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How to start a startup with minimal losses: 23 rules

For 5 years of bootstrapping, I tried a lot of things and found that there are many ways to create complexities that take time and energy. As a result, you are forced to deal with them instead of doing business and building up the value of your product.

The ability to not create difficulties for yourself is very important for a startup. In the early stages of bootstrapping, nothing happens until you, the founder of the project, move. Therefore, saving your time and energy is crucial.

If you want to completely minimize the complexity of starting a software business, then follow each of the rules below.

Rule # 1: Organize a Stable Income


If your product can work on a subscription model, for example, like SaaS, use this: even if you need to finish it a bit to apply this business model.

But in this case, your income can be predicted. In a nutshell, then your monthly revenue will be equal to the previous monthly revenue minus departed users, and taking into account new arrivals this month.

Starting a business with revenue, which mainly grows and very rarely drops significantly, reduces your stress level by a hundred times compared to a situation where the revenue changes according to the principle of "either thick or empty."



Rule # 2: Follow your monthly plan clearly.


Many experienced SaaS figures will advise you to offer annual discounts to users instead of monthly subscriptions. Despite the fact that in the moment it can work and get more money out of customers' pockets, this option has its drawbacks:

  1. The total amount you earn will ultimately be lower due to the large discount.
  2. You violate Rule # 1, making your revenue unstable.

Rid yourself of an unnecessary headache and follow a monthly plan.

Rule # 3: Do Not Bother With Invoices


Make your customers pay on a pay-as-you-go basis. As a payment method, offer a small list of cards that your processing system supports. Do not bother with invoices: you can spend a lot of time in vain, sorting out bills and resolving cash flows.

Rule # 4: Outsource Billing


At CrankWheel, we use the Braintree payment gateway and the Chargify subscription management platform. This is a good option, but if today I started all over again, I would choose Paddle or a similar "reseller" of software. He will take care of everything related to billing and sales / VAT taxes. Each month, the service transfers the earned revenue to you. Yes, they charge a higher percentage than when using a payment gateway (for example, Stripe or Braintree) directly, but this is the option of outsourcing that will greatly simplify your life:

  • a lump sum per month greatly simplifies your bookkeeping;
  • You do not support customer billing
  • You do not need to bathe with chargebacks, they do it for you;
  • they process subscription plans, coupons, offers, reminders and more.

Rid yourself of the hassle of billing — throw a couple percent on top of your costs and end it.

Rule # 5: Down with freemium!


Using the freemium model means that your sales will be delayed. After all, usually the appetites of users grow gradually, and it will take a long time before they want to talk with you about the expansion of functionality. This makes the cycle of accumulating feedback and making changes to improve the conversion at different stages of the funnel very long, you will have to wait a long time for the result of these changes, and this will complicate the optimization. And what's more, you'll have to use more sophisticated conversion tracking systems.



You will also have a lot of the cost of free user support for the freemium version of your product. I love all our users equally, and we like to provide them with high-quality service. However, the burden of supporting this category of clients can increase the level of stress in the team, especially when it does not grow, and the work becomes more.

Rid yourself of an unnecessary headache and stick to the standard, free version with a fairly short trial period, and then demand payment under the threat of blocking your account or product. You will have fewer potential buyers, but they are more likely to become them (a stronger intention to buy), which means that (a) you can spend more precious time of the founder (or seller) to communicate with the user during the trial period, and (b) you can invest more in paid advertising to attract new customers.

Rule # 6: Do not try to do today what you need to do tomorrow


I myself fell into this trap at previous startups, making not the easiest choice for the short and medium term. Instead, I was counting on a distant bright future, where the good enough and most reasonable decisions that need to be made today do not seem cool enough.

A typical example is the premature complexity of a project’s architecture with a focus on high scalability. The fact is that at the initial stage you (or your technical team) just need to choose the simplest architecture that can work for your first few tens of thousands of users. Typically, this will be a relational DBMS, such as PostgreSQL on Amazon RDS, several EC2 instances or containers, and some routing.

At the initial stage, there is no need to create a deployment system or ingenious architecture that will scale to support tens of millions of users and / or groups of dozens of developers. This will slow your progress and reduce the likelihood that you will break even before your business begins to grow.

Save yourself the hassle. Be simpler and make the most sensible decisions to achieve your short-term goals as quickly and efficiently as possible, perhaps with a little eye on your medium-term goals. Ignore your long-term goals if it saves you time now: you can always make the necessary changes later. You will have more resources to do this exactly when such a need actually arises.

Rule # 7: Choose Simple, Boring Technology


By definition, the goal of bootstrapping is to create a viable business. You may also have a secondary goal: to learn something in the process. This is all well and good, but don't focus on learning new technologies along the way unless there is another way to realize your idea. Of course, this adds significant technical risk, which I would like to avoid.



So use databases and programming languages ​​that you (or your technical team) know well. Use the frameworks you have already used. Focus on what business risks and competitive advantages your new project has.

Rule # 8: Choose a stable, multi-vendor platform


If your project is tied to one vendor, for example, Apple App Store, Google Play, Chrome Web Store, e-commerce platform Shopify and Magento, or CMS such as WordPress, most likely you will have problems with this over time.

Of course, this has its advantages, for example, the integrated marketplace. But once every few months you will suffer due to some changes or innovations that are implemented by the platform developers. Sometimes this is not solved by periodically updating your project, because the vendor can make such serious changes to his platform that they will turn into a crisis for your entire business.

You can avoid this problem by relying on long-term stable multi-vendor platforms such as web or Linux.

Rule # 9: Do Not Open Your Own Office


Maintaining and maintaining your own office is not easy. Your printer breaks down, coffee runs out, a pipe leaks, the cleaners quit, you need to look for someone who will water the plants in your absence, and so on and so forth. Most of these tasks by themselves take a little time, but if all this time is summarized ...

Instead, you can find a turnkey office or coworking, where they solve all problems for you.

Rule # 10: Use a Contact Center


Answering calls between attempts to program, being distracted by parsing calls or optimizing advertisements will greatly reduce your productivity. Therefore, it is much better if 80% of your calls are converted to e-mails or support tickets, analysis of 19% of accumulated and carefully selected calls will be tailored to your schedule, and 1% of truly emergency situations will be guaranteed to be redirected to the support team.

Such a service is unlikely to be cheap, but the game is worth the candle. We use AnswerConnect . You are required to clearly state in which cases the service should transfer the call to you, receive a message or create a ticket for the support service.

Rule # 11: Choose a Large, Stable Bank


I once chose a small and flexible bank in the hope of getting better and faster service. Instead, they accepted strategic changes and refused to serve business customers. A change of bank is still a pleasure.

Choose one of the large, boring banks, which in 5 years will offer the same range of services that you need.

Rule # 12: Choose a Simple Corporate Structure


Do you like paper work, phoning with lawyers and accountants, studying the intricacies of managing a company in different jurisdictions? No? Then choose the simplest corporate structure that you can and let it grow, gradually becoming more complex as necessary. And while the project is small, you manage one corporate enterprise in one jurisdiction, with one bank account and so on.

There was a time when I was thinking about moving a legal entity or opening a branch in the USA. I know that I saved myself a lot of trouble without doing this. And still I can’t say what could have changed for the better, if I had done it.

Rule # 13: Find an Accountant Who Will Be Your Partner for Years
Believe me: changing accountants is a painful process. Do your best to avoid this. Finding a company that you can rely on over the next 5+ years is much more important than the fact that its services are 20% more expensive than any other company.

Rule # 14: Do not contact investors


Investors will want to get a seat on the board of directors, and very often apply for some special rights or privileges in your company. And once they are on the board of directors, you cannot ignore them: these are the rules of the game. They will put a lot of pressure on you to grow faster, very often they impose such a fast pace that it may be incompatible with your well-being, mental health, the balance between work and personal life and maintaining interest in work.

This is especially important if you take money from a venture capital fund (VC): they usually give 5 years to prepare your project for an IPO or M&A. They are not interested (and cannot be interested) in a company that pays dividends, or in creating a private business in the long term.



Attraction of investors and dependence on the next round of financing is also one of the most important distractions. You will just have no time to engage in building up the real value of your business in its direct profile. Ask any founder who has been fundraising, and he will tell you that for several months you are completely engaged exclusively in preparing for the round of financing.

You can avoid this trouble by financing the development of the project yourself or at the expense of customers. Here, too, not everything goes smoothly, but at least you get an incentive and the opportunity to evaluate and satisfy the initial demand of customers for your product or service.

Rule # 15: Don’t Take Grants


A typical government grant for research and development often assumes that you will write a roadmap for the development of your project for 2+ years, and then you will more or less stick to this direction, otherwise you won’t get all the money. This will affect your decision-making process, especially with the advent of requirements that may not correspond to the level and pace of development of your business. Instead, find contact with your customers, making them an exclusive source of income.
However, there is an exception: grants that are provided without any conditions (with the exception of some reporting requirements), for example, tax refund on research and development. They are essentially free money, if you can take the time to prepare the required statements, you should go for it.

Rule # 16: Do Not Make Partnership Agreements


Any partnership is time-consuming and often requires significant investments on your part, whether it is an intermediary, a partner in sales channels, a market place, joint promotion, or something else. Often your partner invests much less (in money or time). In this case, you certainly do not need such a partner.

Another problem with partnerships is that they most often take you one step away from customers. This means that you will learn more slowly about what your customers want and what they need right now. Therefore, to provide prompt and high-quality customer support and build your brand will be one step more difficult.

Rule # 17: No Patents


For small companies, patents are unlikely to be of great value if you do not hope that one day one of the large technology companies will swallow you. Filing a patent application is associated with your direct participation in the process, with a lot of time. And of course, it costs a lot of money. There is not only an initial installment at the time of filing the application, but also a couple of installments of several thousand dollars needed to promote a patent. And even then there is no guarantee that you will be extradited.

Well, let's say you got a patent, and some big corporation begins to violate it. They will have 1000 times more legal capacity to defend their “right” than you, so it makes no sense to you even sue them. And vice versa, let's say a certain small company violates your patent. Then you may have a chance to defend yourself, but you also risk losing and throwing away money spent on legal costs.

The only situation in which a patent may make sense (in addition to the above option to sell your company at a higher price) is when a certain company tries to sue you because of a violation of their patent. You can try to keep a well-documented source with information about the registration of your patent (with dates approved by any third party), but since most jurisdictions currently have a source policy, this may not help much. You must relate this opportunity to the potential threat of such a claim.

I’ll add the phrase “I'm not a lawyer” in case I’m wrong: so you don’t blame me later when you get into trouble, following my advice.

You can save a lot of effort by not applying for patents at all. Think about it.

Rule # 18: No Takeover Negotiations


As your business successfully grows, many may begin to wonder if it is for sale. If you want to continue this development yourself, do not enter into dialogue: such dialogs distract and sometimes even sow doubt. Just tersely say that you do not plan to sell the business.

Rule # 19: Do not use all marketing channels at once.


If you use too many different channels with a small command, you will do poorly. Choose a couple of channels at a time and get great results or skip to the next channel if the previous one does not work for your product.

Organize information about the channels that work as soon as possible. This will allow you to quickly increase sales through these channels. In addition, this will allow you to reduce the time required to launch the channel.

For example, content marketing is a channel that works in your case. You can create standard operating procedures and increase the frequency of blog posts from once every two weeks to once a week.

Rule # 20: You need to invest in marketing, and not just spend money on it


If you can find a marketing channel that over time brings positive feedback about the quality of your products and allows you to recoup your investment, make this channel the main one.

Examples of such channels can be lists of application stores, software catalogs, and similar trading floors. You can invest in them by requesting user reviews. Remember to create a great product so that your reviews are good.

Another example is content marketing, where you can invest in SEO to drive free traffic to your website. Another example is affiliate marketing, where you can invest in finding and training your partners.

Over time, these types of marketing investments will lead to business growth.

Rule # 21: Do not make large-scale launches and presentations


Organization of the product launch event at a major conference or at the Product Hunt venue, as well as similar all-or-nothing promotions distract you from directly working on your project. Moreover, you may not be able to protect your business model and find the ideal target audience. The fact is that the audience at such events most often differs from the audience that you can really interest using your proven marketing channels.

Such a launch is also the best example of when you just spend money on marketing, instead of investing in it. You can say that this is an investment because it allows you to build a base of beta testers or potential buyers. In truth, this is more like an “investment” in a car, which depreciates pretty quickly. After a couple of years, you can only have 10% of those users who were originally in your beta tester database. A waste of money and time, I think.

Don’t bother: instead, just invest in your proven, scalable, integrated marketing strategies.

Rule # 22: Do not host exhibitions and conferences


Exhibitions and conferences are very expensive, and they distract the attention of an already busy team. A few weeks before the event, one of the team begins to spend part of his time on booking furniture, creating marketing materials, working on social networks and so on. The week before the event, you are discussing how to draw attention to the event. Next week, you do nothing, except to constantly wander around somewhere, listen and communicate with speakers and sit in the mail client. And then, for at least a week, and often many weeks, you still live at a crazy pace, processing leads and new contacts received through the event. But if this event was not a niche, then most of the attracted audience will be useless for you.

Rid yourself of the hassle and excess spending, and use marketing channels in which you can invest.

Rule # 23: Don't Get Distracted by Uninvited Guests


As soon as your startup is presented on the network, you will begin to receive many letters and phone calls. Only the lazy will not try to offer you their services and products.
Ignore all such offers. As the founder of the startup and the leader of the team, you must independently manage its time and priorities. You must understand at any time which tasks are most important. Do not be distracted by uninvited guests. In the best case scenario, you can put these proposals into the middle of the box. Perhaps someday you will return to them.

Recognition and Caution


I broke almost all of these rules!

Not only that, I continue to violate many of them on a regular basis when I decide that it makes sense for my business. We have fantastic partners, we hold many conferences, accept annual payments and issue invoices, we are a free product that is highly dependent on one vendor (Chrome Web Store), and we work with a lot more marketing channels than could have been . In the past, we took grants, made large-scale launches, and much more.



These rules are not the ultimate truthrather, it is food for thought. I want you to think about compromises: how and why additional difficulties may arise, which can distract you from your main activity if you decide to “break” one of the “rules”.

For example, if you decide that exhibitions are suitable for your business, you must understand what price you will pay for it. It's not just about money, but also about time. Perhaps this is the best way for your product to find the perfect target audience.
Or for example, you may decide that your business can only be successful if you take money from VC. You should be aware of trade-offs when working with institutional investors, but, of course, there are certain types of businesses that are more likely to be successful with investments than without them.

I could go on and on, but I will give you the last example: if you think that someday you want to sell your company, the best time is when you are keenly interested in your company. So you can break this rule too. Your rating will be higher when there is a steady interest from several potential buyers. If there is no such interest or it has already passed, it will be much more difficult for you.

PS So go and break the rules - but first think, and then do it.

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