Tim Gittos

I'm an Australian currently living in Austin, TX in the USA.

I currently earn a living programming, though I wouldn't call myself a programmer. If I had to attach a label to myself, I'd use the term autodidact.

I love learning, and my favorite things to learn about are programming, computer graphics, AI & machine learning, robotics, painting and creativity.

Book Notes: Start Small, Stay Small - A Developer's Guide to Launching a Startup

Last updated on 15 Apr 2013

Amazon: Start Small, Stay Small: A Developer’s Guide to Launching a Startup (referral link – help me buy new books!)
ISBN: 0615373968
Read: 2013-04-15

I actually read this one a while ago, but I think it deserves some note taking, so I re-read it.

In my opinion, one of the best ways to start a business is to bootstrap. This is probably due to the fact that I am fairly risk adverse, but that’s neither here nor there. This book covers some important information about bootstrapping, and provides a great balance between theory and practical advice.

Notes

Chapter 1 – The Chasm Between Developer and Entrepreneur

Aimed at developers who want to bootstrap. Not for VC funded, ultra fast growth startups.

Fast growth, VC funded startups have pressure to go after larger markets fast, which is hard, due to investors wanting a return. Bootstrapped startups can go after smaller niches and own them, and take their time to figure it out.

A bootstrapper needs to be a developer who can sell. They need to be able to manage a website and market, including finding a market.

Venture backed = high risk, high payoff. Bootstrapped = low risk, lower payoff (though still nice, otherwise why do it?)

The wrong reasons to build a software product:

Reason #1: Having a product idea
Beware product vs. project. A product is a software project with a market of people who want to buy it.

Reason #2: To get rich
Bootstrapping will not likely bring a million dollar payday. Venture backed startups or the lottery may, with terrible odds.

Reason #3: Because it sounds like fun
It’s only fun at the end. It’s hard work most of the time.

Break the link between dollars and hours. Make money from software, not time.

Set goals to harden your resolve during tough times:

1. Write goals down
2. Make a public commitment
3. Become accountable

Last 2 are reasons for a cofounder or entrepreneur community

Biggest roadblocks to success:

Roadblock #1: No market
You probably don’t have the clout to create a market. Don’t build a product if you don’t know there’s a market for it already.

Roadblock #2: Fear
Lean in. Fear means you’re growing.

Roadblock #3: Lack of goals
Use the steps above to manage goals.

Roadblock #4: Inconsistency
Make sure everything you’re doing is relevant. Stick to an information diet.

Roadblock #5: Believing you have to do everything yourself
Get someone who charges less for their time per hour than you do. You’ll always save money in the long run.

“Dollarize” – show how a price is less expensive due to the amount of money saved in the long run.

Dollarize your time to validate outsourcing – see roadblock #5. Calculate time value based on freelancing rates or salary. Keep in mind desired earnings isn’t actual earnings.

Shoot for a $100/hr rate in the long run. Your startup won’t start there, but once you have a firm dollar rate, you can work on increasing it.

Realizations of dollarizing time:

Realization #1: Outsourcing is a bargain, as long as they charge less per hour than your dollarized hour.

Realization #2: Keep work and play separate
Don’t do both at the same time, you’ll suck at both.

Realization #3: Wasting time is bad
Each wasted hour is $xx.

Realization #4: Information consumption is only good when it produces something.
Unless you do it for play.

Realizations from transition from developer to entrepreneur:

Realization #1: Being a good technician is not enough
As per “The E-Myth Revisited” by Michael Gerber, ned to be entrepreneur (dreamer, visionary), manager (business stuff), technician.

Realization #2: Market comes first, marketing second, aesthetic third, functionality fourth.

Realization #3: Things will never be as clear as you want them to be.
Selling (and anything fuzzy involving humans) involves lots of guesswork, lots of iteration. Guess, measure, tweak.

Realization #4: You can’t specify everything… but you do need a plan.
Be agile.

Realization #5: You need to fail fast and recover.
BE AGILE!

Realization #6: You will never be done.
An artist never finishes a work, he just stops working on it.

Realization #7: Don’t expect instant gratification.
Inertia. Starting for the first time is way harder than doing it for the second time.

Realization #8: Process is king.
Lighten your mental load by storing information in process.

Realization #9: Nothing about a startup is a one-time effort.
Most startups won’t be automated. They’ll require maintenance and tweaking.

Chapter 2 – Why Niches Are the Name of the Game

The single most important factor to a product’s success is whether there’s a group of people willing to pay for it.

Luck is the exception. Sites like Hot or Not and Plenty of Fish.

Find a niche to avoid big player competition and make a larger impact.

Reasons you must go niche:

Reason #1: A niche requires you to narrow your product focus.
The narrower you make your product while still maintaining a large enough market, the more profit you will generate. Selling software to 100% of the people in a 5,000 person niche is better than selling to 10% of the people in a 50,000 person niche. Advertising will be cheaper, communities easier to build, competition lower.

Reason #2: Nice advertising is more cost effective.
Niche advertising space is usually cheaper. This is true from magazines to Google AdWords.

Reason #3: Niches have less competition.
Big companies like big markets.

Reason #4: Niches have higher profit margins.
Owning your niche allows you to charge higher prices (but don’t price gouge).

Reason #5: Niche markets are not used to good marketing.
Good marketing will have a bigger impact.

Reason #6: It’s easier for prospects to trust you.
Easier to build a name/reputation in smaller markets.

A warm niche is a niche where you have some kind of association. You or someone you know is involved in it.

You can work your network to turn a cold niche into a warm niche by finding someone with experience.

Coming up with niches:

Approach #1: Look at all areas of your life
Think of problems with hobbies, interests, jobs, and those of people you know.

Approach #2: Look at occupations

Approach #3: Cheat
http://www.entrepreneur.com/businessideas/ – search Category → Online Businesses
http:www.sixmonthmba.com/2009/02/999ideas.html
http://www.ahbbo.com/ideas.html
http://ycombinator.com/ideas.html

Find niches based on experiences. For example, examine keyword entrances on your blog or website. Large segments of people entering a single page on a set of keywords might be a niche.

If your target market is not online, you have no chance of succeeding using the methodologies you’ll find in this book. Target market must be online.

Evaluate the size of a market by finding cheap advertising opportunities, either online or offline. Also look at competition. If you can’t find competitors, you haven’t found a market.

Determine if you can reach them inexpensively.

Vertical markets (dedicated to a single industry or hobby) are better than horizontal markets that cut across many:

Reason #1: Members of a vertical have similar behavior
Marketing and sales approach is simpler.

Reason #2: Members of a vertical talk to one another
Word of mouth, convincing thought leaders is easier.

Reason #3: Members of a vertical “hang out” together
Each marketing opportunity will reach more people.

Reason #4: Members of a vertical have similar needs.
Easier to narrow scope of product.

Determine pain in a niche that can be solved with software, either yourself of by talking to a contact.

Measure demand using

*Google AdWords Keyword Suggestion Tool: https://adwords.google.com/select/KeywordToolExternal
*SEO Logs Keyword Difficulty Tool
*Micro Niche Finder (paid)

Steps:

Step #1:
Enter main phrase without quotes, include synonyms, run search, change to “exact match”, search again. Results show search volume. Assuming you can rank #1 for that keyword, you would get roughly 50% of those hits. Then multiply this by 4, to account for long tail searches and other traffic streams. Estimate a reasonable conversion rate, and plug in your price: [volume] * [conversion rate] * [cost] = [revenue].

Step #2:
Choose valuable keywords, and any related terms.

Step #3:
Enter each keyword from above step one at a time. Score returned is measure of difficulty in ranking. 39 and below is good. 60 and above is bad.

Step #4:
Sanity check the keywords you’ve chosen by searching for them, clicking on the first page, checking it’s page rank with the Google Toolbar. Check SEO, domain age, and back links from PageRank meter on Google Toolbar. This determines the strength of your competition.

When final niche and keywords have been selected, set up AdWords/mini sales site with a monetary commitment attached. When user tries to buy, tell them it’s not ready, offer to put on mailing list.

Chapter 3 – Your Product

Success of product relies on product, market, execution.

Test pricing by doing A/B tests and tracking metrics.

Chapter 4 – Building a Killer Sales Website

When thinking about sales funnels, increasing conversion rate is usually easier than increasing size of funnel.

Don’t plan on selling to customers on their first visit.

Expect conversion rates between 0.5% – 4% depending on the price point of your product.

Primary goal of sales website should be to turn visitors into prospects, by getting an email address.

Getting an email address requires trust, relevance and a reward. A free download or a free trial.

Single call to action.

Home page may not be the most visited page. Deep linking. Every page needs a call to action. Every page needs a single purpose. Everything should be within 2 clicks. Make buttons look like buttons. Text sucks, people like images and video.

Find a hook that solves a pain point.

Email has a high conversion rate. Build your list by giving something away or have a short email course.

Email content relevant to your niche every 2-4 weeks. Possibly automate this, with emails being sent at days since sign up milestones. Send product updates.

Email tips:
1. Test and optimize when you send your emails.
2. Send HTML and text email.
3. No attachments
4. Pay attention to the “from” name and address
5. Good subjects
6. One goal for each email
7. Test

Chapter 5 – Startup Marketing

Not all traffic is the same, depending on source. Sources for quality traffic change as niche changes.

Use PPC to find SEO terms and optimize. Do not sustain a business on PPC.

Maintain a mailing list.

Blog.

Work on organic search results with SEO.