Bootstrapping and Profitability

Discussions
#1

Hey guys -

I wrote about something that’s been on my mind a while but only solidifying as a concept now.

Basically, I wanted to talk about Profitability, because I feel that gets overshadowed by revenue and other metrics. I think for us bootstrappers, that’s really about paying ourselves the salary we need to sustain our continued push to do what we do.

Also, the idea that Profit isn’t just the monetary aspect. If that’s all there is, then we’d all just sell our time for money in order to pay ourselves a comfortable enough salary. This is where, in my opinion, self funding a product business using our income from “client work” falls short.

It’s why I think launching a productized service first gets you there faster, because it can be profitable (financially) very quickly, but also establishes your business/brand/audience/customer-base to fuel other products and give them the oxygen they need.

That’s it in a nutshell, and I fully fleshed it out (with a 3-phase roadmap) here:
http://casjam.com/making-progress-profitably/

I’d love to hear any thoughts or comments.

Here’s to a great 2016!

#2

I took the view of my saas being a long play, more like an investment vs a quick return. That does mean doing work not related to it to sustain income but it also provides a safety net and cushion to build it up.

At this point all revenue can get either get pumped back into building the service or I can draw some out if I need some extra cash above what the client work provides. The initial build out was time consuming but now month to month it is minimal unless I want to add in a new feature. The money it generates each month is equal to something I would need a sizeable six figure investment to return. My view for now is to keep it growing at a steady rate and treat it as investment income only. All of this is also more bearable because I really do enjoy my client work though.

#3

Nice article @CasJam!

What about the conundrum of a Productized Service having high marginal costs–meaning that as you increase the revenue, you’re also adding more costs (e.g. WP Curve, with higher support loads come a higher number of support staff)?

That seems to sap profitability away and make it less attainable, increasing the friction for the jump to product.

Thoughts?

#4

Thanks @daverodenbaugh - Yep - clearly there are higher costs of delivering the service especially as it scales up. Still - the early days of a productized service can be much more profitable than the early days of a SaaS, which makes it much more likely that you (typically a solo founder) can commit time and energy to it.

The point I’m making though is that a profitable productized service can later be leveraged to launch related products (software, books, etc.) to the same market, once the initial brand / audience has been established, not to mention the cashflow to reinvest in those products. LeadFuze and PodcastMotor are good examples of companies are taking this next step. Audience Ops is doing it too.

That’s not to say that you must expand your product line in order to scale. You can grow as a productized service and maintain healthy profit margins. Yes, it will probably mean growing your team. But since you’re focused on doing just one thing, it’s more streamlined and efficient than a traditional agency model.