Episode 662 | Selling for Five Years of Runway, Profit vs. Revenue Multiples, and More Listener Questions (Rob Solo)

Rob Walling:
The big question is can I find people to talk to? If no one will talk to you, this is such a good lesson. I’ve said this on the podcast before, but I think it deserves to be stated again. It’s that if you try to validate a product before you build it and you cold call, cold email, cold dm, run ads, whatever it is you do, and no one will talk to you about this problem. How are you going to get them to talk to you once you’re selling something?
Welcome to yet another episode of Startups for the Rest of Us, I’m your host, Rob Walling. Today I’m answering listener questions. We’ve had an amazing influx of audio and video questions and so I’m going to be digging into those today. My first question is from Misha about switching jobs while bootstrapping a company.

Misha:
Hi Rob, my name is Misha. I have a question, should I switch jobs while bootstrapping a SaaS company? We haven’t launched yet. Our plan is to launch in about two months. The reason I’m looking to switch jobs is while at my current gig I can do the job easy enough and block out time to work on the SaaS product. It comes with plenty of what I call emotional politics, things that are distracting things that add emotional stress to the day and kind of sap motivation and focus. The new job is more technical work, so it’s a little bit less or quite a bit less on these emotional politics because I can focus on doing software development basically.
It also comes with a pretty significant pay increase of about 20% and that would be helpful since we haven’t launched the company yet and it’s more cash I can feel like I can devote into that space. So wondering how do you think about just bootstrap in your company knowing one’s going to be a long road before you can quit it, quit your day job for this bootstrapped company, but at the same time need to provide for yourself and your family. And how do you decide which opportunities to take and when to take them? Thank you.

Rob Walling:
Definitely an interesting question and one I myself faced many times and I’m sure a lot of bootstrap founders face as well. The way I would think about it is that if I haven’t launched yet with my side project and let’s say my goal is to get to $10,000 in MRR, that even with a little bit of expenses I can quit my day job and maybe the ultimate goal is to get to millions in ARR, but let’s just say the short term goal is to quit the day job. If I haven’t launched yet, the odds of me getting to 10K, MRR in 12 months are pretty thin. It’s possible if you get lucky, if everything comes together in a way that doesn’t usually come together as we see in the state of independent SaaS, just how many folks struggle to get past that initial $500 or $1,000 of MRR.
Let’s just say maybe on average, I’m making numbers up here, but let’s say that most apps take 12 to 18 months from launch to get to 10K, MRR. And if you’re lucky, it’s a little shorter and if you’re unlucky it’s longer or you never get there. With that in mind, I would ask myself, am I okay working at my current job with the politics making 20% less for 12 to 18 plus months?
So that’s one way to frame it. The other way I think about this is how much disruption will this have on my life and my ability to work on this side project? The good part is it sounds like you already have a job offer, so we can scratch the whole scouring job boards looking for jobs part of the process and just assume you’re at a decision point where you already have an offer and you could just accept it.
So then how many weeks or months is this going to kind of disrupt your personal life and frankly cause you to need to focus on the new job to make a good first impression and to get it to where you’re, you’re a trusted resource. Whenever I started a new job, I was always hustling, especially in the early days because I wanted that first impression to be that I got (beep) done and then people would stop bothering me. And so when I think about that, it sounds like you already have that with your current job. So how many months does it take you to get that with the new job? And I don’t know what the answer is, maybe it’s six weeks, maybe it’s six months, it probably depends, but that is going to probably pull time and focus away from your side project.
Next question is how much? Do you think you’ll still be able to do some work on your side project? I would absolutely expect so, but those are the two sides of the decision as I see it. It’s how long am I willing to work at my current job knowing that it’s going to take me a long time if I ever hit 10K, MRR with this project, the side project versus how much disruption will I have in the short term? A few months, probably. I mean if I were to guess I’d say in two to three months, if you hustle you can make a great impression. People kind of stop micromanaging you and you’ll have that, I think that mental bandwidth to be able to continue pushing on the side project. So that’s the calculus. I know what I would do in your shoes. I don’t want to make recommendations, but if I were in your shoes, I probably would switch jobs. I hated politics so much in any job that I worked at that that would be the leading factor for me to want to switch up because that alone would be a cognitive load for me if day-to-day I was dealing with that and I think that would make me less happy in my personal life.
And I also think it would probably negatively impact my ability to work on my side project or what it may do is make me work more on my side project such that I could get out of it faster. But that’s how I would think about it. But to each their own, it truly does depend on your prediction of how you think these things will play out and your own ability to deal with a crappy job because in the short term it will set you back, but in the long term I would guess it’s probably going to be a better choice.
The one other thing I’ll mention, it’s almost a tangent, but most employers, especially hiring developers are going to have you sign an IP assignment agreement and in that you will have to name any side projects that you are working on that you want to retain ownership of.
And so that’s something to think about and some companies will just ban you from working on side projects and they say, “We own everything you do even on your own computer at your house in the evening.” Now I think that’s bull crap and I personally would never sign one of those but find out in advance if this company has a clause like that because then that changes the decision obviously because you don’t just want to say, “Oh, they’ll never figure it out.” Because that’s a huge danger of you building something successful and then having someone else with a claim to own it. But if they don’t have a clause like that and they just say, “Name the things you’re working on.” And maybe you need to get permission or maybe you don’t, maybe they just want to know what it is that you’re working on the side, then you will have to list it and the new employer will know that you’re working on this thing. So that’s just one other factor I would keep in mind as I thought this through. Thanks for the question Misha. Hope that was helpful. My next question is from anonymous and it’s about factors for an acquisition.

Speaker 3:
Hey Rob, longtime listener since way before I started our company, which I’ll keep anonymous for reasons that will then become obvious, but we’re now approaching about $2 million ARR and we’re evaluating acquisition opportunities. And I guess I had predominantly two questions. So one, we are a very small team, we’re about four people full-time and we’re trying to understand when we can get a realistic valuation on revenue versus SDE. We’ve been optimizing for SDE for a long time and we’re just unsure when we can sort of pivot to the revenue valuation multiple. And the second was I’d love to know how you thought about an earn out in terms of when you were evaluating offers for Drips. So obviously… pay each year, but I don’t think that’s sufficient because I just, there’s a huge premium we place on our freedom and our ability to not be an employee and I just don’t see that talked about very much in terms of how people actually value that. And I’d love to hear about your thought process in terms of how you were evaluating opportunities and interest for Drip.

Rob Walling:
Anonymous cutout there for just a couple seconds in the middle. I think we get the gist of the two questions he’s asking. The first question is, small team $2 million ARR, how easy is it to get a revenue multiple versus SDE, I should define SDE, it’s kind of like net profit but it’s called seller discretionary earnings. And what it means is you take your net profit and then you add things back in like the owner’s salary or if you pay for your cell phone and your internet from the company, maybe a company car, whatever it is that you’re pulling out that really are discretionary earnings that if you left would remain in the company, those are added back in to net profit. And so you can imagine that a company doing $2 million ARR that is generating $1.2 million in, let’s just say net profit SDE, make them equivalent, $1.2 million and you get a five X multiple, you get $6 million, that’s great, but if you’re going to get a revenue multiple, you can often get the same multiple if you’re growing fast enough.
So five X on, $2 million ARR is going to give you $10 million. So it’s a big difference between the two and sometimes it’s even larger. General rule of thumb, and this is so general and it depends, so please don’t take this as gospel, but usually when you get to about $1 million ARRs, sometimes $1.5 million if you are growing quickly and growth is a big key to this and your churn is not super high, there’s a bunch of factors. But if it’s a really strong business, that’s when you can start asking for revenue multiples. So if you’re selling something that’s doing $250K a year, pretty much expect to sell for a seller discretionary earnings, multiple, SDE multiple. If you’re doing $750K a year, odds are pretty dang high. There’s, I’ve seen some exceptions, I saw someone doing 75K a year get $750,000 in cash for their company. It happens but it’s not the norm.
So you think about it as a bell curve, where in the center is the likelihood or the frequency that it happens. And then as you go out, there are these outlier multiples right? To the left, it’s low multiples and to the right it’s high multiples and it just depends on how desperate someone is to acquire your tech, or your company and are there any equivalent replacements on the market that they can acquire. ‘Cause if you’ve built something truly unique or you’re way ahead of everyone else, you’ve built an amazing team, whatever it is, that can be a huge factor in jacking that multiple up if they can’t find an equivalent replacement to buy. So all that said, the biggest factor is growth, right? And if you’re growing 100% year over year at $2 million ARR, I don’t see why you wouldn’t be able to get a revenue multiple.
Now I didn’t write any rules, it’s a market and so selling right now is better than selling last year, but not as good as selling two years ago when everything was frothy. So two years ago maybe if you were going 40% year over year, you know could get a revenue multiple and maybe now it’s 50, 60, 70, there’s some number in there. It just depends on the acquirers. Most acquirers are either private equity firms or strategic acquirers where there is a logical fit into their business that you will fit into. And so if you are growing quickly and you have relatively low churn, so there’s like a path to keep growing, and you’re in a space where there are PE buyers or strategic buyers, then that’s where it starts to make sense. And that’s where you contact like a sell side SaaS broker, like Discretion Capital, it’s run by my good friend and Tinyseed co-founder Einar Vollset
And that’s where they help folks who once they get into that single digit or double-digit million ARR, they can run a process and they know all the big players of private equity players, the strategics and they put together a, it’s a whole process, it’s months worth of work and it’s something that they do very well and that’s how you get top dollar for something like this. It doesn’t just happen by accident. The reason you run this process is to get multiple buyers. If you’ve read the book, the Art of Selling Your Business by John Warlow, it’s very good and it talks about the way you get maximum bids. The way you get maximum sale price is by having multiple buyers. And the best way to do that is to run this process and the best way to run a process is not to do it on your own because you don’t know how to do it, right?
I remember thinking I was going to run my own process and I think that’s a terrible way to go. I think you will always leave money on the table when you go that route. With that said, if you’ve optimized for profit, which it sounds like you have, it can be really difficult to make that pivot because you’ve kept the team super small and you probably have sacrificed growth for profitability. And I’ve talked about this many times on this show, where in the short term it can be easy to say, “Oh look how profitable we are. We’re a half a million-dollar business that threw up 400 grand for the founder.” That’s amazing. But if you could instead grow twice as fast, you can sell that thing for 10 times more than if you’re milking it for cash, right? Private equity and strategic acquirers, they don’t care very much at all about profitability.
Now if you’re lose buckets of money, of course, but if you’re running at breakeven and you’re doubling every year and you’re in the millions, people will take a look, like you will have buyers champing at the bit. So it can be difficult to make that pivot because if you’re growing at 20% a year and you’re super profitable, it seems like you’ve built a great business, you’ve built a great lifestyle business even at $2 million a year. And I’m not saying no one will buy you for a revenue multiple, but it’s definitely more challenging. It’s a lot to say on this topic. I should probably get Einar Vollset back on the podcast and we can talk this through ’cause it’s a super interesting question.
Second part of his question was about thinking of earn outs. Meaning you’re going to work at the acquirer for a year, two years, three years, whatever, and you get part of the purchase price up front and then you get these progress payments that may happen after one, two and three years.
So general rule of thumb is if you’re going to sell for many millions of dollars, if you go to say Facebook, or Google, or a huge brand name company, big tech, pretty much three year earn out is standard. There are exceptions but usually it’s three years with smaller, I’ll say known name tech companies. The ones that we’ve heard of but maybe are not mentioned in the New York Times or people are not frequently protesting them in the Silicon Valley. Those usually ballpark about two year earn out. But have I seen folks sell a company and walk away within weeks of closing? I have once again think of the bell curve. How often does that happen? Not very often and I have seen folks negotiate earn outs lower down to 12 months, 18 months, not with big tech but with these smaller PE acquirers and other things, especially if you have a team in place.
And that’s another thing, a lot of us founders think, I’m going to keep the team small ’cause it makes it easy, that’s great, but then everything relies on you, so your earn out’s going to be longer if you don’t have a team in place to do things. If you’re still making the product decisions, or you’re still writing code, or you’re still involved in the day-to-day of that business, the acquirer doesn’t want you to go away because they don’t want to have to replace you. So the more you hire and the more you delegate, the better position you are in to negotiate and say, “I’m basically an observer in this company.” If you can say this company’s growing and I only work 15 hours a week on it, 10 hours a week, some small number because everyone else is doing all the work that is actually the best position to be in to walk away within months or whatever, 12, 18 months of an acquisition.
But to really answer Anonymous’ this question he was asking, it’s a huge premium to place on your freedom. Even if you get a million dollars, 2 million during this earn out to work another year or two, is it worth it? And in my book, I knew that if I was going to sell for enough money that I never had to work again. I was going to work to minimize that earn out, but I was okay to work there for a period of time that made it worth it that when I got out I could do whatever I wanted. And so if that had been four years, no there’s no chance, three years, nope, wouldn’t have done it, two years felt too long. So I really negotiated that down. Actually there’s a reason our acquisition took 13 months, I’m not sure I’m talking about this, but I negotiated a lot of stuff and they were really keen to buy us and that helped.
I wasn’t as keen to sell, but I certainly was intrigued by the idea of diversifying my holdings from this one company that was worth millions and millions of dollars, to having cash in the bank and being able to put that into other assets. I kind of wish there was secondary that existed back then. It really wasn’t a thing where you could actually take chips off the table. If I could have sold 10% of it for $1 million dollars or whatever the numbers would’ve been, that would’ve been super intriguing, right? ‘Cause that’s a way of diversifying that is something that’s more possible today. We do it ourselves through our Tinyseed syndicate, where if a founder’s doing a few million a year and they want to take a chunk of money off the table, sell it to investors in order to keep going and grow that company, that’s something that is now an option and it’s not as frowned upon as it used to be.
But with all that said, you’re right. It’s a big trade-off to work for someone else for a year or 18 months or whatever that number is in my book though, the cash just has to be worth it. What you get out of the deal has to be worth that money. And again, I could imagine a deal falling apart if the cash was amazing and they said, “You have a three year or four year earn out.” I would say “No way.” The opportunity cost is just too great. And so if you want that earn out to be as small as possible, then you need to figure out how to make this company run itself a little more than it probably is today with only four employees, and then realize the odds of getting it below even a year I think are pretty slim.
One other thing that I would say is I have heard of folks kind of getting a full time earn out for a year and then having six months or a year as almost a consultant where it’s like you back off, no one reports to you but you will commit X hours per week at an hourly rate to continue working on it.
So there’s some in-betweens there. You’re still tied to it, but you’re kind of not under the thumb of the acquirer so to speak. There’s a lot there. Thanks for that question Anonymous. I hope it was helpful. My next question is from Victor about whether to take a role as a founding engineer or try to start a lifestyle business.

Victor:
Hi Rob, I’m Victor. I’m a JavaScript full stack developer and I’m not sure what to do with my career. So I have an offer to be a founding engineer on an agile backed or BC back startup and that would lead me to perhaps a more corporate job or a role as a founding engineer, corporate engineering, managing people and perhaps sacrificing time for money. So I’m not sure that’s what I really want to, I learned to code to have a lifestyles business, but I feel like the alternative is going backwards because I know how to code the super complex app using JavaScript, but if I have to perhaps become a Shopify developer or a WordPress developer and then leverage that experience to build an app with that for my customers, I would be doing things that I think of super simple. So the question is what should I do? Should I kind of go backwards and build for people that then I can help sell a plug into? Or should I go for the more conventional or perhaps conventional startups career where I become part of a founding team and then in the future perhaps fund my own company or become a CEO of that company? Thank you for the space.

Rob Walling:
It’s a good question, Victor. I think there’s a bit about risk versus reward here, but there’s also a bit about freedom in this decision. I guess I want to comment, start by commenting on one thing you said. You said, “I feel like the alternative is going backwards because I know how to code super complex apps using JavaScript, but if I opt to become a Shopify developer, WordPress developer, then leverage that experience, I’ll be building super simple things.” That would carry absolutely zero weight in my decision personally. If I’m going to try to start a business, I don’t care about the technology. Are you building it for fun and for the challenge? Because if you are, go work on an open source project, maybe start your own, go do fun hobby projects, screw around with AI, and crypto, and Python sentiment analysis APIs, just have fun, go do it.
But if you want to make money from something then know that you’re going to have to do away with your technical preferences and there’s a decent chance you’re going to build stuff that’s going to be too simple for you. Or you acquire something and it has a (beep) code base that you don’t want to work on. I’ve done both of those things. It didn’t matter because my goal was to get to the point where I could quit my day job, and if that’s the goal, then you have to make that the number one goal in my opinion to get there in any timeframe that makes sense. And look, I know I talk a lot about the stair step approach and building Shopify apps or WordPress plugins, you don’t have to do that either. They’re all types of routes you can go. You could just try to build that standalone SaaS app. It’s going to be harder, but if you want to build something complicated, you can go try to do that.
For me, the calculus I put into it is if I’m going to be a founding engineer at a company, and this means there are founders, two or three founders, and they have the bulk of the equity and then as a founding engineer, you’re probably one of the first one, two, or three engineers, so you might get a percent, or 3%, or 5%, some number. It’s usually pretty small. Probably in a venture backed company there’ll probably be like 1%. And so I am betting that those founders are going to be able to execute and make this company a reality. And if they’re raising venture, I’m just guessing that they are, the odds are they won’t. The odds are that they won’t succeed because that’s how venture works. And so when I think about my own decisions of working as a founding engineer versus starting my own stuff, I had more confidence that I could execute on these small stair step one and two opportunities with a higher likelihood that I would have just enough success.
Maybe it was $2,000 a month to make my house payment. Maybe it was 10 grand a month to quit my job. I thought the odds of me doing that were better than this company selling for what, $100 million, $1 billion dollar, whatever that number would have to be for it to make sense for them to sell and for it to make sense for the opportunity cost that I was going to put in.
Now, I’m thinking about being a founding engineer as kind of being all in on it. That likely means you’re going to work long hours, you’re going to be really focused on it, you’re going to be driving it to succeed because you’re all in on it. You have this equity and you want that to grow,
And maybe that’s not correct. Maybe you can work 40 hours a week and then do the side project on the side and that would be perhaps the best of both worlds.
I don’t know the particular situation and of course I’m not saying don’t be the founding engineer. I don’t really like to give advice, but I like to say in your shoes, this is how I thought about this when I was at your stage. It’s an interesting question, Victor, thanks for sending it in. My next question is from Ryan who’s thinking about selling his business for five years of runway. “I’ve been looking into selling my project management company. I’ve been bootstrapping for seven years on my own. I make $180,000 a year. It’s ARR, growth is low at 15% a year and I’m struggling to market and develop on such a large project and I’m getting tired.”
I’m going to assume this is software. He’s said project management company. Oh, I’m going to assume it is a SaaS app.
“I’ve received an offer to buy the company for $500,000 in cash, which is four times STE plus $125,000 seller note or alternative revenue royalties on top of the cash, still working out the details. It’s a full share sale, no earn out, it’s not an amount of money that will change my life in any way, but it could buy me five years to work on what’s next and it’s tempting. Two questions given the current financial climate, you think it’s a reasonable deal. Second question, what revenue or growth do you see in tiny seed companies over five years? Surely with product market fit, getting back to $180K ARR within two to three years should be possible, especially if I can reinvest earnings into the company rather than paying my salary. Thanks for your advice, Ryan.”
Sorry it took me so long to get to this one, Ryan. The text questions they do fall to the bottom of the stack. I wanted to get this one in. It’s a few months old even though there are still more audio and video questions.
So my opinion is, current financial climate, do I think it’s a reasonable deal? It doesn’t sound terrible to me. It sounds about in line, so it’s kind of a five times seller discretionary earnings with 20% of that on a note. Yes, the market is what, 4 to 6-ish STE. Again, you can get 2.7 if your app is declining, and you can get 7 if it’s in a super hot space and growing rate. There’s all these numbers, but 4 to 6 I think is a typical range, five to 7 in that range. So to get 5 for this when it’s not growing superfast and you’re kind of tired of it, I can’t give you advice, but in your shoes, I would probably personally cash it out. I love the idea of having that money in the bank to be able to just focus on something else full-time that I have a ton of motivation to work on and I have effectively infinite runway.
I know five years isn’t infinite, but that’s a really long time. To your second question about revenue growth in tiny seed companies over five years, I mean we’ve been around for five years. We’ve only been funding companies for four years, but yeah, there’s a huge bell curve. You see people on the bottom that are flat and people on top that are doubling MRR for one month to the next. So it’s a huge difference. Depends on market factors, all the stuff that you would expect, but getting back to 180K of ARR, which is $15,000 a month in two to three years, I think is absolutely possible. I think especially if you use one of your unfair advantages and hopefully you have one now that you have this app under your belt. Do you have a network in the space, an audience in the space? Can you sell to the same customers? Do you see a problem already that you think has a gap and has a pretty desperate need to be solved? There’s a lot of things you’ve probably learned from growing this first company that I think will allow you to stair step your way up and potentially grow faster with the second one.
Now there’s also the danger of you always forget how hard it is in the early days, and I’ve said this, I remember I said this on Twitter and Heaton Shaw responded, “Absolutely, every time.” And he’s on what is fourth or fifth product? And you just forget that the first 12 months you think you’re going to get there faster because you know what you’re doing, and you have the money, and you have the focus and you should be able to get there faster and you don’t, right?
It’s super frustrating. Trying to find product market fit is the huge question mark because you might find it in three months and you might find it in 18 months. And that’s the biggest difference is, as you build something people want and are willing to pay for it. It’s like how quickly can you get there? And without knowing your individual skillset and the market you’re going after, it’s really hard to guess how long that will take. But if you were to come to me and say, “I’m an experienced entrepreneur, I have half a million dollars in the bank, I have years of runway, do you think I can get to $15,000 of MRR?” I would probably bet on, yes. Good question, Ryan, thanks for sending it in.
My last question for the day is from Gavin about whether it’s time to move on.
Gavin says, “I built teencybit.com, a daycare management app targeted towards home daycares. I was inspired by my mom who runs one of these small in-home daycares, but she won’t use it. She’s helped me test some things but doesn’t seem interested in using it. This sucks. I’ve emailed some local daycares with little response. My question is, when do I learn that this isn’t going anywhere? Did I try something in a space where I really just didn’t have enough connections? Is there a cheap way to market this and further this test? I feel ready to give up and try something else, but I also don’t want to give up on something that could actually make some money. What should I try before giving up?”
So specifically with this case, I know that daycares are notoriously cheap, especially home daycares because they think consumers, and I remember our sons were at an in-home daycare. It was actually good friends of ours, and at one point I asked the owner about the software she used for billing and she said, “Yeah, they charged like $5 a month flat,” or $10 a month. It was incredibly cheap. And I was like, “Really? They don’t take a percent of the payment?” She said, “No, if they did that, I wouldn’t use them.” And I was like, “Wow, what if they went to $20 or $30 a month?” She said, “Yeah, that’s too expensive.” And I remember being like, oh, that’s a mentality. It’s this really frugal. I have my house and I have this little home business but not a good market.
That’s what I took away from that, and I’m making a very broad generalization based on that one interaction, but sounds like maybe you found that a bit as well. I think the biggest thing I would think about of what do I try before giving up? Well certainly try to ask my mom why she doesn’t want to use this? Is it too complicated? Is it just easier to do on paper? Is it easier to do the way you’re used to in Excel spreadsheets or whatever it is, and maybe that’s just your mom, but then if you can’t get other people to talk to you to also tell you why they will or won’t use it, then you’ve kind of hit roadblocks, right?
The question you ask is there a cheap way to market this and further test this? I don’t know. Is there search engine engine traffic for this? Have you gone to a keyword tool? Have you looked on Facebook groups? And Cora’s not a great place for this, but where do home daycare folks hang out and do they have this need? It’s like I would go back to pretending I didn’t have a product and I would try to run it through the 5:00 PM framework. You’ve heard it here on the podcast, you can Google it’s 20, 30 episodes ago, but I would reevaluate this idea, now that you have the software, you kind of have invested a bunch of time, but it’s a sunk cost, right?
You’re not going to get that back by pushing on this further. And I would be trying to look at this through the lens of where is the traffic? Again, it sounds like you wrote code based on one person having that need, and this tends to be that scratch your own itch fallacy of well, I have the need and so everyone else does too. And let me tell you, the hundreds of products that I’ve seen fail because you have a need yourself or one other person has it and you don’t set up a landing page and drive traffic. You don’t get 10, 20, 30 other people to buy-in and say, “Absolutely, I would want that.” Before we launched Drip, I had 11 yeses who’d said they’d pay $100 dollars a month. Before Jason Cohen launched a WP Engine. He had 40 people who said they would pay, I think it was a $100 a month as well for WordPress hosting.
That’s not the only way to validate, but it is a way to get around this, certainly putting up a landing page and trying to send paper, click Facebook, Instagram traffic, Google AdWords traffic, to it and gathering emails, probably not going to work. And those are the two ways I think about validation. You have your landing page smoke test, and then you have your individual conversations. And so again, I would go back to that step one phase one before I even had a product and figure out, is this thing viable? Stop working on the product, it doesn’t matter at this point. The big question is, can I find people to talk to? If no one will talk to you, this is such a good lesson. I’ve said this on the podcast before, but I think it deserves to be stated again, it’s that if you try to validate a product before you build it and you cold call, cold email, cold dm, run ads, whatever it is you do, and no one will talk to you about this problem, how are you going to get them to talk to you once you’re selling something?
That’s when it becomes even harder and developers think, “Oh no, once I have a product, then it’ll be much easier because I have something to show them.” No, all you’re trying to find out, is this pain real? How have they tried to solve it? Are they willing to pay to have this solved? And you can read books like the Mom Test or Michelle Hansen’s, Deploy Empathy to find out questions you should be asking, but if no one will get back to you, either it isn’t a pain point or you’re not doing a very good job of outreach. When I outreached, I would say, “,I’m a developer founder, I’m a local entrepreneur. I don’t have anything to sell you, but this is a problem I’m trying to solve. I’m wondering if it’s a problem for your business. Even if you respond with five words of yes it is, no it isn’t, that would be amazing.”
It’s like email them again. I mean that that’s kind of the things I would do before I gave up on an idea like this. With that said, personally, I would’ve a tough time going into the home daycare market because it’s basically a B2C app, but you have to build it like a B2B app and it’s not going to have the virality of B2C, right?
The reason B2C works is because people talk about it and they recommend it to one another, and usually there’s a viral loop built in and it’s mass market, so anyone can use it. But you’re building an app that has B2C price sensitivity, but in B2B form, and that’s kind of the worst of both worlds. So thanks for the email, Gavin, hope that was helpful.
And that’s a wrap for today. Hope you enjoyed those listener questions as much as I did. If you have a question you want to hear me, or me and a guest answer on this show, head to startupsfortherestofus.com. On your mobile, you can do this. You just click a button, you can record audio, you can record video, or you can send a text question. You can also email questions at startupsfortherestofus.com, and we are getting a nice influx of questions, so these episodes will keep coming out and I look forward to hearing from y’all. This is Rob Walling signing off from episode 662.