Building A 6-Figure SaaS Business as a Non-Technical Founder
While working full-time at Kettle & Fire, I created and bootstrapped ARPU in 2018. I only invested $10,000 into creating it, and a year later it was generating 6-figures in annual profits. In 2020, it was acquired by Churnbuster.
All of this was achieved while working on it as a side project, and as a non-technical founder. In some ways, side projects require better strategy than regular businesses due to the resource constraints. This is my story of how we created getARPU.com even though I had a FT job (for a summary, scroll to the bottom of the article).
Part 1: How did I come up with the idea?
Throughout my life, I’ve always created side businesses (selling shot glasses, creating HR videos, and a group dating website). However, my ideas were usually scattered and low quality due to my lack of experience.
Fast forward to 2018, my experience at Kettle & Fire helped me establish my professional network, and most importantly, I was able to experience many problems within the direct-to-consumer industry. Every time I experienced a problem, I would write down the solution as a potential business idea.
Lesson: Even if you want to be an entrepreneur, it's valuable to gain some industry experience by working for talented people. It'll help you come up with better business ideas.
By now, I had a big list of potential business ideas. The next step was for me to start prioritizing the ideas. Since my intention was to create a side business, it meant I would be constrained on my available time. I'd only be able to work on it weeknights and weekends. Cash will also be limited because I'd have to self-finance and bootstrap it.
To prioritize the ideas, the ideal side business should have:
- High Margins & LTV: This helped me rule out most of my agency, consulting, and physical business ideas that I had. This meant the remaining ideas I filtered were related to the education or SaaS space.
- Organic Customer Acquisition: This for me meant that I needed either a strong SEO opportunity, or an arbitrage opportunity in a marketplace/app store.
- Low Starting Costs: This for me meant that I’d prefer to partner with co-founders that would be fine with upfront equity rather than cash payments
After those 3 filtering criteria, I ended up having 2-3 business ideas. Of which, one of them was inspired by seeing how Dollar Shave Club (DSC) sends “pre-shipping” notification emails that allow customers to add products to their next order.
These upcoming order notifications are sent to active subscribers prior to the order renewing. It's a perfect time for consumers to add more products because the order hasn't shipped yet, which ultimately makes the brand more money.
I reached out to my contacts at DSC, and they were able to share with me that these emails were very effective in generating incremental revenues. At this point, I knew that there was a business opportunity, all I would have to do is build it.
The next step was to convince developers to partner up with me. I knew I wanted to keep starting costs low which meant I preferred my developer partners to be co-founders and accept equity instead of upfront cash payments.
The problem? Quality developers are extremely busy and it’s hard to convince them to take equity as the main form of compensation. The good developers get approached by their friends all the time with "app" ideas. So it's very important to have the most important pieces figured out prior to approaching developers.
Lesson: To partner with great developers, you'll have to build an amazing business case. This means doing all the non-technical leg work upfront so developers will take you seriously.
Part 2: Figuring Out The Distribution
This business was meant to be a side-business. For me, this meant distribution would mostly have to be organic. I needed an evergreen source of leads to come with me, with very little marketing or sales required.
For me, it was the ReCharge app store. This is where my industry experience comes in. I knew the Shopify app store is extremely competitive. It would be difficult to stand out.
However, I knew that most Shopify brands that had a subscription program used ReCharge, and they had their own app store.
This is important because most of the large Shopify stores all had a subscription business. So in a way, ReCharge's app store was a trojan horse into the Shopify ecosystem. It was less competitive than the Shopify app store, but had a stronger concentration of quality brands (they have >10,000 customers, many of them Shopify Plus brands). This would be my source of organic leads.
Because of my FT job, I already had relationships with many of the executive members at ReCharge. My connections gave me the contact information of the person who was responsible for their app store. So I set up a meeting with them to discuss my idea. My only goal was to get some sort of written proof that if I was to build the app, they would put it on their app store.
During the meeting, I went over...
SLIDE #1 (WHY ME): I wanted to communicate to the ReCharge team why I was in a unique position to help their customers with my app idea.
SLIDE #2 (THE OPPORTUNITY): For DTC subscription businesses, I knew that the main reasons for cancellation are “too much volume”, and that subscription customers are the most profitable type of customers. These are the opportunities that my app would solve.
SLIDE #3 (THE SOLUTION): I just created some Photoshop mockups to show what it would look like, and the user flow.
After the meeting, I got an email and written proof that they would place my SaaS idea into their app store if it passed their QA/QC requirements. This would come in handy to convince developers to partner with me.
Lesson: Before starting your business, it's very important to at least have a strong idea of how you'll get customers. The more organic it is, the better. Leverage your experience and connections as much as you can.
Part 3: Quantifying The Business Opportunity
Now that I had a good initial distribution plan, I needed to research what the business opportunity was. The size of the prize had to be large enough to bring in meaningful revenues. To do this, I had to find out the:
- Total Addressable Market: On ReCharge's website, it says they have over 10,000 customers.
- Total Serviceable Obtainable Market: I used a tool “BuiltWith” to quantify all the merchants on the ReCharge platform who would be our ideal target customer (ie: food/bev, personal care). I then overlaid the pricing from similar companies to understand how big of an opportunity this was.
This gave me a rough approximation that even if I was to capture a few % of their total customers, it would be a 6-figure annual business.
Part 4: Creating The Initial Mockups
The last thing before approaching developers was to provide an initial mockup and product journey of the idea. My goal was to make it as easy as possible for developers to understand the product roadmap. So I mapped out the entire customer journey, what each button would do, and the MVP features.
Part 5: It's Time To Contact Developers
To recap, before I even approached developers, I have accomplished:
- Figuring out the distribution strategy by getting written confirmation that ReCharge would accept the app on their platform
- Quantified the market size and business opportunity to show that the market was large enough
- Completed the initial mockups so it's easy to understand the scope of development work required.
Only when all of the above were completed, did I finally reach out to developers.
The partners I wanted to be James & John Erck from Above Market. I worked with them in the past with a project for Kettle & Fire and was extremely impressed by the quality. So I reached out, showed them the idea, and also outlined what I needed them to do.
I knew they were busy because they owned an agency with many clients, but by having all my homework completed before talking with them, they were willing to partner with me by taking an equity stake in lieu of cash payment.
This was critical because I didn't have the funds to pay in cash, but because of all the homework I did upfront, I was able to bootstrap the business by paying them solely on equity.
Once everyone was on the same page, I formed the business, got all the paperwork ready, and we all got to work!
Lesson: When starting a business with developers as co-founders, it's important to make sure everyone is on the same page with responsibilities and who will own what. It's also wise to have a features brief completed so everyone knows the exact scope requirements are for the first version.
Part 6: Launching The Business
After about 6 months of development, the app was ready for the first group of beta customers. This is again where I leveraged my connections within the industry.
From my role at Kettle & Fire, I was able to build my own slack community of executives at other DTC brands.
This provided me direct access to the decision-makers of many of our target brands. And since I had a good relationship with many of them, I was able to close our first batch of customers without having to do any marketing.
Part 7: Scale & Beyond
After a few months of operating with the initial beta customers, we worked out most of the bugs and ReCharge put us on their app store.
Funny story, I specifically named our app "ARPU" because ReCharge's app store is ranked alphabetically. Guess who ranks for the top spot on their app store :)
From there, it was all about scaling the business. On our signup form, we would ask leads "where did you hear about us?" I started seeing quite a few sign-ups coming from the account managers who worked at ReCharge. Their internal employees would refer us to their customers.
Based on this insight, I decided to host virtual lunch & learn where I would send UberEats gift cards to account managers at ReCharge. All they would have to do is eat lunch, and sit in on a virtual webinar to learn more about my app.
The account managers loved it, and we started doing this every quarter so even new hires would get exposed to us.
As a result, any time ReCharge had a new customer, their account managers would recommend our app as part of their onboarding. And since their account managers were responsible for larger stores, we were able to start acquiring good quality customers.
Lesson: Use "how did you hear about us" surveys to understand where your customers are coming from. When you see a pattern, start to dig deeper and identify ways you can encourage and scale that source.
SUMMARY OF KEY POINTS:
1) To come up with business ideas, it's useful to work under someone and get industry experience. Invest the effort to build out your professional network, and to keep track of the problems & solutions you encounter along the way. These will be your future business ideas.
2) Based on your circumstances, create your own criteria to filter through good & bad business ideas. I personally focus on the ideas where there's a really clear path to distribution.
3) For SaaS businesses, if you're a non-technical founder, do as much work as you can before you look for technical partners. This means having a strong plan for distribution, quantifying the market opportunity, and doing mockups of your product.
4) When you finally reach out to developers, invest the effort and over-communicate the responsibilities of each member. Have a clear definition of what is the main features of the MVP and milestones.
5) For your first group of beta customers, this is where you leverage and spend your social capital that you've been accruing to-date. Be generous in helping others to build your social capital, and conservative with how you spend it.
6) Leverage "how did you hear about us" surveys do identify other sources that drive customers. Be creative on ways to incentivize and scale these new sources.
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