Rob Walling - The SaaS Playbook-Start Small, LLC

THE SAAS
PLAYBOOK
B U I L D A M U LT I M I L L I O N
D O L L A R S TA R T U P W I T H O U T
V E N T U R E C A P I TA L
R O B WA L L I N G
Written by Rob Walling
Edited by Jessie Kwak
Cover Art by Pete Garceau
saasplaybook.com
ISBN 979-8-9877465-2-3 (ebook)

Copyright © 2023 Rob Walling
First Edition
All rights reserved. No part of this book may be

reproduced in any form or by any electronic or
mechanical means, including information storage
and retrieval systems, without permission in writing
from Rob Walling, except by a reviewer who may
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Trademarked names appear in this book. Rather

than use a trademark symbol with every occurrence
of a name, we use the names solely in an editorial
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with no intention of infringement.
Praise for The SaaS Playbook
“Rob knows software, and he knows startups. I’ve been learning from him
since the early years of HubSpot. You should too.”
— DHARMESH SHAH, Cofounder/CTO, HubSpot
“By far the best book on this subject. Packed with specific instructions but
also surprisingly deep insights into the hurdles and solutions. You can tell he’s
speaking not only from his own extensive experience but from knowing hun-
dreds of other startups. A must-read for every bootstrapping entrepreneur.”
— DEREK SIVERS, Founder of CD Baby. Author of Anything You Want
“If you’re starting or running a SaaS business, this book isn’t just good; it’s
essential. Rob’s seen hundreds of SaaS businesses fail and dozens succeed,
and he’s distilled that knowledge into a beautifully readable, perfect-sized
volume of only the really good advice. Even as a seasoned founder, I kept
uncovering bits of gold, chapter after chapter. You will, too. If you want to
avoid the pitfalls that imperil every SaaS startup (and kill 95% of them),
read this cover to cover and refer back often; that’s my plan.”
— RAND FISHKIN, Cofounder, SparkToro
“I do whatever Rob recommends in SaaS! With a track record like his, it’s
a gift he’s sharing this playbook with the world. Must read for every SaaS
creator.”
— NOAH KAGAN, Chief Sumo, AppSumo.
“Rob’s one of the few minds who sits at the center of the SaaS ecosystem
with the knowledge of not only how to build SaaS products properly but also
how to scale them. His playbook is something I’ve wanted for years—glad he
finally put it down on the page so we can all learn.”
— PATRICK CAMPBELL, Cofounder, Profitwell
“Most of the advice that’s out there about growing a SaaS past the initial
phases is pretty bad. Not a lot of people have actually run a bootstrapped
SaaS business for a long time. Rob Walling is the exception. He’s been in
the trenches for over a decade and has been mentoring the indie software
community the whole time. I started reading this book, and I can’t put it
down.”
— PELDI GUILIZZONI, Founder and CEO, Balsamiq
“Rob has more years in the bootstrapped trenches than anyone, and that’s
why he’s my go-to source for how to build a lucrative bootstrapped business.
After learning from his teachings and community, I exited my bootstrapped
SaaS for 7 figures!”
— LAURA ROEDER, Founder, Paperbell
“Rob is a startup Grand Master who’s inspired me and countless others. A

chance to learn from Rob’s condensed knowledge is a drop-everything-and-
do-this-instead moment.”
— COURTLAND ALLEN, Founder, Indie Hackers
“Rob has instilled so many important lessons about building software busi-
nesses in me so deeply that I almost forget how naive and lost I was before
finding his work. Even if you wouldn't call your business SaaS, you're going to
learn something from this book that changes the trajectory of your company.”
— ADAM WATHAN, Founder, Tailwind Labs
“If you want to raise a million dollars for your next big idea, look elsewhere.
If you want to develop your idea into a multimillion-dollar software compa-
ny, this book is for you. Rob Walling is the go-to strategist for bootstrapped
entrepreneurs. As a founder, he's achieved life-changing exits, all while ad-
vising and helping countless others. His ability to share his in-the-trenches
experience with authenticity, clarity and intellectual honesty is unmatched.”
— DAN ANDREWS, Author of Before the Exit
About the Author
Rob Walling is a serial entrepreneur who has started six compa-

nies (five bootstrapped, one funded). He’s been teaching founders
how to build, launch, and grow startups for 17 years, but he hopes
that doesn’t make him sound old.
He runs the largest community for non-venture track SaaS found-

ers, MicroConf, and the first bootstrapper-friendly accelerator for
SaaS, TinySeed.
His podcast Startups for the Rest of Us has shipped every week
since 2010 and now has more than 650 episodes and 10 million
downloads.
Rob has invested in more than 125 companies and has been quot-
ed in dozens of major publications, including The Wall Street Jour-
nal, Forbes, Entrepreneur, and Inc. Magazine.
This is his fourth book about building startups. Learn more about
him at RobWalling.com.
For this book’s online resources or to purchase the print, ebook,

or audio version, visit saasplaybook.com.
Dedication
To Sherry and the boys
Thank you for your tremendous

support during the years it took me
to learn what’s in this book
Table of Contents
Foreword by Jason Cohen 13
Introduction 19
The Playbook for Building a Multimillion-Dollar SaaS 29

You Know What’s Cool? A Million Dollars 29
What Is Bootstrapping, Really? 31
Why Focus on SaaS? 34
Why Is SaaS the Best Business Model? 35
Achieving Escape Velocity 39
Market 43
Strengthening Product-Market Fit 43
How Can I Compete in a Competitive Market? 51
How Much Should I Worry about Competition? 55
How Can I Build a Moat? 57
Should I Translate My Product into Other Languages? (And 62
Other Common Mistakes)
Pricing 67
How Should I Structure My Pricing? 67
SaaS Cheat Code: Expansion Revenue 70
Should I Offer Freemium? 73
Should I Ask for a Credit Card Up Front? 75
When Should I Raise Prices? 79
How to Raise Prices 80
Marketing 87
How Do I Find More Customers? 87
Marketing Funnels 89
SaaS Cheat Code: Dual Funnels 93
Business-to-Business SaaS Marketing Approaches 95
How Do I Know Which Marketing Approaches Fit 101
My Business?
How Should I Structure Sales Demos? 109
Team 117
How Should I Structure My Team? 117
Hiring Managers 127
How Can I Hire Great People? 1 31
Should I Offer Equity, Stock Options, or Profit Sharing? 135
Do I Need a Cofounder? 139
80/20 SaaS Metrics 143

Which Metrics Should I Track? 143
3 High/3 Low Metrics Framework 145
SaaS Cheat Code: Virality 152
How Much Should I Worry about Churn? 154
SaaS Cheat Code: Net Negative Churn 161
Mindset 165
How Do I Achieve Success? 165
Where Should I Focus My Time? 168
Should I Raise Funding? 171
Am I Turning Speed Bumps into Roadblocks? 176
Where Can I Find Community? 179
How Can I Avoid Burnout? 182
What Are Founder Retreats? 186
Afterword 191
Acknowledgments 193
Appendix A: Resources 195
Foreword
by JASON COHEN, Founder, WP Engine
Is it OK to want to get rich with your own two hands, beholden

to no one, especially not to some already rich person who wants
to trade a huge chunk of the reward for a check and some advice
from the cheap seats?
Is it OK to be obsessed with your work and ideas yet not want to

“change the world” or “put a dent in the universe?” Is it OK if you
want to make a low-chance-of-success career decision mostly be-
cause you hate being told what to do and therefore cannot, in your
own words, be successful in a “real job?”
Is it OK to have the hubris of thinking your product is better than

the other hundred already in-market and that it makes sense for a
101st to exist? Is it OK to spend every waking hour (including two
in the morning) obsessing about your project rather than about
other people, turning yourself inside out even to the detriment of
health and relationships?
It doesn’t matter whether it’s OK, it’s what you’re going to do.
14 | THE SAAS PLAYBOOK
You’ve already decided to do it; that’s why you’re holding this book.
You’ve already decided you have to do it, whether it’s justified or
not, whether for a higher purpose or a simple force of personality.
Congratulations, that makes you a founder. (Or should I say, con-

dolences.) Join the party.
It is a peculiar party, its members bonded by experiences that can

be explained but not truly understood by those who have not expe-
rienced it for themselves, like becoming a parent. Experiences like
quitting your job and finding those you count as friends or family
becoming doubters waiting—maybe even hoping—for you to fail.
The elation the first time a customer gives you money for some-
thing that you created, which you can hardly believe they did con-
sidering how bad the product is.
The trepidation of the first time you hire someone, where the fam-
ily of a fellow human being is now dependent on you, and sud-
denly you realize that payroll is a permanent inexorable weight, a
new stressor and a visceral demonstration that the line between
“business” and “personal” is very wide and very fuzzy.
The gut-wrenching first time you fire someone, having worsened

the situation by waiting far too long, having no idea how to be
constructive, giving explanations that are nonsensical because
they are not the true reason, knowing you are putting their entire
family at risk, and afterward the others simply mutter “what took
you so long?”
The constant barrage of customer complaints and compliments,

of showing up randomly on Twitter and in newsletters, whether
for good or ill, of judgments from anyone and everyone about how
stupid it is that you did this or how genius it was that you did that,
which incidentally they’re wrong about half the time, although it
can be hard to tell which is which.
FOREWORD | 15
So you possess the personality defect that drives you to join this
coterie; now comes the hard work. Fortunately for you, Rob Wall-
ing has been one of the most active members of this party for
a few decades, having built several successful companies and,
through investment, has seen the ups and downs of more than
one hundred. He distilled this experience into a book of wisdom,
exactly what you need to tackle the work now in front of you.
Most of what you’ll need to do, you’ve never done before, and
you’re not good at it, although you think you are. Probably you’ll
be better than most people at doing it for the first time because
you’re highly motivated and because the work is connected to
other work that you do understand. So, you don’t know market-
ing, but you do know your customer; it’s better to write clearly and
directly to a person you deeply understand than to have a degree
in advertising.
Still, you’re not good at it, whether or not you think you are a ge-
nius at everything. This delusion of competence is helpful in over-
coming the otherwise overwhelming barriers to embarking on this
improbable project. And in some aspects, your unacknowledged
deficiencies aren’t detrimental—you don’t need to be an expert in
E&O insurance when no customers are depending on your soft-
ware, nor in accounting when there’s no revenue to account for.
But there are key areas, early in the life of a bootstrapped compa-
ny, where lack of competence is a leading cause of death. Dozens
of twittering successful bootstrappers agree, for example, that
picking the right market was the primary cause of their success;
many self-reported autopsies blame the converse. Pricing is an-
other example; in my case, the moment when hyper-growth ignit-
ed in my most successful company was exactly coincident with a
customer-inspired revamp of our pricing and packaging.
Focusing your attention and your learning on these specific areas

that are covered in this book—market, pricing, and also market-
ing/sales, team, metrics, and personal mindset—gives you the

best chance to succeed. Success is still not guaranteed, but these
are the areas where it’s most vital to make good decisions. You can
make the best possible decisions in poker and still lose; that’s the
nature of systems—like poker and startups—that are equal parts
skill and luck. In such systems, you must be diligent and inten-
tional in making the best possible decisions, recognizing that luck
is a real but uncontrollable force. And you need the wisdom that
can only come from seeing the movie play out hundreds of times
in different ways, which is exactly what Rob has done, not only
through direct experience but as a writer, thinker, interviewer,
and synthesizer. There is no better way to maximize your proba-
bility of winning.
You chose this path because you don’t like to be told what to do,
and here’s a book telling you what to do. But it’s not forcing you to
do things. It’s giving you Cheat Codes in the areas that are crucial
to get right and in which—for the good of the company—you have
to admit you are not a world expert.
And if you discover any of it wasn’t right for you, you can wave
your thriving business in Rob’s face and tell him how wrong he
was. Won’t that be fun?
So read this book. Use it to become a better version of the person

you already are, and give you and your business the best chance
at success.
JASON COHEN, Founder, WP Engine

Introduction
My phone buzzed. It was an incoming email.
I never have email notifications turned on, except for two weeks in
late June of 2016. The startup I had launched two and a half years
prior had grown into one of the top 10 companies in our space and
was in the final throes of being acquired.
Some acquisitions are scary. All of them are stressful.
This one was going to be life-changing, which made it even worse.

If it didn’t go through, I’d be back in the startup grind. Restless
sleep. Loads of stress. Financial uncertainty.
For something I had dreamed about for decades, running a

fast-growing bootstrapped startup was more of a mixed expe-
rience than I’d anticipated. There was absolutely fun to be had
(“These are the good old days,” I used to remind the team), but the
struggle was real. And it was taking a toll on me.
My mind flashed to the day we crossed $1 million in annual rev-

enue. The day we hired our eighth employee. The day we finally
moved into a real office with huge windows overlooking a busy

downtown street. In each of these moments, I felt like I’d made it.
I then flashed to my “lost” six months in 2014 when I thought of

nothing else except how I was going to make payroll. The moment
I broke down sobbing in my parked car because of the stress of the
acquisition. Or the moments I yelled at my wife or kids for things
that were far more my fault than theirs.
And yet there I sat, in a college classroom outside of Portland,

Oregon, in late June 2016. I was at my oldest son’s cello camp. He
was practicing with a group of other musicians. And I had a new
email notification on my phone.
“Please DocuSign: Drip Written Consent of Board

(asset sale, Drip Shareholder Consent . . .)”
“This is insanity,” I thought. “I can’t believe this has come together.”
To the chagrin of the cello instructor, I motioned that I needed to

step out of the room for a moment. I opened the email, signed the
final documents that would be life-changing in many ways using
my index finger on an iPhone screen, and clicked “confirm.”
It was done. The result I had dreamed of for decades and been “all
in” on for 15 years was over. I could take a deep breath and relax.
At least, that’s what I kept telling myself.
I opened my mobile banking app and logged into our company

bank account. “That’s a lot of zeros.” By far the most money I had
ever seen in one place. At that moment, life felt different.
*Bzzzzzzz*
INTRODUCTION | 21
A text message arrived from Derrick, my cofounder, with whom

I’d spent the past three and a half years building Drip. He’d sent
me a screenshot of the company bank balance.
Me: Haha, I was just going to send you the same thing ;-)
Wow.
Congratulations, sir
Derrick: *virtual handshake* Congrats indeed!
He followed up with a bitmoji of him in a green suit with dollar

bills falling around him, which was quite out of character for my
typically reserved cofounder.
I exhaled slowly. The stress wasn’t going away. I hoped it would

soon.
Why You Should Read This Book
There’s a narrative in the startup ecosystem that assumes you will

raise funding when you start a company.
I’ve attended meetups where I mentioned bootstrapping my com-

pany to millions in revenue and was asked, “Why would you do
that?” From the near-mythical origin stories of Apple, Facebook,
and Google to the wildly popular TV show Shark Tank, funding is
the assumption rather than the exception.
In the introduction of my first book, written in 2009, I said the

following:
I am not anti-venture capital. I am anti-everyone-thinking-ven-

ture-capital-is-the-only-way-to-start-a-tech-company.
The dream of being picked from a sea of wannapreneurs, anointed

as a “real” founder, and handed buckets of money is alive and well
in Silicon Valley and other startup hubs around the world. Except
there’s something wrong with seeking this narrative . . . It’s lazy.
It implies that you need someone else’s permission to build your

company. That you’re not a real entrepreneur until an investor
tells you that you are.
Or maybe you like having an excuse not to ship, and a never-end-

ing quest for funding is a pretty good excuse. There’s a reason the
most common piece of advice I give aspiring founders is:
Build your business, not your slide deck.
Instead of waiting for a basket of money to fall into your lap, go

build your business. If you were an author, I would tell you to stop
asking publishers for permission and go write your book. Andy
Weir (author of The Martian) didn’t wait for approval; he wrote
an international bestseller that’s been made into a film starring
Matt Damon.
If you were a filmmaker, I would tell you to stop asking film stu-
dios for permission and go make a film. Kevin Smith and Robert
Rodriguez did, and they’ve built careers based on their unique
voices and scrappy approaches to filmmaking.
Much like the author who waits to write their book, or the film-
maker who waits for permission from the studio, the startup
founder who waits for funding to start their company is more
likely to wind up disappointed than funded. At least, that’s the
way the numbers play out.
If you search for meetups about startups, most will assume you
are seeking funding. If you search the Internet for how to launch
a startup, the first step is usually building a slide deck to pitch
INTRODUCTION | 23
to investors. Instead, I would tell you to focus on building your

business.
The point of this book is to show you that path. If raising fund-
ing is the blue pill, I invite you to take the red one. It may not be
pleasant, but it’s a reality you control. A reality where you don’t
need permission.
After nearly two decades of working with startup founders, I know

that bootstrapping takes longer to generate life-changing wealth
than the moonshot approach of raising venture capital. But the
likelihood of some kind of a “base hit” is much, much higher. You
might think of it as a .01% chance of making $100 million versus a
20% or 30% chance of making hundreds of thousands or millions
(and maybe a higher percentage if you don’t make the common
mistakes).
More than 99% of companies that seek funding do not receive it,
and the vast majority of those that land funding ultimately fail.
This is not the case with bootstrapping, as I’ve observed first-
hand while starting six startups and running the largest commu-
nity for bootstrapped (and mostly bootstrapped) software found-
ers, MicroConf.
There are superpowers to being bootstrapped. One is that you

don’t need anyone’s permission to start or build your company.
Another is that your business doesn’t die until you quit. Boot-
strappers don’t run out of money; they run out of motivation.
It’s a shame that although more than 99% of new companies

started every year take no funding, every article you read about
starting a tech startup assumes and glorifies the raising of a huge
funding round. As if raising funding is the goal—it’s not.
Building a business that generates enormous profit and serves

its customers, founders, and employees should be the goal. As a
founder, you’re likely seeking freedom from working for others or

wealth to support your lifestyle.
Maybe you want to spend 10 hours a week working on your com-

pany and the rest of the time traveling or with your family.
Or maybe you want to earn millions of dollars so you can buy your
dream car, your dream house, or Banksy NFT.
Maybe you just want a sane work life in which you have more say
about when and how much you work.
There are many reasons to start your own company, and funding
is simply a tool you may or may not opt to use. The good news is
the easiest way to raise funding is to build a great business first.
I wish the tech press spent more time selling us on this dream and
less time telling us how a company that will be out of business in
18 months just closed its Series A (at a ridiculous valuation, no
less; otherwise it wouldn’t be on the front page of TechCrunch).
Aspiring founders read this and figure that if they play the startup
lottery, one day they, too, can be anointed as worthy.
My intent is not to dissuade you from raising funding (I run a fund

that invests in startups, for crying out loud). My hope is to expose
you to the massive, unseen part of the startup ecosystem that
exists beyond the tech press. The part that houses the more than
99% of startups that don’t ask for permission to start.
Instead, they show up, they work hard, they focus, and they ship
products every day. They made the decision to build their busi-
ness instead of their slide deck. This is what I did on my 13-year
journey bootstrapping software products and software as a ser-
vice (SaaS) companies. Tens of thousands of others are doing the
same today.
INTRODUCTION | 25
Many will become successful, and some will become wildly prof-
itable. They won't get there by waiting around or asking permis-
sion. They show up every day, and they do the work.
Who Should Read This Book
If you want to build an ambitious software startup with or with-

out raising capital, you should read this book.
More specifically, I will focus on SaaS. Think of SaaS companies

as real products used by real customers who pay them real money
(usually monthly or annually). You’re likely aware of many SaaS
companies: MailChimp, Basecamp, Dropbox, Slack, and Zoom,
to name a few.
If you’re looking to grow a side project that could one day replace
your full-time income (and then some), you should read this book.
If you’re a software developer, a no-code aficionado, or you’ve

never written code in your life, but you’re looking to learn the
most actionable tactics and frameworks to build and launch a
SaaS, you should read this book.
If you’re looking to learn how to build a product people want and

are willing to pay for or how to reach customers at enough scale
to grow your company into a seven- or eight-figure business, you
should read this book.
Who Shouldn’t Read This Book
If you are dead set on raising venture capital and building a high-
risk billion-dollar company, this book is not for you. I won’t be
showing you how to hone your pitch deck, cozy up to venture
capitalists, or evaluate a term sheet.
If you’re looking for excuses for not making progress on your

startup, this book is not for you. I won’t be telling you that you
deserve to be successful or that it’s going to be easy. I’ve been
doing this too long to present it any other way.
If you’re looking to build a business on your own that pays your

bills but doesn’t grow beyond that, this book will have mixed val-
ue for you. There’s a significant difference between launching a
product that generates $20,000 per month and one that makes
$200,000 per month, starting with foundational elements like the
idea and the market.
If you want to build a business that allows you to stay small and
live the four-hour workweek, I suggest checking out my first book,
Start Small, Stay Small: A Developer’s Guide to Launching a Startup
(even if you’re not a developer).
That book focuses on starting small software companies for life-

style purposes like quitting your day job or minimizing the hours
you need to work. You might think of the book you’re currently
reading as a sort of spiritual sequel to Start Small, Stay Small.
If you’re looking for the promise of riches followed by generic

advice like “build an audience and ask them what they want,”
“scratch your own itch,” and “follow your passion,” this book is
not for you. It’s not a regurgitation of the feel-good entrepreneur-
ial tropes on social media.
The Playbook for Building
a Multimillion-Dollar SaaS
You Know What’s Cool? A Million Dollars.
I struggled with the title of this book. I’m not a fan of hard-sell-
ing, over-promising Internet marketers who use phrases like
“seven-figure” or “million-dollar” because they have a nice ring
to them.
And yet, this book focuses specifically on guiding you toward

launching and growing a SaaS product to seven or eight figures
in revenue. So “Build a Multimillion-Dollar Startup” is the actual
focus, not just marketing copy.
My first book, Start Small, Stay Small, focused on tiny niche prod-
ucts that generate thousands or low tens of thousands in revenue
each month.
That’s not the focus of this book.
This one is another step or two along the journey (in my Stair Step
Method of Entrepreneurship, this book is focused on step 3).
The Stair Step Method of

Entrepreneurship
STEP 3 Standalone SaaS product
Repeat step 1 until you

STEP 2 own your time
(e.g, three Shopify apps or WP plugins)
One predictable, organic

STEP 1 marketing channel
(e.g, Google, Shopify app store, WP.org)
Step 1: Your First Product

You’ve got a simple product with a simple marketing plan,
usually with a single traffic channel, like a WordPress plugin
or Shopify add-on. Basically, something that allows you to
start generating revenue and learn the ropes.
Step 2: Rinse and Repeat

Step 2 involves doubling down on the model that worked in
Step 1 and repeating it until you own your time. Take a look at
what made that product a success and repeat it with another
product. Continue getting good at the free or low-cost traf-
fic channels that are working for you.
Step 3: Standalone SaaS Product

SaaS is complex to build and market, and there’s a long on-
ramp to any kind of substantial revenue. The point of the
Stair Step Method is to allow you to gain experience, skills,
confidence, time, and revenue before starting the difficult
challenge of building a standalone SaaS product.
THE PLAYBOOK FOR BUILDING A MULTI-MILLION DOLLAR SAAS | 31
I developed the Stair Step Method based on patterns I saw in the

bootstrapped software community, but of course, it’s possible to
skip the stairs and still achieve success with your product.
Whether you’ve bought out your time with smaller products or you
want to jump into the deep end, this is the playbook for launching
and growing a SaaS startup to millions in revenue without raising
buckets of venture capital.
This book is filled with lessons I’ve learned about building com-
panies, having done it myself, invested in more than 125 startups,
and worked closely with thousands of founders through my writ-
ings, podcast, community, and SaaS accelerator.
It’s a collection of the best strategies, tactics, and frameworks I

know for conquering the speed bumps you’ll encounter on your
startup journey.
What Is Bootstrapping, Really?
As recent as a few years ago, a startup was one of two things:

bootstrapped or venture-funded. Over the past few years, more
options have become available, even though most people still
think in terms of the bootstrapping versus funding dichotomy.
Here are terms the startup community uses to describe the fund-
ing status of a company:
Bootstrapped: You started the business on your own, with lim-

ited resources, and grew it slowly over time as the business gen-
erated cash. This is the longer road, but it allows you to maintain
complete control of the business and not answer to investors.
Venture-funded: You found investors (sometimes friends and

family, but usually angel investors or venture capital firms) who
were willing to write you a check to grow your company and raise
your next round of funding in about 18 months. Rinse, repeat,

and sell the company or IPO seven to ten years later for at least a
billion dollars.
Self-funded: Some use this interchangeably with bootstrapping. I

define it as being able to fund your next startup with your current
resources.
Maybe you have a product generating $30,000 a month, so you’re

able to invest $15,000 a month into your next effort. I did this
when I started an email service provider called Drip. I invested
between $150,000 and $200,000 of the profits from a prior SaaS
company into building, launching, and growing Drip before we
reached profitability.
I had that luxury because I had stair-stepped my way up from

consulting during the day and building products at night to having
a few small software products making $500 to $5,000 per month
to a SaaS application that earned $25,000 to $30,000 per month
and allowed me to enter the extremely competitive and lucrative
market of email service providers.
Mostly bootstrapped: Some founders want to build a boot-

strapped company but know that a bit of funding will help them
get there faster. These funding rounds are usually in the $100,000
to $500,000 range, and they are raised from friends and family,
non-venture-focused angel investors, and bootstrapper-friendly
funds like the one I run, TinySeed.
I was blown away the first time I heard a founder talk about rais-
ing funding without the intention of following the path of tradi-
tional venture capital. That company is Customer.io, which raised
its first round of $250,000 in 2012. Customer.io is now a highly
profitable, eight-figure SaaS company.
They have since raised additional rounds of funding, but the

founders still own the vast majority of the company, and they
run it as if it were bootstrapped. It’s capital efficient, maintains
healthy but steady growth, and focuses on serving its customers
and team members rather than its investors. I would call them a
mostly bootstrapped company. They don’t fit the technical defi-
nition of bootstrapped, but they are much closer to being boot-
strapped than venture-funded.
Castos is another example. The founder, Craig Hewitt, saw a gap

in the podcast hosting market and parlayed a podcast editing
service into a WordPress plugin and then into a SaaS business
called Castos. He grew the company profitably to six figures of
annual recurring revenue before taking $120,000 in funding from
TinySeed, followed a year or so later by an additional $756,000 in
funding from follow-on investors.
Craig used his funding to expand their team, allowing him to grow
top-line revenue and create room to expand the team even further.
He didn’t sign a lease on a big office in the SOMA neighborhood of
San Francisco or spend $50,000 on a billboard on Highway 101.
Instead, he hired slowly and grew efficiently. Thus, I call Castos a
mostly bootstrapped startup.
So Many Terms, Which Should We Use?

In this book, “bootstrapped” includes self-funded, bootstrapped,
and mostly bootstrapped startups. The difference between hav-
ing no money or a bit of money is insignificant compared to the
chasm between bootstrapping and raising millions in venture
capital to shoot for that “$1 billion valuation or bust.” It’s no lon-
ger a dichotomy of funding versus no funding; it’s about how you
approach your company’s growth.
Do you aim to build a real product that sells to real customers who
pay you real money? This book calls you “bootstrapped,” even if
you raise a bit of money.
Do you aim to run your company near break-even, be capital effi-

cient with your decisions, and potentially pull profits out over the
long term (or sell if it makes sense)? This book calls you “boot-
strapped,” even if you raise a bit of money.
Do you aim to avoid raising money from investors who want you
to raise another round of funding every 18 months and consider it
a failure if you don’t sell for $1 billion? This book calls you “boot-
strapped,” even if you raise a bit of money.
Why Focus on SaaS?
You might wonder why this book focuses specifically on SaaS and
not just tech startups, such as two-sided marketplaces, biotech,
direct-to-consumer applications, and games.
Specific >>> General

Focusing on SaaS allows me to give extremely specific advice that
doesn’t apply to other types of companies. For example, I could
spend pages discussing churn, onboarding, and lifetime value
(LTV), topics that don’t apply to some companies.
If this book were not focused on a single type of company, I’d have
to take the typical approach and water down my advice, providing
you with less actionable information and far less value.
A Repeatable Playbook
SaaS may seem boring to people outside of it. Instead of the next
sexy direct-to-consumer viral game, ride-sharing app, or social
network, SaaS focuses on solving pain points for businesses.
Thus, the ideas seem pretty dry if you can’t see past them and
look at the exciting part: you are solving someone’s problem in a
real way and creating a valuable business while doing it.
Through my years of starting companies and hosting events for

startup founders through MicroConf, I’ve been exposed to thou-
sands of founders and their journeys, both successful and unsuc-

cessful.
Several years ago, I began to pull out success patterns, turning

them into SaaS-specific rules of thumb, best practices, and frame-
works. Those have coalesced into a repeatable playbook that I’ve
seen tested and improved in my own startups and in those I’ve
invested in or advised.
This book is the culmination of those years of trial and error.
Why Is SaaS the Best Business Model?
There are a couple of reasons why SaaS companies have the best
business model in the world. Let’s dig deep into some of the most
relevant.
Recurring Revenue
Every business wishes it could charge a subscription for its ser-
vices and get paid in advance before it renders those services.
There’s a reason every consumer product niche is now blanketed

with subscription companies, whether they sell snacks, under-
wear, or Star Wars merch. The subscription razor startup Dollar
Shave Club sold for a billion dollars.
John Warrilow wrote an entire book on how to do this with tra-

ditional, non-subscription businesses called The Automatic Cus-
tomer: Creating a Subscription Business in Any Industry.
Subscription revenue is a business cheat code.
Recurring revenue protects you during recessions and builds on

itself every month. Every business wants recurring revenue, but
only some can pull it off.
With SaaS, it’s built into the business model. People expect to pay
you every month (or year) for your product. There is no need for
financial gymnastics; you get it free with SaaS.
Recession-Resistant
During the 2008 financial crisis, I owned a small software product
that sold for a $295 one-time fee. As the recession hit, my revenue
dropped by 80% in one month. I was lucky I had other sources of
income to support me, a few of which charged a subscription. This
crisis was my wake-up call: recurring revenue handles economic
downturns exceptionally well.
Even if revenue plateaus during a recession or other unexpected

events (like the COVID-19 global economy shutdown), revenue
tends to be insulated against a free fall thanks to its recurring nature.
Not Dependent on Luck

My mental framework for success involves varying degrees of hard
work, luck, and skill. The amount of each depends on a myriad of
factors, with hard work and skill being the easiest to control.
Launching a B2B SaaS company is about building a real product

for real customers who pay you real money. You’re solving a prob-
lem, and therefore your profitability is based on finding a problem
that’s worth paying to resolve and solving it in a way that makes
your users desperately want your solution. There’s not much luck
in that formula.
Compare that to a crypto startup, a new social network, or a

ride-sharing app. Each of these spaces has had dozens of compa-
nies focused on them for years, and their winner-takes-all dynam-
ics require hard work, great execution, and a good bit of luck.
There were many social networks before Facebook and ride-sharing

apps before Uber. Still, variables out of your control, like smart-
phone penetration, consumer behavior, or Internet speeds, can
make or break your company. This tends to be different in SaaS.
Don’t bootstrap a SaaS product if you want to start a startup for

the excitement or the press coverage. Instead, move to a startup
hub, raise boatloads of money, and hope you’ve bought the win-
ning startup lottery ticket. If you want to start a company with a
higher chance of a “base hit” outcome (meaning millions or tens
of millions in revenue or enterprise value), go with SaaS.
Not Fighting a Battle on Two Fronts

One of the most challenging problems to solve when building a
startup is kickstarting a two-sided marketplace, where you need to
bring both supply and demand to the table simultaneously (think
eBay or Uber). It’s a bit like marketing two startups at once, and
one of the most common pieces of advice I give to bootstrapped
founders who want to start a two-sided marketplace is: Don’t.
It’s not that they can’t work, but they usually need a ton of funding
to get off the ground, and building one requires much more luck
than most people realize. With a two-sided marketplace, if you
have 10 people on one side and 1,000 on the other, your business
is a failure. With B2B SaaS, if you have one, 10, or 100 customers,
you have a business.
You Don’t Need Funding

There are certain startups, such as those that manufacture physi-
cal products, marketplaces that charge a transaction fee, or social
networks that push off monetization for years, that burn capital in
the early days much faster than they generate it from customers.
These businesses require outside funding to pay for their burn
until they hit scale.
For the most part, SaaS does not have this capital requirement.
There are thousands, if not tens of thousands, of SaaS companies
that are profitable, continue to grow, and have never raised a dime
of outside funding. Companies like Zoom, Slack, and PagerDuty
went public with an enormous percentage of their venture capital
still in their bank accounts. Actually, Zoom had more cash in the
bank than they had raised!
As I said in the introduction, I am not opposed to outside funding,

and in many cases, it’s the best option to survive the early days
and reach escape velocity. But one of the best aspects of SaaS
is that you don’t need funding, but if you find it helpful at some
point, your capital efficiency and incredible margins make it rel-
atively easy to raise.
High Profit Margins

Because of the low cost of servicing additional customers, SaaS
companies reach gross profit margins of 90% and net profit mar-
gins of 50% or more at scale. This capital efficiency is one of the
reasons they are easier to bootstrap than most other types of
startups and an abundance of cash flows into SaaS, both from
venture capital and private equity.
High Exit Multiples

The increasing volume of cash-seeking to invest in or acquire
SaaS companies has driven their valuations higher and higher
each year. Exact valuations depend on your annual recurring rev-
enue (ARR), growth rate, platform risk, and other factors. Still, it’s
not uncommon for a growing SaaS company doing $1 million or
$2 million annually to sell for four to eight times top-line revenue.
Note I didn’t say four to eight times profit, a multiple many busi-
nesses would kill for.
Think about it this way: for every $1,000 of monthly recurring

revenue (MRR) you generate, you generate $60,000 of value in
your company (assuming you sell at five times annual revenue).
That is an unreal multiplier on your effort.
You may build your company and run it forever, which is great.
But if you decide to exit at some point, know that the value you’ve
created in your company is enormous compared to the same size
company in most other sectors.
Achieving Escape Velocity
When I sat down to write this book, I sketched out a long list of
topics. It quickly became apparent that topics relevant at one stage
of a startup are less relevant at another. For example, if you’ve just
launched, you should approach finding customers differently than
if you’re making $100,000 in MRR.
To that end, I decided to focus this book on topics that will help
a business with some semblance of product-market fit take its
company to the next level.
My mental shorthand for product-market fit is: you’ve built some-

thing businesses want and are willing to pay for. With SaaS, prod-
uct-market fit starts very weak and often begins to strengthen
when you’re around $10,000 or $20,000 MRR. It then transitions
to the next level, what I call escape velocity, once you’ve built one
or more repeatable growth channels.
The process of moving from “a product people love” (product-mar-

ket fit) to “a product people love, and you can find more of them
every week” (escape velocity) involves building your product for
your ideal customer, finding one or more marketing channels that
work, building moats, reevaluating pricing, building your team,
unlocking SaaS Cheat Codes, and finding and fixing bottlenecks
in your funnel.
The strategies in this book are arranged into six parts:
• Market: How to understand your market and beat your com-

petition
• Pricing: Structuring pricing for maximum growth
• Marketing: Finding and scaling the right marketing channels
• Team: How to get the right people working with you
• 80/20 Metrics: The highest-impact SaaS metrics you should
be watching
• Mindset: The psychological factors that can help you be-
come a successful founder
Although all of the strategies, tools, and frameworks in this book

will help your business grow, keep an eye out for four super-strat-
egies, which I call the SaaS Cheat Codes.
These Cheat Codes—expansion revenue, virality, net negative

churn, and dual funnels—can grow your business at an incredible
pace if you get them right.
Let’s dive in!

Market
Strengthening Product-Market Fit
As I said in the introduction, this book assumes you have some

semblance of product-market fit, but it is a long road from launch-
ing a product to building something people want and are willing
to pay for.
So much of your company’s success will depend on developing

a deep understanding of your market and ideal customer. Often,
this understanding becomes a moat of sorts and is one of the best
ways I know to strengthen the love your customers have for your
product.
Although there are many ways to develop this understanding, one

of the most reliable is having conversations.
Most entrepreneurs don’t have enough conversations with poten-

tial, current, and past customers. It’s time-consuming, and while
running a company, you’re doing everything from building new
features to troubleshooting security issues to answering support
emails. Even if you see the value of customer research, how do you
find the time to do it?
There’s another reason entrepreneurs don’t talk to customers:

fear—fear that they’re bothering them, fear the customer will say
something they don’t want to hear, fear that it’s a waste of time.
In my experience, the conversations you have with customers,

whether via email, chat, or on a call, will be some of the most valu-
able time you spend understanding your market, especially in the
early days.
These conversations will inform your product road map and how
you build features as well as your positioning, marketing copy,
and pricing. You’ll build a better product for your ideal customer
faster than if you try to guess what people need.
When Ruben Gamez, the founder of SignWell, decided to build an

e-signature tool, he knew he needed to do something unique to
make his product stand out. He talked to people about the prob-
lems they had with e-signature tools, and one thing he kept hear-
ing was that customers wanted to send a link to the document that
needed to be signed rather than having the email come from an
impersonal third-party service.
Ruben listened, and that was one of the many features he heard
through customer conversation that helped SignWell become a
strong player in an incredibly competitive market.
Who should you be talking to?
• Prospects
• Customers
• People who decided not to become customers
• People who became customers and then canceled
MARKET | 45
Asking the Right Questions

The key to getting actionable information from customers depends
on whether you’re doing early customer discovery or researching
how (and whether) to build a new feature. But typical questions
might include:
• Can you walk me through a sample flow?

• What problem are you trying to solve?
• What do you currently use to solve this problem?
• What did you use in the past?
• What are some of your biggest frustrations about this solution?
As a general rule, ask open-ended rather than leading questions.

If you say, “We’re thinking about building this. Check out this
mock-up,” most people will have a hard time being honest. They
don’t want to hurt your feelings, so they go along with it and you
don’t get useful data.
Deep dives into customer conversations have literally filled books.

For a great resource on doing customer interviews as a founder,
check out the book Deploy Empathy: A Practical Guide to Inter-
viewing Customers by Michele Hansen. You can also listen to my
interview with Michele on Episode 586 of the Startups for the Rest
of Us podcast.
In these conversations, this is the time to put your consultant hat

on and have a conversation entirely focused on your customer’s
needs, not your product—this part is important.
As Jim Kalbach, author of The Jobs To Be Done Playbook, told me

on Episode 577 of my podcast, when you look at the people you
serve through the lens of your own solution or product, it clouds
your judgment.
By taking yourself and your offering out of the equation, potentially

—there’s no guarantee of this—you can actually find opportunities
that you wouldn’t see otherwise.”
Building the Features Your Customers Want

One of the popular memes in the entrepreneurial world is that
your customers will tell you what they want—just launch some-
thing ASAP, and they’ll tell you how to make your product better.
But that is assuming your customers know what they want.
Henry Ford never actually said his customers wanted faster hors-
es instead of a car, but the wisdom in that story is strong enough
that people have been repeating it for 100 years.
Your customers don’t know how to build software as well as you

do, and even if they did, they’d never match the insights about the
market you’ve learned building your product. In fact, if they could,
you should probably close up shop, go to bed, and try something
new in the morning.
As my last startup, Drip, began to grow, we received several fea-

ture requests per day, and we had to constantly make difficult de-
cisions about which ones we were going to invest our limited time
and resources into building.
I wanted to build a product that people used—a lot of people—

and that meant learning how to take certain points of feedback to
heart and discard the rest. A big part of the reason Drip was suc-
cessful was that we used the feedback from our best customers
to find and solve problems other email service providers didn’t.
This involves learning how to separate valuable ideas from dis-

tractions, and until you hire a product manager (something that
typically happens north of $1 million in ARR), you’re the person
who needs to decide which features will strengthen your prod-
uct-market fit.
MARKET | 47
I filtered them by putting them into three buckets: The Crackpots,

No-Brainers, and In-Betweens.
The Crackpots. First up are the crackpot requests: ideas so far out
of left field you can’t imagine why they want it or even understand
what they mean.
The crackpot suggestions are the easiest to process because you

know right away you’re not going to build them.
Here are some examples of oddball requests:
• Features that would require building an entirely new product

(e.g., “Why can’t I use your email provider to publish blog
posts?”)
• Features that would turn your product into a clone of your
competitors (e.g., “It’d be great if you could add a shopping
cart, and a CRM, and lead scoring, and . . . just build a clone
of Hubspot and charge me one-tenth of the price.”)
• Features that are the opposite of your product’s strengths
(e.g., “I like that your UI’s so streamlined, but can you add
these ten new options to fit my rare and unique use case?”)
No, no, and no—these folks make it easy to say, “Sorry, these re-
quests are not a fit for us.”
No-Brainers. You’ll also get requests that are either already on

your road map or make you wonder why you didn’t think of them.
Once in a while, your customers will come up with an idea that’s
so awesome you want to put it into production immediately.
These are also easy to handle because you know they’ll objective-
ly improve the product and make it more valuable for your users.
For instance, at one point, a customer reached out to see if there

was a way to retroactively add a tag to his subscribers based on
links they had clicked in the past.
Well, no . . . but it was a great idea and not terribly hard to build.
Drip was (and might still be) the only product that offered that
feature, and it became a powerful tool for our users that they
couldn’t use anywhere else.
List pruning is another example of a no-brainer feature. Subscrib-

ers zone out over time, driving up the cost of your email plan and
skewing your metrics with “dead” users that wouldn’t open an
email if it contained the cure for cancer.
Most list management systems don’t have built-in list pruning,

and it’s a big chore to go back and figure out which subscribers to
delete from your list.
So when a customer reached out and asked if we could make a

button that would prune inactive subscribers according to some
basic best practices, we immediately put it on our road map.
In-Betweens. I’d estimate only 10% to 15% of the feature requests

are crackpots, while maybe 20% are no-brainers, so that leaves a
lot of judgment calls.
The reality of running a software product is that you will get doz-
ens of feature requests that aren’t necessarily bad, but aren’t slam
dunks either.
You can’t build all of them—that’s how good software bloats into
a mass of buttons, boxes, toggles, and settings. As the founder,
you’re the gatekeeper. You’re going to have to say “no” to an awful
lot of good ideas.
I usually roll my eyes when people quote Steve Jobs as their rea-
son for taking a particular course of action because he was such
an outlier that his thinking won’t work for most of us. But on the
MARKET | 49
topic of saying “no,” he nailed it:
“ People think focus means saying yes to the thing you’ve got to focus
on. But that’s not what it means at all. It means saying no to the hun-
dred other good ideas . . . Innovation is saying ‘no’ to 1,000 things.”
As we just discussed, one way to weed through feature requests is

to figure out the problem your customer is trying to solve. When
a customer asks you to add a new kind of button, they don’t re-
ally care about the button—they’re trying to do something in the
software they can’t figure out and believe a button is the best way
to accomplish that.
Your job is to figure out the problem your customer is trying to

solve, not just build the solution they suggest. Then, figure out
whether that solution requires a new feature and whether it’s
worth building.
It’s pretty easy to do this in a way that makes people feel like
you’ve listened to them, whether you end up building what they
want or not.
Ask yourself these three questions:
Question #1: What’s the Use Case for This? Or, in layman’s terms,
what problem are you trying to solve?
You can get at this by asking questions such as: “What leads you
to want that? What problem are you trying to solve with this fea-
ture? What are you currently using to get that done?”
Sometimes you’ll realize you already have a way to solve the cus-
tomer’s problem but in a way they hadn’t discovered yet. At that
point, it’s up to you to explain how they can use your tool to ac-
complish their goal and maybe add something to the UI to help
other users find it more easily.
If your product doesn’t already meet the customer’s needs, you

must determine whether you can build the feature and whether
you want to. At the end of the day, this depends on how many
people you think will use it. This leads us to . . .
Question #2: What Percentage of Customers Will Actually Use

This Feature? More than 5%? Ten? Twenty? You won’t know for
sure, but spitballing your best-guess percentage can help you de-
cide whether to build the feature and how prominent it should be
in the UI.
If you think only 5% to 10% of your customers will use something,

go a step further and spot-check which users they are.
If it’s a random group of users, it might not be worth building. But

if that 5% to 10% are power users and this feature would make
your product more useful to them, consider building it and keep-
ing it hidden from the average user by omitting it from the stan-
dard UI and only enabling it upon request.
Why hide these features? Because if the vast majority of your us-
ers will never need them, adding dozens of checkboxes and drop-
downs will make your core product confusing for them.
If you think 20% or more of your customers will use a feature, it’s
something to consider building.
But first, you have to ask yourself one more question . . .
Question #3: Does This Fit with My Vision of the Product? Every
feature has opportunity costs. Every hour you spend building a
feature is an hour you don’t spend building a different one.
Ultimately, you’re the founder. If a feature request doesn’t fit with

your vision of what the product should be, it’s probably not one
you should build.
MARKET | 51
One elegant solution to many of those “big lift” feature requests

is to add integrations. Problems that might take weeks or months
to solve are often already solved by another product. If you can
integrate their application programming interfaces (APIs) into
your product in just a few days, fulfilling those requests can be a
win-win for you and the customer.
Too many products get cluttered with obscure features that only
help one or two customers, and too many entrepreneurs get
bogged down in building endless feature requests instead of fo-
cusing on making great software.
As a bootstrapper, time and money are precious, and feature re-

quests can wipe out both quickly.
But the most important resource in your company—and the most

scarce—is your vision for your product and how it solves your
customers’ problems.
Solving your customers’ problems is the road to strengthening

product-market fit. Expect a long, slow road of customer conver-
sations and hard decisions with incomplete information as you
work to build something people want and are willing to pay for.
How Can I Compete in a Competitive Market?
A mature, competitive market can be a total bloodbath, but it can

also be a fantastic place to grow your business once you get a
foothold.
For one, a competitive market is proven. You already know that

people are willing to pay for the problem your product solves. If
you can figure out a way to stand out among the crowd, you could
be looking at a very lucrative business.
For another, it can be a great place to find an underserved niche

of customers who are frustrated with what the big incumbents

have to offer.
You’ve heard stories of small startups disrupting the status quo,

but usually they’re led by an experienced founder, or they’re
backed with impressive amounts of funding. I don’t recommend
starting your first startup in a highly competitive market without
prior experience or funding—or both.
But if you’re getting a foothold in a mature market and you’re

ready to scale up, here are some ways to do it.
Compete on Price
Competing on price is tricky, but you can get traction if you offer
more than 80% of the product for half the cost.
In a mature market, the large players have pricing power that al-
lows them to raise prices relatively frequently. When you don’t
have the brand or credibility, it can be hard for customers to justify
paying the same price for your service.
In addition, your competitors’ pricing power often leaves plenty

of room for you to underprice them and still have significant profit
margins.
In this case, if you’ve built a product that’s easier to use than the
large players’ products and you are less expensive, it can be an in-
credible one-two punch when convincing early adopters to switch.
I’m not recommending that you remain the low-cost provider in-
definitely, but before you’ve built a strong brand, this can be a good
strategy. Of course, you should keep adding value to your product
and raising prices as it matures.
MARKET | 53
Compete on Sales Model

Another place to innovate against bigger competitors is with your
sales model.
Many incumbents in competitive markets have a high-touch sales

process where customers must schedule a demo before learning
the price. They may also have mandatory setup fees.
If you enter the space with a low- or no-touch sales process and
your pricing is listed on your website, you can start winning cus-
tomers who don’t want to jump through so many hoops.
When we launched Drip into the marketing automation space,

one of the biggest players, Infusionsoft, wouldn’t let you see their
product until you had paid a couple-thousand-dollar setup fee
and gone through the required training.
With Drip we offered a free trial—all you needed was a credit card.
This made early adopters more willing to give us a shot.
Compete on Product
The third area in which you can outmaneuver larger competition is
your product—especially if you’re dealing with larger companies
who have 10- or 15-year-old code bases and clunky user interfaces.
In the world of accounting software, many Quickbooks refugees

are looking for a solution with better UX or more streamlined
features. Xero was able to get a foothold by building a cloud-first
accounting package.
In customer relationship management (CRM), plenty of people

are looking for a Salesforce alternative that feels fresher and like
a better fit for their business. Pipedrive, Close, and many others
have been able to carve out pretty great businesses by improving
product usability and ease of setup.
If you can enter a competitive market with modern UX and the

ability to ship features quickly, you can build a great product while
also developing the reputation of being innovative and nimble.
This is a temporary advantage. Over the years, your UI and code

base will age, and you won’t be able to ship as quickly. By that
time, you should have a more mature product that handles the
majority of use cases versus the early days when you’re using any
advantage you have to compete against full-featured products.
How to Market Against Large Competitors

In Judo, you’re taught to use your opponent’s weight and strength
against them. The same holds true in business.
You’re not going to outmuscle or outspend entrenched, well-fund-

ed competitors. You need to use their biggest strength (their size)
to your advantage.
With big companies comes slowness to react to the market, dat-

ed UX, legacy code, and all the competitive disadvantages we
discussed. If they’ve been dominating the market for years, they
probably also have a group of users who have defaulted to using
them but are frustrated by the experience.
If you can find this group that desperately wants to escape and
help them migrate to your tool, not only will you gain new custom-
ers, but they will rave about you to others in their circle.
You’ve turned the strong brand of your competitor into a massive

lever: word of mouth.
People also love the scrappy new underdog, which can be a great
marketing angle for a startup in a competitive market.
Rental car company Avis did this with its “We’re #2, we try harder”
ads in the 1980s.
MARKET | 55
I did this with Drip. Our home page essentially communicated

that we were “not Infusionsoft, Marketo, or Pardot.”
The headline on our homepage was “Lightweight Marketing Au-

tomation That Doesn’t Suck,” which was very much a swipe at our
larger, clunkier competitors.
How Much Should I Worry about Competition?
Most founders worry too much about their competition. They fol-
low them on social media, scour the news for updates, and have
Google alerts set up on competing founders and executives.
And it’s not doing their mental health any favors.
You do need to have your finger on the pulse of the competitive

landscape, but for your own sake, you need to be deliberate about
how you keep tabs on your competitors. It can lead to a negative
emotional cycle if you start every day focusing on the competition
while having your bagel and coffee.
In my experience, unless you’re losing deals to specific competi-

tors on a regular basis, it’s more helpful to keep your eyes on your
own paper. Your number one goal should be serving your custom-
ers—not perseverating over your competitors’ every move.
There are only two things you should care about when it comes
to competition:
High-Level Updates. If an announcement is big enough to merit

space in your industry news sites, it’s probably worth paying at-
tention to. Is your competition announcing new funding? Launch-
ing big features? Making a major shift in positioning?
Read it and understand it. But rather than losing sleep over wheth-
er you should follow suit, spend that energy studying what that
tells you about your industry and your customers.
Deals You’re Losing. If you’re losing deals to a competitor, you

should figure out why. Is it because you lack specific features? Is
it because of your pricing? Do they have SOC 2 compliance?
Once you understand why you’re losing deals, you can decide how
to address those objections. Maybe you need to carve out a new po-
sition in the market where those features aren’t as necessary. May-
be you need to revamp your pricing or look into securing similar
certifications.
Conversely, here’s my rule of thumb for what you should ignore

about your competitors:
Low-Level Details. From the outside, it might look like your com-
petitors have their act together. But if you’re not in the room where
decisions are being made, all you see is a polished image. Don’t let
that polished image fool you into thinking your competitors know
what they’re doing.
I’ve seen many, many companies raise millions in funding and

then misprice or misposition its product, move too slow on the
technical side, make a mess of its branding, or make any number
of first-time founder mistakes.
Just because your competitor is acting, don’t assume it’s the right
move—or even a well-thought-out move.
Their Funding. If a competitor raises funding, that’s not necessar-

ily a bad sign for you. It’s not a sign they know what they’re do-
ing—just that they were able to convince an investor that there’s
an opportunity.
When I see a company raise funding, the most common result is

that it blows through it in about 18 months. If it doesn’t have sig-
MARKET | 57
nificant traction by then, it is likely to flame out.
Funding obviously works in some instances, and if you have an

experienced competitor gaining traction and adding funding to
the mix, that’s something to take to heart.
As a caveat, if your competition raises a lot of money—like $5

million or more—be aware they might be trying to suck the air out
of the market by either offering a free solution or dropping prices.
Being Copied. If your product is successful, competitors will

copy you.
Even if you don’t say it to your team, even if you never say it pub-
licly, it’s infuriating to see someone come into your space and copy
your positioning, features, or marketing. It’s even more annoying
when they pretend like they’re innovating by doing so.
As a founder, it’s your job to manage your mindset and not let
their plagiarism derail you. It’s inevitable in business, especially
if you’re on the leading edge of your industry.
Sometimes copying gets so bad you need to enlist the help of a

lawyer to send a cease and desist. Things have to be pretty blatant
to get to this point, but it happens.
One way to make yourself less vulnerable to copycats is to build a

moat around your business.
How Can I Build a Moat?
As you scale your company, you need to think about how to pro-
actively defend against competition. The more success you have,
the more your competitors will grab their battering ram and start
storming the castle.
In medieval times, you’d dig a moat to keep enemy armies from

getting anywhere near your castle. In business, you think about
your economic moat.
The idea of an economic moat was popularized by the business

magnate and investor Warren Buffett. It refers to a company’s dis-
tinct advantage over its competitors, which allows it to protect its
market share and profitability.
This is hugely important in a competitive space because it’s easy

to become commoditized if you don’t have some type of differen-
tiation.
In SaaS, I’ve seen four types of moats.
Integrations (Network Effect)

Network effect is when the value of a product or service increas-
es because of the number of users in the network. A network of
one telephone isn’t useful. Add a second telephone, and you can
call each other. But add a hundred telephones, and the network is
suddenly quite valuable.
Network effects are fantastic moats. Think about eBay or Craigs-

list, which have huge amounts of sellers and buyers already on
their platforms. It’s difficult to compete with them because ev-
eryone’s already there.
In SaaS—particularly in bootstrapped SaaS companies—the net-

work effect moat comes not from users, but integrations.
Zapier is the prototypical example of this. It’s a juggernaut, and

not only because it’s integrated with over 3,000 apps. It has wid-
ened its moat with nonpublic API integrations, meaning that if
you want to compete with it, you have to go to that other company
and get their internal development team to build an API for you.
MARKET | 59
That’s a huge hill to climb if you want to launch a Zapier competitor.
Every integration a customer activates in your product, especially

if it puts more of their data into your database, is another reason
for them not to switch to a competitor.
A Strong Brand
When we talk about your brand, we’re not talking about your col-
or scheme or logo. Your brand is your reputation—it’s what peo-
ple say about your company when you’re not around.
Having a strong brand means you’re in a lot of conversations. When

people discuss options, you’re in the mix. People are talking about
your product on their podcasts and forums and to their colleagues.
You’ve developed a reputation for reliability and innovation, or
maybe you’ve become known for solving a unique problem.
Once people recognize and trust your name, you become a brand
rather than a commodity. Instead of comparing your pricing and
features to everyone else, prospects will start looking at you as a
unique offering, even if your features are mostly equivalent to a
competitor.
There are hundreds of CRMs, but I bet if you and I sat down and
tried to name every one we could think of, we’d top out at maybe
a half dozen. Those are the ones with strong brands. It’s a signif-
icant advantage.
A quick note: Positioning is part of your brand.
Maybe your digital asset management software could work for any-
one, but if you decide to focus your product on museums and make
sure it talks to the collections management tools they’re already
using—and that your marketing and website are speaking the lan-
guage of that world—you may be able to build a brand moat around

a segment of the market that can be tough for competitors to cross.
Positioning is a book in and of itself, so I’ll point you to Obviously

Awesome by April Dunford as one of the best positioning books
for SaaS companies.
Owned Traffic Channels

A friend of mine owns a SaaS company that’s competing in a mas-
sively crowded space. His product gets 500,000 unique visitors
a month because he’s exceptional at search engine optimization
(SEO), and his company ranks on the first page of Google for
many high-volume terms.
He owns these organic traffic channels in his market, so even

though other names on those pages might be more recognizable,
he can stay highly competitive.
Even if you own a high-traffic search term on Google, Amazon, or

the WordPress plugin store, you can have a pretty commoditized
product that can still succeed.
One caveat is that this moat can be a bit dicey to maintain because
the algorithms at any of those companies can change quickly—
and have. Google’s many updates have tanked businesses over-
night that depended solely on SEO-driven traffic.
High Switching Costs

Products that require a significant amount of work to migrate
away are said to have high switching costs. High switching costs
reduce your churn and create a moat that keeps customers from
switching to a competitor simply because that competitor is new-
er, cheaper, or even builds a better product.
Most APIs are difficult to leave because to do so requires expen-

sive developer time to integrate with a new product. Companies like
MARKET | 61
Stripe, Twilio, and SendGrid have a pretty hefty switching cost moat.
Tools like Slack are difficult to switch from because of the need
to obtain buy-in from every manager in an organization. Also,
because of the high number of integrations pushing data, Slack
requires effort to recreate.
Tools with low switching costs are those in which history is most-
ly irrelevant, and the time it takes to recreate something you’ve
built in the tool is low or nonexistent.
For example, a social media scheduling tool is easy to switch from

because there is no critical history stored or complex workflows
that need to be recreated using a new tool.
Likewise, one-click SaaS analytics tools that tie into your Stripe
account are relatively easy to switch from because they are “one-
click easy” to set up.
False Moat: Unique Features

As makers, we want to believe that features are what differentiate
us. After all, we’ve spent hours building and perfecting those fea-
tures. That’s worth something, right?
Don’t get me wrong. Unique features are a fantastic differentia-

tor—for a few months, until a competitor duplicates them.
You can create a brand around continuously building and ship-

ping innovative features, especially when your competitors are
legacy companies who don’t have your feature velocity. Believing
these features in and of themselves are a moat, though, is a trap.
By definition, a moat should endure; it should sustain itself and

grow stronger as your business grows. If you’re relying on a con-
stant stream of new features to differentiate you, you don’t have a
moat. You have a hamster wheel of features.
You can absolutely find growth that way. But realize you’ll also
want to focus on some of the other, more enduring, moats.
Should I Translate My Product into Other Languages?

(And Other Common Mistakes)
I’ve seen founders fall prey to some common siren songs, which I
talk about below. With some rare exceptions, heading down the fol-
lowing roads is a distraction at best and a major blunder at worst.
Founders often take one of these paths to solve a real problem:

their company isn’t growing fast enough. In most cases, the solu-
tion is not to pursue these distractions but to strengthen your
product-market fit or improve your marketing and sales efforts.
If your company isn’t growing, you don’t need to chase a siren

song. You need to get to the root of the real problem, one that’s
not usually fixed by the approaches discussed below.
Translating Your Product into Other Languages

When a founder comes to me with the plan of translating their
product into another language, I advise against it.
The mechanics of translating a web application aren’t complicated.

But you’re not just translating the app—or even your knowledge
base, documentation, and website. You need to translate your mar-
keting into Spanish or German or French. You need someone on
your team who can do email support or live chat in that language.
You need to manage your social media presence, maintain an email
list, and many other things to support customers in that language.
There has only been one time when a founder told me they were
going to translate their app and it turned out to be a good deci-
sion. In that case, he wanted to add Spanish as a second language
(English being the first).
MARKET | 63
In this case, the users of his product primarily spoke Spanish, but
their managers—his actual customers—mostly spoke English.
This founder didn’t have to take on the challenge of handling mar-
keting or customer support in Spanish, but by translating the app
itself, he made it more accessible to his customers’ end users.
White Labeling
White labeling is when another company pays you to license your
product and present it with its own branding, and the moment
you launch a successful product, people will start emailing you
with “exciting opportunities” to white label.
For the most part, these conversations are a big waste of time.
Usually what you have is someone who wants to start a business
but can’t build their own product. They want to pay you per ac-
count they add, but they have no audience or distribution. In the
end, you’ll spend a bunch of time talking to them, writing up con-
tracts, and taking feature requests—for nothing.
If you’re approached about white labeling by a large player, it’s

worth having the conversation. You know they’re not wasting
your time because they don’t want to waste their own.
To justify the effort of white labeling, I recommend charging an up-

front fee. We’re talking tens of thousands of dollars—$30,000 to
$50,000 at a minimum. If someone balks at paying that fee, they’re
not willing to put enough skin in the game to warrant your efforts.
I’m not a fan of white labeling in most situations. It’s a way to

serve customers and make money without building a brand. We
discussed above how a brand is a moat, and losing that is an un-
fortunate consequence of white labeling.
Adding Other Verticals Too Early

Adding other verticals is the easiest siren song for me to justify.
Sometimes it makes sense to pivot or expand to other niches. For
example, if you have a product that’s working well for wedding pho-
tographers, chances are it will also serve wedding videographers.
But unless you’re pivoting your product, you must be extremely

careful about adding new markets. For example, if you add wed-
ding coordinators to your wedding photography SaaS, you’re
probably dealing with audiences that have different needs—even
though they’re in the same industry.
The danger of adding other verticals flippantly is that it can lead to

a lot of complexity in your product. Unless you already dominate
a particular niche and are moving into another or are making a
full-blown pivot into the new space, be careful with this one.
Underpricing Your Product

I dig into pricing in the next chapter, but I want to call out what is
perhaps the most common mistake I see founders make: listening
to the voice in their head telling them that keeping their price low
is the key to kickstarting growth. It’s not.
Most of the reasons I see founders pricing too low are psycholog-
ical, not logistical. You’re afraid of rejection. You’re having trouble
seeing value in your product because you built it. You’re compar-
ing your price to cheap competitors rather than seeing how much
value you bring to your customers.
Pricing too low holds your business back in two major ways. First,
if you’re charging $10 instead of $100 a month, you have to find
10 times as many customers. Second, you’ll have a much harder
time finding those customers because you’ll be severely limiting
the marketing channels you can afford to use.
Pricing incorrectly can mean the difference between building a

$250,000-a-year business and a multimillion-dollar business.
We’ll dig into that in the next chapter.
Pricing
How Should I Structure My Pricing?
Pricing is the biggest lever in SaaS, and almost no one gets it right
out of the gate.
Fortunately, you don’t need a PhD to structure your pricing well.

Like most things in SaaS, finding the right pricing structure is
one part theory, one part experimentation, and one part founder
intuition.
I wish I could tell you a single “correct” structure, but it varies

based on your customer base, the value provided, and the com-
petitive landscape.
Most founders price their product too low or create confusing tiers
that don’t align with the value a customer receives from the product.
On the low end, if you have a product aimed at consumers, you

can get away with charging $10 to $15 a month. The problem is at
that price point, you’re going to be dealing with high churn, and
you won’t have much budget to acquire customers.
That can be brutal, but if you have a no-touch sign-up process

with a product that sells itself, you can get away with it. Castos’s
podcasting software and Snappa’s quick graphic design software
are good examples of products that do well with a low average
revenue per account (ARPA).
You’ll have more breathing room (and less churn) if you aim for
an ARPA of $50 a month or more. In niche markets—or where a
demo is required or sales cycles are longer—aim higher (e.g., $250
a month and up).
If you have a high-touch sales process that involves multiple calls,

you need to charge enough to justify the cost of selling it. For ex-
ample, $1,000 a month and up is a reasonable place to start.
If you’re making true enterprise sales that require multiple demos

and a procurement process, aim for $30,000 a year and up (into
six figures).
One of the best signals to guide your pricing is other SaaS tools,
and I don’t just mean competition. Any SaaS tool a company in
your space might replace you with, a complementary tool or a
tool similar to yours in a different vertical can offer guidance, but
make sure you don’t just compare features; compare how it’s sold.
As mentioned above, the sales process has tremendous influence

over how a product should be priced.
There are so many SaaS tools out now that a survey of competi-
tive and adjacent tools can give you a mental map of the range of
prices you can charge.
No matter where your business sits, one thing is true: “If no one’s
complaining about your price, you’re probably priced too low.”
PRICING | 69
Segmenting Your Customers

The first step to structuring pricing tiers is to segment your cus-
tomers. You need to figure out who’s using your product, how
they’re using it, and what value they’re getting from it.
For example, I use a company called SquadCast to record inter-

views for my podcast (disclosure: I’m also an investor). SquadCast
users come in all sizes, and each segment has a range of needs and
price sensitivities.
You can imagine a hobbyist podcast aimed at fly-fishers or gamers

would pay $10 or $15 a month but not much more. This person
would have a consumer mindset.
In the middle of the market, a podcast like mine that’s aimed at the
entrepreneur audience will probably be okay paying $50 to $100
a month because it’ll get at least that much value out of its show.
At the top end of the spectrum, you can imagine large podcast
networks like NPR or I Heart Radio have much larger budgets
to spend on recording—and they also have very different needs
than a hobbyist or mid-market show. They’ll be happy to pay 20
times more than the base plan because of the sheer value they’ll
get from the product.
SquadCast’s tiers reflect this by scaling up the usage and features

they offer in each subsequent tier.
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When you segment your customers by size and usage, you start
to see how your pricing tiers work to offer the most value to cus-
tomers while driving growth for your business. Getting pricing
tiers right also allows you to tap into the SaaS Cheat Code we’ve
already alluded to: expansion revenue.
SaaS Cheat Code: Expansion Revenue

Expansion revenue is when customers pay you more as they
get more value from your product. They might manually up-
grade to the next tier or be auto-upgraded as their usage
changes.
There are two basic ways to build expansion revenue into

your pricing tiers.
Value Metric. A value metric is how your company measures

the per-unit value of your product.
A typical value metric might be the number of users your

customer brings to your product. MailChimp’s prices are
based on subscriber count, so subscribers are their value
PRICING | 71
metric. Salesforce’s prices are based on the number of seats,

so seats are their value metric. Usage is another good value
metric, like the number of recording hours for SquadCast or
gigabytes used for Dropbox.
This works because the more your customers use your

product (and the more value they get out of it), the higher
the price they will pay.
If you design this so that the value metric is tied to your

customer’s success, they will be much less resistant when
moving up to the next level. They’ve increased the number
of subscribers on their mailing list, hired more people for
their sales team, or increased the number of podcasts they
put out every month. Jumping up to the next tier means
their own business is growing alongside the value they’re
getting out of your product.
A quick note about seats as a value metric: Seat-based

pricing is a common value metric for SaaS, but I recom-
mend offering it only if two users from the same company
see different things when they log into your product.
For example, if User A logs into the CRM and sees tickets
assigned to them by User B, seat-based pricing makes
sense. If both users log in and have the exact same expe-
rience, they might as well just share a login.
Feature Gating. The second way to unlock expansion reve-

nue is by expanding the features your customers can access
at higher plans. This tends to be less effective than value met-
rics because it’s not as intrinsically tied to the growth of your
customers’ businesses.
Feature gating can be useful if you find your customers don’t

necessarily experience an increase in usage as their compa-
ny scales but do end up needing an expanded set of features.
Gated features can be ones that you build or integrations you

have with other services. For example, if a customer wants
to export their data to Tableau, you automatically know
they have the budget to pay for an expensive SaaS product.
It’s reasonable to assume this type of customer would see
enough value to pay a premium for a Tableau integration.
In this case, choosing to pay for higher tiers still provides

them with increased value linked to their own success.
Using Both. You can also combine a value metric and feature
gating. I tend to encourage people who are in the early stag-
es to start by using just one model, then refine that as they
get to know their customer base and what they need. But in
many cases, having per-seat pricing with two or three levels
of feature access is not a bad way to go.
Be aware, though, that it can quickly get complicated when

you try to use both feature gating and value metrics.
Enterprise Pricing
One big mistake founders make is not charging enough for their
most valuable customers: those on enterprise plans.
Typically founders will undercharge, especially if they come from a

development background and aren’t used to paying enterprise-lev-
el prices for software. If you worked in a big company but were
never part of a sales conversation about which $50,000-a-year
software to purchase, those numbers might seem unreal next to
your $7-a-month GitHub subscription.
PRICING | 73
With enterprise deals, you’re not charging more just to charge

more. There are key differences in the way enterprise customers
buy products. There are extra hoops to jump through in their pro-
curement process. You might need to do a custom integration. If
your enterprise tier is underpriced, you’ll lose money trying to sell
to enterprises and service their accounts.
A loose rule of thumb is to charge 10 to 20 times more than your

standard plan. If you are only charging two or three times more,
you won’t be able to hire that customer success person or sales-
person you need to manage the high-touch sales process, let alone
cover the cost of acquiring enterprise clients.
Should I Offer Freemium?
According to the State of Independent SaaS Report, 66% of SaaS

products offer a free trial, but only 17% offer a forever-free (aka
freemium) plan.
Is freemium the path for you? It depends. Freemium is like a sa-

murai sword. If you know what you’re doing, it’s powerful. If you
don’t, you can cut your arm off.
There’s a reason that many venture-funded companies offer

freemium and many bootstrappers don’t. This is because ven-
ture-backed businesses can afford to support a large freemium
user base.
For a bootstrapper, though? You typically need as much cash as

you can get in the short term. Freemium pushes your revenue into
the future, so if cash is tight it can be less than ideal.
Free plans don’t just magically work—you need to understand

how they function.
Freemium works best with a simple product that doesn’t require

much work for the customer to get value, where the support bur-
den is reasonably low and there’s some level of virality built into
the product.
For example, an e-signature app is pretty straightforward. The

user uploads a doc, then sends it or signs it within minutes to get
near-instant value. If you’ve created an easy-to-use product with
a good UI, you will not have to do much in the way of support
or onboarding. Plus, every time a user needs a document signed,
they’re spreading the word about your product because you’ve
built in the Virality Cheat Code (covered later in the book).
As long as your per-user or per-usage costs are pretty low (i.e.,

you’re not paying much every time someone sends an email
through your e-signature app), then you can offer a freemium tier
without spending much cash.
On the other hand, a freemium model would likely not work for a
construction management software CRM with low to zero virality
and a complex setup and onboarding process.
You can run into problems if your free users are in a completely
different market than your paid users. Do they need additional
features or require more support? Are they in different verticals
or categories?
If your freemium users aren’t at some level helping push growth

of your paid tiers, offering a freemium plan isn’t the right call.
Competitors and Freemium

If all your competitors offer freemium, does that mean you have
to? Not necessarily.
The reality is that many startup founders don’t actually know

what they’re doing. They’ll launch a freemium option for a while
and then shut it down because it was too much work or didn’t
PRICING | 75
provide the results they expected.
If the majority of your competitors offer a free plan and it’s be-
come a sticking point with the prospects you talk with, then you
might consider offering a freemium option to remain competitive.
Or you could come into the market like automated customer ac-
quisition software Bounce Exchange (now Wunderkind). Not only
did they not offer freemium like the majority of their competitors,
but they also launched at $2,995 a month. Some people in the
community thought they had lost their minds.
However, Bounce Exchange had a different business model. They

became successful because not only did they offer software, but
they also managed the entire service for their customers. They
did a great job of creating a product for a very specific segment of
the market who was willing to pay for it rather than racing for the
bottom with pricing.
Should I Ask for a Credit Card Up Front?
One of the most common questions I get about trials is whether

or not you should require a credit card up front.
Dropping the credit card requirement is an attractive option be-

cause you can get ten times as many trials if you don’t ask for a
credit card. Although I typically default to asking for a credit card
up front, it helps to understand the pros and cons.
Entering a credit card is a qualifying event. A person willing to

enter a credit card has more interest in your product than some-
one who won’t, and it reduces the number of tire kickers in your
sales funnel.
This is important because all those free trials can actually be pret-
ty expensive. If you’re bootstrapping, you probably don’t have the
funds or time to manage support and onboarding for people who

are not likely to convert.
When thinking through requiring a credit card up front, ask yourself:
• How high is my support burden for each customer going

through the trial?
• Do I have the bandwidth to multiply my support burden by
10, knowing there will be many more tire kickers?
A lot of first-time founders tell me they don’t want to require a

credit card because they want to get as many people as they can
into the app to learn what people want.
The problem with this approach is you end up getting a bunch of

noise from users who aren’t your core customers. Instead, you
end up with an unfocused group chattering about different things.
You don’t know who to listen to, making it hard to focus on the
next feature you should build.
When You Should—and Shouldn’t—Ask for a Credit Card

Of course, there are always exceptions.
If your product is often adopted by employees who don’t have

company credit cards, you may want to drop the requirement.
A good example of this would be Slack, Trello, or Dropbox, which

have freemium levels and trials that anyone can set up. Team
members can set up an internal Slack group without having to
get approval from a manager with a company credit card.
Once your initial champion and their team start using your prod-
uct at work, they’ll see how valuable it is (and probably want to add
integrations). Then, they can make the case to their manager to
break out the company credit card and upgrade to the pro version.
PRICING | 77
If you’re not in that situation but are having trouble getting people
to sign up with a credit card, the answer probably isn’t to drop the
requirement. Instead, make sure you’ve built something people
want and learn how best to market it.
Opening the Floodgates

As I said, my default recommendation is to require a credit card
up front. But I’ve seen founders decide at a later date to open the
floodgates by removing the credit card requirement. Here’s what
these founders had in common:
• Their companies were early but established.

• They had more than $20,000 MRR.
• They knew their customers and market intimately.
• They knew their conversion, churn, LTV, and other metrics
by heart.
• They had the resources to handle the influx of new trials.
Castos was one of these companies.
Founder Craig Hewitt didn’t see a significant increase in his com-

pany's growth rate after Castos dropped the credit card require-
ment for its free 14-day trial, but overall the move was positive for
the company. It enabled more employees from large nonprofits
and organizations to try the product without having to ask for
the company credit card number and gave Castos’s sales team the
ability to have prospects try the product more easily.
If your business has matured to a place where you know that if

you had five or 10 times more trials you’d see increased growth,
try dropping the credit card requirement for one to two months
to see how it impacts the business.
But during that time, be obsessive about the numbers. Every met-
ric you know by heart—trial-to-paid, churn, referral, etc.—is go-
ing to change once you pull the credit card requirement. Best case,
you’ll know within a month or two if it’s working, but it can take
several months because you also want to take into account chang-
es in downstream churn. Craig said it took almost two months
after Castos dropped the requirement for him to get a bead on the
new numbers.
As I mentioned, your support requirement will also change when

you add five to 10 times the number of new trials. You’ll have to
keep a sharper eye out for spammers and be much more active to
convert users who don’t provide a credit card up front because
90% of them wouldn’t have signed up otherwise.
Just remember the golden rule of experimenting: Only change one

variable at a time.
If you’re going to remove the credit card requirement, don’t also

increase the price. Don’t also introduce a free plan. Let the met-
rics stabilize so you can identify the patterns before you do the
next thing.
You may want to consider a shorter trial length so you can see the
results of your experiments even faster. A seven-day trial means
you can run through four cohorts of trial users in the same amount
of time as a 30-day trial—that’s four times as many tests.
Not every industry or app can have a seven-day trial, but the
shorter you make your trial—including having no trial at all but
just a refund policy during the first 30 days—the faster you can
experiment.
You also want some positive time pressure to encourage users to

start getting value from your product right away. If you offer a 30-
day trial, how many users will wait until you send out that final
“your trial is ending” email to actually start using their account?
PRICING | 79
When Should I Raise Prices?
I recommend revisiting your pricing every six to 12 months be-

cause if you’re like most founders, you’re probably charging
too little.
Most founders think that the biggest reason to raise prices is to

make more money, and that’s a good reason to do it. More money
means you can hire more people, spend more on marketing, or
take home more profit.
But there is a second-order effect that most people miss. Across

all SaaS marketing approaches (which I talk about in the next
chapter), maybe five are available if your ARPA is, say, $20 a
month. If you charge $500 a month, it’s closer to 10. And if you
charge $5,000 a month, you have every SaaS marketing approach
at your fingertips.
So it’s not solely about making more money. It’s about providing
you with more options to grow your business.
It’s not technically hard to raise your prices. You change a number
on the pricing page and make an API call, and there you go. You
doubled your prices. It’s the emotional part that typically makes
it hard for most founders.
Some tell me, “If I raise my prices, I’ll make my customers angry.
I’ll completely crush my business. I’m going to take it too far.” Or
they’ll push back by saying, “I can’t just raise prices to infinity,
right? At some point I’ll get too high for my market or where my
product is at.”
Yes, you will probably make some customers angry. No, you’re
probably not going to crush your business—and you can always
roll back pricing if you find out it’s a mistake. It’s possible to
raise your prices higher than what the market will bear. But more
founders err on the low side than the high side regarding pricing.
When you talk to customers who are churning or prospects who

aren’t converting, you’ll inevitably hear from someone that your
product is too expensive.
Dropping your price is rarely the answer when it comes to prod-

uct-market fit because pricing is such a huge lever in the business.
But those customers might still be right.
It may be that you are overcharging for what your product current-
ly does. When I launched Drip, it was just an email capture widget
that sent out an email sequence. I charged $49 a month and kept
getting feedback that it was too expensive.
I could have dropped the price to $19 or $29 a month, but I didn’t
want to build a cheap tool. I wanted to build a tool that was an
easy sell at $49 a month.
I call that “aspirational pricing,” and I used it to push me to keep

improving the tool until it was worth what I wanted to charge for it.
A lot of founders underprice their products because they don’t

want the rejection. They don’t want to hear people complain.
Some people are going to complain about your pricing no matter

what—but it’s incredibly tough to build a business when you’re
underpriced. Instead of dropping your price, one approach is to
figure out what you need to build to make your tool worth what
you are charging.
How to Raise Prices
That said, there are ways to raise your prices that cause the least
amount of shock to your customers.
PRICING | 81
One simple option is to decrease the value metric of your plans

but keep the prices the same. If today, customers get 3,000 sub-
scribers for $49, switch it so tomorrow they get 2,500. Your pric-
ing in dollars stays the same, but people need to upgrade to higher
tiers faster.
Another option is to hide your lowest pricing tier on your pricing

page. This should be relatively quick to hide, and you’ll see the
impact of sign-ups relatively quickly.
The typical way to raise prices is to increase them across the

board and watch your numbers to see how new customers react.
Or you could multiply your pricing by 10 to go after a new segment

in your market. One of the first batches of TinySeed companies
was a SaaS tool for interior design teams called Gather (Gather-
It.co). It wasn’t growing as fast as it could in its early days for a
couple of reasons. First, it was catering to one- and two-person
architect and interior design shops, which are naturally price-sen-
sitive. Second, its price point was only $29 a month.
It decided to pivot and go upmarket. This was a gamble because

the features a 40- or 50-person architecture or interior design
firm needs are much different than small shops, and Gather had
to build to get there.
It took nearly 18 months of painful work, but eventually it was

able to double its prices, then double them again. It churned out
lower-end customers as it landed bigger ones, and now it charges
ten times what it did at the beginning.
Most of the time, your price increases won’t be as drastic as Gath-

er’s. We’ll talk about the logistics of raising prices in a minute, but
first I want to discuss two potential mindsets when raising them.
Experiment vs. Certainty

There have been times when I raised prices because I knew we
had to do it, and I didn’t care if it hurt our funnel in the short term.
We were going to raise prices, and things would have had to go
pretty far sideways for me to roll it back.
But there have been other times when I was less certain, and I
proceeded with a bit more caution.
Knowing which time is which is a question for your “founder gut.”

If you’re not certain, treat it like an experiment. Make the change
one you can undo quickly if you need to, then watch it painstak-
ingly every day.
Give it a couple of weeks, or maybe a month, and keep asking your-

self: What are the results? How many people are coming through
my funnel? What does my trial-to-paid look like?
This is what we call the “poor person’s split test.” In a perfect world,
you’d split test the pricing evenly at the same time—but that’s diffi-
cult for a SaaS company. I only know of one that’s done it.
Zapier didn’t publish pricing on its public page. When you clicked
the sign-up button, it was forked within the app so that half saw
one price and half saw the other. That gave Zapier great data, but
for the rest of us, monitoring cohorts of sign-ups at the new price
will have to do.
If you know for certain that you’re going to raise prices, make
this a marketable event—especially if you’ll be grandfathering in
current users at the old rate. Announce the price increase ahead
of time and let the world know that if they’ve been meaning to try
your app, now’s a good time. If they sign up for a trial now, they’ll
be grandfathered in at the old price.
PRICING | 83
Grandfathering Existing Customers

If you’re going to raise prices on your pricing page, what do you
do with your existing customers? Do they keep the old pricing?
Do you upgrade everyone?
In a perfect world, you’d just upgrade everyone. After all, if you

have a restaurant and change your prices, everyone who shows up
next week to get a burger and fries pays the same new price. With
SaaS, though, it’s a bit trickier.
Why consider grandfathering old customers?
• If you’re worried people might go to a competitor

• If you’re worried thousands of customers will write in angri-
ly to your support people
• If you’re worried you’ll damage your brand and your reputa-
tion
How should you decide?
Use Rob’s Rule of 10: If raising prices for existing customers will
not grow MRR by at least 10% (ideally more), it’s rarely worth
considering.
The amount of headache, support burden, brand damage, and po-

tential churn is so onerous that if you’re only going to grow by a
few percentage points, it’s best just to grandfather those users in.
On the other hand, if you’re changing your pricing significantly—

say, from $9 a month to $99 a month, it’s not economically viable
to grandfather the existing customers. Prepare yourself for the
onslaught of emails as your lower-paying customers churn out to
make way for higher-paying ones.
Here are a couple of tips:

• Never promise to grandfather customers for life. Next time

you raise prices, you might not want to. Or you might sell the
company and the new owners don’t want to honor that deal.
Lifetime deals are for one-time sale stuff, not for SaaS.
• Enterprise customers expect annual increases of 5% to 10%
as standard, so build that into your contracts.
Raising Prices Well

If you’re not going to grandfather in existing customers, give your-
self a comfortable amount of time between announcing price in-
creases and actually implementing them.
I recommend two to four months, depending on how difficult it

is to switch away from your product. Too short, and people will
feel trapped. Too long, and when the price hike does come around
they’ll have forgotten and think you’re raising prices again.
One thing you never want to do is raise prices on existing custom-

ers without sending notice. That’s a recipe for angry customers.
When you announce a price increase, use this template:
1. Set the stage for the value your product offers (i.e., we’ve
been around for some time, we’ve become a trusted provid-
er in this space, etc.).
2. “We’re changing our pricing.” Let them know up front
what’s going on.
3. Provide high-level justification about why you’re changing
your pricing (i.e., we’ve added tons more value, we’re in a
completely different space than when we launched, we’re
expanding our features, etc.).
4. (Optional) Offer more specifics about whom it impacts,
when price increases will go into effect, etc.
5. (Optional) Provide more justification if you feel it’s necessary.
6. “Reach out with questions.” Let them know your doors are
open for questions, comments, and feedback.
PRICING | 85
For a solid example, check out CartHook’s announcement of its

price increase from a few years ago (bit.ly/carthookpricing). Its
announcement covers each of these six basics really well.
Another great example of how to raise your prices is Gymdesk,

a TinySeed company that provides online management software
for fitness and wellness businesses.
Founder Eran Galperin knew his product was underpriced at the

beginning of 2021. In launching the company six years prior, Eran
had priced Gymdesk below his competitors. No longer wanting a
reputation as a budget product, Eran decided to raise Gymdesk’s
pricing considerably, in some cases by more than 50%.
In an interview for the MicroConf YouTube channel, Eran told me

about the emotional aspect of raising his prices. He’d built a per-
sonal relationship with many of his small business customers and
knew how thin their margins were. He wrote an email explaining
the price increase, then opted to grandfather in old customers
at their original rate for a few months before moving them to a
discounted plan.
“Most of our customers responded very positively to that,” Eran

recalled. “Some of them even wrote back and said, ‘Congrats, you
deserve a raise.’”
In the end, only a few of Gymdesk’s more than 600 customers left
as a result of the price increase. The company’s MRR increased
by 25%, MRR growth went up by around 70%, and its ARPA has
continued to climb.
With the increased revenue, Eran was able to be more aggressive

with marketing and hire four full-time team members to grow his
one-person operation.
Marketing
How Do I Find More Customers?
There’s a harmful myth among aspiring founders that you can

build a great company simply by building a great product. Do that,
and it will “sell itself.”
This myth is perpetuated by successful companies—think of Ap-

ple or Basecamp—where it appears their products do sell them-
selves. But really, they are so good at marketing that it’s invisible
to most people. Think about it. Many of us tune into Apple’s prod-
uct announcement live streams, which are essentially hour-long
commercials.
Yes, you can get lucky with early adopters and word of mouth.
Some people do. But the vast majority of the time, if you’re going to
be successful, you have to build a good product and market it well.
And if you’re going to grow your SaaS business to seven figures,

you have to figure out how to spread the word without pouring
millions of venture capital dollars into glossy launch parties and

billboard ad campaigns.
As a founder with a technical background, I understand the ten-

dency to shy away from marketing and sales, hoping the business
will catch on based solely on the virtues of the product.
I did that for years until I realized the only way to reliably build a
business was to get good at marketing.
I know for a fact marketing is a huge area of concern for most SaaS
startups because when we ask in the TinySeed application what a
company’s biggest hurdle is, the vast majority say they need more
customers.
Many people can write code. But creating a product people want
and actually selling it is relatively hard. To build a seven- or eight-fig-
ure SaaS business, you need to develop your marketing tool belt.
Can’t I Just Hire Someone for That?

At some point, you’ll reach the stage where you have enough reve-
nue to hire a marketer. But you’ll still need to learn marketing well
enough to get to that place.
Marketing strategy is hard (and expensive) to hire out, and you’ll

need to know enough about marketing to understand whether or
not the marketer you hired is doing anything useful. Marketing
strategy is all about deciding which approaches to try in which
order, tracking the return on investment (ROI) of those approach-
es, and building on them to grow the business. It’s a difficult role
to outsource.
Once you have a marketing strategy, it’s possible to hire someone

to implement each piece of it. You can hire a freelancer or agency
that specializes in pay-per-click (PPC) or SEO. You can hire copy-
writers, social media managers, and graphic designers.
MARKETING | 89
But at a minimum, founders need to learn SaaS marketing strat-

egy or risk losing control of and visibility into a crucial part of
their business.
Let’s take a quick look at the basics, then talk about scaling from
there.
Marketing Funnels
A marketing funnel describes the stages of your customers’ jour-

ney from the moment they learn about your business to the point
at which they become paying customers.
The most common marketing funnels in SaaS are high-touch,

low-touch, and dual. Which one is right for your product? That
depends on your market, pricing, and customer base.
As Aaron Kassover, founder of AgentMethods, told me: “ It seems

like most SaaS founders want to go low-touch because that’s what we
prefer as customers. We hate having to talk to a salesperson before
getting our hands on a product. But most markets prefer high-touch.
Switching from low- to high-touch was really hard for me because it
wasn’t what I wanted, but it’s what propelled us to product-market
fit. How you sell is as important as what you sell.”
High-Touch Funnel
A high-touch funnel gives your customers a lot of human interac-
tion as they make their buying decision.
FIRST
TOUCHPOINT
EMAIL OPT-IN
(OPTIONAL)
NURTURING
DEMO
PURCHASE
DECISION
EXPANSION
REFERRALS
For example, a prospect might first become aware of your product

because they stopped by your booth at a trade show and met with
you or a member of your sales team. They volunteer their contact
info and become a lead.
Leads aren’t necessarily going to buy anything. They might have

just been interested in the whitepaper or webinar you were offer-
ing. A lead becomes an opportunity when they express interest in
your product.
For example, when someone from your sales team follows up with
an offer to jump on a sales demo, they say yes. If the demo goes
MARKETING | 91
smoothly, that opportunity might sign up to become a new cus-

tomer, who usually gets passed to a customer success represen-
tative to set up their account.
Obviously, the higher touch your marketing funnel is, the more
money you need to make from each customer. High-touch funnels
work best for companies that charge a minimum of $500 a month
and focus on customers who can afford that price point.
Higher-touch funnels also tend to focus more on outbound market-

ing tactics like cold-calling, cold-emailing, and LinkedIn outreach.
The percentage of conversions you’ll have with a high-touch fun-

nel will vary depending on your industry and pricing. A product
with a $100,000 annual contract value (ACV) will have a very
different close rate than a product with a $3,000 ACV.
You can do a lot to improve your funnel metrics by bringing in

qualified leads, educating them before they become opportuni-
ties, and closing the sale during demos. In the pre-acquisition
days of Drip, we had a close rate of 25% to 35% from demo to
customer, and most were one-call closes.
Low-Touch Funnel
A low-touch or no-touch funnel works when you have a wide mar-
ket and a low-priced product.
WEBSITE
VISIT
EMAIL OPT-IN
(OPTIONAL)
NURTURING
FREE TRIAL
PURCHASE
EXPANSION
REFERRALS
In this model, you set up a large funnel where leads come in on

their own and are led automatically through a sales process with-
out much input from you or your team.
For example, your prospects become aware of your image-editing

app through ads on Facebook and sign up for your free seven-day
trial without talking to someone on your team. After the trial is
up, some percentage automatically converts to customers on your
$19-a-month paid tier.
MARKETING | 93
Imagine your basic sales funnel:
• You drive traffic through content marketing, SEO, appearing

on a podcast, etc.
• They hit your website to check out your product.
• They sign up for a trial or request a demo.
• They use your software during a trial period, then convert to
paying customers.
• They stick around as happy, satisfied customers.
• They eventually upgrade their account or refer additional
people to your product.
Because you’re not spending as much energy qualifying leads,

you’ll see lower conversion rates and usually higher churn—
but because your low-touch funnel doesn’t require as much
hand-holding, your cost to acquire a customer and the cost to sell
to that customer are very low.
A low-touch funnel tends to be a volume game. It is highly focused

on inbound marketing tactics like SEO, PPC ads, content market-
ing, and influencer marketing.
Rules of thumb for funnel metrics change over time, so instead

of including them here I have a page on this book’s compan-
ion website where you can see my most up-to-date numbers:
saasplaybook.com.
SaaS Cheat Code: Dual Funnels

Another Cheat Code is something I call a dual funnel, which
targets both a wide audience at a low price point and a pre-
mium or enterprise audience at a high price point.
This works well because the wide, low-touch funnel allows

you to bring in customers who can help your product spread

via word of mouth. That brand recognition can feed your
high-touch, high-priced funnel.
One example is SignWell, an e-signature app with a wide, low-

touch funnel bringing in professionals and small businesses
who only need a few documents signed. On the flip side, that
same e-signature app might target mortgage brokers who
need 5,000 or 10,000 documents signed each month.
What often happens in the case of a dual funnel is that in

the early days the low-touch funnel brings in the majori-
ty of the revenue. As you build your user base and bring in
more high-end users, they will become a higher percentage
of your revenue base.
At that point, when you’ve developed a strong brand, you

can build the business on both fronts, and your growth will
be dramatically accelerated.
What If My Funnel Isn’t Working?

You’ll know your funnel isn’t working if your numbers at any phase
are below the typical rule-of-thumb ranges. Customers and pros-
pects are spilling out of your funnel somewhere, and you need to
fix that leak before you start pouring more money into marketing.
Start by examining the metrics at the bottom of that funnel, then

work your way up to see where the problems are.
• How happy are your customers?

• How long do they stick around?
• How many of your trials convert to paid customers?
• How many website visitors sign up for a trial?
• How well does each traffic source earn you website visitors?
MARKETING | 95
If your customers are frustrated and churning out after a few

months, it doesn’t matter how many people you’re sending to your
website. Everything at the top of the funnel is a vanity metric when
the bottom of your funnel isn’t healthy.
Keep in mind that you need to have enough traffic coming through
your funnel that reliable patterns appear. If you’re only tracking a
handful of customers, you won’t have enough data to see notice-
able patterns.
How you fix your funnel depends on where the problem exists.
Starting at the bottom of the funnel:
• Are people churning out in high numbers after paying for a

month or two? You likely have a problem with onboarding or
product-market fit.
• Are people trying your product, but not many are convert-
ing to paid? This could be a problem with your onboarding
(you’re not getting them to experience value quickly enough)
or your sales process.
• Do you have a lot of website traffic, but no one is signing up
for your trial? You probably have an issue with your value
proposition, marketing copy, or positioning.
Having an outside perspective can be invaluable in helping you

troubleshoot the problems in your funnel. Ask members of your
mastermind for help, reach out to an advisor or mentor, or even
consider hiring a consultant to help plug the leaks before you
spend too much time and money bringing in new leads.
Business-to-Business SaaS Marketing Approaches
Diving into the implementation details of marketing approach-

es is beyond the scope of this book (I’ll leave that to books like
Traction by Gabriel Weinberg and Hacking Growth by Sean Ellis
and Morgan Brown). But I want to include a list of the 20 most
common business-to-business (B2B) SaaS marketing approaches

so you have an idea of where to start.
Then in the next section, we’ll dive into my framework for filtering
and prioritizing marketing approaches to find the best options for
your particular situation.
The “Big 5” SaaS Marketing Approaches

I call these the big 5 because they are the most common marketing
approaches that work for B2B SaaS companies.
SEO. SEO is not just about Google. Even though it’s the largest
search engine in the world, there are many more search engines
people use and which might be best suited to your product.
For example, YouTube is number two, and Amazon is in the top

five. There’s the iOS App Store, the WordPress Plugin Repository,
the Shopify App Store, the Adobe App Store, and hundreds of oth-
er places worth learning how to get your product to rank. Some of
these in particular might be where your ideal customer is searching
for your solution and have the benefit of being fairly easy to rank.
With Drip, we built a couple of WordPress plugins and ranked

well for email marketing-related terms in the WordPress Plugin
Repository.
I’ve seen founders build Chrome plugins to rank in the Chrome

Web Store. Or write a Kindle book using the expertise they devel-
oped running their company to rank in Amazon’s search.
PPC Advertising. PPC advertising is the tried-and-true, usually

expensive way to drive traffic quickly. This is where you buy traffic
through keywords on Google (AdWords) or in platform-specific
marketplaces like Facebook, Instagram, YouTube, Amazon, Cap-
terra, LinkedIn, and many others.
MARKETING | 97
Cold Outreach. This is outreach to prospective customers directly

via email, phone, LinkedIn, or DMs on social media. This works
best when you can get a list of businesses that need what you’ve
built and can find a signal that they’re at a point in time where
they need your product.
For example, at Drip we knew Infusionsoft customers would be

looking at new options as their one-year contract came up, so we
got a list and pinged them about eight months after their contract
started to see if they were interested in exploring other options.
Integration Marketing. This is one of the only marketing ap-

proaches that also serves your current customers because it im-
proves your product by adding more features through integration
with a partner.
To come up with ideas, think about what steps happen before or

after your product. Contact a potential partner and outline what
you can offer them by integrating with their platform. Don’t build
the integration unless you both agree to promote it. Promotion
can include:
• Publishing a blog post

• Emailing both partners’ email lists
• Posting a tweet
• Writing a knowledge base article
• Mentioning your company in-app
• Hosting a webinar
• Listing products in an add-on marketplace
Approach this in an agile way. Start by building a minimum via-

ble integration. Maybe the first version of the integration doesn’t
have gold-plated authentication, and instead users have to paste in
their keys. However, the first version should be enough to launch
the integration and promote it to see if it brings in new leads.
Then, determine which integrations your users are using the most
and circle back to release another version that maybe adds OAuth
or a simpler integration.
The results of these integration marketing efforts can be long-last-

ing because many times the articles, forum posts, and other as-
sets produced by the company you are partnering with will be
high-converting and produce leads for years.
A related marketing approach is pursuing partnerships. These are

similar to integrations, but you can execute them without writing
code. Many partnerships are simply a reciprocated promotion of
the other product to your audience using one or more of the pro-
motional pieces we discussed.
Content Marketing. Although it is often coupled with SEO, con-

tent marketing relies solely on virality or on building an audience
slowly over time, without the long-term benefit of organic search.
This includes writing blog posts you hope will make it to the top
of social news sites like Hacker News and Reddit and building
a media brand alongside your product (something I recommend
only for very well-funded companies). It also includes producing
content to educate people at different steps in their funnel whom
you already have permission to contact.
Most people think of blog posts when you mention content mar-
keting. However, content can include books, ebooks, audio (think
podcasts), video (think YouTube), or even in-person courses that
are given away to bring links, traffic, and leads and build credibility.
Most founders start by producing the content themselves, then

hire people to help with production later.
Other (Still Important) Marketing Approaches

Amazing companies have been built on these approaches, but
MARKETING | 99
your ability to use each one depends on the availability in your

niche and the cost to execute compared to your ACVs.
Affiliate Marketing. Affiliate marketing is a common way to tap

into established audiences in your industry. You’ll typically pay
between 10% and 30% commission to the affiliate. If you’re selling
to large companies, affiliates are usually replaced with resellers.
This is almost more of a business development approach than

a marketing one because you typically have to build or have a
relationship with the influencers who have an audience. Setting
up an affiliate account and posting a link isn’t enough to get your
affiliate marketing program up and running.
The danger of affiliate marketing is how much affiliate payouts

can eat into your revenue.
At scale, most SaaS companies have net margins between 30% and
50%, where a 50% margin is impressive. If you’re giving away 30%
of your top line to affiliates, you can have an incredible revenue
graph but have the least profitable SaaS application on the block.
One way to be cautious with your commission rates is, for exam-
ple, to give 20% to most affiliates and provide higher rates (say,
30%) to premium affiliates who have large audiences.
In-Person Events and Trade Shows. Events and trade shows can
be a fantastic marketing approach, depending on your industry.
Maybe your product serves an industry where the majority of

business is still done in person at conferences and trade shows. To
earn buyer trust, you need to meet them where they are. One com-
pany I know of is marketing to city governments, and the founder
has had success meeting prospective clients at in-person events.
Attending an event may also be a brand-building exercise where

you immerse yourself in the community and establish strong re-

lationships with your customers.
Whatever the reason, take a hard look at your ROI. Will landing one
enterprise deal give you a return on the cost (in money and time) of
attending the event? Then it could be worth it. But if you have to sign
up 20 new customers to make your money back, you either need to
raise your prices or in-person events are not a fit for your business.
Free Tools (i.e., Engineering as Marketing). Usually tied in with

SEO, this approach involves building a software tool you give
away for free to generate traffic to whom you pitch your main
product. Examples include HubSpot’s famous website grader and
SignWell’s e-signature creator.
Hangouts. These are gathering places like online forums, private

Slack groups, Facebook groups, and subreddits.
Q&A Sites. This approach focuses on answering questions on

Quora, Stack Exchange, and other relevant Q&A sites.
Virality. Make sharing your product with other potential users

part of your product’s experience. (We discuss virality in the met-
rics chapter when we look at my 3 High/3 Low Framework.)
Other People’s Audiences. This involves putting yourself in front

of established audiences through guest posts, podcast tours, and
YouTube tours.
Daily Deal Sites. These sites promote SaaS products and other
software tools at deep discounts. For example, AppSumo and
PitchGround.
Launch Sites. These sites curate and showcase new SaaS and soft-
ware products for clients to discover. They rate them by a voting
system. For example, Product Hunt and BetaList.
MARKETING | 101
Lesser-Used Approaches
These are tactics used by such a small percentage of mostly boot-
strapped B2B SaaS companies that we won’t focus on them in
subsequent sections (but I want to list them here because they
might be valuable in certain situations).
Building an Audience/Community/Movement. Five percent of

companies funded by my SaaS accelerator, TinySeed, built an au-
dience before they launched. And only a handful more, at most,
build one as they scale.
Display Ads. This is buying ads based on a cost per impression

rather than cost per click.
Viral/Stunt Marketing. Stunt marketing works for Red Bull, but

it’s expensive, and the brand-building that results doesn’t have a
measurable ROI.
Speaking Engagements. Although it is not a very scalable mar-

keting approach, putting yourself on stage as an expert in front of
200 or 2,000 potential customers can provide solid ROI and will
inevitably strengthen your brand.
PR. PR can help build buzz about your product in the media (ei-
ther mainstream press or news sites specific to your industry).
Offline Ads. These include billboards, bus stop benches, and ra-
dio ads.
How Do I Know Which Marketing Approaches Fit My Business?
As we saw in the previous section, there are many ways to market

your product. And a big challenge we face as founders is prior-
itizing which approaches to try. This section discusses how to
filter and prioritize marketing approaches to find the handful that
are likely to work best for your business. Here’s the framework I
recommend for this:
The Three Factor Framework

The three factors of a marketing approach are speed, cost, and
scalability. You need to take all three into account when choosing
marketing approaches.
Speed. How long does it take for a marketing approach to start

returning results? Weeks? Months? Years? How long can you af-
ford to spend money and time on a marketing approach before
you start to see new customers?
In the early days, faster approaches are the key to getting initial
customers. As your product matures, you can afford to spend
more time cultivating slower marketing approaches.
Ideally, you should be working on a fast and a slow approach at the

same time. If you focus only on fast tactics, you’ll always be chas-
ing new leads. If you focus only on slow approaches, you’ll end
up in a wasteland while you wait for your efforts to show results.
For example, you can get relatively fast results with cold outreach
while building organic search results that can sustain you in the
long term.
Cost. How much will it cost? In the early days, you’ll want to think in
terms of hard costs—dollars and cents—instead of your own time.
The higher your ACV, the more money you’ll have to invest in
marketing. As you scale your product and raise prices, you'll no-
tice that more marketing approaches become available.
Scalability. Can you scale this approach to reach more people?
Many marketing approaches in the low-scalability camp are ei-

ther one-time events like posting to Product Hunt or require a lot
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of time, like answering questions on Quora.
On the other hand, if there is enough search intent for your tool
and you can dial in search and PPC ads, you can often keep turning
that dial up to reach more people without spending a lot more time.
Which Approach Works Best at Your Price Point?

It’s challenging to create a concrete list of which approaches work
best at what price point because many of the costs vary widely
depending on the space you’re in, whether the founder is running
the effort, or whether you’re trying to hire outside staff to assist.
But I’ve put together this list to serve as a starting point.
Note that any approach listed as a fit for a particular ACV can also
be used in the higher ACV tiers.
High ACV (~$25,000 and up)
• Cold-calling (fast, scalable)

• In-person events (moderately fast, less scalable)
• PR (moderately fast, less scalable)
• Offline ads (moderately fast, scalable)
• Display ads (fast, scalable)
Medium ACV (~$7,500 and up)
• Cold-email (fast, scalable)

• PPC (depends on cost; fast, scalable)
• Integration marketing (slower, somewhat scalable)
• Free tools (you might get lucky and have it work with low
ACV; slow, scalable)
• Hangouts (fast, less scalable)
• Q&A sites (fast, less scalable)
Low ACV
• Content marketing (moderately fast, scalable)

• SEO (slow, scalable)
• Virality (slow, scalable)
• Affiliate marketing (only if founder-managed, otherwise
move to Medium ACV; moderately fast, scalable)
• Partnerships (only if founder-managed, otherwise move to
Medium ACV; can sometimes be fast, somewhat scalable)
• Other peoples’ audiences (fast, less scalable)
• Launch sites (fast, less scalable)
• Daily deal sites (fast, less scalable)
Prioritizing Marketing Approaches

Once you’ve narrowed down your list of potential approaches,
you can use any prioritization framework to sort them. I’ve found
the ICE framework helpful for this purpose. ICE stands for:
• Impact: If this works, how big will the potential impact be?
• Confidence: How likely is this to succeed?
• Ease of implementation: How easy is this to execute?
ICE is often used to prioritize feature development, but it’s also a

good tool for prioritizing marketing.
To do this, list potential approaches in a spreadsheet and rate

them on a scale of one through 10 for each of the above charac-
teristics. I’ve seen people use several methods to get the score.
1. Score = Impact x Confidence x Ease: This gives you a score

with an exponential impact. In other words, the higher you
rate any one area, the more confident you need to be.
2. Score = (Impact + Confidence + Ease)/3: This gives you an
average of these three scores.
MARKETING | 105
However you rank those facets, using the ICE framework is a way
to get your approaches into a spreadsheet and figure out which are
the best to start with. You can list things by high-level approach-
es (content marketing, PPC) or by individual tactics (ebook, blog
post, guest posting, YouTube ads, Facebook ads).
You can also start by ranking high-level approaches, then start a

new tab in the spreadsheet to break down the top approaches by
individual tactics. Then tackle the highest-rated approaches and
tactics first.
Tips for Running Marketing Experiments

Once you have prioritized the marketing approaches that best fit
your company, it’s time to put them into practice. Every change
you try in your marketing strategy will be experimental until you
verify that it delivers the results you are aiming for. Before you
start running your first experiment, keep these three tips in mind.
Keep a Marketing Changelog. I recommend keeping a marketing

changelog, a chronological record of everything you try, even small
things like updating marketing copy on your website. At some
point in the future, if you realize trial conversions dropped 14 days
ago, you can refer back to your changelog to see how you broke it.
Measure. One mistake I see founders make at this stage is that

they don’t measure the effectiveness of each channel. They buy ads
but don’t track how much it costs to acquire each new customer
based on that ad. They do SEO but don’t attribute where the traffic
is coming from.
Track as you experiment, and don’t rely on your gut instinct of

whether a marketing approach is working.
You’ll want to track your cost (in dollars and time) and the results.
Compare the results of each marketing approach with your initial
rating in the ICE framework. How close were you in your original
estimation? What assumptions did you start with, and how cor-
rect were they? What issues did you uncover? What did you learn?
This data will help you hone your founder gut when choosing your
next marketing approaches and tactics with the ICE framework.
Don’t Try Too Much at Once. The approaches that are best suited
for your business will vary, but there is one thing that tends to
work well: doubling down on a successful approach rather than
spreading your energy all over the place.
You don’t need to try dozens of marketing approaches. I’ve seen

SaaS companies grow to seven and eight figures by picking just
one or two marketing channels and scaling them well, whether
that’s content marketing, SEO, integration marketing, PPC, dis-
play, outbound, or something else.
You want to start by testing one approach that works quickly

(e.g., cold outreach) and one that works slowly (e.g., Google SEO).
Assuming you have the resources to tackle both, this allows for
short-term and long-term growth. Obviously, the more resources
you have, the faster you can move.
Getting a Head Start On Marketing Experiments

Solving the puzzle of how to reach your audience can be tough
if you’re a trailblazer. But if you’re fighting for the attention of a
defined audience in an established market, here’s a way to get a
head start: Talk to the people who are already marketing to them.
If you’ve built a tool for developers, you can take a look at other
tools your audience would likely use. If they’re not direct competi-
tors, contact the founder and ask for a quick call. Say, “I know you
market to developers. Could you spend 30 minutes chatting with
me about what’s working for you?”
Obviously, if they’re a competitor they’re not going to tell you

MARKETING | 107
their marketing secrets. But I’ve found that if they have a com-
plementary or unrelated tool, they’re often happy to help. That
conversation might even turn into a partnership later.
You can also learn from your competitors. Watch how they’re
talking to your shared audience (with the caveat that just because
they’re marketing a certain way doesn’t mean they know what
they’re doing).
You can also talk to their past employees to get the inside scoop.
I’ve reached out to former employees of competitors on LinkedIn
to say, “I’ve built a competitor to your former employer, and I’d
love to chat about what’s working in our industry when it comes
to marketing.” I make it clear they don’t have to tell me any secrets
they don’t feel comfortable sharing, and I’ve even offered to pay
them for their time.
Salespeople especially love to network—and talk. They’re often

a fount of knowledge about what sales brochures look like, how
the marketing team works, and what your audience is looking for.
A final approach is to interview your competitors’ founders and

marketers. It’s surprising how much you can learn by listening to
a founder talk through their approach on a podcast.
Scaling Marketing the Smart Way

One of the biggest mistakes I see venture-funded companies
make is raising buckets of money, then dumping it into marketing
before they have product-market fit. They’re driving a bunch of
people to a product that few want or are willing to pay for.
It’s not sustainable, and good marketing only makes a suboptimal

product fail faster.
If you’re a bootstrapper, you can’t afford to make this mistake.

Before you start pouring money into finding more leads, you’ll
want to do three things:
1. Make sure you have reasonably strong product-market fit.

2. Make sure your conversion, churn, and other bottom-of-
the-funnel numbers are good.
3. Experiment to find the most effective marketing approach
for your product.
What about Word Of Mouth Marketing?

You might have noticed that I left a big marketing channel off the
above list: word of mouth.
Whenever I ask an entrepreneur where most of their leads are

coming from and they say word of mouth, I like to keep digging.
Usually, the real answer is that they don’t know where customers
are coming from.
Which is pretty dang risky.
Word of mouth comes when you start to have an identifiable

brand—which generally happens once you get to about seven fig-
ures of revenue. You’ll know you’re there when the conversation
moves from people talking about “marketing automation” to men-
tioning two or three players in the space, and you are one of them.
With my SaaS company, Drip, we had excellent word of mouth, but

I could see what percentage of our new users came from integra-
tions, organic search traffic, podcasts, and other channels. With
Drip, as far as we could tell, word of mouth drove 15% to 25% of
new users.
The takeaway is that word of mouth does not account for as much
as you think it does—which means you need to get to work figur-
ing out where your traffic is actually coming from.
If you don’t know where your customers are coming from, how
MARKETING | 109
can you find more of them? How can you figure out which of your
marketing experiments are working? How can you dial in your
marketing budget better? How can you know which levers to
move to scale your business?
It’s easy to figure out where people from your PPC ads and SEO
are coming from. It’s much harder to figure out where direct traffic
is coming from. You might have gone on a podcast and mentioned
the URL. Someone might have read about it in a book, newspaper,
or magazine. They might be on a different device than the one on
which they originally heard about your product, so the referral
link is cleared. This could be a returning visit.
You’re not going to be able to attribute 100% of traffic, but you

should try; any attribution is better than none. One simple ap-
proach is to ask customers how they first heard about you or ask
where they heard about you right before they signed up. Both data
points are helpful.
Another clever approach is the approach Ruben Gamez, founder

of SignWell, takes. He told me, “When someone first visits your
website, set a cookie with their referral source and another for the
landing page. Then save those to your database when they sign
up. You can also send them to Stripe, ChartMogul, Mixpanel, etc.
for easy segmenting in those tools.”
How Should I Structure Sales Demos?
(I know that sales isn’t marketing, but I’ve included it in this section
for those of you with high-touch funnels. If you have a low-touch
funnel, you can skip this section and move on to the next chapter.)
I’m not a great salesperson. But even if you don’t think of yourself
as a salesperson, every founder needs to be able to sell—whether
you’re talking to potential customers, trying to raise investment,
or even just “selling” the company’s vision to new hires.
Many founders I talk to shy away from sales because they have
negative perceptions. They think of the high-pressure salesper-
son at the car lot or the bored upsell from the customer service
rep at their internet provider.
With B2B SaaS, sales shouldn’t be sleazy. Instead, it should be an

educational conversation.
My TinySeed cofounder Einar Vollset says, When selling SaaS,

think of yourself as an unpaid expert who’s helping the prospect solve
their problem using software.
You’re not trying to force a fit between your software and your pros-
pect’s problem. You’re putting on your consultant hat to help your
prospect define their problem and come up with a good solution.
Thinking of yourself as an expert problem solver first sets a good

tone for sales demos. When I used to do sales demos, I would
introduce myself as the founder and say, “I’m not trying to talk
you into anything. I’d just love to show you our tool and get your
feedback on how it might fit your needs.”
If your tool doesn’t fit their needs, it’s far better to let that pros-
pect move on (maybe with a recommendation for a tool that’s a
better fit) than to pressure them into signing up. Don’t waste time
or money onboarding someone who’s just going to churn out after
a month or two.
Qualify before You Demo

There are few things worse than showing up to a sales call to
find out the person doesn’t have the budget or the need for your
product. As someone with intimate knowledge of customers who
buy your software, you should have a good idea of the common
threads that link them.
Asking even a few questions about budget, timeline, and the prob-
MARKETING | 111
lem they are trying to solve can be a window into whether it’s
worth your time to jump on a demo.
Have a Script
Even though as the founder you can run a demo with your eyes
closed, if you have a standard script, you are always ready to train
someone new to take over sales.
Say No to People Who Aren’t a Fit

If you know someone will not get value from your product or be-
lieve they will be a problem to support, do not be afraid to let them
know you don’t think they are a fit and recommend competing
tools. If you are qualifying people in advance of your demo, this
shouldn’t be something you have to do often, but forcing a sale
only to have a customer churn out a few months later will waste
a lot of resources.
Follow Up
It’s amazing how many salespeople don’t bother following up.
People are busy, and following up until someone tells you they are
no longer interested is the process that good salespeople follow.
If Possible, Take Payment over the Phone

Giving a demo and hoping the person signs up through the web-
site is not a great way to close a deal. Not every SaaS application
is a one-call close, but if yours is, set up their account at the end
of your call, including taking their payment info over the phone.
Ask the Right Questions

Here are good questions to ask during sales demos:
What Problem Are You Looking to Solve? Your demo is not a

product tour; it’s proof you can solve their problem. Focus on the
customer’s pain and how you can fix that.
When I was selling Drip and a prospect said, “I want to be able

to email my website visitors, prospects, and customers different

content,” it was an easy demo.
Sometimes your prospect may be unable to clearly articulate the

problem they’re trying to solve. Or they may come in thinking
they’re trying to solve one problem when they actually need help
with something else. The more conversations you have with pros-
pects, the better you’ll be at consulting with them.
How Are You Solving That Problem Today? Finding out what oth-
er tools and software they’re currently using to solve their prob-
lem helps you frame your solution relative to what they’re already
familiar with.
For example, if they’re using Mailchimp, I could compare Drip’s

features to what they already know. If they say Infusionsoft, I know
they’re used to a more expensive and clunkier tool. If they say
they have an Access database and they’re sending emails through
a hacked-together system, then I could start by talking about the
benefit of using an email service provider at all.
How Big Is Your Organization? Are they a solopreneur with 500

people on their email list? A company with a few dozen employ-
ees? A Fortune 1000 company with an intense enterprise sales
process?
Knowing this can help you understand how valuable this sale is
to your company and how much value you’ll be able to provide to
them.
How Sophisticated Is Their Understanding of This Category? Try

to ask tactfully how much expertise they have so you can speak
to their level. Again, when you’re thinking like an expert problem
solver, your goal will be to educate your prospect. They should
walk out of the sales demo better able to do their job—regardless
of whether your product was a good fit.
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One way to ask about their expertise is by going deeper into how
they’re using other tools. For example, if a prospect tells me they’re
using Mailchimp, I could gauge their sophistication by asking if
they’ve used any of the automation features.
What’s the Decision-Making Process? Toward the end of a sales

demo, it’s good to get a sense of who else needs to weigh in on
this decision. Are you talking to the decision maker? Does your
prospect need to go back to a group? Is there any collateral you
can provide, like a PDF or a guide, that will help them champion
your product to their organization?
Talk through the timeline of when you can expect to hear from
them, when you should follow up, etc. Then, when the demo’s
over, make sure they’re in some type of CRM so that you follow
up at the right time.
Demonstrate How Your Tool Solves the Problem

Thinking of yourself as a problem solver first helps solve another
common issue I see with sales demos. Instead of giving prospects
a painfully detailed explanation of every feature, only show them
the relevant parts.
Software demos are not tours of your product. You don’t need to
take a deep dive into all your settings and obscure integrations, no
matter how proud you are of them. Instead, think of a sales demo
less as a presentation and more as a conversation. You should be
asking questions and listening more than talking.
For more on sales demos, I recommend the book Product Demos

That Sell: How to Deliver Winning SaaS Demos by Steli Efti.
A Hack to Lower Sales Effort

Sales demos are pretty high-touch, which means they should be
reserved for customers who are going to pay you enough to be
worth it.
You need a good process for qualifying prospects before they get
to you so you’re not stuck doing demos with people who will pay
you $30 a month or are the wrong fit for your product.
Dialing in your positioning, website, and marketing is one way to

make sure you’re attracting the right prospects and weeding out
those who aren’t a good match. Using a qualifying form to sched-
ule a demo is also good. Have them put in the company’s name,
the company’s size, their best work email, and other information
you need to know.
Weeding through those prospects can be time-consuming—espe-

cially if you have a dual funnel with low-priced and enterprise-lev-
el tiers.
Here’s a hack: At Drip, anytime someone clicked “Book a Demo,”

they got a pop-up that asked for their name and value metric (i.e.,
how many subscribers they had). If they put in a low number,
they were redirected to a page with a video demo, a 10-minute
screencast of me walking through the product. If they put in a
high number, they were directed to our scheduling link to book a
time for a more extensive conversation.
As Drip grew, the cutoff number for in-person demos grew, too. At
first, we were doing demos for people in our lowest tiers because
it was early and we wanted to learn about our market by talking
to anyone we could. Bit by bit, we ratcheted up the number on the
form based on how many salespeople had the bandwidth to run
demos.
When Should I Hire Someone to Take over Sales?

Hiring someone to help you with sales comes down to whether
you’re good at it and whether you enjoy it. If you’re good at sales,
it makes sense to keep doing it until sales conversations are en-
croaching on the rest of your founder responsibilities.
MARKETING | 115
If you’re bootstrapping, you have to hustle in the early days until

you have the money to hire someone. But by the time you have five
or six employees, you probably should only be involved in large
deals. Sales demos are usually easy to teach, and as a founder,
your energy will be better spent elsewhere.
One thing to note is that if most of your leads are warm, inbound
leads, you can actually combine the sales role with customer success.
This works best when your prospects already have some sense
of your product and are just trying to understand whether or not
it’s a good fit for them. Your customer success/salesperson will be
there to show them around and answer questions rather than lead
high-pressure sales calls. If it’s more cold/complex sales, you’ll
want a salesperson incentivized by commission.
Team
How Should I Structure My Team?
In the early days, you’ll be handling support, writing code, run-

ning marketing experiments, doing sales demos, and onboarding
customers. You wear all the hats, which means you cannot focus
on one role.
If you want your business to grow, you have to start peeling off
some of those hats and giving them to other people.
But a challenge most founders face is, because you perform three
(or ten) roles at once, you think you can hire people who can also
handle many roles. It’s easy to dream of hiring someone who’s
good at customer support, business development, and front-end
design when you’re handling those tasks and none of them add up
to a full-time position. But these three disciplines require specific
skill sets unlikely to exist in a single person.
When building your team you should delegate roles, not tasks.
So how does one do that?
The good news is there aren’t that many departments in a SaaS

company. The following is a list of the departments you’ll need
(plus a likely first hire in each):
Product. Product is focused on what to build and how it should

function. Your first hire in this area will likely be once you’re above
$1 million ARR, with a title like Product Manager.
Remember that “Manager” at the end of a job title implies they

manage a process, not people. “Manager” at the beginning of the
title implies they manage people.
Design. Design works with product and engineering to help de-

fine how new features should look while also weighing in on how
they should function from a user’s perspective. Your first hire here
will likely be a UX Designer.
Engineering. Engineering is focused on writing code and man-

aging production servers. Your first hire here will likely be some
variation of a Software Engineer.
Marketing. Marketing is focused on generating and converting in-

bound leads. It usually includes marketing strategy (deciding which
approaches to tackle), implementation, and business development.
Your first hire here will depend on your marketing funnel, but
typically you start with individual contributors who have experi-
ence implementing one or two marketing approaches (e.g., SEO,
content, PPC).
But eventually you will need to hand off marketing strategy and
project management to a Manager/Director of Marketing.
Sales. Sales brings in qualified leads and closes deals. This role is
TEAM | 119
divided into a Sales Development Representative (SDR) or Busi-

ness Development Representative (BDR) who qualifies leads for
an Account Executive (AE) to close the deals. Your first hire here
will likely be an AE who qualifies and closes their own deals.
Customer Support. Support answers incoming support emails,

chats, and phone calls. Your first hire here will likely be a Custom-
er Support Representative.
Customer Success. Customer success focuses on getting custom-

ers to stick around; their goal is to help people get onboarded and
not churn. Your first hire here will likely be a Customer Success
Manager.
Human Resources. Human resources (HR; sometimes called Peo-

ple Ops) is focused on compliance, payroll, people ops, and orga-
nizational structure. Your first hire here will be a ways down the
line but will likely be a combined Operations role that handles HR,
Legal, and Finance. This role typically has a title like Operations
Manager or Director of Operations.
Legal. Legal responsibilities are outsourced to an external lawyer,

with the founder handling coordination until there’s enough bud-
get to hire someone in an Operations role.
Finance. Usually outsourced to a bookkeeper and accountant,

with everything beyond that handled by the founder (for now)
until there’s enough budget to hire an Operations person.
What Role Should I Fill Next?

Being a founder means firing yourself from one job after another
to focus on the high-level strategic roles the company needs you
to handle.
Before you can fire yourself, you have to hire someone to fill that
role. To determine which role to fill next, track your time for a week
or two (or you can list from memory) to compile a list of all the
tasks you’re handling. As a founder, these will usually span many
departments and many roles.
Then, using the list of departments I provided above, group your

tasks into those departments (and if possible, individual roles).
Once you have that list, ask yourself:
• Which of these am I bad at and think someone else could do

better?
• Which of these am I good at but don’t enjoy?
• Which of these could I stop doing that wouldn’t cause a neg-
ative impact?
• Which of these could I hand off to a current team member?
• Which of these, if leveled up, is most likely to grow the com-
pany?
In a perfect world, you’ll find that what the company needs most
urgently is one of the things you’re not good at or don’t enjoy.
When that doesn’t happen, you’ll have to decide which role to
prioritize. It seems there is never enough money to hire for every
role you’d like to.
As a general rule: support is usually an early hire because it’s a

repetitive task of lower value than other things a founder is typi-
cally focused on.
Sales, marketing implementation, and development usually come

next; which one depends on the skill sets of the founders. If you
have two founders who are both engineers, you likely don’t want to
hire an engineer. In that case, you’ll want to do some soul-search-
ing to determine if one of you should dive deep into marketing or
sales or hire for it. Hiring for a role a founder has never done can
be quite challenging.
TEAM | 121
Can I Combine Roles?

When you have roles that don’t require 40 hours a week, it can be
enticing to want to combine two or three roles into a single hire.
It’s hard to imagine hiring a full-time person to handle something
you only spend 10 hours per week handling.
One reminder I have for you is that, as a founder, you are often
more effective than the average hire. So realize something that
takes you 10 hours per week might take them 20.
Second, as the founder, you are often not doing the best job han-
dling certain tasks because you’re in a hurry as you task-switch
from one to the next. Someone focused on a single role will do a
more thorough job, requiring more time than you expect.
But unless you’ve raised a chunk of funding, when you only have
10 or 15 employees, you’ll want to look for generalists who can fill
two roles at once. Eventually, you will hire specialists with specif-
ic domain expertise who fill a single role.
With that said, certain roles combine more easily because they
require similar skill sets. If you are going to combine two roles
into a single hire, here are some typical combinations that work:
Customer Success Customer Success AE

+ AE* + Customer Support + BDR / SDR
* Only with warm, inbound leads
Product Manager Engineer Engineer

+ Designer + Product Manager + Designer
Marketing Strategy Marketing Strategy

+ Marketing Implementation + Marketing Project Management
Legal + Finance + HR
(Operations)
Finding someone who is good at and wants to handle multiple

roles will be more difficult than finding someone to fill just one
role. But in the early days, you won’t have much of a choice.
As your team grows, you’ll start splitting these roles using the
same principle of firing yourself from roles you’re not a good fit
for. If your Customer Success Manager is great with your high-
end customers, hire someone to take their support workload off
their hands so they can focus on retaining your best customers.
When splitting roles, have your team member run through the
task-tracking exercise described above to help determine which
role you most need to hire for.
Don’t Invent Job Titles

I used to make up job titles because, as a bootstrapper, I didn’t
particularly care what someone’s title was. I didn’t want it to mat-
ter—but it really does.
When we realized we needed an architect to scale our infrastruc-

ture at Drip, we asked our internal recruiter to hire for the job of
“Senior Scaling Architect.” She eventually talked us into the title
of “Senior Architect.” Why? Because when she ran the data, she
couldn’t find enough salary information on the title we’d given
her. Not only that, but if we’d used a made-up job title, qualified
candidates wouldn’t have known what we were hiring for.
There are standard SaaS job titles. Use them. Your ideal candi-
dates have saved job searches for things like “Engineer,” “Cus-
tomer Service Lead,” and, yes, “Senior Architect.” Ignoring that
makes it harder to connect with people searching for the job you’re
hiring for. It also does a disservice to whomever you end up hiring.
They’ll have a much tougher time explaining their qualifications
to their next employer when their job title was “Code Wizard”
rather than “Senior Engineer.”
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Although a treatise on organizational structure is beyond the
scope of this book, here’s a typical hierarchy of engineering titles
(in descending order of authority) that can be easily translated
into other departments:
• Chief Technical Officer

• VP of Engineering
• Director of Engineering
• Manager of Engineering
• Senior Software Engineer
• Software Engineer
• Junior Software Engineer
• Entry-Level Software Engineer
Note: These titles assume the typical path is to move into manage-
ment, which doesn’t have to be the case. Individual contributor
titles above Senior exist, such as Principal Engineer and Distin-
guished Engineer. But for the sake of simplicity, I’m laying out
the above hierarchy, which will work for companies well into the
millions of ARR.
Another note on titles: be careful with handing out elevated job

titles to early employees. One company I know named their first
customer service person “Head of Customer Success.” When they
inevitably grew and added more customer service people, they
didn’t want him managing them and ended up in a tough situa-
tion. Should they demote him and have him leave? Or come up
with an even more elevated title for the real manager?
A Note for Technical Founders

SaaS founders generally come in three flavors: those with a soft-
ware development background, those with a marketing or sales
background, and those who are subject matter experts.
I just got done recommending you hire for the roles you don’t
enjoy or aren’t good at. This is especially true if you’re a founder
who’s great at sales or marketing. It’s a no-brainer to hire more

technical help to free up your time to land more customers.
However, if you’re a founder who’s really good at the technical

side of things, my advice is different. I recommend you focus on
building skills in sales and marketing and start hiring developers
to get yourself out of the nuts and bolts of the code.
There are two reasons for this.
First, developers are gonna develop. If your sole focus is on the

product, you will want to solve every business problem by devel-
oping. Is your revenue plateauing? Are your churn numbers high?
Are you not closing sales? The solution is to code more features
. . . right?
Actually, building more features probably isn’t the answer to those

problems. But if writing code is comfortable for you and market-
ing is not, you’ll have a natural tendency to over-build the product
instead of getting to the real source of the problem.
Second, coding is deep work. You need to get into the Zen state of
flow to have the right headspace. But looking up at the clock and
saying, “Oh wow, it’s already 4 o’clock!” is antithetical to handling
all the day-to-day marketing and sales tasks you need to do as a
founder.
As a developer, you need to be on what Paul Graham calls a Mak-

er’s Schedule, where you can take a whole afternoon to immerse
yourself in work uninterrupted.
As a founder, you will absolutely be on a Manager’s Schedule,

which cuts the day into one-hour increments you can fill with all
those necessary meetings and other tasks.
Of course, you can ignore this advice. You’re in control; it’s your
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company. Just know that you will hamper growth if you keep the
job of developer forever.
A Note for Nontechnical Founding Teams

Ninety percent of bootstrapped SaaS companies have at least one
technical founder, according to MicroConf’s State of Independent
SaaS Survey. If you do not have a developer on your founding
team, you are very much in the minority.
9 in 10 bootstrapped SaaS companies have one

or more developers on their founding team.
There’s a reason for this: building SaaS is both complex and ex-
pensive. Aside from marketing, sales, and support, you have to
write code and maintain an always-on production environment.
Developers who are good at SaaS are usually not cheap, and being
able to tell the difference between someone who says they are good
and someone who is actually good is close to impossible without
knowing how to evaluate their code.
Having no developers on your founding team makes SaaS difficult

to bootstrap. Most of the founders I see who attempt this either
raise funding very early or run another business that throws off
enough cash to allow them to hire a senior developer out of the gate.
Whereas, if one of the founders was a developer, they would build
the product during nights and weekends for no out-of-pocket cost.
If you have no technical founders and want to launch a SaaS, find

a developer you can trust early and expect to pay them a lot. You
will almost need to think of them as a cofounder because they
will be making technical decisions that will have a major impact
on your company's future. If you don’t have the budget to do this,
I encourage you to find a developer cofounder.
Craig Hewitt, the nontechnical founder of Castos, told me, If I did

it again, I’d very much want my first developer to be a cofounder or
someone I know really, really well. I’ve wasted too much money while
being misled by developers who are just looking to make a few bucks
and don’t care about the outcome of the project.
What If I Don’t Plan to Hire?

If you’re a lifestyle bootstrapper who’s happy without scaling, you
may not be planning to hire. And that’s great, but I’d still challenge
you to consider hiring at least a support person.
Why? Because for bootstrappers, a lack of money isn’t what kills

businesses. It’s founder burnout.
Sure, you’re good at answering support emails—you know the

product inside and out. Sure, it might not take much time out of
your day. (Or does it? I bet it takes more time than you think.) But
that doesn’t mean you’re the right person for this job.
One objection I hear repeatedly is, “My product is so technical, I’ll

never be able to find a support person who can handle it.”
This is rarely true. It’s not that your product is too technical; it’s
that you need to take the time to set up documentation, systems,
and training. I’ve seen super technical products where people
found a sharp junior developer who could provide amazing sup-
port. Eventually that junior developer will graduate to an actual
developer in the company, and you can replace them.
In the long term, handling support will likely lead to burnout, and
hiring a frontline support agent will free you up to keep doing the
work you love.
Be a Team, Not a Family

You’ll hear a lot of people talking about how their company is all
one big happy family, but I caution against that.
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I do not refer to my fellow employees as family. I view us as a

high-performing team (this sentiment was popularized by Netflix
in an early culture document).
Calling your employees your family is disingenuous. It may give

you warm fuzzies to say it, but you don’t fire your sister or uncle.
You do bench a teammate if they’re no longer the best player for
their position.
The team mindset allows healthy interpersonal relationships to

develop and friendships to be built without putting your business
at risk. Teams that are “families” become enmeshed and don’t
maintain appropriate boundaries.
When you hire, be up front about your company culture: you’re

a team, you support each other, and you work together for the
success of the business. If a teammate isn’t performing, you need
to be able to make the right decision for the company.
High-performing team members should be happy to hear it. We’ve

all worked with people who aren’t as good as the rest and who,
frankly, drag the rest of the team down. It sucks to constantly pick
up the slack for someone who’s always dropping the ball, doesn’t
get things done as fast as you do, or doesn’t care as much as you do.
If you hire and tolerate mediocre performance, you will lose your
best people and create a culture of underperforming.
No one has ever said, “I fired that person too soon.” Normally
the regret is that you waited too long to fire someone and they
dragged morale down around them.
Hiring Managers
I separate management into two components: supervision and

leadership.
• A supervisor is someone who approves vacation time, gives

reviews, and decides on salary increases. They basically han-
dle the nuts and bolts.
• A leader—like a tech lead or a development lead—is some-
one who gives technical guidance, mentorship, seniority, and
direction.
A manager is a person who supervises and leads. In a lot of com-

panies, especially in the early days, that role is divided.
At Drip, my cofounder Derrick led our team when it came to tech-

nical guidance and code review, but the developers reported to me.
Derrick didn’t need to get bogged down with scheduling vacation

time or health benefits—that would have been a waste of his skill
set, and I didn’t want him burning cycles learning management
when there were features to build. So those supervisory decisions
came to me.
You can—and should—hire or promote roles like development

lead or customer success lead early to keep every decision from
falling back on you. Even before you have the budget to hire a full-
blown manager, you will likely find stand-out folks you trust to
make decisions for a particular project or department. If you don’t
find leads early, you will eventually find yourself overwhelmed
with the volume of questions that come back to you because you
haven’t put the proper expertise in place.
If everyone who works for you is a task-level thinker (see side-

bar), it places a tremendous burden on you as the founder. As you
grow and transform from a product into a business, usually in
the $20,000 to $40,000 MRR range, it’s time to consider bringing
some project-level or owner-level thinkers onto your team.
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Task-level thinkers are team members who focus on their

current or next task. They might be early in their career or get
overwhelmed with more than a few sequential tasks on their
plate. Most of us begin our careers as task-level thinkers be-
cause prioritizing many complex, interrelated tasks is often
not a natural ability.
Project-level thinkers look ahead weeks or months and jug-

gle multiple priorities. They often rely on team members to
complete work that’s combined into a single deliverable. Proj-
ect-level thinkers have advanced systems in place to track
the myriad moving parts needed to successfully complete a
project.
Owner-level thinkers not only manage projects but also

think about how to improve internal processes and bring ideas
for experiments that can change the trajectory of the com-
pany. Owner-level thinkers look ahead months or years and
consider strategic shifts that may need to take place to take
the company to the next level.
Not only will this remove stress from your life, but it will also help
your team move faster because they don’t need to wait on you for
every decision. And if you plan to sell the company at some point,
the less the business relies on you, the better terms you’re likely
to receive.
When Should I Hire Managers?

When you’re just starting out, you won’t have the budget to hire a
manager. It depends on several factors, but I usually recommend
finding leads once you have two or three people in the same de-
partment and finding a manager once you have four or five people
in the same department.
You can stretch this, but it will take a toll on you. It takes up too
much of your time if you’re managing twelve direct reports well
(e.g., holding weekly or monthly one-on-one meetings, working
on career development).
Usually, founders let it go for too long and then start managing
their team poorly because they are pulled in too many directions.
This can work for a while, but it will eventually lead to poor results
or folks leaving your company.
Keep in mind that your first management hires must also be indi-
vidual contributors. You’ll want to find someone who can manage
and develop. Or manage and do customer support or write docu-
mentation or work on strategy.
Promoting managers from within can be a good way to go if you

have someone ready to move from task-level to project-level. In
this case, you take that promising tech lead or head of customer
success and train them to run one-on-ones, evaluate for raises,
approve vacation time, and—most importantly—give both posi-
tive and negative feedback.
What Makes a Good Manager?

Just because someone is a good lead doesn’t mean they will be a
good manager. Not everyone has supervisory skills or the desire
to learn them. If you hired your most senior developer because
of their ninja coding skills, it doesn’t make sense to bog them
down managing time-off requests and answering questions about
health insurance.
I find that people who’ve had a good manager in the past tend to
have a leg up when it comes to being a good manager themselves.
The problem is that many bootstrapped founders have never had
a “real job” inside a bigger company. They haven’t experienced a
range of managers or aren’t familiar with office politics, so they
don’t develop a mental model of managing a team well.
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One of the more challenging things about becoming a manager is

learning to give negative (constructive) feedback. Most people are
nice, and most of us don’t like conflict. It’s not fun to have to tell
someone they dropped the ball—but it is a necessary skill to learn
to help your team members grow and keep the company culture
from slipping into mediocrity.
My rule is to praise in public and correct in private. If I’m going to

tell someone they screwed up, it’ll be in a one-on-one meeting and
never in front of someone who wasn’t involved. Team meetings
are for giving out props to team members who are doing a great
job, not tearing someone down for a mistake.
Giving both positive and negative feedback builds trust, which is

the most important part of being a good manager.
Your team members need to trust that you’ll be fair. That you’ll
listen to them. That you’ll make good decisions. That you’ll take
the fall instead of throwing them under the bus when things go
wrong—because if someone below you makes a mistake, that ul-
timately falls on you.
They also need to trust that you’ll tell them the truth, even if the
news is not good.
One company I worked at had a problem where the managers were

too nice. Eventually when they had to let someone go, that person
was shocked because no one had ever told them something was
wrong. Of course, they then spoke with old coworkers via a back
channel, word spread around the company, and suddenly every-
one was wondering if they were next. The trust was broken.
How Can I Hire Great People?
Now that you know the role you want to fill, how can you find the
best candidate?
I’m a staunch supporter of taking your time to fill a position. The

people you hire—particularly at this phase of your business—can
either help you grow or hold you back. It’s better to be picky and
learn to hire slow and fire fast.
After spending hundreds of hours hiring at my last startup, I swore

I would never hire on my own again. If you have the money, hire
a recruiter to help you find the best candidates.
Many recruiters will work off commission, such as asking for 15%
of the first year’s salary. Unfortunately, they are more expensive
than the value they bring. I recommend going with a flat-fee re-
cruiter like Remote First Recruiting.
Whether or not you have the money to hire a recruiter, these tips
will help you find and attract the best candidates.
Be Different. When I was hiring for Drip, I would write job de-
scriptions explaining that we viewed software as a craft. That we
often wrote 2.5 lines of test code for every line of production code
and that our codebase was immaculate.
I wanted to attract developers who viewed themselves as crafts-

people, who were looking to work in an environment where that
meticulous dedication would be valued.
When writing job descriptions, you want to show folks that work-
ing at your company will be unlike other places they’ve worked.
It’s not enough to say that you’re different; you have to be different.
Work on Interesting Problems. Amazing team members want to

be challenged and learn something new each day. Your job de-
scription should lean into this.
It’s helpful if you happen to be working on an exciting, innova-

tive product, but it doesn’t need to be. Building an email services
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provider like Drip wasn’t inherently interesting. But when I would

recruit developers, I would engage them with the things that were
interesting.
• We were scaling fast, which is an interesting problem.

• We had a wide variety of UX paradigms, so the product itself
looked great and was fun to work on.
• There was so much going on in the app that a developer’s
day-to-day job would be varied.
Lean into Your Advantages. As a bootstrapped or mostly boot-

strapped company, high pay and benefits probably aren’t going
to be your advantage. Those are the advantages of Fortune 1000
companies. But those companies also have Achilles heels: office
politics, no remote work options, massive teams, tons of meet-
ings, and other headaches that many great team members don’t
want to deal with.
Your advantage is in finding what motivates these top performers

beyond pay and benefits and giving it to them.
For example, here’s a pitch I could give to any role I was hiring for:
“We’re fully remote. We’re a small team with no politics. You’ll
work with and learn directly from the founders. We’re a fast-grow-
ing company. You’ll work on interesting problems.”
For specific roles, I added even more advantages.
I told developers, “You’re going to have a huge impact on the

product and the company. You’ll work on an amazing code base.
We ship features weekly, so you’ll always be working on some-
thing new.”
I told customer success folks, “We have a great product, and our
customers love us, which makes your job easy. We also have a high
feature velocity to make sure it continues to be easy.”
Think of Your Job Description as a Sales Letter. Your job descrip-

tion should convince the person reading it that you have a fantas-
tic company and that they should apply.
You’re not a big company, so don’t write like one. One of your ad-
vantages is that you can inject personality into your job descrip-
tions, even to the point of making them entertaining. Write like a
human, and don’t shy away from having personality.
At Drip, I had a line in our developer job description that read,

“Crappy code makes you want to flip a table.” It’s a quirky thing to
say and made people realize our team had personality and opin-
ions. It was an instant filter to drive away people with whom that
thought wouldn’t resonate and attract those with whom it did.
When you think along the lines of a long-form sales letter rather
than a list of requirements, it will set you apart from the stiff For-
tune 1000 job descriptions and communicate something about
your company’s culture by showing, not telling.
You should also let candidates know you’re picky about who you
hire. A-level performers want to work with other A-level perform-
ers, and they get excited by the idea of joining a top-notch team.
Build an Audience. I struggle a bit with this advice because you

can build an amazing company without an audience. I’ve seen
hundreds—thousands—of founders who have built strong com-
panies without an audience.
I also don’t believe you need to build an audience to build a suc-

cessful SaaS product (in fact, I think it’s a waste of time for most
people).
That said, having an audience makes hiring easier. Because when

you have an audience that knows you, likes you, and trusts you,
it’s much easier to attract good talent.
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Top-tier talent is constantly learning. They are reading blogs and

books and listening to podcasts. If you are one of the people they
learn from, you’ll find a higher percentage of top-tier talent in
your audience when it comes time to hire.
Remember: Hiring Is Hard, but Retention Is Critical

I want to point out that all the hiring tips in the world won’t help
you if you’re not focused on retaining your people. If you misrep-
resented what the experience would be like, or you don’t keep
them interested in the work, top performers will move on because
they have the option to work anywhere.
For further reading, I recommend the book Who: A Method for

Hiring by Geoff Smart and Randy Street. It gives a solid framework
for the entire hiring process. In addition, it provides a solid inter-
view approach to discover more about what candidates actually
did in their previous roles and teaches you how to avoid asking
surface-level questions.
For further reading on job descriptions, I’ve seen a few companies

emulate Drift’s approach of creating a 90-day plan for every new
role, and that effectively becomes the job description. You can read
about Drift’s hiring process here: drift.com/blog/hiring-philosophy/.
Where to Find Qualified Candidates

If I were hiring right now, there are a handful of websites I would use
to advertise the job listing. Because these sites change over time,
I have a page on this book’s companion website that includes the
most up-to-date hiring sites for SaaS founders: saasplaybook.com.
The primary benefit of these job boards is that candidates are

typically looking for roles at remote or small startups.
Should I Offer Equity, Stock Options, or Profit Sharing?
Bootstrapped founders face a big question: How do I incentiv-

ize employees beyond the agreed-upon salary? —Bonuses?

Profit sharing? Stock? Equity? First, let’s talk about why this
might be a good idea.
Hopefully your employees love working for you because of the

interesting things they’re working on. Extra incentives—when
properly aligned with the company’s goals—can provide motiva-
tion and retain employees. And in a competitive talent market,
smart incentives can help you land top candidates.
It’s not a requirement to offer bonuses or profit sharing, but if your

team is cohesive and working hard toward the same end goal,
you’re creating profit, value, and wealth together. It feels right to
share that with your team.
(Note: Nothing in this book should be considered legal or tax ad-

vice. Speak with a lawyer and accountant before starting an em-
ployee incentive plan.)
Bonuses
Bonuses sound great because of their flexibility, but they are tricky,
given their arbitrary nature. They are a decision to give people an
extra few thousand dollars at the end of a year.
Bonuses can make people feel left out or that you’re playing favor-
ites. They might feel like you’re giving more money to someone
who doesn’t deserve it.
If you don’t have a profitable year and don’t give out bonuses,
people can get angry and blame you. They’ll point out how much
money you spent on things they don’t like. Not to mention in Cal-
ifornia, a lawsuit ruled in favor of employees over nonpayment of
bonuses those employees had come to depend on.
Usually, it’s better to incentivize employees with something more

aligned with the business goals you’re trying to achieve.
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Equity
Equity gives employees ownership—and not just literal owner-
ship. It gives them emotional ownership of the business and mo-
tivates them to grow it.
Equity is tricky, though. An equity holder only makes money if you

sell the business or pull out dividends.
With a venture-backed startup, selling is often the goal, and equi-

ty comes with the promise of large liquidity in the relatively near
future. Because bootstrapped startups tend to grow more slowly
and deliberately, equity isn’t always as much of an incentive.
Another challenge of equity grants is that they’re different

from stock options. You’re literally giving a portion of the com-
pany to someone, which is taxable on the current value of the
company. You might create a brutal taxable event for an em-
ployee if you give them a substantial amount of equity (or
even an insubstantial amount if the company is large enough).
In addition, if you’re a pass-through entity (such as an LLC in the

US), capital gains will pass through to any equity holder.
Let’s say your LLC makes $500,000 in profit this year, and you’ve
given 1% equity to a key employee. Even if you haven’t pulled
money out, they will receive a K-1 for 1% of that $500,000, or
$5,000. Essentially, they’re getting taxed on $5,000 even though
they didn’t receive that money.
In most cases, equity is best for founding employees (cofounders)

who receive it when it’s virtually worthless and they know the
ramifications.
Stock Options
Stock options are the standard startup approach to getting deeper
buy-in from employees. An option just means an employee has
the option to purchase a share of stock in the company.
If you grant someone 10,000 options, they can purchase 10,000

shares at a fixed price (called the strike price) set each year by a
company’s IRS filing. That strike price is usually quite a bit less
than the share valuation during the last funding round, which
means it’s a good deal, at least on paper.
Those 10,000 options vest over time, the standard is four years,
creating an incentive for the person to stick around so they don’t
lose their unvested options.
From the company’s side, you would set up an options pool of 10%
or 15% of outstanding shares that are given out in small chunks to
new hires, the amount varying based on seniority.
Stock options have simpler tax implications than equity because

they are a promise to the employee that they can buy shares at a
future time rather than actual shares.
Stock options are a reasonable choice for employee incentives,

especially if your goal is growth and an exit rather than running
the company for the long term.
Profit Sharing
The nice thing about profit sharing is that it doesn’t require you to
sell your business for your employees to make money. If your goal
is to make your company profitable and run it for the long term,
profit sharing may be your best option.
Consider structuring profit sharing as a pool rather than a com-

mitted percentage to an individual. For example, instead of telling
early employees that they’ll get 1%, 2%, or 3% of profits, have all
key employees share in a 10% or 15% profit-sharing pool.
As you add more people to the pool, those first employees’ per-
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centage of the pool will go down. But ideally, profits should be

growing, and every team member should be contributing to that.
Peldi Guilizzoni, founder and CEO of Balsamiq, wrote perhaps

the best explanation of profit sharing I’ve seen. To read it fully, go
to bit.ly/balsamiq-profit-sharing. Essentially, the company start-
ed with a pool of 10% of the profits, which was distributed each
quarter. At some point, years into the company, he increased that
pool to 15%. I believe he’s now up to 20%.
That profit pool is allocated to full-time employees. Twenty-five

percent is split equally, and 75% is based on seniority, then it’s
weighed by the cost of living for each employee.
Guilizzoni notes that they do quarterly distributions because

monthly was too much paperwork and yearly kept some unhappy
people around longer than they should have stayed.
Some companies have folks vest into profit sharing for their first
few months, much like some companies have a waiting period to
get health insurance or to access a 401(k). This is a way to make
sure the person’s a fit for the team and that the team is a fit for
the person.
Of course, if your plan is to grow and exit rather than run profit-
ably, profit sharing is likely not your best option.
Do I Need a Cofounder?
Venture capitalists tend to look unfavorably on single founders,

partly due to the opinion of Y Combinator founder Paul Graham.
In the bootstrapped SaaS space, though, single founders make up
many of the most successful companies. In fact, over half of the
respondents (56%) to our 2022 State of Independent SaaS Report
were single founders.
The short answer is: no, you don’t need a cofounder. In fact, the
most equity you will ever give away is to your cofounder. No inves-
tor, employee, or advisor will come close to owning the amount
of equity you give away when starting a company with another
founder and splitting it 50/50.
Being a single founder has its own list of pros and cons. The beau-
ty of being the sole founder is the simplicity. You don’t have to
play nice with a cofounder, and you get to make all the decisions.
One of the major downsides is that you need to make all the deci-
sions and do all the work yourself. Especially in the early days when
resources are tight, this can be isolating and mentally challenging.
Most of the single founders I know have a strong network, wheth-

er it’s other founder friends they can lean on when things get
tough, mentors or advisors they can bounce ideas off, or a long-
term mastermind group (I talk more about masterminds later in
the book) that offers ongoing support and advice and serves as a
sounding board.
There can be enormous value in having a partner in the trenches

with you as you travel this long journey. Here are some thoughts
to keep in mind if you’re considering a cofounder:
Are Your Skills Complementary? Too much overlap means you’ll

argue over certain areas of the business and neglect others. The
best mix I see is a developer founder pairing with a marketing/
sales founder or a developer and a subject-matter expert.
How Well Do You Know This Person? You are effectively entering a
marriage. If you don’t know the person well or have never worked
with them before, take things slow. “Date” by working on small
projects before equity changes hands.
Are You Protected If Things Don’t Go Well? Talk to a lawyer. Make

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everyone’s equity vest, typically over four years. One of the worst
things you can do to your company is let a founder walk away with
50% of it after working on it for a few months. At my SaaS accel-
erator, TinySeed, we wanted to but sadly declined to fund several
companies in this situation.
How Much Value Does a Cofounder Add? The biggest question

to ask yourself is: Will joining forces with this person make the
company more valuable? Will it help it grow faster? Although this
is a difficult question, I’ve found that being on the fence about
whether someone will bring value means you should probably
find another option.
Too Many Founders

Some companies I see don’t need more founders. Sometimes they
need fewer.
The partnership between cofounders is almost like a marriage.

There are interpersonal dynamics and intense decision-making.
There’s financial responsibility. At times you’ll spend more time
together than with your significant other.
Add a third or fourth person into that mix, and there can easily be
too many opinions to serve the business well.
I understand the impulse. Starting a business as a solo entrepre-

neur is scary. Starting one with a partner is less scary. So why not
bring a few more onto the bus?
What often happens is that when three or four friends get togeth-
er to start a company, one of them is a weak link in the chain. If
you’re in this situation, you may already know in your gut who
isn’t pulling their weight. And that weak link will be detrimental
to the business—both in terms of the increased growth you need
to justify having that founder on board and because there are too
many chefs in the kitchen.
80/20 SaaS Metrics
Management guru Peter Drucker said, “ If you can’t measure it,

you can’t manage it.”
Most founders get overwhelmed when they think about metrics

because they don’t know which to track or are tracking too many.
This section will help you narrow your focus to the core SaaS
metrics that matter most (the 20% of metrics that will drive 80%
of your results).
Which Metrics Should I Track?
As a founder, data is your copilot. You should know your most

important numbers if you’re going to grow your business.
You don’t have to be a metrics savant, though. I’ve seen founders

build relatively successful businesses without getting mired in the
numbers (though often in spite of that fact, not because of it). I’ve
also seen many companies take longer to gain traction because
their founders don’t track basic metrics—or put too much empha-
sis on the wrong ones.
Two “North Star” Metrics

Your two most important metrics are MRR and month-over-
month growth rate. Those are the top-line numbers that indicate
how far you’ve traveled and how fast you’re going. Every SaaS
founder should look at these numbers on at least a weekly basis.
But MRR and growth rate are lagging indicators.
To that end, I’m going to give you a metrics framework called 3

High/3 Low to help you zero in on the other important key per-
formance indicators of your business.
(Note: These are overall business metrics. Separately, there are

marketing funnel metrics you should track, which we covered in
the chapter on marketing.)
Tracking the 3 High/3 Low Metrics (six in total) will tell you two
important things:
1. How healthy your business is

2. When your revenue is going to plateau
These metrics aren’t difficult to track. A dashboard like ProfitWell,

ChartMogul, or Baremetrics can connect to your payment proces-
sor and give you the data at a glance.
You’ll notice that many of these six are in tension with each other.
You want the Low Metrics to be as low as possible and the High
Metrics as high as possible, but often when one is going down, it’s
causing another to increase.
I’ll provide some rules of thumb in the following section, but keep
in mind that your product, ideal customer, and industry will have
a substantial impact on these numbers.
80/20 SAAS METRICS | 145
3 High/3 Low Metrics Framework
The 3 High/3 Low framework includes the next six metrics you
should be tracking after MRR and growth, and you want to push
three of them upward (i.e., high) and three of them downward
(i.e., low).
We’ll start with the three Low Metrics.
LOW: Cost to Acquire a Customer (CAC)

In its simplest form, CAC is all the costs associated with landing
new customers (e.g., marketing, advertising, sales) divided by the
number of customers you acquired during that period.
It’s sometimes tricky to calculate because getting a handle on your

marketing costs can be tricky. If you’re focusing on SEO, you may
be creating all the content yourself rather than paying a writer. You
may be getting a lot of your early customers from forums you spend
time on or by getting in front of other people’s audiences. In those
cases, the cost is your time rather than an easy-to-calculate number.
It’s a lot simpler to calculate CAC if you’re running ads. Then, you
can see how much you’re paying per click and track how many
people convert from each source.
But if you’re not in that position, valuing your time at a certain

rate (e.g., $150 an hour) and taking your best guess at time and
money spent on marketing in a given month can get you to a good
enough estimate of your CAC.
How do you know if your CAC is too high? By calculating how long
it’ll take to pay back the costs of acquiring each customer.
As I was first getting into recurring revenue, I thought that if I was

getting $1,000 in LTV from each customer, I could spend $700 to
acquire every customer and make $300 a pop. Right?
The problem is that you’re not getting $1,000 every time you sign
a new customer. With a $50-a-month contract, you’re getting that
$1,000 over the course of the next year and a half.
If you spend $700 per new customer in January, you won’t break
even on those customer acquisition costs until next February (as-
suming the customer doesn’t churn).
With venture capital, the rule of thumb is that you should spend
no more than one-third of your customer’s LTV or no more than
one ACV.
As bootstrappers, we don’t have enough cash to wait 12 months to

recoup CAC from every customer. Most successful bootstrappers
I know are in the two- to six-month payback period (depending
on how much cash they have in the bank).
There are times when that number can get more aggressive. For
example, at our peak with Drip, we could afford to spend more on
customer acquisition because we had the cash in the bank and I
knew the numbers in the rest of our funnel by heart. Even at our
peak, though, we were only running seven or eight months out—
that’s the high end for bootstrapped companies.
LOW: Sales Effort

Sales effort is a measure of the length of your sales cycle and
includes the number of touch points required to make the sale.
Where CAC measures the amount of money you’re spending to
get a new customer, sales effort measures the time and energy
you’re spending.
The best way to track sales effort is to look at both the average
number of days from someone scheduling their first demo to clos-
ing and the number of calls it takes to close a deal.
Your ability to keep sales effort low depends greatly on your in-
dustry and customer base.
If you’re doing enterprise sales, your sales cycle will be long and
require more effort than if you’re targeting solopreneurs and oth-
er small businesses with a single decision-maker. A three- or four-
month sales cycle is reasonable in enterprise sales—and worth it
because the ACV might be $50,000. If you’re spending that much
time for $5,000 contracts, though, that’s rough.
No matter what your sales process looks like, you want your sales
effort to be as low as possible. Here are some ways to lower this
number.
Self-Serve Sign-up and Onboarding. Many inexpensive products

can get away with low price points because they have a low-touch
or no-touch sales process. They have a self-serve sign-up and on-
boarding process, which requires almost no sales effort.
The higher your ARPA, the less likely they are to become custom-
ers without some sales effort. But finding places to offer self-ser-
vice along the journey can reduce the amount of hand-holding
your team has to do while making the process speedier for your
customer.
One-Call Close. Self-service isn’t going to work in a lot of spaces,

but you can try to get to a point where the decision is made by a
single person. You can do this by targeting a founder, a developer,
or a single manager.
You can also streamline the back-and-forth of providing more

sales materials, getting on second calls, waiting for input from
the committee—and on and on.
Educate your customers as much as you can ahead of time so they

have the information they need and develop checklists to gather
the information you need to close the deal quickly.
LOW: Churn
Churn is the percentage of people canceling their subscription
each month, and it’s the Achilles heel that kills (or plateaus) SaaS
apps. If you can keep churn low, growth is much easier. If churn
is high, it’s a force that’s very hard to outrun.
Focus on revenue churn. To calculate this, divide the gross MRR

that canceled in a given month by the starting MRR for that month:
Canceled MRR
Gross revenue churn =
MRR at the start of the month
As a general rule, for most bootstrapped B2B SaaS businesses:

Gross churn > 10% = Catastrophic Gross churn 4–5% = Fine
Gross churn 8–10% = Not Good Gross churn 2–3% = Good
Gross churn 6–7% = Meh Gross churn < 2% = Great
With this caveat: if you are focused on high-priced contracts,

say, above $25,000, your churn should be lower than the chart
above. In that case, I’d categorize fine churn as 2–3%, good
churn as 1–2%, and great churn at or below 1%.
Churn is such a critical metric because it helps you calculate when

revenue will plateau.
At some point, the number of new customers you acquire will equal
the number of customers you churn out each month. This causes
your growth rate to effectively hit zero. You’ve hit your maximum
number of customers (and revenue) that you can achieve without
changing something in the business.
It’s a simple calculation:
MRR added each month

= Maximum MRR
% Churn rate
If you acquire $5,000 in new MRR each month and have a churn
rate of 10%, that’s 5,000/0.10 = $50,000. If you don’t change
something in your business, you will plateau at $50,000 in MRR.
This plateau number should strike fear in your heart because SaaS
plateaus are brutal. They are often difficult to fix, as they might
require a strategic overhaul of your product, customer focus, or
marketing approaches.
I recommend every SaaS founder calculate their plateau number.

You could feasibly have a dashboard that calculates it in real time.
It gives you a window into the future and lets you start trouble-
shooting early to push that plateau further out.
Churn is such a critical metric that we’ll dive deeper into it in the
next section.
HIGH: Annual Contract Value (ACV)

ACV is the amount a SaaS customer will pay if they stick around
for a year, whether you offer a yearly plan or calculate it based on
12 months of your monthly subscription cost.
A lot of SaaS resources will point you to tracking LTV, but ACV is ac-
tually the more valuable metric for SaaS bootstrappers. Here’s why.
The simplest equation for LTV is your ARPA divided by your churn.
For example, if you’re getting $50 a month from a customer and

have 5% churn, your average LTV for each customer is $1,000.
This is far from a perfect formula, but it’s the simplest one to get
insight into your LTV.
Let’s say you lower that churn to 1%, which makes your LTV
$5,000. Pretty good, right? Except that you’ll be getting that five
grand over the next eight years. If you have millions in venture cap-
ital in the bank, maybe you can afford to wait a while to recoup your
costs, but as a bootstrapper, you need to be thinking shorter term.
That’s why I recommend you stay focused on ACV as a key metric

rather than LTV.
One of the biggest ways to keep your ACV high is to sell to busi-
nesses rather than consumers—usually the larger the business,
the more they can pay (though that depends on the problem your
product solves). This metric in particular is usually in tension with
CAC and sales effort because selling to more significant custom-
ers requires more sales effort, which is naturally more expensive.
You can also increase ACV by raising prices, which we covered

in-depth in the Pricing chapter.
HIGH: Expansion Revenue

We discussed this in the Pricing chapter, but as a refresher, expan-
sion revenue is when customers pay you more as they get more
value from your product. Whether by manually upgrading to the
next tier or being auto-upgraded as their usage increases.
You can increase expansion revenue by having pricing tiers that

ensure the more value a customer gets out of your product, the
more they pay. That can be through value metrics (like adding
seats in a CRM or subscribers in an email services provider), fea-
ture gating, or both.
When your expansion revenue is high enough, you can actually

get to the point where your revenue is growing even when you’re
not adding any new customers. That’s what makes expansion rev-
enue an incredible SaaS Cheat Code.
HIGH: Referrals
The last critical SaaS metric is referrals, or how many new custom-
ers were referred by your existing ones. Referrals are a good metric
to monitor because it is less of a lagging indicator than most.
When your referral per customer is high, the natural flywheel of

virality starts to spin. Over time, word of mouth can become a big
driver of new customers—and certainly one of your highest-con-
verting drivers. Referred customers have substantial conversion
rates and take a lot less sales effort because they’re already in-
clined to trust your product.
The best way I’ve seen for determining how many referrals you’re
receiving is to ask how a customer heard about you at their point
of sign-up.
Asking for Referrals. Not every product can have word of mouth
baked into the product, but every founder can—and should—be
proactive about asking for referrals.
When you see that trials are converting well and customers are
happy with your product, set up an automated email that goes out
around the 60- or 90-day mark. Say something like, “So much of
our business is based on referrals. If you’re enjoying our product,
could you please pass the word along?”
The automated email works well when you have a pretty hands-
off, low-touch sales process. However, for products with higher
ACVs and a more intensive sales process, it’s better to ask for re-
ferrals in person.
SaaS Cheat Code: Virality

When we talk about a SaaS product having virality, it means
that every user you add has a viral coefficient greater than
zero. You can count on each new customer bringing at least
a fraction of a new customer within a particular time frame.
Some ways of achieving virality are stronger than others.
Strong Viral Loop. When the value of your app is in how it

connects people, you have a strong viral loop. Take Face-
book, where people who join tend to invite their friends
onto the platform. Slack is the same way. It’s not useful if
you’re on your own, so when someone adopts the tool, they
also generally invite the rest of their team.
In the above examples, people need to sign up for an account

to use the product. But you can have strong viral loops even
without that requirement.
When I send out a SavvyCal link to someone who wants

to book time on my calendar, they click through the link
and experience for themselves how easy the tool is to use.
The fact that the link came from someone they know is a
tacit endorsement. When they want to try a scheduling app
themselves, they’re already inclined to trust SavvyCal.
Electronic signature apps have that same built-in virality.

When you send your SignWell link for a colleague to sign a
document electronically, they are exposed to the experience
of using it and may be inclined to choose it next time they
have a document that needs a signature.
Weak Viral Loops. Making your brand visible on custom-

er-facing interfaces is another form of virality.
When Drip customers on certain low-price plans put an

email sign-up widget on their website, anyone who sees the

pop-up also sees the words “Powered by Drip.” If they’re in
the market for an email widget for their own website, they
might check out Drip.
A lot of SaaS tools require branding or watermarking as part

of their free plan. For example, Mailchimp adds a badge to the
bottom of every email sent through their free plan. Veed.io, a
video editing tool, adds a watermark to videos made with their
free plan.
The first reason these are weak viral loops is that, even
though they get your brand in front of potential users, it
doesn’t create as strong a bond as when someone interacts
directly with your product.
The second reason is that if someone is interacting with

your product because they were invited (like in the Slack
example), they’re probably closer to the target audience
than someone who’s just on a mailing list or watching an
influencer’s video on YouTube.
Building Virality. Although this SaaS Cheat Code can be in-

credible for growth, it’s extremely difficult to retrofit virality
into your product. If you want to build a viral product, start
from the beginning and actively pursue the business ideas
that lend themselves to strong viral loops.
The good news is that you can absolutely build a SaaS com-
pany to millions in revenue with a zero viral coefficient. Vi-
rality is amazing when you have it, but it’s not a deal breaker
for building your company.
A Quick Note on Vanity Metrics

Sometimes you’ll hear a founder bragging about getting 50,000
unique visitors a month to their website, getting 100 new free us-
ers a week, or having 25,000 people on their mailing list.
Those numbers sound impressive until you dig deeper.
How many of those unique visitors convert to trials? How many

of those trials convert to customers? What’s the open rate on that
mailing list?
Vanity metrics like page views, subscribers, or free users are in-
teresting, but only in context. The real question is: how many of
those visits or free users are turning into paying customers?
How Much Should I Worry about Churn?
Churn is the death of SaaS. I’ve seen multimillion-dollar acquisi-

tions fall apart because of high churn.
In your company’s early days, the actual number of churning cus-

tomers doesn’t matter much because your numbers are too small
to be meaningful. If you have $1,000 in MRR and one custom-
er paying you $200 cancels, that’s 20% churn. Normally, I would
consider that business-on-fire level—but in this case, it’s just a
single customer.
When you see a company with high churn, it’s a sign something’s
not working. The product isn’t where it needs to be, they’re solv-
ing a problem no one needs solved, or they’re getting the wrong
customers through the door. At that point, they should be trying
to refine product-market fit.
Until you have product-market fit, you should worry much more
about why people are churning than the actual churn number. Of
course, low churn is always better. But throwing churn-reduc-
ing tactics at your customers when you haven’t built something
people want and are willing to pay for can mask your lack of
product-market fit.
There are many ways to game churn, like making people email
you to cancel or moving to annual only, but those often hide the
real reason people are churning, especially early on. The approach
at this stage is to find out why people are churning and use that
knowledge to refine your product-market fit.
Once you have decent product-market fit, your churn rate be-
comes highly relevant because it’s how you know when you’re
going to plateau, and it’s part of your LTV calculation, which is
one indication of the strength of your business. Reducing churn
is a critical part of keeping your business strong.
Generally speaking, the lower your product’s price point, the

higher your churn. Some of the TinySeed companies that cater to
hobbyists or very small businesses have churn in the 5% range,
and while I’d love to see churn lower than that, it’s okay because
they are in massive markets and have a very low cost to acquire
new customers.
For most companies like the type we’re discussing in this book, I
suggest shooting for gross revenue churn as low as possible, cer-
tainly under 3% per month. At the venture scale, successful com-
panies have less than 1% gross churn.
Segmenting Churn
If I tell you a product has an average review of 2.5 stars on Amazon
of over 1,000 reviews, it probably sounds mediocre.
But if I tell you that it has 500 five-star ratings and 500 one-star
ratings, that’s a different story. Half of the product’s users love it,
and half are the wrong audience.
It’s the same with churn rate. Saying you have a gross churn rate
of 8% doesn’t give you the right information to work with. But
once you start looking at the churn rate of specific customer seg-
ments, you’ll get a clearer picture of what’s going on.
I like to segment by three things: pricing tiers, marketing chan-

nels, and time.
Segmenting by Pricing Tier

One TinySeed company has two pricing tiers: $30 a month and
$100 a month. As they worked on their churn, they broke it into
segments and found that Segment A ($30 a month or less) had a
net churn rate of 11%, which is obviously a big problem.
On the other hand, Segment B ($100 a month or more) had a net

churn rate of -4%.
Negative churn? What does that even mean?
Net churn is when you subtract expansion revenue, which is

when customers pay you more money when they get more
value from your product—usually when an existing customer
upgrades to a higher pricing tier.
Your business achieves net negative churn when your ex-

pansion revenue outpaces the revenue you lose from churn-
ing customers. It can be hard to wrap your head around, but
+4% churn means you’re losing 4% of your recurring revenue
each month. And -4% churn means you’re gaining 4% of ad-
ditional recurring revenue each month without adding new
customers.
(We cover net negative churn, one of the SaaS Cheat Codes,
later in this chapter.)
So for this company, its high-paying customers who make up 80%

of their revenue have negative churn. It’s night and day trying to
grow a company when you have 11% churn versus 4% net negative
churn.
This is the value of segmenting churn instead of viewing it as a

single number. It inevitably helps you understand your business
better than if you were viewing churn in aggregate.
This company’s numbers aren’t unique. In almost every case,

your low-paying customers will churn faster and your high-pay-
ing customers will be stickier.
Is the answer in this case to cut your lowest pricing tier? It de-
pends. If your lower tier allows people to try out your product
and you’re seeing a decent amount of conversion from that tier
to a higher one, it might be worth dealing with the high churn
rate. Especially if the lower tier doesn’t require a lot of expensive
support or onboarding.
However, it could also be that your lowest tier is attracting a seg-

ment of customers who aren’t as good a fit for your product as
the higher-tier customers. You’ll have to do some more digging
to find out.
Segmenting by Marketing Channel

Seeing churn based on marketing channel is an advanced approach,
but the results can be eye-opening. It allows you to see which of
your marketing channels (or salespeople) are driving long-term
growth and which are increasing sign-ups that churn quickly.
As Aaron Kassover, founder of AgentMethods, told me: Seg-

menting churn by acquisition channel has been really helpful for us.
Learning that the LTV of a pay-per-click lead is way lower than av-
erage saved us from wasting a lot of money.
Unfortunately, doing this requires some setup. In AgentMethods,

they track it in ChartMogul by sending attribution data as a cus-
tom attribute they filter against.
As Aaron explained, Besides any UTM data, we also send things

like sales rep, onboarding rep, [and] NPS score. It’s really interesting
to see how metrics like churn and ARPA vary by salesperson.
You could roll your own solution to this, but taking developer
time away from your product is a foolish decision in my opinion.
I would recommend Aaron’s approach or using a tool like Seg-
Metrics (built to solve this problem) or Mixpanel to allow you to
segment your churn by marketing channel.
Segmenting by Cohort
Another interesting way to segment churn is by time-based co-
hort. The easiest way to do this is by setting up a retention grid,
which sorts customers based on their tenure with your company
and their paying relationship. Some SaaS metrics providers offer
this out of the box.
MRR Retention
Month Account Age (Months)

0 1 2 3 4 5
October $3.995 99% 98% 99% 96% 92% 91%
November $3.487 98% 96% 75% 63% 63%
December $3.743 101% 96% 92% 90%

January $2.166 108% 98% 97%
February $2.475 103% 106%
March $2.068 102%
You’ll often see that churn is significantly higher in the first one
to two months of a customer’s lifetime because people use that
time as an extended paid trial—they are basically sticking around

because they haven’t yet set up their account, but they intend to.
This is helpful because if you have massive churn in the first 60

days, you can hypothesize that this is due to people not setting up
their accounts or not seeing value in the product. But churn after
that will often have a different cause.
To figure out why people are churning in the first few months, ask
yourself:
• Is it taking too long for customers to find value?

• Are they finding that the product doesn’t actually meet their
needs?
You can nudge both of these in your favor.
It’s Taking Customers Too Long to Find Value. If customers aren’t

seeing value in your product, it could be a matter of education.
The standard approaches are to send onboarding emails to orient
them to your product (see Val Geisler’s Dinner Party Strategy) and
to hire a customer success manager to walk new accounts through
the onboarding process (assuming their price point makes this
worthwhile).
When you have a high price point, hiring someone to help with
onboarding can go a long way toward helping your customer find
value.
Essentially, you’re trying to help new customers find your mini-

mum path to awesome (MPA). Basically, the moment when every-
thing clicks and your customer says, “This is amazing!”
For a social media scheduling app, maybe it’s when they load the
first few posts and realize they can sit back and let your product
take care of the rest. For an email product, it could be the minute
they get a form installed on their website and start seeing new
subscribers.
It’s not always easy to find the MPA. Your product might be so
complicated that there are many paths to seeing value.
In that case, the burden is on you to educate your customers about

how to get the most value in the shortest amount of time. One way
to shortcut the process is to interview customers who are actively
using the product and ask them when they first realized how your
product would help them.
With Drip, we even built a custom internal dashboard to track

where trial users were along the path to awesome. Had they cre-
ated their first email list? Installed a form on their site? Activated
that form?
I could watch individuals or groups of users go through those

steps during the trial phase and see a leading indicator of how
many were likely to convert into paying customers.
Customers Are Realizing Your Product Doesn’t Meet Their Needs.

Sometimes this is a messaging issue. Somehow customers have
unrealistic expectations about what your product will do for them,
and it’s not until they spend some time using your product that
they realize it’s not a good fit.
In this case, it’s helpful to look at new customers by industry and

traffic source to see if there are patterns related to how they found
you or what they are trying to accomplish with your tool.
Are you overselling your product’s capabilities to an audience

looking for more sophisticated solutions? Is your messaging at-
tracting a type of business (e.g., size, vertical) that isn’t a good fit?
One way to answer the above questions is to simply ask.

There are many ways to ask customers why they churn. At Drip,
any customer that canceled their account received an automated
email within ten minutes of canceling. It said, “Hello, I’m one of
the founders of Drip, and I’d love to hear why you decided to can-
cel your account.”
We got a wide range of responses. Some people would tell us they

were shutting their business down—which isn’t something we
could fix. Others would say they switched to a cheaper tool because
they didn’t need our more powerful product. Others switched to a
competitor because they needed a feature we didn’t have.
The key to getting useful data points out of an exit survey is to

keep it short and direct, create a connection (“I’m the founder,
and your feedback would help me build a better product!”), and
ask for a reply—even if it’s just four or five words.
This can give you a glimpse into what potential customers want,
which helps guide product decisions.
More often than not, you can get a quick win with churn using
tactics like an email welcome sequence and in-app onboarding
tools to make sure new users see value early. However, pushing
churn below 2% or 3% is a long road that unfolds slowly as you
refine your marketing and sales language, learn more about your
ideal customer, and add more features those customers love (we
covered that in the Market chapter).
If you reduce churn enough, you might find yourself unlocking the
SaaS Cheat Code: Net Negative Churn.
SaaS Cheat Code: Net Negative Churn

Your business achieves net negative churn when your ex-
pansion revenue outpaces the revenue you lose from churn-
ing customers. While +4% churn means you’re losing 4%
of your recurring revenue each month, -4% churn means

you’re gaining 4% of additional recurring revenue each
month, without adding new customers.
If you are able to achieve net negative churn, you have an

incredible business. You can add zero customers in a month
but still grow. If you continue adding new customers, net
negative churn becomes a massive flywheel that helps your
business grow faster and faster.
It’s pretty magical to see. Not to mention that upselling ex-

isting customers is a lot cheaper than acquiring new ones,
so your CAC decreases and profitability increases.
It’s challenging to get to net negative churn purely by grow-

ing expansion revenue, though. You also need to do the work
we talked about above to get your gross churn down to rea-
sonable levels (in the 0% to 3% range).
When I owned HitTail, an SEO keyword tool, I structured

my pricing using the value metric of website visitors. Once a
customer went from 10,000 to 20,000 page views (or 20,000
to 50,000), they bumped up to the next tier.
The problem was that it didn’t happen as often as I expect-

ed. And because HitTail was a fairly inexpensive tool, our
churn was around 8%. Our 3% expansion revenue was a
nice offset, but it didn’t help us achieve net negative churn.
On the other hand, I recently spoke with a company that

uses an API credit system in which the more calls a cus-
tomer makes to their API, the more they pay. Like HitTail,
it has a 3% expansion revenue. But because its product is
high-priced and their churn is low (2%), that’s enough to get
them to 1% net negative churn.
Mindset
How Do I Achieve Success?
Success comes down to three factors: hard work, luck, and skill.
A particular person’s journey might require an equal one-third

of each factor, but in most cases, they are not evenly distributed.
If we look at Mark Zuckerberg’s experience launching Facebook,

we assume he worked hard and had some technical skills and a
lot of luck. The luck of timing and stumbling onto an idea that
others had around the same time were factors we can only guess
fell into place for him.
How about Jason Fried and David Heinemeier Hansson building

Basecamp into a mostly bootstrapped company that throws off
tens of millions of dollars per year in profit?
When I asked Jason on stage at MicroConf in 2019 why Base-

camp had over 3 million accounts created in its first 15 years, he
responded, “ Truthfully, luck and timing were one and two. And we
did a good job, too. But really it was luck and timing.”
Hearing him recount the story, it’s obvious they worked hard and
had excellent design and technical chops. Those two factors alone
would have allowed them to build a great business. But maybe not
one that grew organically to (presumably) more than $100 million
in revenue in about a decade.
Plenty of highly skilled founders work hard on their ideas only to

build companies worth far less than Basecamp.
What Can You Control?

You can control two of these factors: hard work and skill. Although
we can attempt to create our own luck, we do that by working
hard and acquiring or improving our skills.
Skills can be improved through applying hard work to a particular

field of study, for example: copywriting, visual design, filmmak-
ing, coding, or SEO.
With each of us starting from a different place, some may need

more work to learn skills others gained through their upbringing.
But you can build skills to become more successful through hard
work.
You can also control your mindset.
Successful founders come in all varieties. Some are highly driven

and motivated and seem to move at superhuman speeds. Others
are more chill and purposeful, showing up day after day to do the
work. But they all share a few key traits.
Successful Founders Have a Bias toward Action. When in doubt,

they do something. They don’t wait around; they don’t procrasti-
nate. They don’t think of reasons it should take longer—they start
shipping.
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A mistake I see founders make is taking too long to act. They get
paralyzed in analysis and have a lot of churning without making
any notable progress.
Successful Founders Develop Their Gut. I’ve talked a lot about

“founder gut” in this book, that instinct that helps you tune out
the noise and find the right path. Some founders have it innately.
Others develop it by going through the School of Hard Knocks and
learning through trial and error what works and what doesn’t.
You can also circumvent some of the more painful lessons on your
way to developing your founder gut by watching, listening, and
learning from others.
You might join a mastermind group and learn from your peers. You
can hire a coach. You can find a mentor—whether that’s someone
you know personally or someone you’ve never met whose work
you follow. (I’ll talk more about finding masterminds and mentors
later in this section.)
I can’t underscore enough that learning from others is a great way

to develop your founder gut. You’ll save so much time and heart-
ache than if you insist on making all your own mistakes.
My founder gut has made huge leaps when I’m around someone
who’s amazing at something that I am not.
Successful Founders Manage Their Own Psychology. For years

I’ve been saying that more than half of being a successful founder
is managing your own psychology. I came to this realization af-
ter seeing my wife, Dr. Sherry Walling, help founders find success
after months or years of failure due to mental blocks and other
unhelpful patterns.
In parallel, I’ve observed founders who seem to succeed no mat-

ter what’s thrown at them, be it unethical competitors, hackers,
lawsuits, or a major platform threatening to shut them down (all

scenarios I’ve helped founders work through).
Then there are those who get in their own way at every step. They
don’t do it intentionally, but they always seem to have a reason
they can’t ship, can’t market, aren’t closing sales, or aren’t grow-
ing their business.
It’s about their internal psychology.
In the rest of this section, I’ll talk about some of the frameworks
that are key to developing the mindset you need for your business
to achieve escape velocity.
Let’s start by helping you get out of your own way.
Where Should I Focus My Time?
In the early days, your priority is doing whatever it takes to figure

out one thing: How do you build something businesses want and
are willing to pay for?
There’s no blueprint for this. It’s a few rules of thumb coupled

with experimentation and gut feelings, and because of the un-
certainty, it is often a hard point on your entrepreneurial journey.
The early days are a pressure cooker. You might be putting your
nights and weekends into making this work. You might be eating
through your savings or relying on a spouse for support. It can be
rough, which is why in those early days your priority needs to be
moving as quickly as possible to get to product-market fit.
You need to move fast, and you need to work on the right things.
Before you find product-market fit, you’re mostly scratching and

clawing and (as Paul Graham famously said) doing things that
MINDSET | 169
don’t scale. You might be handling email support or finding cus-

tomers one at a time from your network. Spending your time pri-
oritizing these things won’t help you build a million-dollar busi-
ness, but in the early days, that’s what will get you to the point
where you have an opportunity to build that business.
As you move toward escape velocity, you figure out how to get
more of these things systematized. You hire people to handle sales
demos, answer customer support emails, and build the product.
Eventually, you get to a place where the hundreds of tasks that

used to be clogging up your to-do list are someone else’s respon-
sibility.
Once that happens, where should you focus your time?
Efficiency vs. Effectiveness

When I was in my 20s, I had the luxury of being able to spend a
lot of time working on random things. I could come home from
my day job and work 20 or 30 hours a week during nights and
weekends because we didn’t have children.
The problem was that I was often ineffective at what I was work-
ing on. I could get a lot of things done “efficiently.” But becoming
“effective” took a lot of hard work and learning.
You can be highly efficient by doing 10 tasks in a day, but if you

didn’t need to do eight of those, you weren’t very effective. Effec-
tiveness is when you do only the two tasks that actually drive your
business forward.
A friend of mine has health issues, so he only works on his com-

pany three or four hours a day—but he gets more done than most
founders do in 10 because he’s not doing extraneous stuff. He has
a strong sense of what will drive the business forward, and he
works only on those tasks.
How do you know what to work on? Some founders are good at
seeing this from the start—most of us are not. You can get better
at it by:
• Being around successful founders, seeing what they work on

and how they think about things
• Learning through your own experimentation, trial and error
• Exploring mental frameworks like my Stair Step Method of
Entrepreneurship, Sean Ellis’s Three Stages of the Startup
Pyramid, and my Risk vs. Certainty framework I’ll outline
next
Risk vs. Certainty

In SaaS, there are risks, and there are certainties.
Certainties are things that need to get done, and you know how
to do them. You know you need to build a new feature, you just
need to grind for eight hours and write the code. You know you
need to update your website copy. You know you need to send out
an email newsletter to your customers announcing new features.
Risks are the things you’re not sure of. You know you need more
customers, but you don’t know how to do that. You need to ex-
periment with marketing approaches to figure that out. You know
something’s off with your product-market fit, but you don’t know
how to fix it. You need to do a deep dive into customer research
to figure it out.
The areas of risk are iterative. You’re rarely going to get them right
the first time, so you need to try things, make mistakes, adjust
course, and know when to give up and when to press on.
Risky areas require founder-level thinking. Certainties only re-

quire the ability to execute them and can be handed off to task- or
project-level thinkers.
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As revenue grows, you should begin hiring so you can delegate

your certainties. You can hire someone to write code, write a
newsletter, or file your taxes (all certainties). You should focus
your energy on areas of risk because risks move your business
forward, and they require a level of problem-solving that is hard,
if not impossible, to hire for at this stage of your business.
Should I Raise Funding?
You may wonder why I’ve placed this section in the chapter on
mindset. The mechanics of raising funding are straightforward,
but I’ve found the internal struggle a founder faces when deciding
whether to raise funding is often more challenging.
I’ve never been anti-funding. But I am against the all-or-nothing

narrative that you should always or never raise funding. I find ex-
treme absolutes are usually unhelpful, especially when deciding
if you should accept outside investment.
Being anti-funding is like being anti-hammers. Funding is a tool,

and you should learn when to use it and when it’s not a good fit.
Ten years ago, it was much more difficult for bootstrapping found-
ers to raise money while using a capital-efficient approach to
growth and not being pressured to raise additional funding every
18 months. Most investors, whether angels or venture capitalists,
share the mentality that once you raise funding, you are seeking
to grow fast enough that you can raise a Series A funding round
and shoot for a billion-dollar outcome.
Venture capitalists weren’t interested in giving a few hundred thou-

sand dollars to a founder whose vision involved organic, natural
growth. They were looking to invest in unicorns (billion-dollar
companies). The way to build a unicorn company is to raise fund-
ing, grow quickly, and repeat that cycle about every 18 months,
diluting founder equity and potentially forcing a great $20-million
or $30-million business to grow past its logical limit. This often

implodes because the founders try to force their company into
this “unicorn-or-bust” model that most venture capitalists seek.
These days, though, capital that doesn’t force you onto the ven-
ture-funded track is much more accessible. It’s now possible to
raise an angel round or join an accelerator like TinySeed that gives
you a boost without tying you to the venture-funded track.
Raising $100,000 to $500,000 after you have a modicum of initial

traction won’t solve all your problems, but it can certainly make
things less stressful and can buy you the resource no founder ever
has enough of: time.
In your personal life, money saves you hours.

In your business, money saves you years.
If you’re working nights and weekends, raising enough to fund a

year or two of your salary can be a game-changer for your com-
pany. Being able to quit your day job and focus full-time makes a
night-and-day difference in achieving escape velocity.
If you’re already full-time, raising funding to hire someone who

can take tasks off your plate can be equally powerful. It’s incred-
ible the boost you can give your business when you’re no longer
stuck in the code or the support treadmill.
Funding can be a powerful tool—but you need to know what

you’re getting into.
Have a Plan
What will you do with the money? How are you going to deploy it
to grow the company?
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It is tough to find an investor who will give you money if you don’t
have a plan, and it can be dangerous for your business. If you don’t
know what you’re doing, money will not fix that. You’re just going
to make bigger mistakes, faster.
I generally don’t recommend raising funding before you have

some semblance of product-market fit because (A) your valuation
is lower at this stage, and (B) you’re likely to burn through most of
that money just trying to find product-market fit.
Don’t Torch Your Cap Table

Your capitalization table is a list of who owns what percentage of
your company. Literally: Rodrigo owns 70%, Janine owns 20%,
and Fred owns 10%.
Your cap table can get complicated if you start taking multiple
rounds of investment. I’ve seen cap tables with 40 entries, where
the founder still owns 50% of the company, a bunch of angel in-
vestors own 5% each, and early employees each own 1% to 2%.
A complicated cap table isn’t a deal breaker. But you can torch
your cap table if you let early investors or founders take too much
of the company. We’ve had multiple companies we’ve been unable
to fund because of their cap table.
One was a company where the founder only owned 30% because
he’d given up 70% to an agency he was working with in the early
days. Another founder gave 60% of her company to an early in-
vestor who had only invested $50,000.
When you let early investors take too much, you end up shooting
your business in the foot by making it uninvestable. You also put
the majority of the profits into someone else’s pocket.
You can also torch your cap table by not vesting founder equity. If
you start a company with two other people and split it equally, but
six months later one of your cofounders gets a full-time job and
leaves, they still own 33% of your company. You and your remain-
ing cofounder are stuck working the next five or 10 years growing
a company and putting money in your ex-cofounder’s pocket.
This also creates a problem if you want to raise money. Normally

in first-round funding, investors want to make sure the founders
who are actively working on the business own 80% to 90% of it.
This can be fixed with vesting, where you get zero shares during
the first year you work at the company and 25% of shares after the
first year, then the rest drip out over the next three years. Those
numbers can vary—you might decide to say it’s three years to
vest. Just make sure to talk to a lawyer when you set it up.
Funding Is a Tool
There are a lot of dynamics when it comes to raising money, and,
like I said before, raising funding won’t automatically solve your
problems.
At the end of the day, raising money can make the downsides of
your product or business model worse. If you don’t have prod-
uct-market fit, haven’t found a good marketing approach, or are
working inefficiently, raising money can exacerbate those issues.
But raising funding also has the potential to save you years. As
Craig Hewett, the founder of Castos, told me, funding allows you
to “live in the future” by making investments you otherwise would
have had to wait for.
When Craig Hewett raised money for Castos, he spent it on hir-

ing senior sales and development team members rather than the
juniors many startups are forced to hire because of a lack of cash.
This allowed Castos to make progress fast.
Ruben Gamez, the founder of SignWell, used funding to invest in

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compliance (SOC2 Type 2 and HIPAA). They would have done so

eventually, but they wouldn’t have been able to afford it until later.
This investment allowed them to start closing major deals sooner
and grow faster.
Strategic hiring can be another way to spend funds. Jordan Gal,

the founder of Rally, hired a chief of staff almost from day one. He
told me, “ Money allows you to hire in such a way that you, as the
founder, can focus on whatever your superpower is, with far fewer
distractions than when bootstrapped.”
Derrick Reimer of SavvyCal burst into a crowded scheduling

space by investing funds into SEO and marketing earlier than he
would have been able to if he was purely bootstrapped. This po-
tentially shaved a year or more off his marketing efforts.
Those are just a few of the ways funding can help when applied
strategically.
Drawbacks
There are three main drawbacks to outside funding.
The first is the time investment. A typical angel round can feel like
a part-time job, taking 10 hours a week for three to six months.
Getting accepted into an accelerator might only cost you the time
to apply, handle interviews, and work with legal counsel to review
and sign the docs. But there is a definite time investment involved
in raising, and during those hours you won’t be working on tasks
that could drive your business forward.
The second is the added complexity. Anytime you add someone

to your cap table, you have one more entity involved. Even if in-
vestors have limited or no rights in decision-making, you have an
external source to whom you need to report financials, keep up-
dated, and potentially obtain signatures from if you make certain
changes to your corporate structure.
Finally, there’s the fact that you are selling part of your company
to someone else. The idea, of course, is that the funding should
allow you to increase the value of your company far more than
the value of the equity you sell. But that ultimately falls back on
your ability to execute and grow the business with the funding
provided.
Am I Turning Speed Bumps into Roadblocks?
During an episode of my podcast, as my former cohost and I dug

into some struggles he was running into getting his product to es-
cape velocity, I said this phrase: “It sounds like you’re taking speed
bumps and turning them into roadblocks.”
As a founder, you can choose to look at an obstacle as something

that keeps you from moving forward (a roadblock) or as some-
thing that slows you down for a minute as you continue along your
path (a speed bump).
As I look back on my experience building startups, I can see how

my mindset around this has evolved over time. In the early days,
everything seemed like an insurmountable roadblock, a compa-
ny-ending event.
These days I force myself to view things as speed bumps. As I’ve

made this seemingly simple mental shift, I've become more effec-
tive and less stressed.
Roadblocks
Problems are inevitable when you are building a company. When
they arise, if you find yourself using phrases like the following,
your founder lens is viewing them as roadblocks:
• This is too big to fix.

• If this doesn’t work, the business is finished.
• I’m out of ideas. I can’t make this work.
MINDSET | 177
Obviously there are situations where a problem is an actual road-

block. A roadblock is a business-ending situation where a plat-
form is shutting down its API or you’re being sued out of exis-
tence. Although these things happen, they are much less common
than speed bumps.
Speed Bumps
The tricky part about speed bumps is they masquerade as road-
blocks. They do this by taking advantage of your lizard brain. The
stress and uncertainty we experience as we build companies leave
us vulnerable to believing things that simply aren’t true.
We often do this because our stress level is high and our minds
don’t quite know how to handle it. When we’re in a constant fight-
or-flight mode, most things feel like an existential threat. They
feel business-ending.
I recall trying to land a major customer for Drip, and my inner

voice was saying: If you don’t land this customer, the business is
going to fail.
That statement was factually inaccurate. It would have been a

disappointment if we didn’t land the customer, but every month
several significant potential customers showed up in our inbox.
We had options.
This was absolutely a speed bump, not a roadblock. But I let it

become a roadblock in my mind, taking a toll on my happiness
and productivity in the process.
In the early days of TinySeed, I spoke with a founder who decid-

ed not to accept our investment terms. My inner monologue was
telling me: Our approach is too new, and people aren’t ready. It’s
not going to work.
Yet here we are years later with batches of successful startups I

couldn’t be more proud to work with. In retrospect I turned a mi-

nor rejection (a speed bump) into a mental roadblock that stuck
with me for days.
Unnecessary Stress
Roadblocks put stress on your mind, on your body, and on your
relationships. It’s no way to live, especially for folks who are build-
ing startups to improve our lives.
We don’t have to grow at all costs or answer to a board. We build

startups with the handicap of not being able to raise buckets of
funding. Not receiving funding means hard-earned freedom, and
you shouldn’t squander it by letting your mind manufacture road-
blocks where there are none.
At some point a couple years ago, I realized that all the stress
and worry over my then 14 years building companies was not a
good thing. When people ask what my biggest regret has been as a
founder, it’s that I stressed too much about things that were going
to work out. I made roadblocks out of speed bumps.
Optionality
My process for solving problems has moved from stressing about
everything that could go wrong to mapping out three or four pos-
sible options if things do go wrong. Often these options are not
optimal, but none of them would be business-ending.
Typically they involve spending more money, investing more time,

turning down a lucrative deal, or navigating a sticky situation. These
are all things I’d prefer not to do, but none would ruin the company.
Making the mental shift from “everything will end” to “we’ll

switch to plan B, C, or D” has been one of the biggest leaps in my
own psychology. I’ve realized this over the past few years, but I
heard it in full force in the podcast episode I mentioned at the
start of this section.
MINDSET | 179
I would not be overstating to say this has been a life-changing

realization. My regret is that I didn’t discover it years ago.
Where Can I Find Community?
About a decade ago, I started championing masterminds on Start-

ups for the Rest of Us. They were popular in the Internet marketing
space and, given the impact they’d had on my life, I felt they would
be particularly valuable to both early and growth-stage startups.
Masterminds are small groups of people that have similar experi-

ences, challenges, and trajectories in their businesses. Simply put,
they embody the phrase: Two (or three) minds are better than one.
Because many bootstrapped founders run solo operations, the

idea of having a crew to provide feedback—based on an under-
standing of our industry that few have—was too good to pass up.
There are three clear benefits of being a part of a mastermind:
Growth. By surrounding yourself with folks who can provide you

with informed advice, qualified referrals, and critical constructive
feedback on your failures in a safe space, you are setting yourself
up with the resources and guidance you need to focus on growing
your business.
Hopefully there’s at least one other person on each call who has
more experience in a specific area than you do. There are some
things in my business that I’m pretty damn confident I’m good at.
But I know I have blind spots in other areas. I can bring those things
to my mastermind because they don’t have the same blind spots.
Accountability. As many solo founders know, keeping yourself ac-

countable with no outside forces can be challenging. During most
mastermind meetings, there is a point in time when each mem-
ber is in the hot seat, discussing past goals and their progress,
setting new goals and tracking them, and reporting back to the
other members with updates along the way. By asking your group
to keep you accountable to your business, you’re also committing
to holding them accountable.
A good mastermind also forces you to look at your weaknesses.

You can bring your weakest attributes in front of this small group
of trusted individuals who know your story, your revenue, your
growth rate, and all your foibles—personally and professionally.
Your mastermind will tell you things that if your spouse said them,
you’d ignore them. (Ask my wife about that.)
Support. Humans are social beings. Napoleon Hill says that the
convergence of two individual minds creates a third, invisible
force that combines the strength of both of its components.
When you share your vulnerabilities and successes with others,

you magnify your own experience and make it the experience of
those around you. The power that comes from those shared ex-
periences can be just as compelling and empowering as your in-
dividual success.
Three of my favorite entrepreneurial communities are Indie Hack-

ers, the Dynamite Circle, and of course, MicroConf.
How Can I Find a Mastermind?

As the idea of masterminds has become more common in the en-
trepreneurship space, they’re becoming easier to find. You can start
one of your own—I typically recommend you join a community
and look for members within that community with whom you gel.
Or you can take advantage of a matching service like MasterMind

Jam or the one we started at MicroConf. We started matching
because we had so many people asking us how to find a mas-
termind, and at the time of this writing, we’re close to matching
MINDSET | 181
1,000 founders across 50 countries with more than $200 million

in collective ARR.
We also put together a free guide to masterminds, including spe-

cifics about format, how to form and run a group, and everything
else you need to get started. You can read it at microconf.com/
mastermind-101
Choosing the Right Mentor (Or Two)

While a mastermind is a group of your peers—people who are on
the same path and facing similar challenges—a mentor is some-
one who’s been down the path before. A mentor gives you advice
from a place of success: they’ve successfully bootstrapped a start-
up or two, or they’ve been in business for years.
Note: I use the word “mentor” here unconventionally. In this con-

text, I mean online mentors with whom you chat regularly and
those you follow from a distance (through a podcast, blog, book,
or YouTube) and may never connect with directly.
A mistake many new founders make is either listening to too many

people or no one at all.
I made the second mistake for years. I thought I had such a unique
take on business that I didn’t need to listen to others who had come
before me and likely had insight into how I could be successful.
Other founders make the opposite mistake, following 10 or 15

different people who each have different approaches to starting
a company. They try to combine all of their information into a
single approach, which often leads to information overload and a
mess of conflicting tactics.
My advice: find a mentor or two. But no more. This keeps your in-
formation consumption at a reasonable level while allowing input
from outside sources.
How to Choose a Mentor

Perhaps a mentor is creating content that resonates with your
goals, or they’ve built a company you admire. Here are a few ques-
tions to consider when choosing a mentor:
• Have they accomplished what I want to accomplish? Does it

seem like they got lucky, or could they do it again?
• Does this person have a reasonable personal life? Do they
treat people well? Do they have a happy family? If some-
one has a catastrophic personal life, odds are decent that
if you’re not willing to do the same, you’ll be unlikely to
achieve success in the same way they did.
• Do you want to be like them, and are you willing to do what
they’ve done to become successful?
Who you choose as a mentor is a deeply personal choice, but it’s

usually pretty obvious who resonates with you both as a founder
and as a human.
How Can I Avoid Burnout?
In 2015, as I was riding the rocketship of Drip, I started to burn out.
As the founder, I was bearing the burden of every task that slipped
through the rest of the team. I managed legal, HR, payroll, opera-
tions, business development, and marketing; I co-led product and
engineering; and I ordered snacks for the office. These were all
things the company needed, and I was fully capable of doing them.
A few of them brought me joy.
Every month I asked myself how I could hire someone to do all of

the above. But being cash-strapped in a hypercompetitive space
meant that shipping more features felt more important than find-
ing someone to handle day-to-day business tasks.
Some months Drip grew enough to warrant hiring one or two ad-
MINDSET | 183
ditional full-time employees. And every time, I opted to hire in

customer success, sales, or engineering. I wanted to close more
deals and ship more features, my happiness be damned.
Except it began to take a toll in a serious way. My motivation

slipped over the course of many months. After overcoming the
prolonged financial stress of 2014, when Drip wasn’t growing
quickly enough, I began to experience burnout in mid-2015. Many
days I showed up to work and stared at my Trello board, unmo-
tivated to do any tasks. Nothing on the board looked interesting.
Jason Cohen did a talk at SaaStr in 2018 that put visuals to what
I experienced.
Everyonedeserves fulfillment
Trap
JOY SKILL
Trap Burnout
NEED
Image adapted from Jason Cohen’s talk at SaaStr, 2018.
In one circle are the things you’re happy doing. In the second are
the things you’re good at. And in the third are the things your
company needs.
The sweet spot for your work should be where all three intersect.
If you’re focusing solely on things you’re good at that bring you joy,
you can get stuck galloping down paths that are detrimental to the
needs of your company. If you’re doing things the company needs
that bring you joy (but you’re not good at), then you’re dragging
your company down.
But if you’re stuck doing things the company needs that you’re
good at (but don’t like), that leads to burnout.
That’s exactly what I was doing. I hired an executive assistant who

lightened that load for a bit. She helped streamline a few things
and made appointments, but what I really needed was someone
to whom I could delegate at another level.
At the time, I felt like we couldn’t afford someone who wasn’t con-
tributing to the bottom line of the company. In retrospect, this was
one of the biggest mistakes I made while building the company.
I should have hired someone who could come into the office and
handle operations. Things like legal, payroll, HR, and facilities.
Most of these were outsourced to external providers, and it was
just a matter of interfacing with them.
As I look back at my descent into burnout, one thing that could

have saved me was having enough funding to hire someone to do
the work that didn’t bring me joy. Or prioritizing spending mon-
ey on hiring and delegating tasks that didn’t move the business
forward but were contributing to my lack of satisfaction at work.
I hope you’re not at a place where the next section is helpful to you.
I hope that you’re smarter than I was and are putting measures
into place to keep yourself from burning out like I did.
As Jason said in his talk: “The right question is what should you be
doing differently now […] in order to build a company that’s more
MINDSET | 185
healthy and prosperous, and also avoid this balloon payment of emo-
tional toil at the end.”
Getting through Burnout

I’ve heard burnout manifests itself differently in different people,
but for me it felt like a mix of depression and frustration. Not
the kind you can clear up with a weekend away, but a long-term,
deep sense of tiredness, lack of motivation, and feeling just a little
pissed off at all times.
This led to my aforementioned stints of staring at Trello for hours

and a lack of presence at home. I would be home with the family,
but most of the time my mind was elsewhere.
I tell this as a cautionary tale: if you find yourself listless, unmoti-

vated, or constantly frustrated as you endure the stress of build-
ing your company, it’s unlikely to fix itself. The best remedy for
burnout is significantly changing your habits and patterns related
to work, including stepping away for weeks, which feels like the
last thing you can do when everything is going crazy (whether it’s
good crazy or bad crazy).
If you find yourself in this situation, you need to address it, or it

will get worse. If unaddressed, burnout can lead to terrible out-
comes, including long-term damage to your brain.
If burnout is a situation you find yourself in, consider reaching out

to a professional who works with founders on the mental game
of entrepreneurship. Dr. Sherry Walling is one (she happens to
be my wife, and she knows her stuff), but there are many other
executive coaches and therapists who work with high-performing
individuals to manage stress, burnout, and everything else that
comes with our line of work.
I’ve only started to touch on burnout here, but for an entire chap-
ter about it, check out my third book: The Entrepreneur’s Guide
to Keeping Your Sh*t Together: How to Run Your Business Without

Letting it Run You.
What Are Founder Retreats?
After I left Drip, I took six months off to decide what to do next. I
wasn’t sure I was going to start another company.
I wanted to do something fun. I love tabletop games, so I consid-

ered getting into the tabletop game space—maybe manufacturing
them, publishing them, or building a tabletop gaming site.
I was actually in talks with a major tabletop review site and was
starting to look at a hard pivot. What would it look like to sell the
podcast? To sell MicroConf? Maybe it was time for me to get out
of the startup game and sail off into the sunset to game until I got
bored of that and moved on as well.
I was on the verge of making a life-changing decision, and I need-

ed some perspective. I decided to go on a retreat.
Taking a Founder Retreat

The two biggest things that have helped me in my journey as a
founder are masterminds and founder retreats. Without those, I
sincerely don’t think I would be as successful as I have been.
My wife Sherry has a PhD in psychology. She started going on

annual retreats after we had kids, where she got away for 48 or 72
hours without podcasts, movies, or books—just herself, a note-
book, and silent reflection.
When she first started taking retreats, it didn’t sound like my thing.
I’m always listening to a podcast or an audiobook. I’m constantly
working on the next project. But after seeing her come back from
these retreats energized and focused, I decided to give it a try.
MINDSET | 187
I booked myself a hotel on the coast and drove out for the week-
end with no radio, no project, no kids, and no distractions.
Over the course of that two-and-a-half-hour drive, things began

to settle. I started feeling everything I hadn’t had time to feel for
the past year. In the silence, I had sudden realizations because I
was finally giving them quiet time to emerge.
During that retreat, it became obvious that my whole life had been
about entrepreneurship. Ever since I was a kid, I have wanted to
start a business. I’ve always been enamored with being an entre-
preneur and the excitement of startups.
I realized that I was coming to this decision of what to do next

because of the idea of wanting to get away from the thing that had
caused me to feel bad—as though startups were at fault rather
than the decisions I made.
At that time, my podcast had more than 400 episodes, which had
been recorded over eight years. That wasn’t an accident. It existed
because I loved doing it. I showed up every week even though it
didn’t generate any revenue.
During my retreat, I realized that being involved in the startup

space is my life’s work. The podcast, my books and essays, Mi-
croConf—all were part of my legacy. Instead of selling it off and
striking out in a new direction, I decided to double down.
Within a couple months, I launched TinySeed. Then I leaned into

the next stage for MicroConf, where we transitioned from a com-
munity built around in-person events to an online and in-person
community, plus mastermind matching, virtual events, funding,
and mentorship.
I also began working on this book.

As a founder, it’s important to know yourself. Even if you started

out with firm self-knowledge, the fast pace and pressure of boot-
strapping a business—not to mention the pressures of the rest of
your life—can make it difficult to see your path. A founder retreat
is a way to reacquaint yourself with yourself every so often.
After my first founder retreat nearly a decade ago, I started going

on a retreat every six months. Now I do one a year, and it’s one of
the most important things I do for myself, my business, and my
family.
If you’re considering a retreat, several years ago Sherry wrote an

ebook called The Zen Founder Guide to Founder Retreats that ex-
plains exactly what questions to ask yourself, the four steps to
ensuring you have a successful retreat, the list of tools she rec-
ommends bringing along, and how to translate your insights into
action for the next year.
Afterword
You made it! I appreciate you sticking with me through parts that
were fun and those that were less fun (metrics, anyone?). My hope
is that this book brought you many times more value than what
you spent buying it.
If you liked it, a rating on Amazon or a mention on Twitter would

help me tremendously.
If we’re not connected on Twitter, I’m @robwalling. Feel free to ask

me questions about the book or anything startup related.
If you want to hear more about building, launching, and growing

startups, I host a weekly podcast at startupsfortherestofus.com
and a weekly YouTube series at microconf.com/youtube.
If you have a question or to purchase the print, ebook, or audio

version of this book, visit saasplaybook.com.
Thanks for reading!

Acknowledgments
This is my fourth book, and trust me when I say that writing them
does not get easier. This book is only possible because of the many
people who generously contributed their time and energy.
Thanks to my parents, who long ago taught me the value of hard

work.
Thanks to Ruben Gamez for convincing me I needed to write it

and for being the place where I steal a lot of my good ideas.
Thanks to my writing coach and developmental editor, Jessie

Kwak, for asking the right questions and putting up with my many
rewrites.
Thanks to Charlie Gilkey for the pep talk when I stalled halfway
through the book.
Thanks to Sherry and the boys for their support during the years
it took me to learn these lessons.
Thanks to Ruben Gamez, Craig Hewitt, Aaron Kassover, and

Derrick Reimer for offering critical feedback on early drafts.
Appendix A: Resources
Although it is far from exhaustive, this appendix is intended to

provide you with additional resources for learning and commu-
nity, including several that were mentioned throughout the book.
I maintain a page on this book’s companion website with up-to-

date information on topics that change frequently. To view the
page, visit saasplaybook.com.
Communities
MicroConf is a community of tens of thousands of ambitious SaaS
founders, ranging from those in the idea stage to those who have
many millions in revenue. It offers both online and in-person
events, a free online community (hosted in Slack), mastermind
matching, and more. Learn more at microconf.com
Indie Hackers is a community of developers launching side proj-

ects and building them into full-time incomes and beyond. Indie
Hackers has a long-running podcast in addition to its vibrant (and
free) online community. Learn more at www.indiehackers.com
The Dynamite Circle is a community focused on digital nomads and

those looking to build incredible lifestyles through their businesses.
They cater to every type of entrepreneur, from software to freelanc-

ers to agencies, e-commerce entrepreneurs, and content creators.
They offer a paid online community, in-person events, mastermind
matching, and more. Learn more at dynamitecircle.com
Rhodium is a community of digital entrepreneurs and investors.

They offer an online community, facilitated masterminds, and
in-person events for entrepreneurs running content, e-com-
merce, SaaS, and productized service businesses. Learn more at
rhodiumweekend.com
Podcasts and YouTube Channels

Startups for the Rest of Us is a 30-minute podcast I’ve shipped
weekly since 2010. It covers many topics contained in this book,
including all aspects of building, launching, and growing SaaS
companies. Learn more at startupsfortherestofus.com
Bootstrapped Web, with Brian Casel and Jordan Gal, is a

long-running conversation between two SaaS founders who talk
week-to-week about building their companies.Learn more at
bootstrappedweb.com
Lenny’s Podcast, with Lenny Rachitsky, is an interview show that

focuses on building and growing great products. Learn more at
www.lennyspodcast.com
In Demand, with Asia Orangio, breaks down marketing myths

and lays the foundation for both bootstrapped and funded SaaS
founders to grow their businesses with strategies and tactics that
work. Learn more at in-demand.castos.com
MicroConf’s YouTube channel is where we publish weekly videos,

usually 10 to 15 minutes long, focused on tactical SaaS-related
topics, from ideas to validation to launching and growing. Learn
more at microconf.com/youtube
APPENDIX | 197
Dan Martell’s YouTube channel is where SaaS coach Dan Martell

talks about all things SaaS, from branding to sales to growing your
team and more. Learn more at youtube.com/user/danvmartell
Masterminds
If you are interested in being matched with like-minded founders,
check out these SaaS-focused mastermind matching services:
• MasterMindJam. Learn more at mastermindjam.com

• MicroConf Masterminds. Learn more at
microconfmasterminds.com
You can also check out MicroConf’s free guide to starting a Mas-
termind at microconf.com/mastermind-101
Books
Marketing
• Traction by Gabriel Weinberg
• Hacking Growth by Sean Ellis and Morgan Brown
• The 1-Page Marketing Plan by Allan Dib
Sales
• Product Demos That Sell: How to Deliver Winning SaaS Demos
by Steli Efti
• Founding Sales by Pete Kazanjy
• Demand-Side Sales by Bob Moesta and Greg Engle
• The Ultimate Sales Machine by Chet Holmes, with Amanda
Holmes
Positioning and Branding

• Obviously Awesome! by April Dunford
• Building a StoryBrand: Clarify Your Message So Customers
Will Listen by Donald Miller
Mindset
• The Zen Founder Guide to Founder Retreats by Sherry Walling
• The Entrepreneur’s Guide to Keeping Your Sh*t Together

by Sherry Walling with Rob Walling
M&A
• The Art of Selling Your Business: Winning Strategies & Secret
Hacks for Exiting on Top by John Warrillow
• Before The Exit: Thought Experiments For Entrepreneurs:
A Short Guide For Founders Planning to Sell Their Business
by Dan Andrews
Customer Research
• The Jobs To Be Done Playbook: Align Your Markets, Organiza-
tion, and Strategy Around Customer Needs by Jim Kalbach
• Deploy Empathy: A Practical Guide to Interviewing Customers
by Michele Hansen
• The Mom Test: How to Talk to Customers & Learn If Your
Business Is a Good Idea When Everyone Is Lying to You by Rob
Fitzpatrick
Other Works by the Author
Start Small, Stay Small

A Developer’s Guide to Launching a Startup
Start Small, Stay Small focuses on practical, step-by-step

instructions used by hundreds of developers on the road
to launching their startups. Whether you have a product
idea or are still looking, this book takes you through the
process of finding an idea, testing it, converting visitors to
buyers, and attaining profitability as quickly as possible.
“Every software engineer can pull an idea out from here…

I wish I had this when I was starting my business.”
— PATRICK MCKENZIE, KALZUMEUS
The Entrepreneur's Guide to Keeping Your Sh*t Together

How to Run Your Business Without Letting it Run You
by Sherry Walling with Rob Walling
Running a business is hard. It can ruin your health, your

relationships, and your life. The Entrepreneur's Guide to
Keeping Your Sh*t Together is an invaluable guide to stay-
ing sane and ensuring both you and your business thrive
for years. Learn new ways to deal with the responsibility
and fear of being an entrepreneur; cope with depression,
anxiety, burnout, ADHD, and other common psycholog-
ical burdens; and overcome procrastination to get more
things done—faster.
“A personal, generous, and incredibly useful guide to staying sane and changing
the world at the same time. Read it before you think you need it.”
— SETH GODIN

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THE SAAS

ISBN 979-8-9877465-2-3 (ebook)

All rights reserved. No part of this book may be

Trademarked names appear in this book. Rather

“Rob is a startup Grand Master who’s inspired me and countless others. A

Rob Walling is a serial entrepreneur who has started six compa-

He runs the largest community for non-venture track SaaS found-

For this book’s online resources or to purchase the print, ebook,

To Sherry and the boys

Thank you for your tremendous

Foreword by Jason Cohen 13

The Playbook for Building a Multimillion-Dollar SaaS 29

80/20 SaaS Metrics 143

by JASON COHEN, Founder, WP Engine

Is it OK to want to get rich with your own two hands, beholden

Is it OK to be obsessed with your work and ideas yet not want to

Is it OK to have the hubris of thinking your product is better than

Congratulations, that makes you a founder. (Or should I say, con-

It is a peculiar party, its members bonded by experiences that can

The gut-wrenching first time you fire someone, having worsened

The constant barrage of customer complaints and compliments,

Focusing your attention and your learning on these specific areas

ing/sales, team, metrics, and personal mindset—gives you the

So read this book. Use it to become a better version of the person

JASON COHEN, Founder, WP Engine

My phone buzzed. It was an incoming email.

Some acquisitions are scary. All of them are stressful.

This one was going to be life-changing, which made it even worse.

For something I had dreamed about for decades, running a

My mind flashed to the day we crossed $1 million in annual rev-

moved into a real office with huge windows overlooking a busy

I then flashed to my “lost” six months in 2014 when I thought of

And yet there I sat, in a college classroom outside of Portland,

“Please DocuSign: Drip Written Consent of Board

“This is insanity,” I thought. “I can’t believe this has come together.”

To the chagrin of the cello instructor, I motioned that I needed to

I opened my mobile banking app and logged into our company

A text message arrived from Derrick, my cofounder, with whom

Derrick: *virtual handshake* Congrats indeed!

He followed up with a bitmoji of him in a green suit with dollar

I exhaled slowly. The stress wasn’t going away. I hoped it would

Why You Should Read This Book

There’s a narrative in the startup ecosystem that assumes you will

I’ve attended meetups where I mentioned bootstrapping my com-

In the introduction of my first book, written in 2009, I said the

I am not anti-venture capital. I am anti-everyone-thinking-ven-

The dream of being picked from a sea of wannapreneurs, anointed

It implies that you need someone else’s permission to build your

Or maybe you like having an excuse not to ship, and a never-end-

Build your business, not your slide deck.

Instead of waiting for a basket of money to fall into your lap, go

to investors. Instead, I would tell you to focus on building your

After nearly two decades of working with startup founders, I know

There are superpowers to being bootstrapped. One is that you

It’s a shame that although more than 99% of new companies

Building a business that generates enormous profit and serves

founder, you’re likely seeking freedom from working for others or

Maybe you want to spend 10 hours a week working on your com-

My intent is not to dissuade you from raising funding (I run a fund

Who Should Read This Book

Derrick: virtual handshake Congrats indeed!