to turn around to the idea that growing as fast as humanly possible isn't the way to go. That being said, putting pressure on a company to grow distribution and ubiquity fast is a great thing if you're an internet business that has the ability to monopolize a new category/subspace. > very often faster than may be compatible with your well-being If you're taking VC money, you know the ride you're in for. Don't be naive. And then don't be soft. > mental health, work/life balance and ability to keep finding your work fun See the last point. > Rule #21: Don’t do big launches I've had a lot of success with well-timed ProductHunt launches. It's a huge reason we were able to get early traction that led to sustained bottoms-up growth. I've done multiple 1k+ upvoted PH launches: https://www.producthunt.com/@vhmth/made https://www.producthunt.com/@vhmth/made These launches took my co-founders and I no more than a few days and most of the work was put in upfront on build. You can do it quickly - you just need to cram more hours in.
- joisig 7y ago
  OP here, thanks for chiming in. Mostly responding to say that I love your product Loom, use it several times a week. > If you're taking VC money, you know the ride you're in for. > Don't be naive. And then don't be soft. Exactly. Eyes wide open, make sure you know what you're choosing.
raverbashing 7y ago
Rule #7.1 - Boring technology will bite you. They have sharp corners and rough edges (usually at the edges) and you can cut yourself with it.
t222 7y ago
This article resonated on so many levels with my experience of running a small business. I wish I had seen it three years earlier :) A few additions from me: 1. Monthly subscriptions I wanted for those to be a success so much. After struggling for a few months with churn we decided to stop them and only offer annual subscription. We had people subscribe for a month, (ab)use our customer support for the entire period and then cancel because the task that needed our product was done with our help. One could argue that our product doesn't bring enough value or that we made a mistake providing the support. We have a few times less churn from annual subscriptions and in general a lot better and happier customers. The other thing with annual subscriptions is that you get your money upfront. Monthly subscribers churn for trivialities such as expired credit cards. 2. No investment A big hell yeah on this one. We were this close (three times) to get investment money. God I am so happy we didn't. Our main goal was hiring top talent. Unfortunately the talent didn't turn out to be that top so we turned down the investors. The whole experience with building pitch decks made me disdain the investing process and the people involved. Now I think of investors (accelerators, angels, VC) as a waste of time. You are better spending that time on your customers and product. I know a lot of people on HN would disagree with this ;) 3. Grow marketing skills and don't pay for anybody to do it for you Learn how to do marketing. Just do that. And by marketing I mean mostly content marketing. Learn how to write copy, learn how SEO works, check your Google search console often to see where you stand for the keywords that matter. 4. Ads We don't do ads (Google, Twitter, Facebook). We tried it and failed. For example we were the top (only?) merchant bidding for particular keywords and still reached zero conversions (and paid Google and Twitter a lot of money). Facebook was even a bigger flop. 5. Accept only credit card online payments Hell yeah! Issuing invoices, accepting wired payments and manually hooking up a "fake" subscription with your licensing software is a mess. God forbid somebody asks for a refund. I strongly back what the author said about Gumroad and Paddle (we use the former and are quite happy). 6. Promos This was one of our biggest mistakes. Doing holiday (Christmas, end of year, black Friday, cyber Monday) promotions definitely brings some sales. In our case though almost all of those new customers (90%+) churned at the end of the billing period. We have less than 10% churn otherwise. 7. Discounts We no longer do discounts for individual requests ("hey I like your product but it needs feature X - give me $100 off for the tip" or "I have a great idea I need your product for but can't afford it yet"). We decided we don't need that kind of people as customers. Always very demanding and the end most of them (70%+) churn. In the early days we did a lot of those though. We still do volume discounts. Also we no longer do educational or non-profit discounts. Education institutions and non-profits often have bigger budgets than the rest of our customers. It isn't fair to make a discount for a huge non-profit and to charge regular Joe the shelf price. 8. Freemium We do it, it sucks. Probably shouldn't have done it. It is a lot of effort as the author says. Can't really measure the conversion rate. Probably the only good use for it is the (somewhat) extended trial - we disable a few features of the product after the trial ends. HTH
bisrig 7y ago
Something that I think is missing in the discussion here with regard to payment methods is: know your market segmentation. If you are targeting b2B (i.e. large business), there are going to be a lot of circumstances where credit card payments are a non-starter. From personal (F500) experience, I know that I am going to have to move mountains in order for purchasing to accept a commercial arrangement with monthly credit card payments, which means I will usually move on to a competitive solution if one exists. In fact, one of the first questions I usually ask a vendor is "do you sell through (preferred reseller already listed as an approved vendor in our purchasing system)" as I know this is going to make my job of getting the purchase approved 100x easier. So in conclusion, know your market segmentation and how your potential customers' expectations for how they will do business with you.
- joisig 7y ago
  This is true and is the reason I break my own rule in this case - because of large companies that are only willing to pay through an annual PO/invoice process. None of our customers are quite big enough to require the use of a preferred reseller, but I've heard of that arrangement as well.
everybodyknows 7y ago
>#17: No patents … >Having documented prior art related to the patent (e.g. in your source code repository or as dated documents in Google Docs or similar) is likely to be as good a defense as having filed a patent at some point. Has a git repo, privately held and without third-party attestation e.g. github, ever been successfully cited as evidence of prior art? Timestamps could be faked, so you'd have to point to the work history, which would be gibberish to a patent judge and jury.
- redis_mlc 7y ago
  The US, like most countries, is first-to-file now. So "prior art" doesn't matter as much. However, in some general legal dispute, timestamps and headers can be very useful, especially if somebody strips them poorly. Put a header in your files too with author and company info.
  - joisig 7y ago
    Thanks, I will update the post to talk about first-to-file since that changes the tradeoff one is making by deciding whether to file patents or not.
    - redis_mlc 7y ago
      First-to-file in the US started March 16, 2013. Filing patents is mostly something to do for startups if it's easy for you (ie. your investor has an IP lawyer, or a relative is one), or your investors want a patent story. But even some SF Unicorns don't file patents, or delay it for a decade. The problem with patents is that most startups can't afford the legal fees and distraction to defend them, so why pay to file? However, definitely file trademarks and copyrights (cheap and easy) and renew your domain names. Source: have done my own IP for software for 20 years, now looking into music rights.
shostack 7y ago
SEO is not free traffic. It is time and potentially money invested in creating an optimized site, producing great content that gets indexed and back links, and then marketing the hell out of said content so you actually get back links.
redis_mlc 7y ago
The other rule I've heard from very successful owners is to keep headcount under 50 employees. Above that, you get into weird administrative requirements like submitting payroll on tape, large company labor reporting requirements, etc.

554 points by joisig 7y ago

Most of those rules are decent, but they all have exceptions. You almost need a final rule, to think about the reasons the other rules exist, and feel free to break a rule if appropriate for your own specific situation.

bruckie 7y ago
It already has exactly that: A confession, and a caveat I’ve broken almost every one of the rules above! ... The rules are not meant as absolute rules, but as food for thought: For you to think about the tradeoffs, of how and why there will be additional hassle and distraction from your core activities, if you decide to “break” one of the “rules”. (maybe that was missing from an earlier revision or something?)

acvny 7y ago

Very good rules. I went through the point about unsolicited offers. I didn't know how to say no.

hyzyla 7y ago

My favorite rule is "Investment to the marketing, don't spend". I think, if replace "marketing" to anything else, this rule can be applied to any aspect of the life.

hbcondo714 7y ago

> building on top of long-term stable, multi-vendor platforms like the web, or Linux. For rule #8, is the author recommending to build custom CMS / e-commerce features for a SaaS? If so, sounds like a lot more work.

fxtentacle 7y ago
I think he's suggesting to avoid the vendor lock-in that would come from renting the official hosted WordPress. But I would guess that installing the open source WordPress on your own dedicated Linux server is just fine, because there's no way someone could force you to change something.
joisig 7y ago
Good question (OP here). What I mean is that for example, if you build a Chrome Extension (which is the main way my company's product gets used, so I'm familiar with the pitfalls), you are now at the mercy of Google and how they choose to develop their marketplace for extensions, how they choose to enforce user security, and how they choose to change the platform over time. Single vendor platform, similar to the other app stores. I'm not suggesting you rely on nothing else such as 3rd party CMS or e-commerce features, but I am suggesting that for example if you build a Shopify plug-in, you are at the mercy of how Shopify chooses to develop their ecosystem, and there will be potentially existential crises along the way. As with all the other rules, it's one you can and should break when it makes sense for your business. There are many thriving startups on top of Shopify's ecosystem, Apple's ecosystem, Google Chrome's ecosystem, and so on and so forth - I'm just urging you to be aware of the hassle you are creating for yourself by choosing such a path, and to balance it wisely against the benefits.
- hbcondo714 7y ago
  Thank you for your reply and clarifying.

fxtentacle 7y ago

Rule #11 can be more challenging than you'd think. For my first start-up, we had to initially sign up with a smaller bank because the bigger ones did not want to deal with first-time CEOs. After a bit more than a year of waiting, we were then allowed to create an account at the big boring bank.

halfmatthalfcat 7y ago
Interesting, I walked into a local Chase branch and opened a business checking + credit card no questions asked.

mdonahoe 7y ago

"Rule #5: Don’t do freemium" Isn't CrankWheel, the author's company, a freemium product? "Free forever for limited use. No credit card needed" What experience does the author have with SaaS products that have no free tier? I stopped reading here.

joisig 7y ago
My company operates on a freemium model. It's a big hassle, as documented in the section about not doing freemium, but it's also something we decided was fundamental to our main distribution channel which is the Chrome Web Store (breaking another of the rules in the article - but maybe check the last section). I haven't run a non-freemium SaaS company, but I do see what benefits it would bring if we were able to operate on a typical 14 or 30-day trial model. The big ones that would bring are a much shorter sales pipeline and shorter feedback loop on ad spend.
- adz_6891 7y ago
  Thanks for the clarification here! Since you are using freemium at the moment do you have some way of quantifying the hassle that this decision has created? It would be interesting to know more about how you navigate this kind of tradeoff since this is really what matters when it comes to detemerning whether a decision like freemium vs no-freemium is actually a good decision
  - joisig 7y ago
    There's some operational cost (for running servers and such), but not that high. There's considerable customer support cost. The main thing that I feel makes life tough is that the pipeline from, say, doing some paid ads and seeing the results is several months long, and the feedback loop on changes that can affect conversion rates and monetization is similarly very long. We've learned to cope with it but it would be nice to have a one-month feedback loop or shorter.
    - adz_6891 7y ago

fxtentacle 7y ago

Rule #13: I wholeheartedly agree. One of the nastiest turns in my early days of entrepreneurship was when my tax advisor stopped returning phone calls. Shortly afterwards, I was contacted by a government agency that he had not submitted paperwork on time, that they (the government) couldn't find him anymore, and that I was fully legally liable to clean up the whole mess and my company would have to pay a €2500 fine.

fxtentacle 7y ago

Rule #22: My experience is the opposite. For our professional audio software [0] we met almost all of the initial customers at conferences. They tried out our software, enjoyed working with it, and then later purchased a few licenses for trying things out back at home. Some of them later purchased licenses for every seat in their company. I believe it would have been extremely difficult to sell audio software without giving people the ability to test-listen. [0] https://newaudiotechnology.com/products/ https://newaudiotechnology.com/products/

sky_rw 7y ago
Trade shows are absolutely critical if you have a niche B2B product. Especially the smaller ones. The benefits of face to face communication and feedback cannot be beat. For startups, there are many ways to hack this process and get in cheap. You might be able to sublease half a booth from another company. If you have industry partners see if you can run office hours in their booth space. Reach out to show organizers and see if they have any educational break out sessions your could talk at. Or just go without a plan and strike up conversations with other peers in the space. I think many of us who spend our lives behind computers in the tech field don't appreciate how vital these events are to so many industries, or how much actual work gets done here.
PaulDavisThe1st 7y ago
I built a pro-audio software business without ever having a stand/booth at any conference. I went to the conferences early on, and was almost jealous of the startups I saw there. Almost without exception, they've all vanished without a trace and 20 years later, I'm still doing what I do. So in short ... not necessarily.

ttul 7y ago

The title should be amended: “Rules to run a bootstrapped indie startup with minimum hassle”, perhaps. For example, take rule 1: prefer recurring revenue. Recurring revenue is the new hotness, but one time enterprise software licenses provide cash up front as well as the ability to recognize all that sweet revenue in the year it was sold. If you’re bootstrapping and properly accruing your revenue, having some perpetual licenses isn’t a bad thing at all.

jurgenwerk 7y ago

The author argues it's better to have monthly subscription plans only and ditch the yearly plans, but I don't really get it. This goes against one of the most common cashflow optimizations known in the SaaS world - which is to push as many users to yearly plans as possible. I think long term subscription plans should be preferred as they produce lower churn, make the revenue more predictable and bring more money upfront.

ianandrich 7y ago
I thought he was arguing "Monthly vs. Transactional" rather than "Monthly vs. Yearly". I strongly agree with your assessment that Yearly is better than Monthly.
- Silhouette 7y ago
  Rule #1 is monthly vs. transactional, but then rule #2 is monthly vs. annual.
Silhouette 7y ago
I think long term subscription plans should be preferred as they produce lower churn So the received wisdom says, but particularly with card payments, churn rates due to random charge failures are insane. On top of that, the services that handle the payments and subscription management are often relatively new and prone to making changes up to and including things like dumping their whole API or doubling/trebling their prices overnight, making them terrible business partners to rely on. Literally every such service we have ever used has done something like that to us at some point. We are seriously considering dumping any form of recurring subscription, and all the baggage that goes with them, at one of my businesses. The proposed alternative is a simple tiered pricing model where customers have a choice of periods, with the longer ones being more cost-effective for them, but all payments are single, one-off charges only. This would be combined with something I'm seeing a lot lately, which is saving the customer's payment details so that extending for a further period can be done with just a click or two. The alternative we've been considering is one of the services that goes further, outsourcing our entire payment and sales tax infrastructure to them as merchant of record. Given how prohibitively complicated sales taxes are becoming on international transactions if you want to stay compliant, I wonder if this might soon become the only viable operating method for small businesses and startups anyway. However, these services all seem to be really cagey about telling you what using them will really cost and how legally robust their strategy for sales tax management really is, and I have no reason to believe they will be any more reliable as long term partners than the billing/subscription services, so right now we're hesitant to pursue this idea. I'd be very interested in the results if anyone else has tried either of these changes recently and is willing to share their experience.

aabhay 7y ago

Lovely piece, though there is a significant section missing about when in a business’s lifetime these rules should start applying. Most of the business functions (like support calls) should not be automated and doors should be kept open, as long as the key decision maker has bandwidth. E.g. don’t hire an accountant until you can’t do it yourself. Feel free to answer random unsolicited messages until you have no more time for it etc. Running a business is not a matter of defining these principles up front, but letting efficient process emerge from need.

mstipetic 7y ago

I agree with the tone of this article, it ends with "these rules are meant to be broken," which is great. The only rule I agree with strongly is Don't do partnerships. Unless you're in a position where people ask you for a partnership, it never works well. My company spent a lot of time chasing partnerships which on paper make perfect sense, but always got stuck in some middle-management layer where everybody says it's great but nobody really cares.

orthecreedence 7y ago

Regarding fremium, one thing I've had success with is to just not offer support for unpaid accounts. Need help? Go to the community forum. Want support? Pay for it.

anonsivalley652 7y ago

Rule #-2. A profitable business will require lots of smart schlepping. There is no reward for hard work unless it's produces value. Rule #-1. Build a defensible business, not something that's trivial for competitors to copy. Rule #0. Don't make a big, absolutist list of "dating rules". Be flexible and use good judgement. Rule #5. Freemium can be good in many situations: when just out of beta, revenue is plateauing AND marginal user app infrastructure costs are low. You wouldn't do a cloud backup with unlimited storage like BackBlaze as freemium. You would with LucidChart because it costs almost nothing (so long as there aren't huge file attachments). It is smart in certain instances because of long-term economics, free word-of-mouth advertising, future sales and because it builds goodwill that enhances the brand. It's vital to steer enterprise users away from freemium because they have more needs that are better served with pricier support subscriptions (the "Enterprise" version). Rule #22. If you're selling a physical product or b2b service through channels, then trade-shows are a must. It's incredibly foolish to shut the door on distribution when you don't have it. Then again, physical products are a PITA. If it were me, early on, I would corral all the other founders for brainstorming on the Business Model Generation chart to consider what's needed right now and in the near future with some sticky notes. Then, revisit it regularly with periodic founder meetings to make adjustments.

flyingbutt 7y ago
Your rule #0 is a bit ironic, isn't it?
ncallaway 7y ago
The article definitely agrees with your rule #0: > The rules are not meant as absolute rules, but as food for thought: For you to think about the tradeoffs, of how and why there will be additional hassle and distraction from your core activities, if you decide to “break” one of the “rules”. > For example, if you decide going to trade shows is right for your business, you should understand the fully-loaded cost of doing that. Not just the cost in money but also the cost in time. Depending on your product, they can still be one of the absolute best ways to reach your ideal customers.

spectramax 7y ago

Everytime someone offeres top X things to as a startup, I immediately go on the guard. 9/10 times, this advice is useless; 5/10 times it is harmful. My mantra is do not follow any advice and prime your brain with it. It turns out, no one really knows what's going on. They're trying things out and see what sticks. From Harvard MBA folks to your mom and pop shop that sells craft supplies. Please, I plead people on HN to stop listening to advice from people like Sam Altman, they're akin to "How to become a millionaire" books that you find at the side of the grocery store aisle. It is tabloid material that fills your brain with false knowledge. Next time a problem comes up, instead of thinking it through you immediately line up the dots and remember reading some solution to it. On the other hand, read engineering, science and mathematics books. Master statistics and probability. These are universal constants that will always help you. Learn accounting. I see the irony of me providing advice in this rebutal, but there is a distinction - learn universally true things that have data, backed by math and science. Those will always be on your side because that's how nature really works. Otherwise, you'll get stuck in local optimum of following the crowd. No offense to the author, I am glad things worked out for you the way it did. Remember, they won't work out for others and if I were you, I would not speak with such confidence and authority - it stands on stilts.

jtolmar 7y ago

In #4 the author suggests using a service like Paddle to outsource billing. Does anyone here have experience they can share to compare this against Stripe? Other services? It's hard to know how cumbersome any of these products are in practice when their documentation is an endless series of quick start guides that leave critical details as links to other quick start guides. "Set up a monthly subscription service in 5 minutes! Please refer to these three other guides if you want to know which customers have active subscriptions."

rickpmg 7y ago
My concern with #4 would be with this: "You don’t have to fight back against chargebacks, they do that for you;" No way would I delegate this customer satisfaction issue to another company to handle; much less one who doesn't want chargebacks (at any cost.)
- joisig 7y ago
  I don't have direct experience with Paddle so I don't know whether it's that black and white. Having however experienced a months-long hold on our payment processor account at one point because of an abnormally large charge (a fairly large customer that wanted to pay annually by credit card), I think it could be worth leaving that kind of hassle to somebody else, and have that somebody else be a bigger player that more likely has a better relationship with their payment processors.
omnimus 7y ago
Stripe is just payment processor. Paddle is similar to Gumroad they become reseller of your producs. You get payed once month (you give them invoice basically) and you dont have to care about invoicing. Your customers get invoice from paddle. It is for digital products only the system cant be used with anything that you ship. Paddle also takes care of figuring out VAT for you which is a headache if you are based in EU. I guess to some people 2% more might be worth using Stripe (stripe is 3% paddle is 5%) but for smaller players it solves real problems.
- 7y ago

sexy_seedbox 7y ago

> Rule #7: Choose simple, boring technology Depends. For example, as an agency, if we don't try out JAMstack, headless-CMSes, Gatsby/Gridsome, then as an industry, we'll still be stuck in the WordPress/PHP ecosystem for years to come.

cwyers 7y ago
I don't think he's saying that the industry should stagnate. He's saying it might be dangerous, you go first. Let someone who had more of a margin of error figure it out first.
- fyfy18 7y ago
  I read this as sticking to what you know. Maybe you come from a C# background, it's not hot and sexy (sorry C# developers), but it's still a perfectly good technology to build a business on. Compare this to your team deciding to learn the JavaScript flevour of the month and using that - it will probably take you much longer than building with what you already know.
  - TomMarius 7y ago
    What new javascript flavors came out recently?
ganstyles 7y ago
I think _you_ should try out the newer stuff and smooth out the hard edges. I'll stick to stuff that's not bleeding edge, but reliable and battle tested thanks to pioneers like yourself, while I still get to build my business without worrying about the tech flavor of the month. i.e. our front end is built in React, not bleeding edge, but modern, well supported, and stable. But I wouldn't have chosen it without people like you pioneering it first. Thank you!

miguelmota 7y ago

I generally agree with most of the points but just because it worked for the author, it doesn't necessary mean that it'll work for your particular business. Take it with a grain of salt since not all software startups are the same.

luord 7y ago

Not that disagreement matters since he points out at the end that these are guidelines and not rules, but I particularly disagree on Freemium and answering services. The first one not only because the idea I'm working on can't possibly work without a free tier, but also because I use the free tiers of many services; I'd feel better about myself by "giving back" so to say. And the second one simply because I see those services as hassles themselves, though I might eventually change my mind on that.

naringas 7y ago

rule #1 implies that your customers must depend on you, it encourages the service providers to make it difficult (or at least inconvenient) for their customers to replace (or abandon ) them... I don't like it. it reminds me of drugs. but I guess food and water also work like that. it is likely that air will follow this path in the (hopefully very far) future?

hinkley 7y ago
It also isn’t the safety net you think. Several times I’ve worked at a startup where a customer saw us as a critical or even the critical partner in their strategic roadmap and yet they were not paying us enough money to keep the lights on. It made no sense to many of us. Couldn’t they see where this was headed? (of course if you’ve gotten something for next to nothing you might really want to keep the provider around)

epicgiga 7y ago

Great content, I confirmed all these rules the hard way on my first business play.

jwilliams 7y ago

> Rule #14: Don’t take in any investors I know order isn't emphasized in the list, but this should really be #1. Most of the other rules stem or are dependent on this one.

juskrey 7y ago

Recurring revenue seems a golden cow of IT nowadays. But remember, while it devoids of volatility, it also makes business much more fragile. And you see problems too late.

vhiremath4 7y ago

I really appreciate the caveat at the end that these rules aren't absolutes, but I thought I'd chime in anyway as someone who is currently running a VC-backed high-growth startup with all the cliches that come along with that. > Rule #14: Don’t take in any investors > They will put a lot of pressure on you to grow fast I work with Sequoia and Kleiner Perkins. Both told us that we should build a team of Navy Seals vs. a bloated whale. I think most VCs are starting to turn around to the idea that growing as fast as humanly possible isn't the way to go. That being said, putting pressure on a company to grow distribution and ubiquity fast is a great thing if you're an internet business that has the ability to monopolize a new category/subspace. > very often faster than may be compatible with your well-being If you're taking VC money, you know the ride you're in for. Don't be naive. And then don't be soft. > mental health, work/life balance and ability to keep finding your work fun See the last point. > Rule #21: Don’t do big launches I've had a lot of success with well-timed ProductHunt launches. It's a huge reason we were able to get early traction that led to sustained bottoms-up growth. I've done multiple 1k+ upvoted PH launches: https://www.producthunt.com/@vhmth/made https://www.producthunt.com/@vhmth/made These launches took my co-founders and I no more than a few days and most of the work was put in upfront on build. You can do it quickly - you just need to cram more hours in.

joisig 7y ago
OP here, thanks for chiming in. Mostly responding to say that I love your product Loom, use it several times a week. > If you're taking VC money, you know the ride you're in for. > Don't be naive. And then don't be soft. Exactly. Eyes wide open, make sure you know what you're choosing.

raverbashing 7y ago

Rule #7.1 - Boring technology will bite you. They have sharp corners and rough edges (usually at the edges) and you can cut yourself with it.

t222 7y ago

This article resonated on so many levels with my experience of running a small business. I wish I had seen it three years earlier :) A few additions from me: 1. Monthly subscriptions I wanted for those to be a success so much. After struggling for a few months with churn we decided to stop them and only offer annual subscription. We had people subscribe for a month, (ab)use our customer support for the entire period and then cancel because the task that needed our product was done with our help. One could argue that our product doesn't bring enough value or that we made a mistake providing the support. We have a few times less churn from annual subscriptions and in general a lot better and happier customers. The other thing with annual subscriptions is that you get your money upfront. Monthly subscribers churn for trivialities such as expired credit cards. 2. No investment A big hell yeah on this one. We were this close (three times) to get investment money. God I am so happy we didn't. Our main goal was hiring top talent. Unfortunately the talent didn't turn out to be that top so we turned down the investors. The whole experience with building pitch decks made me disdain the investing process and the people involved. Now I think of investors (accelerators, angels, VC) as a waste of time. You are better spending that time on your customers and product. I know a lot of people on HN would disagree with this ;) 3. Grow marketing skills and don't pay for anybody to do it for you Learn how to do marketing. Just do that. And by marketing I mean mostly content marketing. Learn how to write copy, learn how SEO works, check your Google search console often to see where you stand for the keywords that matter. 4. Ads We don't do ads (Google, Twitter, Facebook). We tried it and failed. For example we were the top (only?) merchant bidding for particular keywords and still reached zero conversions (and paid Google and Twitter a lot of money). Facebook was even a bigger flop. 5. Accept only credit card online payments Hell yeah! Issuing invoices, accepting wired payments and manually hooking up a "fake" subscription with your licensing software is a mess. God forbid somebody asks for a refund. I strongly back what the author said about Gumroad and Paddle (we use the former and are quite happy). 6. Promos This was one of our biggest mistakes. Doing holiday (Christmas, end of year, black Friday, cyber Monday) promotions definitely brings some sales. In our case though almost all of those new customers (90%+) churned at the end of the billing period. We have less than 10% churn otherwise. 7. Discounts We no longer do discounts for individual requests ("hey I like your product but it needs feature X - give me $100 off for the tip" or "I have a great idea I need your product for but can't afford it yet"). We decided we don't need that kind of people as customers. Always very demanding and the end most of them (70%+) churn. In the early days we did a lot of those though. We still do volume discounts. Also we no longer do educational or non-profit discounts. Education institutions and non-profits often have bigger budgets than the rest of our customers. It isn't fair to make a discount for a huge non-profit and to charge regular Joe the shelf price. 8. Freemium We do it, it sucks. Probably shouldn't have done it. It is a lot of effort as the author says. Can't really measure the conversion rate. Probably the only good use for it is the (somewhat) extended trial - we disable a few features of the product after the trial ends. HTH

bisrig 7y ago

Something that I think is missing in the discussion here with regard to payment methods is: know your market segmentation. If you are targeting b2B (i.e. large business), there are going to be a lot of circumstances where credit card payments are a non-starter. From personal (F500) experience, I know that I am going to have to move mountains in order for purchasing to accept a commercial arrangement with monthly credit card payments, which means I will usually move on to a competitive solution if one exists. In fact, one of the first questions I usually ask a vendor is "do you sell through (preferred reseller already listed as an approved vendor in our purchasing system)" as I know this is going to make my job of getting the purchase approved 100x easier. So in conclusion, know your market segmentation and how your potential customers' expectations for how they will do business with you.

joisig 7y ago
This is true and is the reason I break my own rule in this case - because of large companies that are only willing to pay through an annual PO/invoice process. None of our customers are quite big enough to require the use of a preferred reseller, but I've heard of that arrangement as well.

everybodyknows 7y ago

>#17: No patents … >Having documented prior art related to the patent (e.g. in your source code repository or as dated documents in Google Docs or similar) is likely to be as good a defense as having filed a patent at some point. Has a git repo, privately held and without third-party attestation e.g. github, ever been successfully cited as evidence of prior art? Timestamps could be faked, so you'd have to point to the work history, which would be gibberish to a patent judge and jury.

redis_mlc 7y ago
The US, like most countries, is first-to-file now. So "prior art" doesn't matter as much. However, in some general legal dispute, timestamps and headers can be very useful, especially if somebody strips them poorly. Put a header in your files too with author and company info.
- joisig 7y ago
  Thanks, I will update the post to talk about first-to-file since that changes the tradeoff one is making by deciding whether to file patents or not.
  - redis_mlc 7y ago
    First-to-file in the US started March 16, 2013. Filing patents is mostly something to do for startups if it's easy for you (ie. your investor has an IP lawyer, or a relative is one), or your investors want a patent story. But even some SF Unicorns don't file patents, or delay it for a decade. The problem with patents is that most startups can't afford the legal fees and distraction to defend them, so why pay to file? However, definitely file trademarks and copyrights (cheap and easy) and renew your domain names. Source: have done my own IP for software for 20 years, now looking into music rights.

shostack 7y ago

SEO is not free traffic. It is time and potentially money invested in creating an optimized site, producing great content that gets indexed and back links, and then marketing the hell out of said content so you actually get back links.

redis_mlc 7y ago

The other rule I've heard from very successful owners is to keep headcount under 50 employees. Above that, you get into weird administrative requirements like submitting payroll on tape, large company labor reporting requirements, etc.