The 9 elements of great bootstrapped business ideas

7day_startup_640

This is a sample from my book, The 7 Day Startup

A popular maxim in entrepreneurial circles is ‘business ideas don’t matter, only execution matters’. The advice is designed to help people focus on launching something, as opposed to stressing out about ideas. From that point of view, it’s good advice.

However it’s not entirely true. There are a lot of things that matter in making a successful business:

  • The idea matters – A bad idea, executed well will not make a good business.
  • Execution matters – A good idea, executed poorly will not make a good business.
  • The founder’s ability to get customers matters – A great idea, executed well, will fail without customers.
  • Timing matters – Speaking hypothetically about an idea is pointless if the timing is wrong.
  • Luck matters – More than most entrepreneurs would care to admit.

Your idea matters, and while you can tweak it over time, it makes sense to start with a strong idea.

I can’t give you the idea for your next business. I can’t realistically even tell you where to find your next business idea. You might already have some ideas, you might hear people complaining about a pain point or you might just have to start cold calling people to find out what you can work on. Or perhaps you already have a business and you still aren’t sure if it’s a good idea.

Here I’ll present 9 elements of a solid idea for a bootstrapped startup, using specific examples of companies that meet the criteria.

Before we get into the 9 elements, there are a few things that will trap new business owners.

Don’t pick low hanging fruit

Creating a startup means creating something valuable for your customers and creating a long term asset. A lot of people go after low hanging fruit. They get caught up in get rich quick schemes and ‘passive income’. Here are some examples:

  • Web designers host client sites to make a bit of money. The host is the company delivering the most amount of value in that scenario.
  • Consultants ‘white label’ existing products and double the price. What value are they creating? What asset are they building?
  • Drop shippers take someone’s products and sell it for more money without doing much. This is OK for the short term, but what separates you from everyone else? Your Google rankings? Good luck with that.

We are talking about launching a real startup here. Something that gives you a purpose, creates something original in the world and builds long term value. You need to think about how you can truly create something.

Regularly creating original things will boost your motivation and confidence, set you up as an authority and put you in a place where you can develop real long term assets.

Creating something real could mean:

  • Writing content on your company blog.
  • Creating a software app that does something slightly better.
  • Creating a services business that delivers services in a slightly different way.
  • Creating physical things in your office environment.
  • Starting a podcast and talking to people in your industry.
  • Creating your own physical products.
  • Writing a book.

It is possible to start a business without creating anything, but long term the businesses that stand out are the most creative ones.

Creation doesn’t just happen one day in the future when you think the time is right.

It’s something that the best companies and the smartest entrepreneurs do every day.

Your business should be original, and it should provide significant ongoing value to it’s customers and to you.

Don’t work for yourself

The purpose of creating a startup is not to create a job for yourself. Why would you create a job for yourself if you don’t want a job? Here’s the reality that people who work for themselves face every day:

  • Work life balance becomes a distant memory.
  • They end up doing jobs they’d never have to do in a real company.
  • They have to work a lot harder.
  • They get paid a lot less.
  • Their income stagnates because they didn’t build a business that could grow.

Not to mention the isolation experienced by working by yourself at home, all day, every day.

The goal here is not to work for yourself. The goal is to create your own company that enables you to do work you enjoy and employ other people to do the rest. You can’t do that if your mindset is stuck on just making enough money so you don’t have to work.

In reality, you might have to make a whole lot less money, and make a lot more sacrifices than you’re comfortable with, in order to create a real company.

But that is the goal, to create a real company not just a job where you are your own nightmare boss.

Don’t try to be Steve Jobs

In my last startup, I tried to be Steve Jobs. I wasn’t creating something that people had proven they really wanted. I was creating something that I thought they would like.

I let my creative side take over my entrepreneurial side. It helps for entrepreneurs to be creative, but fundamentally entrepreneurship is about creating a product that people want, and selling it to them.

It was fun, don’t get me wrong. But it ultimately failed. I’m no Steve Jobs.

As an entrepreneur you need to create something that people are going to like. Asking them is not going to work, because people are bad at predicting their own behaviour. But playing the visionary is a privilege reserved for 2nd and 3rd time entrepreneurs. It’s fun, but it’s fraught with danger.

For your first startup, there is a much easier way.

Solve problems where people are already paying for solutions. TWEET THIS

Compare my analytics dashboard software to our WordPress support service and the difference is obvious. Customers generally used Google Analytics (which is free). Most didn’t use paid analytics software and didn’t even know that you could get dashboards with all of your stats in the one place.

I was trying to create a new behaviour and convince them of a problem they didn’t know they had. It worked for Steve Jobs, but it didn’t work for me.

For WP Curve, most of the people in our audience use WordPress. Most of them aren’t developers which means from time to time they will run into problems. To varying degrees, most of them were paying to solve these problems already.

Signing up with us doesn’t require new behaviors on the part of the customer. They are already budgeting for it, they have already resigned to the fact that they have to pay for it. The hard work is done.

Thinking about your business this way can be useful even at the idea stage. Everyone might be telling you that your idea is great, but look at whether or not they are actively paying for a solution to the same problem. That will tell you how hard it will be to convince them to pay you for your product.

When you’ve had a few exits and you’ve bought the yacht, it’s time to be Steve Jobs and change the world.

Until then, start by solving existing problems that people are already paying for solutions to.

The 9 elements of great bootstrapped business ideas.

1. Enjoyable daily tasks

You often hear people saying to ‘follow your passion’ when it comes to business. I think it makes a lot more sense to follow your customer’s behaviour. However I’ve also made a fatal error more than once of creating a business that I didn’t enjoy.

Rather than complicating things with diagrams and rules, let’s just agree on this. It makes no sense to start a business that is going to have you doing work that you don’t enjoy. So think long and hard about what your day to day tasks will be in your business. Visualize yourself doing these tasks.

If you don’t like what you see, then it’s not a good business idea for you.

2. Product / founder fit

People talk a lot about product / market fit, but for bootstrappers the idea of product / founder fit is just as important. Some people are perfectly matched with their companies and some people aren’t.

In my first agency I was a poor match. The people who do well with local consultancies are not like me at all. I knew that, but I pushed on anyway.

It’s worth thinking about what skills you have, what are you known for and where you can provide the most value.

If that doesn’t line up with your business idea, it’s going to be a long, hard struggle.

3. Can become a scalable business model

For listed companies – if profits unexpectedly go up, the stock explodes. If they unexpectedly fall, the stock crashes.

This is because businesses rarely stagnate. It’s considered unusual if a business isn’t either growing or contracting.

Yet freelancers and small business people accept a business that isn’t growing. They accept that the business barely generates a wage for the founder.

Startup founders should have the ambition to grow their business into a larger company. Some businesses lend themselves to business models that have growth in their DNA. For example with software as a service (SaaS), each month you would expect to bring in more recurring revenue than the previous month.

Some business models don’t have growth inbuilt. For example a local store or a franchise will have fairly static (albeit cyclical) profits.

Your idea is not a solid startup idea if you don’t have the capacity to make use of a profitable growing business model.

It’s time to start thinking about how you might charge and whether you could reasonably expect to grow this business idea month over month.

4. Can operate profitably without the founder

Most small businesses would die without their founders. They are too tied to the delivery of the product or service or they just don’t have enough profits to hire people to replace all of the jobs they do. This is what happened to me with my stagnant business growth with my agency.

In a profitable business you can replace yourself or anyone else in the business and continue to generate profits.

When you start, this is rarely the case.

A lot of people fall into the trap of not worrying about this because they expect that they will have to ‘hustle’ early on with little reward. It’s OK to accept you have to do that, but fundamentally there needs to be a profit margin in the business.

You need to be able to see a point down the track where you can hire in staff or systems to replace you, and still continue to generate a profit.

At that point it becomes a real business.

5. Can become an asset you can sell

Real businesses have assets that have value. Not ‘I think what I’m doing is valuable’, but instead a third party validates that there is value there.

The value could be goodwill from a list of regular customers, intellectual property or the product itself.

Business is not just about making money. It’s about creating something that is valuable. Things that carry value are assets, so it’s your job as a startup founder to build assets.

Focusing on short term launches or projects won’t build assets. Assets are built over time by ignoring short term distractions in favour of a bigger, long term vision.

A list of customers that pay you every month is an asset. If you focus on short term projects you’ll make more money initially. But if you turn down projects and focus on providing recurring value you’ll build a valuable asset.

Your product design and intellectual property are assets. If you resell or copy someone else’s product you might have better margins short term, but creating your own gives you a long term asset.

Your team is an asset. If you hire poor people to save money, you get more money in the short term. If you hire great people you contribute to the creation of a valuable asset over time.

Your website is an asset. If you pay cheap SEO teams to spam your site with crap, you might rank in Google today. But if you deliver outstanding content for years, you’ll end up with an unbeatable competitive advantage and a valuable asset.

Traffic to your website is great, but a large list of people on your email list is an asset.

At the idea stage you have to think about what assets your idea will result in.

Some ideas when worked on, will naturally result in the development of assets over time. Others, like the low hanging fruit discussed above, won’t.

If you work on this idea for 5 years, what will you have at the end?

6. Large market potential

The goal of a startup is to become a legitimate player in their industry. To do that, they have to serve large markets.

They may start serving a small market, but in the end to maintain consistent and growing profits, they can’t be restricted by the pool in which they are swimming.

So at the idea stage, it’s worth thinking about whether your company can have the potential to serve a large market with whatever it’s creating.

This doesn’t mean you have to serve a large market straight away. Noah Kagan’s 24 hour Startup SumoJerky for example is selling 1 particular type of food (Jerky), in a non traditional way (subscription) to a small group of people (startup CEO’s). But there is potential there to reach large markets, perhaps through:

  • Developing their own consumer product.
  • Targeting new groups of people.
  • Selling different products, which would require a name change. (They wouldn’t be the first company to change names to serve a broader market).

At the idea stage, give some thought to whether you are building a business for a small group of people or whether it can grow into a large market.

7. They tap into pain or pleasure differentiators

Everyone will tell you to have a ‘Unique Selling Proposition’ or a ‘differentiator’. What they don’t tell you is it’s not enough to be different.

All that matters is what your customers care about.

Does a marketing firm who targets law firms get more business from law firms than a generic marketing firm? Well that depends on what law firms value. What they find pleasure in (when it comes to marketing) and what their pain points are.

For law firms it might be:

  • How painful will you be to work with compared to the last agency who screwed them?
  • How jealous their competitors will be when they see their shiny new brand?
  • How easy is it for them to ditch you when they want to move on?
  • Will you come to their office dressed nicely and make them feel good?

The truth is, I don’t know what they care about. That’s your job. But just having a ‘point of difference’ doesn’t cut it. You need a point of difference that taps into what your customers care about.

With WP Curve, we aren’t just slightly different to the competition. We are different in areas our customers care about.

  • Our support is unlimited, so customers don’t have to worry about the pain of unexpected invoices.
  • Our support is live 24 / 7, so customers don’t have to worry about the pain of being organized and waiting around for advice.
  • We offer same day turnaround on jobs, so customers can enjoy the pleasure of creating new content on their site instead of waiting around for days or weeks to have it fixed.

I’d worked with small business owners for many years and I knew the agency model just didn’t cut it anymore. In a few short years, the industry went from web developers being the only one to touch a website, to business owners maintaining their own content. Agencies weren’t equipped to deal with this and provide the service that the new type of business owner needed.

We ended up asking customers down the track to confirm these pain points and work out which ones were the biggest. However even at the idea stage we knew we were broadly tapping into them.

What will your customers really care about? Does your idea truly tap into a deep pain or pleasure point for them?

8. Unique lead generation advantage

As I mentioned above, having a good idea that is executed well isn’t the full equation because you still need to find customers.

You get customers by generating leads and the best bootstrapped businesses have ways of generating leads that tap into a key differentiator in the business or the founder.

For example CrazyEgg and KissMetrics generate a huge percentage of their business through content marketing. Their co-founder Neil Patel is probably the most prolific creator of high quality content in the industry. This is a unique advantage for Neil’s companies.

John Dumas from Entrepreneur on Fire is a confident and energetic presenter. He has generated 6 figure months in his first year of business by selling directly on webinars. This way of generating leads taps into a core skill that gives John a big advantage.

Even at this early stage, it’s worth thinking about how you are going to generate leads for your business and what will make you and your company unique.

9. Ability to launch quickly

Like I said before, if you want to be Steve Jobs – great. Unfortunately, innovations like the iPhone don’t get built by first time entrepreneurs or self funded companies. For a business idea to be a good idea for a bootstrapper, it needs to be something you can launch quickly.

I’d love if you chose something you can launch in 7 days. But if you can’t, I’d still favor an idea you can launch in 2 months as opposed to 2 years.

Complex software products, physical products or local physical businesses are difficult. If it’s going to take you a year to launch, your won’t learn from real customer data as you go.

Choose an idea that you can launch and modify quickly. Then when you start getting real data from paying customers, you can innovate and get the product just right.

Is your idea a good idea?

Now that you have those 9 elements to a profitable business idea covered, have a think about most small businesses. It’s clear that they don’t meet many of these elements.

  • They don’t generate enough profit to pay a replacement founder and when they do, it’s not consistent.
  • They are difficult to sell for a reasonable amount of money. If you are able to sell them, they might fall apart without the founder.
  • They die because one piece fails, or they hit ceilings where they can’t grow anymore.
  • Their revenue plateaus year after year because they operate in small markets.

Think about your own idea and whether it’s going to fall into the same traps. Choose a business idea that meets the 9 elements well.

You can tweak the idea later, but some of these fundamentals will be hard issues to solve down the track, so it’s important that the potential is there from the start.

Idea evaluation checklist

Here is a summary checklist you can use to evaluate your business idea. Click here for a free Google doc to use.

CriteriaIdea 1Idea 2Idea 3Idea 4
Enjoyable daily tasks
Product / founder fit
Can tap into a scalable business model
Can operate profitably without the founder
Can become an asset you can sell
Has large market potential
Taps into pain and pleasure differentiators
Has a unique lead generation advantage
Can be launched quickly
Score / 9Score / 9Score / 9Score / 9

If you have any questions feel free to fire away below. I’m still working away on editing the book, so there’s still time to influence the content of the book.

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About

Dan Norris is a co-founder at WP Curve and a passionate entrepreneur with an obsession for content marketing.

36 responses to “The 9 elements of great bootstrapped business ideas”

  1. Steve Spring says:

    This is a great article Dan. I really like the part where you said, “The purpose of creating a startup is not to create a job for yourself.” This is so true for many entrepreneurs, we end up working harder, getting paid less, and most importantly, our work life balance becomes a distant memory. Thanks for offering some solutions to this problem.

  2. Dan Norris says:

    Thanks Steve, I’m glad you liked it mate.

  3. Great article. If you don’t find value in your “product/service” how do you expect others to as well. I have a side business where I freelance out most of the work to other writers but I make sure I spend time on each piece to make sure that the content generated for my client is top self material.

  4. Man this article is a classic. Dan, thank you for the kind shoutout, but even without it, I would have tweeted this all day long to Fire Nation for its killer value bombs laden throughout…love your stuff, and I am a happy and proud supporter (and user) of WP Curve and will continue to be so!

  5. Dan Norris says:

    Thanks John awesome

  6. Shayna says:

    Fantastic analysis, Dan. These points definitely differentiate the real business from the pseudo-businesses or the fragile ones that can be destroyed by a single Google algorithm update.

  7. Dan Norris says:

    Thanks Shayna, I’m glad you liked it. Definitely agree re Google. There are lots of ways to gain short term profits but that’s not what I’m interested in.

  8. Karen says:

    Hi Dan, in #2, you mentioned “In my first agency I was a poor match. The people who do well with local consultancies are not like me at all.” Can you elaborate? Might be helpful to flesh that out in detail.

  9. Dan Norris says:

    Hey Karen yeah, when I look at people who do local consulting well they are typically good with in person sales and networking, they love to go out and have coffee etc, very good with pricing and getting the most out of the deal etc. Often good presenters and get their work from doing events.

    I’m horrible at all of those things, so I always wondered if I was the right fit for running a local agency. I tried to battle it for a while and ‘suck it up’ but in the end I’ve been much better off focusing on things that I am good at.

    With our business that stuff is still beneficial, and I’ve got a co-founder who’s good at it so that helps. But most of our leads don’t come through face to face networking and relationships, at least not yet.

  10. Pindle says:

    Great article Dan! I recognize a lot of things we also discussed internally. When we decided to build Pindle it was because we thought it would be useful to have a visual twitter wall on events (conferences and trade shows mainly). But also because we had a lot of fun working together.

    The business wasn’t growing s expected initially but then we so a good opportunity and we grabbed it. We realize open events like festivals, concerts and sports events want too engage they’re audience as well…and they’re much bigger. That’s when we decided to start offering an Instagram wall for events. And then boom. Now Pindle is a real business that survives without the founders and is adding new customers every month. Thanks for your article and were looking forward to your book. http://www.getpindle.com

  11. Awesome article Dan! Thanks mate 🙂

  12. Dan Norris says:

    Cool good to hear, thanks for the comment.

  13. I have a feeling, Dan.. This book will be awesome! 😉

    Agree with you on the most and I recognize myself in some examples you describe.. Good or bad, there is something to learn every time.

  14. Bettina says:

    Hey Dan,

    I’ve just discovered your blog and have been really enjoying it. I’m getting a lot of value out of your posts, thank you so much!

    I have a question: Why is it so difficult to create a scalable local business that can operate profitably without the founder? I’ve heard this many times, I also know a few local business owners and they really seem to struggle: They can’t find (or afford?) good managers and therefore do everything themselves, so they basically created a badly paid job for themselves.

    Is the market for say a local construction business simply saturated? Or do internet business have an advantage over local businesses because they can produce cheaper by saving on costs for labour, expensive office-space, taxes etc.?

    thanks again!

    xx
    Bettina

  15. Dan Norris says:

    Ha thank you.

  16. Dan Norris says:

    Hi Bettina there are probably quite a few things working against you as a local business owner. Keeping in mind I’m not against creating a local business. But it would be something you’d do for different reasons than creating a startup.

    In terms of scaling I think there are just way too many variables. Normally when someone starts a local business they have a good knowledge of the location. Scaling it would mean figuring out how to open in other locations, requiring a good knowledge of lots of other locations. Either that or offering services online to reach bigger markets. However when they do that they are hamstrung by the expenses associated with having a local business which makes it harder to compete.

    Being local as you point out also means you often get all of the inputs for the business locally. This normally means higher costs, or less quality. This would go for materials, office space, services like internet / power etc, staff. Everything. If your business can’t leverage the best of what the world has to offer but you expect to compete with companies who can, it will be a struggle.

    It probably depends a lot on the business too. Construction is always going to be local by nature. You could have quite a good local construction business but taking it to the next step by going into other markets would be something that 1 / 1000 are able to do.

  17. Bettina says:

    Hi Dan, thank you very much for taking the time to answer my question, I really appreciate that.
    It’s just so interesting that there seem to be two different worlds, one where unhappy small business owners feel stuck and are basically working hard for little money, and one where happy internet entrepreneurs are making a killing.
    Of course I know it’s not all black and white, but being able to “leverage the best of what the world has to offer” as you say seems to be key to success.

  18. Dan Norris says:

    I think you’d be surprised a lot of these marketers aren’t making as much as you’d think. They might not be as happy as you think either. A lot of them are trying to sell something and they present a brave face to help the sales. Most of the people that influence me are not people who are selling anything related to improving my business. The best people to listen to those who have a real business and they are just sharing what they can to help others. There’s a lot of BS outside of that.

  19. Bettina says:

    Hi Dan,

    Very interesting, I’ve actually never been convinced that affiliate marketing is the way to go (if that’s what you meant).

    So could you give us an example of someone worth listening to? I’ve found TropicalMBA and the Foolish Adventure Show very helpful. There were quite a few interesting episodes about productised services during the last months and they basically sold me on the idea. Still, what kind of service business? In what market, what niche?

    You provide a lot of interesting insight and I’m really looking forward to your book. Thanks again for your time!

  20. Hey Dan,

    Nice post. I want to say, this post is very effective. And before starting business we must be create an effective business ideas. Because 90% business success depends on business ideas.

    Regards,
    shuvro chowdhury

  21. Dan Norris says:

    Here are some of my favorites.

    http://tropicalmba.com – Dan just shares what’s going on in his businesses, mainly his physical products business.

    http://www.startupsfortherestofus.com – This is just good bootstrapped startup advice. They are givers and do it because they love it.

    http://blog.bufferapp.com/ – Transparent advice. They do open income reports as well.

    http://blog.kissmetrics.com – Lots of great stuff on here. They put a lot into their content. Neil Patel’s personal blog I don’t think he tries to monetize it at all http://quicksprout.com he’s content is solid. He does it cause he’s crazy haha, he loves it.

    I guess get inspiration wherever you can but there isn’t any magic answers. This Week In Startups is awesome as well but it’s a bit detached from the bootstrapped startup world.

  22. ^

    A thousand times this

  23. Bettina says:

    Thank you for sharing this, Dan, that’s very kind. I love startupsfortherestofus and microconf, too. Recently I discovered the business of software videos – they look good, too.

  24. Dan Norris says:

    Yeah they are awesome!

  25. Brian says:

    Dan,

    Killer stuff, man. On the new ideas front: are you a bigger proponent of reaching out to businesses and asking about their problems, or some kind of forehead-rubbing couch session with yourself? If you’re not “in” already, how do you reach businesses whose problems you’re looking to solve?

    Thanks! WP Curve itself is way cool but I think a lot of the (deserved) buzz around it is that you killed it on the business model. Definitely one I’m going to try to emulate.

    -Brian

  26. Dan Norris says:

    Hey Brian thank you. I’m not a fan of asking. People will only tell you what you want to hear. I’m a fan of launching quickly and responding based on the information that is coming in. You can make your best effort to come up with a good idea based on this post or any other theories but you can’t predict what will happen after you launch.

    You wouldn’t be the first 😉

  27. Thanks for the post, Dan. So, many things resonate with me here and I hope will in the book 🙂

    1. I’m really starting to understand what you mean by working a lot more and earning a lot less because I just quit my day job and doing my best to focus on my own project. Now I see no boundaries between work and my own personal life 🙂 but it’s totally worth it!

    2. Regarding the Ability to launch quickly, I’m super excited by what you’re saying about it because I have this “crazy” idea about agile course creation. The idea is that you can just quickly (within a month) create a video course and then improve it along they way and share your updates on social media. Doing so allows you to both swiftly create courses and have good reason to send social media updates. I just hope that it’s not a too ‘grey’ approach to things. What do you say?

    3. Also, I really should work on being able to replace myself with other people who can do the same for now everything works around me. Thanks for letting me know about that. It’s like a strategic thing for me now. It sounds that outsourcing can be of great help here.

    4. As for the “They tap into pain or pleasure differentiators” section of your article, I have this idea to create very detailed tutorials on all things WordPress SEO and SEO in general (however minuscule it looks for big wig SEOs). I totally know that it’s a pain for most rookie SEO guys. It was for me and SEOs I know. Plus I want to offer custom SEO screencasts (free if enough people vote for them). Do you think it’s a good USP?

    5. Thanks for the shared Google doc.

  28. Dan Norris says:

    Hey Vitaly thanks mate. Re the course it’s always hard to find a balance between getting feedback quickly and producing things of a high standard. Having said that, I think a month is more than enough to create a decent video course. I reckon you could do it in a few days if you had the right processes and knowledge and equipment.

    It’s hard for me to give you feedback on your idea. An SEO info product wouldn’t be something I’d do myself. I guess give it a go and see who pays.

  29. Thanks for your reply 🙂

  30. temafrank says:

    Interesting – most businesses say they start with face to face leads and networkio. So how did you get the initial visibility to launch WPCurve?

  31. temafrank says:

    Great article; one of the best I’ve seen on small start-ups.

  32. Dan Norris says:

    Hi Tema. I put a post up in a forum and I emailed my list. Initial traction was only 1 signups and word of mouth kicked in after that along with the traffic and content on the site. I’d spent a lot of time prior though creating content and building up authority in that forum and building my email list.

  33. James Banks says:

    Dan, that has to be the best article on small business entrepreneurship that I’ve ever read. I too am running a local web agency, and now 20 months in, I am really starting to realise the flaws in the agency model which you have so clearly pointed out here. This may just be a life changer – thank you!

  34. Dan Norris says:

    I hope it is James, thanks for the comment.

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