Founder’s Journey: Building a Startup from the Ground Up

By Josh Pigford, Founder of Baremetrics

About this podcast   English    United States

A weekly podcast by Josh Pigford, founder of Baremetrics, on his journey growing a startup.
April 4, 2018
A couple of years ago, we were in a hard spot. I had just realized we were mere weeks away from running out of cash and had asked the whole team to take a pay cut while we figured out how to get profitable. But in addition to cutting costs, we needed to figure out how to speed up growth. One of the things we did to speed up growth was figure out who our “perfect customer” was. We’d spent the first two years making some big assumptions about who our ideal customer was and who we should target, but had no imperial data to back that up. https://baremetrics.com/blog/perfect-customer
March 14, 2018
When you’re just getting started, everything feels like a big deal. Everything. The tinniest things can turn in to huge showstoppers that drain time and, in many cases, money. But the longer you’re in the game, the more you realize how few things actually matter.
Jan. 24, 2018
Where to publish something has becoming a difficult decision for a lot of businesses. You read so many stories about using various channels to distribute content and grow traffic, it's hard to know what does and doesn't work. Medium, in particular, has become a major player in the world of startup content, but is it really that great? https://baremetrics.com/blog/medium-back-to-blog
Jan. 10, 2018
When building a startup, so much emphasis is put on “the product” or even “the customers”. Everything else takes a backseat. On some level, and at some points in a company’s lifecycle, this makes sense. Of course you’ll make sacrifices and you’ll have to work really hard and work really weird hours. But eventually, you’ll have to stop. The downsides far outweigh the benefits and the damage done to you and your team can be detrimental. That’s what I’m writing about to day. Managing the long term health of you and your team. https://baremetrics.com/blog/startup-health-well-being
Aug. 16, 2017
Last week I hit some sort of boiling point with life and work. July was an incredibly stressful month for me both, personally and with work. Just lots of extremes, and it wore me down. Every single founder is struggling with something. Maybe it's big, maybe it's not. But there's always something. Even the most successful founders deal with this stuff and don't know what to do. Everybody’s winging it. https://baremetrics.com/blog/winging-it
June 21, 2017
There can be some really exciting days when you’re building a SaaS company, but the large majority are a slog. Just one foot in front of the other, slowly trudging your way up the hill in the muck. The hockey-stick growth you’ve envisioned feels laughably far away. Amazingly, you are growing every month, but it’s just…so…tedious. This, my friends, is the long, slow SaaS ramp of death. It’s perfectly normal and par for the course for the large majority of SaaS companies. Check it out! https://baremetrics.com/blog/long-slow-saas-ramp-of-death
June 14, 2017
Founding a company is hard. You’ve got an infinite number of decisions to make while simultaneously trying to catch lightning in a bottle with creating something out of nothing. It’s even harder when you’re doing it alone. Being a solo founder, in many ways, stacks the deck against you. You’re left shouldering the weight of every single decision and don’t really have any one to share it with. However, there are some ways to make it easier and, in many cases, it can actually be a major pro to start a company solo. Let’s take a look at some of the benefits as well as drawbacks so you can figure out if being a solo founder is right for you. Then we’ll tackle some ways to make being a solo founder a pretty great thing. Check it out! https://baremetrics.com/blog/startup-solo-founder
May 17, 2017
https://baremetrics.com/blog/most-startups-are-not-crushing-it Ask any startup founder how things are going and they’ll tell you it’s “going great”. They’ll talk about some new feature they’re rolling out, or a new round of funding. Or maybe they’ll mention how much user growth they’ve had or that they just got covered in TechCrunch. All signs will point to “crushing it”. But, for better or worse, there’s a very high probability that they are, in fact, not crushing it. The exact opposite, actually. We’ve conditioned ourselves to fake it until we make it, but most companies never make it…so we’re perpetually faking it and never actually being honest about our struggles. That prevents us from getting the actionable help and feedback we need and just perpetuates the false narrative that you’re some sort of failure if everything isn’t roses all the time. “That’s great, Josh, but certainly things aren’t that dire, right?” Wrong, little Jonny. Let’s look at the numbers. The data If dig in to our live SaaS Benchmarks you’ll find a few of interesting data points about small to medium sized SaaS companies. Average User Churn is 7.7% per month Average Quick Ratio of 1.4 Average Monthly Recurring Revenue is $19,000 Then one additional, crucial data point not listed on the Benchmarks page: the average SMB SaaS startup has 12 employees. Now, let’s translate that. Average User Churn Average User Churn of 7.7%. You may think that’s not terrible, and you’d be right. The companies that have 25%+ user churn are in a much worse spot. But what does 7.7% user churn functionally mean? It means that every single year most businesses are losing all of their customers! Every 12 months, they’ll not only need to replace the lost customers but add new ones as well. There aren’t an infinite number of customers and at that churn rate, you’ll quickly plateau. Outgrowing your churn will becoming impossible. Average Quick Ratio We’re going to have a quick lesson in growth efficiency, because it really puts things in perspective. To measure growth efficiency, we use a metric called Quick Ratio. How reliable can a company grow revenue given its current churn rate? That’s the question the Quick Ratio metric answers. To calculate your Quick Ratio you simply divide new MRR by lost MRR. The higher the ratio, the healthier the growth is at the company. To put it in a formula: Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR) Say a company has $10,000 in MRR growth. That growth could be made up of any combination of MRR types (New, Expansion, Contraction, Churn) and the Quick Ratio shows you the difference in “growth efficiency” between them. Let’s look at a few scenarios of how that company got its $10,000 in MRR growth and what the Quick Ratio would be. Scenario A $12,000 (New + Expansion) / $2,000 (Contraction + Churn) = Quick Ratio of 6 Scenario B $15,000 (New + Expansion) / $5,000 (Contraction + Churn) = Quick Ratio of 3 Scenario C $20,000 (New + Expansion) / $10,000 (Contraction + Churn) = Quick Ratio of 2 Scenario D $50,000 (New + Expansion) / $40,000 (Contraction + Churn) = Quick Ratio of 1.25 All four scenarios result in $10,000 of Net New MRR, but Scenario A is vastly more efficient at growth as the company is adding the same amount of Net New MRR with much less effort. So, now, when you see that the average Quick Rate of most SaaS companies is 1.4, you realize how untenable that is. There simply aren’t enough customers in the world for any company to survive when your growth efficiency is in the pits. Average Monthly Recurring Revenue + Average Team Size In the companies we benchmarked, the average monthly recurring revenue was $19,000. I want to be very careful here and not imply that “$19,000 a month” isn’t impressive or something to be proud of. It’s a heck a lot more than a lot of startups ever make and for you, individually, it may be exactly what you want or need out of your business. But there’s another metric that when paired with this number is just frightening: the average team size is 12. Let that sink in for a moment. The average startup is making $19,000 per month…with 12 people on their team. Sweet beard of Zeus. Still crushing it? Still think all those startups are crushing it? This is the reason founders and teams get burned out. This is why CEO’s become Chief Fundraising Officers. This is why so many companies get “acquihired” for the people instead of the business (because there wasn’t much of a business there at all). This is why the fairytale “everybody’s crushing it” mentality is insane. It normalizes terrible economics. Now look, if revenue isn’t your goal (or you’re delaying revenue in the name of growing another metric for a while), that’s cool. Everyone has different motivations and outcomes they’re pursuing. There are certainly multiple ways to get what you’re after. But can we just be honest for a change? Can we stop pretending everything is amazing when the economics clearly show they aren’t? What’s the benefit of that to anyone? Next time someone asks you how your startup is doing, try not sugarcoating it. Maybe say, “You know, we’re having a tough time with user acquisition” or “churn has been a beast to tackle”. Then, instead of the incessant high-fiving and pats on the back, you’ll get legitimately useful feedback. You’ll likely find others are struggling with the exact same things and they may even have some business-altering advice for you. Remember, we’re all winging it.
April 12, 2017
https://blog.baremetrics.com/startups-keep-it-classy-5bba13285cc6 Building a business makes relatively sane humans do some insane things. The past 10 years have been the modern day gold rush for tech. And I mean that in the sense where lots of people risk everything and make nothing while a few hit it big. And that “gold rush” culture makes people do some desperate things in the name of business survival. Every day founders have an infinite number of tiny decisions to make and it’s easy to get decisions fatigue. In a moment of weakness you may do something dumb that hurts you, your team, your company, your brand or any one of a thousand other things. So here’s an easy rule of thumb to help you when making decisions: keep it classy. Seriously. It’s that easy. Just ask yourself, “Am I being classy?” If the answer is anything other than “yes” you’re likely taking the route that may have short term gains but long term negative consequences. You don’t want to be a low class business. You never want to leave a bad taste in someone’s mouth. You’ll almost always regret your decision later on if you go the low-class route. Copying others’ product designs, badmouthing competitors, taking advantage of customers, overworking your team…there are just so many problems that aren’t solved but actually completely avoidable by keeping it classy. There are so many things working against the success of your business. So many variables out of your control. Don’t make it harder on yourself by choosing the low-class option. Successful businesses, the ones that survive the ups and downs, are built on having class. Sure, the occasional bad apple slips through and for whatever terrible reason the universe lets them succeed, but nobody actually wants to be the sleazy used car salesman. Deep down we all want to be respected by friends, family, peers, coworkers and customers. That doesn’t come from taking the low-class route. Make decisions you’re proud of. Decisions that, although maybe not the easiest route, don’t leave you feeling icky at the end of the day. Keep it classy.
March 23, 2017
https://blog.baremetrics.com/the-startup-echo-chamber-is-making-you-deaf-771eec220181 Being an entrepreneur is a lonely place, especially if you’re the founder/CEO. Sure, you may have co-founders, but the reality is, there’s a lot of weight on your shoulders, a lot of pressure (self-applied or otherwise) to not drop the ball. To combat this, we’re basically permanently in “problem solver” mode. Everything needs a solution. Which is a natural fit because most entrepreneurs are self-taught and love to learn! “The widget sales page isn’t converting? Well how about imma throw myself in to a hole and RISE FROM THE ASHES LIKE A WIDGET SALES PAGE CONVERSION PHOENIX!” Yes, it’s naive, but it’s also how we were able to make something out of nothing. We just figured it out. We’re really great at just figuring it out. But here’s the thing: solutions aren’t binary. There aren’t “right” or “wrong” ways of doing things. There are just “ways”. Yet, we treat business problems as if they’re all just a series of variables that we just need to find the right combination of and BOOM! #winning Startups are like kids I’ve got three amazing kids. The other night I was chatting with my oldest (she’s 14) and she asked, “Dad, what’s the hardest part of being a parent?” My answer? “That you’re not a robot.” I said it jokingly, but explained to her that so many times as a parent you ask your kids to do something and so many times they just don’t do it. They don’t do it how you asked them to do it or when you asked them to do it. And I explained that even after years upon years of making the best decisions we can as parents, there’s still not a guaranteed outcome. It’s all kind of a crapshoot. Running a business is very much like having kids. You so desperately want to control all the variables. You run in the startup rat race because everyone else is too, so that seems to help solve for many of the variables. You read every startup article you can and your “to read” list has a backlog of 1,000 articles that are sure to change your business. You follow, favorite and retweet popular founders and marketers and feel like you’ve done real work. Then after you’ve done that, you go get drinks at meetups for entrepreneurs. Then after you’ve had your free drinks courtesy of Blorg.io you head home and read Lean Startup for the 9th time and go upvote some stuff about AI and machine learning on Hacker News because #thefuture. You fall asleep after your iPhone hits you in the face lying in bed and then you do it all again tomorrow. The echo chamber You, my friend, are living in an echo chamber and you don’t realize yet, but you’re deaf. In your effort to become an amazing problem solver, you’ve become the worst. You can’t see the forest for the trees, because you’ve completely limited the scope of your thinking to random things you read on the internet from other people just like you who are reading random things on the internet! It’s a big nasty cycle of everyone regurgitating the same rehashed tips and tricks in the name of “content marketing” and #growthhacking and it just doesn’t make you any smarter or better at your job. Every business is different because every problem is different. The way Joe solves problems for his customers are not the same solutions that Sally needs for her customers. Yet founders spend inordinate amounts time surrounding themselves with people just like them doing the same things over and over and expecting different outcomes. How to get out of the echo chamber Getting out of the echo chamber doesn’t make you a bad founder. It makes you an exponentially better one. You know how all of your good ideas come to you in the shower? What if I told you that you could be in the proverbial shower all the time? Getting out of the echo chamber lets you do that. Solving problems isn’t linear. Your brain doesn’t just run along the same path, connect all the dots in perfect order and magically arriving at an amazing solution. You need input from lots of sources. In many cases, you actually need no input at all. Your brain needs a break. It’s why when you’ve been staring at a coding problem for four hours and then go grab lunch and come back you’re able to solve it in four minutes. So, how do you get out of the echo chamber? There are two easy ways. Get a hobby Seriously. Something just absurdly analog. Take up gardening or woodworking. Make stuff out of concrete. Teach yourself jazz flute. Doesn’t matter. It just needs to be away from a computer or anything related to “businessing”. Get friends who aren’t entrepreneurs This is crucial. Living outside of Silicon Valley makes this really easy for me. None of my close friends are in tech. My friends are filmmakers, teachers, writers, florists and print designers. Their jobs are fascinating and we never talk about the tech world. The key here is giving your mind a break and gaining input from seemingly unrelated areas. Stop reading business/startup books. Most are 90% fluff anyways and they’re not covering anything new. Stop surrounding yourself with people and things that are just other versions of yourself. Go be interesting. Not only will it help you actually run your business better, but when you’re done with that business or have moved on to other things, what’s left is that you’ll still be an interesting person and not just the shell of someone good at adding noise to the echo chamber.

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