My Thoughts

This book is filled with actionable, direct suggestions on how to ship a product that will generate revenue. It helps you avoid non-income-bearing ideas that waste time by forcing you to think about earnings as early as possible. While I haven’t successfully applied these ideas yet, it feels as though following this advice strictly would inevitably lead to earning money.

Summary

Start Small, Stay Small is a practical, execution-first playbook for developers who want to launch and grow profitable software businesses without external funding. Rob Walling argues that marketing beats code in determining success: start with a clearly defined, underserved niche, validate demand before building, and focus on building an audience and a sales system that converts. The book emphasizes a market-first approach, lightweight testing via keyword tools and AdWords, and building a minimum viable product while rigorously managing time, scope, and priorities.

Walling lays out a complete operating system for a micro SaaS: set written goals (e.g., first $500/month profit), value your time, outsource early, document processes, and channel energy into Top Shelf marketing (email list, content, SEO). He details how to craft a high-converting sales website (capture emails first, clear hook, single CTA, simple pricing tiers, guarantees), nurture leads with autoresponders, earn focused traffic, and build compounding assets. Finally, he shows how to iterate, measure, and decide whether to double down or start over.

Learnings

• Adopt the entrepreneur mindset: write goals, make public commitments, create accountability; aim for the first $500/month profit milestone.
• Market first, product second: failure most often comes from building something no one wants.
• Choose a tight niche (preferably “warm”) to reduce competition, increase relevance, and simplify marketing and feature scope.
• Validate demand before coding: use keyword tools, competition scores, and short AdWords tests to measure real search volume and interest.
• Product Success Triangle: product, market, execution—early effort should prioritize market and execution.
• Ship a 200–400 hour MVP; trim features aggressively to reach launch faster and learn sooner.
• Value your time; outsource/VA repetitive and low-value tasks; delay automation until the process proves its worth.
• Document repeatable processes to enable delegation, reduce mistakes, and increase the startup’s eventual sellability.
• Focus beats busyness: avoid “fake work” (excess reading/research); take action notes; single-task; either work or truly rest.
• Build compounding marketing assets: an email list, a blog/podcast/video presence, and organic search visibility.
• Use PPC as a learning tool (keyword discovery and validation), not a permanent growth crutch.
• Optimize for quality traffic: small, highly targeted placements convert better than broad “big press” spikes.
• Sales website rule: don’t try to sell on first visit; primary goal is email capture via trust, relevance, and a clear reward (lead magnet, contest, course).
• Core site principles: one primary CTA per page; everything within two clicks; strong hook; buttons that look clickable; visual over text where possible.
• Include core pages: Home, Tour, Testimonials, Pricing/Purchase, Contact; keep the home page simple with a single next step.
• Pricing: anchor to value and market norms; prefer three tiers; lean higher; end prices in 7/8/9; consider support/maintenance fees for one-time licenses.
• Offer a free trial or a strong money-back guarantee to reduce friction and increase conversions.
• Email strategy: build an autoresponder series; maintain relevance; optimize send timing and subject lines; mix education with periodic offers.
• SEO and links: prioritize high-quality, relevant links; vary anchor text; build consistently over time; leverage directories, niche sites, competitor backlinks, alerts, articles, testimonials, and ethical link opportunities.
• Iterate and test relentlessly (copy, pricing, funnels); accept uncertainty, fail fast, measure, and improve.
• Decide to grow or reset based on data; track key metrics from day one to improve operations and preserve optionality for a sale.

‘How to Read a Book’ Analysis

Key Sentences

1. “If you want to self-fund a startup you have to choose a niche.”

• Why it’s crucial: This is a core premise of the book: bootstrapped software succeeds by focusing tightly on underserved, specific markets rather than broad horizontals. It sets the strategic constraint that shapes product, marketing, and execution choices.
• Proposition: Bootstrapped founders should target a narrow, well-defined niche to gain traction and avoid head-to-head competition with larger players.

1. “It’s whether there’s a group of people willing to pay for it.”

• Why it’s crucial: This sentence names the single most important determinant of success—validated demand—over founders, features, or even marketing. It anchors the market-first approach and everything else (pricing, positioning, channels) follows from it.
• Proposition: The decisive factor in product success is the existence of a paying market.

1. “Unless you’re marketing to software developers, your order of importance is market, marketing, aesthetic, function.”

• Why it’s crucial: It provides a priority hierarchy that overturns developer instincts, clarifying where to allocate scarce time and resources. It connects major ideas: market selection first, then customer acquisition, then design, and only then deep functionality.
• Proposition: Prioritize market selection and marketing ahead of design and features to maximize odds of success.

1. “Your number one goal, even beyond selling your product, is turning browsers into prospects.”

• Why it’s crucial: This reframes how to build sales websites: optimize for email capture and relationship-building instead of immediate purchase. It underpins the book’s emphasis on mailing lists, funnels, and nurturing as sustainable growth engines.
• Proposition: Design your site and funnel to capture contact information and nurture prospects rather than relying on first-visit sales.

1. “You should aim to master all three in the long-term but at the start, place emphasis on the latter two to determine if the idea will fly.”

• Why it’s crucial: Referring to the Product Success Triangle (product, market, execution), it directs early emphasis to market and execution (marketing/sales/support) over product polish. This connects strategy with practical validation and reduces waste.
• Proposition: Early on, validate market demand and your go-to-market execution before investing heavily in product development.

Unity of the Book

Start Small, Stay Small argues that the reliable path for a self‑funded developer to build a successful software business is to start in a tightly defined niche, validate demand, lead with marketing and audience-building (not code), and execute with disciplined, testable processes—outsourcing, systematizing, pricing, and conversion-focused sales—to steadily turn targeted traffic into sustainable profit.

Main Problem

How can a developer reliably build, launch, and grow a profitable, self-funded software startup by prioritizing market-first validation and marketing execution under resource constraints?

Supporting Problems

1. How to adopt the entrepreneur’s mindset and goals (marketing-first thinking, written goals/accountability, valuing time, focus, and comfort with uncertainty).
2. How to choose and validate a reachable, paying niche (vertical focus, “warm” niches, demand/competition assessment, and reachability via channels).
3. What to build for that niche and how to scope 1.0 (MVP definition, effort estimation, platform/revenue model, pricing strategy, and build-vs-outsource decisions).
4. How to craft positioning and a high-converting sales funnel/site (hook, core pages, single CTA per page, trials/guarantees, tiered pricing, and conversion testing).
5. How to build and nurture an audience, especially via email (list building, trust/relevance/reward for signups, autoresponders, content cadence and topics).
6. How to acquire and test traffic cost‑effectively (SEO on-page and link building, PPC for validation, social/media/forums/guest posts/affiliates/PR, and channel ROI math).
7. How to systematize and scale operations to maximize founder leverage (documented processes, what to automate vs do manually early, hiring/managing VAs, and time economics).
8. How to iterate post‑launch and decide to grow or start over (measure and test, improve funnel/channels/product, expand within/adjacent niches, track metrics, prepare for exit).

Problem Hierarchy

Mindset and goals (1) come first; without focus, time valuation, and marketing-first thinking, later steps stall. Market selection and validation (2) must precede product decisions. With a validated niche, define and scope the product and pricing (3), then build the sales funnel/site to convert (4). Audience building via email (5) underpins sustainable marketing and should be integrated into the funnel before scaling traffic. Traffic acquisition and testing (6) feed the funnel once conversion paths exist. Systematization and outsourcing (7) support ongoing execution as workload grows. Finally, with data flowing, iterate and make grow-or-restart decisions (8), which depend on metrics generated by all prior steps.

Book’s Structure

1. Major parts/sections and their main points

• Part I: Mindset and Identity Shift (Chapter 1)

• Reframe developer to entrepreneur: market-first, marketing > product, cross-role skills (developer/webmaster/marketer)

• Niche focus; set goals, accountability; value time; avoid faux productivity; process-thinking; fail–measure–iterate

• Part II: Market Selection and Validation (Chapter 2)

• Niches as the core strategy; verticals > horizontals; warm niches; small, reachable markets

• Micropreneur Methodology: keyword demand, difficulty, AdWords testing; quality traffic over quantity

• Part III: Product Strategy, Scope, and Pricing (Chapter 3)

• Product Success Triangle (Product/Market/Execution) with emphasis on Market and Execution

• Scope to fast 1.0 (200–400 hours); hiring/outsourcing tradeoffs; pricing tiers aligned to value and segment

• Part IV: Conversion Infrastructure: Sales Website and Email (Chapter 4)

• Sales funnel design; goal = capture email (trust/relevance/reward)

• Customer insight; single CTA per page; core pages; hook; pricing page; guarantees; lead magnets; autoresponders

• Part V: Traffic and Growth Marketing (Chapter 5)

• “Top Shelf” channels: mailing list, content (blog/podcast/video), SEO

• “Second Shelf” channels: PPC, social, PR, forums, affiliates, ads; link-building strategy and tactics

• Part VI: Capacity, Process, and Leverage (VAs & Outsourcing) (Chapter 6)

• Defer automation; use humans early; two leverage points (pre- and post-launch)

• How to find, onboard, manage VAs; task selection and workflow

• Part VII: Post-Launch Path, Metrics, and Ecosystem (Chapter 7)

• Decide: grow or start over; track data as if selling; engage in communities, conferences, and resources

1. How the parts relate and build upon each other

• Part I → Part II: Mindset (marketing-first, niche focus, goals) sets criteria and discipline for niche discovery and validation.

• Part II → Part III: Validated demand and positioning inform scope, features, and pricing; market size/competition dictate MVP boundaries.

• Part III → Part IV: Product/price decisions shape the website’s messaging, hooks, tier presentation, guarantees, and conversion goals.

• Part IV → Part V: The sales site and list are the conversion endpoints that all traffic channels must feed; email becomes the core asset amplified by SEO and content.

• Part V → Part VI: Marketing execution creates repetitive, delegable tasks; processes and VAs increase throughput, reduce founder bottlenecks, and protect effective hourly rate.

• Part VI → Part VII: With leverage and process, founders can evaluate traction data to choose between scaling the current product or restarting; community/resources sustain learning and opportunities.

• Feedback loops:

• Metrics from Parts IV–V inform ongoing niche refinement (Part II) and scope/pricing adjustments (Part III).

• Process documentation (Part VI) strengthens future launches and potential exits (Part VII).

1. Hierarchical outline (visual structure)

• Start Small, Stay Small (Central Aim: launch and grow a self-funded, niche software business through market-first, testable, lean execution)

• I. Mindset and Identity Shift (Ch. 1)

• Entrepreneur = developer + webmaster + marketer

• Market-first; niche focus

• Goals, accountability, time valuation

• Process orientation; fail–measure–iterate

• II. Market Selection and Validation (Ch. 2)

• Why niches win; vertical advantages

• Warm niches; reachability economics

• Demand estimation: keywords, difficulty, AdWords

• Traffic quality over quantity

• III. Product Strategy, Scope, Pricing (Ch. 3)

• Product Success Triangle (emphasis on Market + Execution)

• MVP scope (200–400 hours); build vs. outsource

• Pricing logic; tiers; value-based framing

• IV. Conversion Infrastructure: Sales Website & Email (Ch. 4)

• Sales funnel; primary goal = email capture

• Customer insight; single CTA/page; core pages

• Hooks; pricing page patterns; guarantees

• Lead magnets; autoresponders; email cadence

• V. Traffic and Growth Marketing (Ch. 5)

• Top Shelf: mailing list, content, SEO

• Second Shelf: PPC, social, PR, forums, affiliates, ads

• Link-building principles and tactics

• VI. Capacity, Process, and Leverage (Ch. 6)

• Defer automation; use VAs to test/operate

• Hire, onboard, manage; task structuring

• VII. Post-Launch Path, Metrics, Ecosystem (Ch. 7)

• Grow vs. start over; track KPIs for optionality

• Conferences, blogs, communities, tools

• Flow (dependency chain):

• I → II → III → IV → V → VI → VII

• With iterative loops: (IV/V metrics) ↔ (II/III adjustments); (VI processes) → (faster future cycles)

1. How the structure serves the book’s main purpose

• Sequenced from mindset to market to execution: Reduces risk for self-funded founders by front-loading validation before build.
• Tight coupling of market, product, conversion, and traffic: Ensures every later activity (site, channels, outsourcing) concretely supports earlier strategic choices (niche, pricing, positioning).
• Emphasis on reusable assets (email list, processes, documented workflows): Compounds leverage for small teams and aligns with “stay small” sustainability.
• Built-in feedback loops and test-first practices: Institutionalize learning and capital efficiency, enabling repeated, lower-risk launches or disciplined growth without outside funding.

Prompt / Agent Ideas

Niche Miner from Warm Networks:
I will paste a list of people I know and their professions/hobbies. Use it to propose 10 vertical niches I could serve with software. For each niche, provide:
- Who they are (1–2 lines) and 3 urgent pains (especially ones tied to time or money).
- “Magazine test” viability: list 3–5 trade publications/sites/forums/events where they congregate.
- Initial keyword set (10–20 phrases) to test demand intent (buy, software, tool, automate, SaaS).
- Competition snapshot: likely incumbents and why a narrow wedge could win.
- A quick “warmth” score (1–5) based on my proximity to the niche.
Ask any clarifying questions first if needed. Then output a table.

$100 AdWords Demand Validation Plan:
Act as my growth analyst. For the product idea “[PRODUCT]” targeting “[NICHE],” design a 7-day exact-match AdWords test to validate real search volume and intent with a $100 cap. Deliver:
- Keyword list (15–30 exact-match terms) split by intent tiers (buy, compare, problem).
- 3 ad variants (25-character headlines, benefits-led copy, niche-specific) and 2 landing page angles.
- Daily budget, bids, geo, and schedule recommendations.
- Success/fail criteria (min impressions/clicks, CTR, CPC, conversion proxy like email signups).
- Post-test decisions: pivot, persevere, or kill, and next experiments.
Output as a step-by-step checklist with metrics targets.

Hook and Homepage Conversion Kit:
Given [PRODUCT], [NICHE], [CORE BENEFIT], and [PRIMARY CTA], craft:
- 20 hook headlines (5–7 words), in 3 styles: who-for, benefit-promise, remarkable-feature.
- A hero section: headline, 1-sentence subhead, 3 bullet benefits, 1 primary button label.
- Above-the-fold layout wireframe notes with a single focus and 2-click path to [CTA].
- 5 A/B test ideas (headline, button copy, social proof, image/video, guarantee).
- Trust elements: 6 testimonial prompts, guarantee copy, and risk-reversal line.
Return all copy and test plan. End with the top 3 hooks you recommend and why.

Value-Based Three-Tier Pricing Designer:
Help me set pricing/packaging for [PRODUCT] serving [CUSTOMER TYPE]. Inputs:
- Hours saved/month: [HOURS]
- Monetized hourly rate: [$/HR]
- Competitive anchors: [LIST OR NONE]
Produce:
- A value ceiling and recommended price band.
- 3 tiers ending in 7/8/9 (Low/Mid/High), with doubling logic and >2x value per jump.
- Feature/usage limits per tier tied to what this niche values.
- One highlighted plan (“most popular”) and justification.
- Add-ons and 20% annual support or monthly equivalent recommendation.
- 5 pricing page best practices and microcopy (FAQ, guarantee, trial).

Autoresponder Engine: 5-Day Course + 6-Month Nurture:
For [NICHE] and [PROBLEM], create:
- A lead magnet title and 5-day email course outline (Day 1–5), with subject lines (<7 words), plain-text friendly body copy, and 1 clear CTA per email.
- A 6-month evergreen autoresponder (biweekly): 12 emails mixing current events commentary, Q&A, interviews, and tips. Include subject lines, preview text, and CTA cadence (every 4th/5th email salesy).
- Deliverability checklist (timing, from-name, spam triggers, attachments policy).
- Metrics targets (open, click, unsubscribe) and A/B test plan.
Output ready-to-paste email content.

Sales Site Blueprint (5 Core Pages, One Goal Each):
Build a mini IA and copy for [PRODUCT] targeting [NICHE], ensuring every page has one primary call to action [CTA]. Deliver:
- Sitemap: Home, Tour, Testimonials, Pricing & Purchase, Contact.
- For each page: goal, key sections, bullet-level copy, and the button label.
- “Two-click rule” checks to reach Demo/Buy/Email from any page.
- Testimonials framework: 8 question prompts to elicit outcome-focused quotes.
- Accessibility for scanners vs readers (headlines, bullets, short paragraphs).
Provide concise copy blocks and a QA checklist to enforce single-focus pages.

SEO + Link Building Playbook for a Vertical:
For [NICHE] and [PRODUCT], produce a 90-day plan to rank for [PRIMARY KEYWORDS]. Include:
- On-page targets: 1 page per keyword cluster (title/H1/meta/internal links).
- Link acquisition mix by month: directories (DMOZ, JoeAnt, Gimpsy), niche/local directories (list 20), competitor backlink outreach (template), testimonials (template), academic/nonprofit free license (outreach template), Google Alerts engagement plan.
- Anchor text rotation strategy (50% primary, 50% long-tail/synonyms/brand).
- Pace: link goals per week to avoid spikes.
- Tracking sheet columns and success thresholds.
Provide outreach email templates and a weekly cadence.

VA/SOP Starter Pack: From Goal to Delegable Tasks:
Turn this goal into VA-executable tasks: “[GOAL, e.g., Find 50 niche blogs with >[METRIC] and contacts].”
Deliver:
- Job post text (skills, hours, budget, trial task).
- SOP: step-by-step with screenshots placeholders, acceptance criteria, and examples.
- Data schema for a Google Sheet (columns and validations).
- QA checklist, time estimate, and escalation rules.
- Communication cadence and daily check-in template.
- A small paid trial plan to evaluate 2–3 candidates fairly.
Output in copy-paste friendly sections.

Accountability & Goal Cadence Generator:
I want to hit $500/month profit with [PRODUCT] in [TIMELINE]. Create:
- Written SMART goals, public commitment script, and weekly accountability email template to a friend.
- A 12-week plan split into Market, Execution, Product tasks (70/30 non-code/code).
- Weekly time-blocks enforcing “work hard/play hard” and a consumption fast.
- A Friday review and metrics dashboard (visits, CTR, signups, conv%, MRR, churn).
- A “dip survival” playbook: triggers, actions, and motivational reminders.
Return a printable plan and email templates.

Human-in-the-Loop MVP Planner (De-scope to 200–400 Hours):
For [PRODUCT IDEA], list all workflows and suggest which to code now vs replace with a human/VA until traction. Deliver:
- Screen list, rough sketch count, and hour estimate using the 4–12 hours/page rule (+DB and integrations).
- Eliminate/sequence features to hit a 200–400 hour v1.0.
- Tasks to replace with VA/manual ops (billing, reminders, onboarding, reporting), with SOP notes.
- Launch checklist and rollback criteria.
- Post-launch iteration loop and what to instrument.
Output a prioritized backlog and a simple burn chart plan.

Highlights

The focus of this book is building and launching a successful software, web or mobile startup with no external funding.

This process includes:

Developing the proper mindset for a self-funded startup

Understanding the Market-First Approach

Finding and testing a niche market

Choosing the optimal platform, price and revenue model

Building a killer sales website

Understanding the primary purpose of your sales website

Building the right kind of interest, and thus driving the right kind of traffic, to your website

Learning how to outsource

Working with virtual assistants

Determining what to do after launch: do you grow the business or start over?

Chapter 1 - The Chasm Between Developer and Entrepreneur

There are many definitions of entrepreneur, but since we’ll be discussing self-funded tech startups we are going to focus our definition on a few key points:

Point 1: An entrepreneur is a technical visionary who creates software for a niche market.

Niche markets are critical. If you want to self-fund a startup you have to choose a niche.

Building an online invoicing software as a service (SaaS) application? Good luck.

Building an online invoicing application targeted at landscape architects? Now you’re talking.

The genius of niches is they are too small for large competitors, allowing a nimble entrepreneur the breathing room to focus on an underserved audience. Once you’ve succeeded in that niche, you can leverage your success to establish credibility for your business to move into larger markets.

Point 2: An entrepreneur merges existing technical knowledge with online marketing knowledge.

The key factor in an entrepreneur’s success is their ability to market their product. I can almost hear you groaning…but keep an open mind. Millions of people in this world can build software. A fractional subset of those can build software and convince people to buy it.

A developer who knows how to market a product is a rare (and powerful) combination.

Note: It settled. It’s not about coding up a product, it’s about marketing it. All in on merketing!!!

Especially in the age of ai.

Point 3: An entrepreneur is a cross between a developer, a webmaster, and a marketer.

Developer

Software entrepreneurship would be nearly impossible without the technical skills we learn as developers. The ability to fix a production site that’s crashing or put together a hot fix for a key customer will be critical to your success.

Webmaster

These days it’s imperative that your startup knows how to sell online. This means creating a website that converts visitors into customers. We’ll be exploring a number of ways to build high-converting sales websites, and doing these will require basic HTML knowledge.

Once your website is up, you will be making constant updates, adding new content to achieve better search engine rankings, tweaking conversions (newsletter sign-ups, trials, purchases, etc…) and most of these tasks will be better executed if you can make small changes yourself. Basic knowledge of HTML or a CMS is essential.

Marketer

Marketing is more important than your product.

Let me say it another way:

Product Last. Marketing First.

Your product has to be good. If it’s not, you’ll be out of business.

But before you build a good product you have to find your market. With an enormous amount of anecdotes to back me up I strongly believe that building something no one wants is the most common source of failure for entrepreneurs.

Most developers want to build software products for the wrong reasons.

Reason #1: Having a Product Idea

If you have an idea for a product, odds are high that you have project/product confusion.

A project is a software application that you build as a fun side project. The code is fun to write because you’re not concerned about quality and performance, and the end result is a neat little application that likely isn’t of use to many people.

A product is a project that people will pay money for. In other words, it’s a project that has a market (a group of people who want to buy it). Without a market, a software application is just a project.

Most developers who come up with an idea know exactly how they will build it, but no idea how they will reach potential customers. They think a link from TechCrunch will drive hundreds, if not thousands, of sales.

On rare occasions the product-first approach works, but for the most part it’s a recipe for failure.

Reason #2: To Get Rich

Getting rich shouldn’t be your goal when launching a product. Thousands of people with significantly more coding and marketing skills have built and launched products, yet still work for a living. If you are doing it for the money you will not stick around during those long months of hard work when no money is coming in.

If you want to make a million dollars, buy a lottery ticket or start a venture-backed startup; the odds of succeeding at either are very much not in your favor, but the potential payout is big.

As I said earlier, I’m pretty sure you’re here to do something with less risk and less reward, but a much higher chance for success. A million dollar payday is most likely not in your future, but owning a successful startup can be.

Reason #3: Because It Sounds Like Fun

We’ve all read the stories of a successful startup and dreamed that we would one day be that person in the Fast Company article. Whether it’s someone who hits it big with a fluke Facebook application or works for years to build a successful software company that you’ve followed through their blog, the story is always romanticized. In other words, the few glimpses you have into the life of a startup are not a true indication of what goes on behind the scenes to make it work.

If you want to become a Micropreneur because it sounds like fun, you’re going to have a rude awakening on the 10th day when the initial excitement has worn off and you’re slogging through exception handling code at one in the morning.

To throw more fuel on the fire, what you know about software development is a small piece of the puzzle. Writing code, where most of us are well-versed, is only about 30% of the work needed to launch a successful product.

The other 70% is debugging, optimizing, creating an installer, writing documentation, building a sales website, opening a merchant account, advertising, promoting, processing sales, providing support, and a hundred other things we’ll dive into in later modules. Some of it is great fun…other parts, not so much.

Suffice to say that being an entrepreneur can be fun, but the fun parts come only with hundreds of hours of hard work.

What are the Right Reasons?

The “right” reason to start a startup depends on your goals. As I mentioned before, Micropreneurs lean towards lifestyle choices (freedom, income independence, location independence), while bootstrappers might embrace the challenge and excitement of owning their own business, to build equity in something they own, and to have control over the projects they work on.

It’s hard to re-train your mind out of the dollars-for-hours mentality. For me it took well over a year.

A study at Dominican University3 revealed that the following 3 factors substantially increased someone’s chance of following through on their goals:

Written Goals – “Those who wrote their goals accomplished significantly more than those who did not write their goals.” 1.

Public Commitment – “…those who sent their commitments to a friend accomplished significantly more than those who wrote action commitments or did not write their goals.” 1.

Accountability – “…those who sent weekly progress reports to their friend accomplished significantly more than those who had unwritten goals…”

It may feel like you’re an exception; that you don’t need goals or accountability…but trust the science and give it a shot. Spend 20 minutes making a list of the things you are hoping to accomplish by starting up. If you believe what was said above, it will make a big difference. Worst case, you waste 20 minutes of your time.

Remember that there is no single best path to success as a startup founder. Since you are deciding on a specific lifestyle and are making sacrifices to get there, it can look like almost anything. Just be sure it’s what you want.

Here’s one question you should think about right now: what is a good short-term goal for your startup?

I have a suggestion to help get you started:

Strive to build a startup that generates $500 per month in profit.

This may sound like an easy goal, but will require more work than you can fathom at this point.

Once you’ve done that you will have so much experience under your belt you won’t believe how much you know (and how little you knew when you started).

Note: At this point it no longer sounds simple. It’s giving hard.

The reason you need goals and accountability is to stay motivated during the hard times. Without goals you are much more likely to throw in the towel when things get difficult. This might be when you launch and no one buys, or you are bombarded with so many support requests you don’t have enough time to build new features.

The key factor in getting you through the dip is your goals. These are the goals you wrote down six months prior due to the advice given to you in a random book about startups.

Once you make it to the other side, you’ve learned what it takes to launch and maintain a product. The next time you launch a product, you will have a monumentally better chance of success because you are now a more savvy software entrepreneur.

Note: You just have to do it once, then it will be much easier.

While there’s no way to avoid the fear of starting your company, the following can help put the fear in perspective:

The up-front fear is a big indicator that you’re going to grow as a person if you proceed through it. And, frankly, the terror wears off pretty quickly.

Overcoming the terror of firsts is hard, but it’s what makes the goal beyond it worth achieving. The terror that stands between you and the goal is something 99.9% of people will never overcome.

Having no clear, written goals for your startup means you won’t know whether to pursue the white label deal someone offers you two weeks after launch, or to start selling in overseas markets because someone asks you to.

Without goals for both yourself and your startup you are flying blind without guidance in situations where there is no right or wrong answer. Answers need to stem from your long-term desires for your startup and yourself.

Your goals must serve as your roadmap that takes you to your definition of a successful startup.

Spending an evening finding 50 blogs to market to is a great way to feel productive, but do you really need 50, or could you get by with 10? Shouldn’t you have outsourced this task for a pittance to any respectable virtual assistant (VA)? In reality, the 4 hours you spent researching should have been 10 minutes spent writing up this task.

Note: Idea for marketing agents?

Tags: project idea

Another common distraction masquerading as productivity is reading business books. It sure seems like Why We Buy6, Made to Stick7 and Outliers8 are going to help you launch a successful product. But reading books gets you no closer to launching than watching Lost.

If reading business books is a hobby, fantastic. But it won’t get you one hour closer to launch.

You can’t consume and produce at the same time – when you’re in high-producing mode you have to temporarily step away from your magazines, blogs, and other forms of distraction for a while. Being in the pattern of checking your RSS reader every time you sit down at your computer kills hours of productivity each week. Those are hours that could be spent building your product.

Anytime you’re on your computer ask yourself “Is this activity getting me closer to my launch date?”

Take a risk this month: outsource your first task and see where it takes you. When was the last time a single tool or work habit offered the opportunity to save 20-60 hours?

Putting a value on your time is a foundational step in becoming an entrepreneur, and it’s one many entrepreneurs never take. Skipping this step can result in late nights performing menial tasks you should be outsourcing, and an effective hourly rate slightly above minimum wage.

It never seems like a good idea to pay someone out of your own pocket for something you can do yourself…until you realize the economics of doing so.

Realizing your time is worth $50/hour is the first step; the next step is actually generating $50 for every hour you work, and the third step is figuring out how to make your time worth $75 or $100/hour. If you continue to think your time is worth $50/hour it will stay at $50/hour.

$100/hour is a good long-term goal to shoot for. If you’ve done your research on one-person software companies (which are similar in economics to small software startups), the reality for most tends to be closer to $25/hour12.

If you are making $25/hour as an entrepreneur you are doing something wrong. Improve your marketing, grow your sales, find a new niche, outsource and automate. $25/hour is not an acceptable dollarized rate for a startup.

Outsourcing aspects of your business is the single most powerful approach I’ve seen to increasing your true hourly rate as an entrepreneur. If I didn’t outsource my administrative tasks, my effective hourly rate would plummet.

Wasting time is bad. Boring movies, bad TV, and pointless web surfing are expensive propositions. If you aren’t enjoying something, stop doing it.

I need to re-iterate here: I’m not saying you should never relax, have fun, watch movies, play with your kids, watch TV, or surf the web. I’m saying that you should be deliberate about your work and your free time to get the maximum benefit from both. In other words:

Work hard and play hard, but never do both at once.

Numerous times throughout the day ask yourself:

At this very moment am I making progress towards crossing off a to-do, -or- am I relaxing and re-energizing?

If I’m doing neither, evaluate the situation and change it.

If you aren’t enjoying a movie, walk out.

If you’re playing with your kids and working on your iPhone you’re not really working or playing – you’re doing both poorly. Put the iPhone away and focus on your kids; it will shock you how much more fun you have and how, after making this choice, you’ll feel energized and ready to dive back into work

The same goes for multi-tasking work in front of the TV. Your productivity level is around 50% when trying to do both. Most evenings you’ll feel as if you worked the whole night but didn’t get anything done.

If your time is worth, say $75/hour, standing in line at the bank is painful. Sitting in traffic is another money waster – every non-productive, non-leisure minute you spend is another $1.25 down the drain.

Since it’s not practical to assume you will never wait in line again, the best counter-attack is to have a notebook and pen handy at all times. Use this time for high-level thinking, something you may have a hard time doing in front of a computer.

It’s amazing that we think we can remember our important thoughts. Due to the amount of information and chaos you consume each day, a thought stays in your head for a few seconds before it disappears. Perhaps you will think of it again, perhaps not. Writing down important ideas is critical to building a list of ways to improve your business.

As someone who likely enjoys consuming in large quantities, at some point you will realize that you are wasting an enormous amount of time. I highly recommend putting the following into place:

When reading blogs or books or listening to podcasts or audio books, take action notes.

Action notes are short- or long-term to-do items that apply directly to my businesses.

For example, I listen to several SEO podcasts. If they mention an interesting website, I make a note to check it out the next time I’m able.

In The E-Myth Revisited13, author Michael Gerber talks about the archetypes of running a business. They are: entrepreneur, manager and technician.

The entrepreneur is the dreamer, the visionary, and the creative mind.

The manager is the person who thinks about return on investment (ROI), near-term success, and productivity.

The technician gets the work done. She follows the manager’s guidance and is concerned about today’s success.

95% of us are comfortable, and probably excel at, being technicians. This means you’re good at writing code, producing something tangible, and cranking away on each task, moving one step closer to launch date.

But it takes more than a technician to run a successful business. It’s critical to look ahead into the near-term and determine which features or marketing efforts will provide the best ROI (manager), and to think out a year or more to determine the long-term direction of your business (entrepreneur).

The first step is to determine your goals and objectives as we’ve been discussing in this chapter.

Without planning, organizing, systematizing, outsourcing, and marketing, all things you will shy away from as a technician, you will never make it past the $25/hour pit that many startups fall into.

The product with a sizeable market and low competition wins even with bad marketing, a bad aesthetic, and poor functionality. Think QuickBooks in the early days, or any niche product you’ve ever seen that looked like it was written by a six year old but sold thousands of copies.

In the same market, the product with better marketing wins. Every time.

In the same market with equal marketing, the product with the better design aesthetic wins. Sure, a few people will dig deep enough to find that the “ugly” product has better or more functionality, but the product that wins is the one that has the best looking website and user interface.

Functionality, code quality, and documentation are all a distant fourth. I know that this sounds sacrilegious to a software developer, but unless you’re marketing to software developers, your order of importance is market, marketing, aesthetic, function.

Writing code is cut and dry. There are different ways to accomplish the same thing, but in general you know how you want your application to behave and you just need to get it there. Your constraints are constant – the compiler behaves the same way it did the last time you compiled.

By comparison entrepreneurship, especially the marketing side, is never this clear. As we’ll discuss in chapter 2, marketing is about math and human behavior. The math part is straight-forward. It’s the human behavior that’s going to throw you for a loop.

Even the foremost marketing experts in the world are not sure whether people will buy a new product. People with 20, 30 and 40 years of experience still have to take their best guess at what will succeed. They have to try things out and adjust as they go. They often do small roll-outs to test audiences and adjust the product or the message before unleashing it on the world.

You will have to do the same and it will involve a lot of guesswork at the start. That’s a hard pill to swallow when you’re used to making decisions based on fact. Instead, you have to take your best guess; then measure and tweak.

And then do it 20 more times until you succeed.

The faster you fail and learn from your mistakes, the faster you will improve. Pretty soon your ads won’t lose money, you’ll get better at estimating level of effort, and you’ll be sure to thoroughly test the complex parts of your code.

But you have to wade through that sea of failures before you can reach the other side. And this can be a hard thing to do.

A product, marketing effort, and a reputation take time to build. But once they build they snowball such that the effort to launch a new version of your product is miniscule by comparison, and your chances of success are much higher.

Once you have 5 releases under your belt, 1500 targeted visitors every month, a 500 prospect mailing list, and hundreds of incoming links…surprise! Things are easier. Much easier.

Documenting repeatable processes for anything you will do more than once is essential to your sanity.

Without process it’s impossible to delegate, difficult to bring on a business partner, and easy to make mistakes. With processes in place it’s much easier to sell your product if/when you want to make an exit.

You have to invest time every month into marketing, development, support, SEO, AdWords, and every other aspect of your business. The dream of building an app that never breaks, never needs new features and possesses auto-pilot marketing are possible, but they will not come by accident.

Chapter 2 - Why Niches Are the Name of the Game

I’m going to take it even further: the single most important factor to a product’s success is not the founders, not the marketing effort, and certainly not the product.

It’s whether there’s a group of people willing to pay for it.

The product with a sizable market and low competition wins even with bad marketing, a bad aesthetic, and poor functionality. Think QuickBooks, Palm, or IE 5.5.

But the way the vast majority (dare I say 99.5%) of all businesses in this world that succeed in the long-term – be they large or small, high-growth startup or lifestyle business – is to find a market that is willing to pay them money for something.

That something can be dry cleaning services, invoicing software, or hosted salesforce automation. What matters is finding a group of people who need your something more than they need the money you’re charging for it.

Building a general purpose, small-business, online accounting application is a really bad idea for a self-funded startup. For one, you won’t have the development or marketing resources to compete with the likes of Freshbooks, Blinksale, and BillMyClients. In addition, you won’t be able to keep up with support or feature implementation for that many general purpose business clients.

If you choose a niche market and focus so tightly that your product becomes the best in class, members of that niche will have no choice but to use your product.

Tags: niche

The lesson here is that the narrower you can make your product while still maintaining a large enough market, the more profit you will generate. It’s that simple – if you can find a small group of people and make them amazingly happy, you will make money.

The most common mistake made by inexperienced marketers is attacking a market that’s too large. Common sense tells you that the larger your market is, the better off you are. For bootstrapped startups, the opposite is true.

Marketing to large markets is not cost-effective. The larger a market, the more money you’ll need to spend in order to locate people willing to buy your product.

Niches Have Less Competition

Niches Have Higher Profit Margins

Niche markets are typically pursued by small players; players who don’t have the marketing expertise (or the manpower) of large companies. As a result, competing in niche markets is a lot easier than running head-to-head against someone like Monster.com (whose well-produced commercials run each year during the Super Bowl).

A “warm” niche is a niche where you have some kind of association. Perhaps you worked for a credit card company for a few years, your wife is a lawyer, you collect comic books, or your brother is a plumber.

Each of these would be considered a warm niche, and introducing a product into this niche will be much easier than choosing a completely unknown market. Remember, you stand a better chance when you know who you’re selling to.

Make two columns on a piece of paper. In the header of the left column write “Person” and in the right one write “Hobby or Work Experience.”

Now for each row write the name of someone you know, including yourself, friends, relatives or colleagues, and write their work experience or hobby in the right column.

Coming up with your initial list of niches amounts to pulling ideas out of thin air. Here are a few suggestions on how to do that.

Approach #1: Look at All Areas of Your Life

Examine your hobbies, interests and work experience. Are you into sports, the news, comic books, arts and crafts, health or shopping? Are you fascinated by modern art? Do you have experience building software for dentists?

Approach #2: Look at Occupations

Scan through the following lists of occupations to determine if you have any experience with them, or if you know someone who does:

http://en.wikipedia.org/wiki/List_of_occupations

http://www.bls.gov/news.release/ocwage.t01.htm

Approach #3: Cheat

One way to avoid the multi-step process of brainstorming niches, evaluating demand and selecting a product is to jump right to a product idea. And why not start with some inspiration to stretch and mold into a niche you’re familiar with?

http://www.entrepreneur.com/businessideas/ – Business idea search engine. I found the best ideas searching on Category->Online Businesses.

http://www.sixmonthmba.com/2009/02/999ideas.html – A list of 999 product ideas. Only a portion are software/website ideas, but even the physical product ideas get your mind thinking about specific niches.

http://www.ahbbo.com/ideas.html – Over 400 home business ideas. More of a generator of niche ideas than product ideas.

http://ycombinator.com/ideas.html – Startup ideas YCombinator would like to fund.

For ongoing inspiration, I subscribe to every one of the following blogs. Even when I’m not prepared to build a product I scribble a note about an idea that I keep for review when I’m ready to build my next application.

http://astartupaday.wordpress.com/ (also on Twitter at http://ww.twitter.com/astartupaday) – by far my favorite web app idea blog. I’ve come very close to pursuing several of his ideas exactly as he’s written them.

http://ideas.4brad.com/ – crazy ideas from Brad Templeton

http://www.ideaisqueen.com/wordpress/ – I’ve seen quite a few ideas that would work for a Micropreneur on this blog.

[http://www.idea