It’s been 10 years in the making.
Well maybe 9 and a half years.
But Time Doctors is officially an 8 figure business. And in this post, I’m going to share everything that we have learned bootstrapping an 8 figure saas business.
This post, and the video below, is the culmination of everything that I’ve learned over the past decade of building Time Doctor with my co-founder Rob Rawson.
So kick up your feet, grab a cup of coffee or tea, and enjoy.
Determine your Niche:
The first thing you want to do to build a 10 Million Dollar Saas company is determine an appropriate niche or industry.
My advice may be somewhat counter-intuitive, but I think you need to find a total addressable market (TAM), between 1 to 10 billion.
A lot of people would say, “Oh, no, go for the multi-trillion dollar space. Go for the biggest space humanly possible.”
And I think you’re absolutely right, if you have the capital to be able to go after it. However, if you’re bootstrapped, like we were here at Time Doctor, it’s very difficult to be able to approach a very large market if you don’t have cash in the bank.
Your better funded competitors will be able to outspend you all day everyday.
So, $1 billion to $10 billion TAM, is the total addressable market that you should really be going after. It’s not too large that you’ll run into a lot of competitors. And it’s not too small in that you won’t be able to build an eight figure business.
Just a note on this: The landscape has changed in the past 10 years since we launched Time Doctor.
When we started, there were only maybe about five or six competitors in our niche.
Now I estimate a few dozen competitors who have built at least a 7 figure ARR business in our time tracking niche. And when I look around at other Saas industries, it’s the same there as well.
Determine Your Sub-Niche
Next step is you need to be able to focus on a singular sub-group inside of that niche. A niche within a niche so to speak.
Inside of our main niche of time tracking, we decided to focus on time tracking for remote teams.
In retrospect, this was an easy decision for us. We have long been on the remote work band wagon. In fact, we’ve built the conference around the topic called Running Remote – which is the largest conference in the world about running and scaling remote teams.
We truly believe that remote work is the future of work and we wanted to be able to build a product particularly connected to that sub-niche.
Once we had a sub-niche, we were able to hone in on our key differentiating feature in those early days.
We focused on what we call remote team analytics. Instead of just tracking when someone was using a computer, we were tracking what sites and apps users were going to throughout the workday.
These days, we do get a lot of customers who aren’t remote first companies because there is overlap in our feature set with their needs.
However, we still remain steadfast on building the best time tracking product for remote teams we possibly can.
Build a product based marketing strategy first
In our experience, it is best to build a product based marketing campaign up until about $1 Million ARR.
This means that you need to get people to use your product by any means necessary in order to get feedback from those early users.
Most of us aren’t going to build products such as Slack and Zoom which are naturally viral. But if I were starting all over again, I would take one page out of their playbook. And that’s freemium.
Freemium is the lowest cost customer acquisition strategy to get customers into your door.
A freemium strategy will also enable you to scale your customer base and get significant penetration into your market. Granted, with this strategy, you’re going to be focused on the SMB market for the first couple of years – until you reach 1 Million ARR.
Once you’ve established yourself in the SMB market, then you can build out your sales team and customer success teams and move up market to enterprise level customers.
Build the business remotely
Without a doubt, the ability to build your business remotely is the great equalizer for growing a Saas startup. I’m obviously biased, but the average amount of money that someone spends on an office lease per employee in the United States is over $12,000.
It is very, very expensive to be able to have an office lease. On average, it’s about 30% of your expenses.
If you build your business remote, you’ll be able to deploy that money into user acquisition, which will help you grow much faster than you would have done before. That has been a huge advantage to us as bootstrapped founders.
The other thing to take into consideration is that if you decide to set up your office in NYC or San Francisco, then you are going to hire from those cities.
Which means you’re going to be forced to pay salaries for folks who live in that area. However, if you’re a remote company, you can hire a really good engineer in Iowa for a fraction of the price of an engineer in San Francisco.
And If you decide to hire from Eastern Europe or Asia, you’re going to find talent for signficantly cheaper.
This is probably the biggest key to our overall success of bootstrapping an eight figure SaaS business is we didn’t go after those really expensive salaries at the beginning. We were able to source talent with cost effective salaries.
Avoid paying yourself as long as possible
This one is probably the hardest pill to swallow on this list. But the longer that you cannot pay yourself, the faster you can grow your business.
That’s not to say you CAN’T pay yourself straight away. But that will slow your growth tremendously, especially in the early days.
For instance, if you decide to pay yourself $3,000 per month, and your cost to acquire a new customer is $100, then effectively you’re losing out on acquiring 30 additional customers every month.
I remember when we first started paying ourselves, it was about two and a half years into the business, and I believe it was a $2,000 a month, which was basically enough for me to survive.
For those first 2.5 years, I was living off of savings. I was incredibly spartan in the way I was living my life. And yes, it was hard. But if I had paid my salary earlier, then we wouldn’t have been able to hire our first customer support rep, which realistically probably added a million dollars ARR to our current total of our business a couple years later.
So you look at that $30,000 investment and you see the dividends that it produces long term. So if you can afford it, do not pay yourself.
If you’re moving up into the right, do not pay yourself as long as humanly possible, figure out what you can do to become ramen profitable, just basically exist, and keep moving forward.
Don’t’ raise money
This is kind of obvious because we’re talking about bootstrapping an eight figure business. I know there are a lot of people out there watching this video thinking about raising money.
Do not do it.
And here is my perspective as to why. There are absolutely amazing debt options available to SaaS businesses today.
When you actually look at the clear economics of raising money, let’s say that you want to sell your business for a hundred million dollars.
Someone who invests $5 million into debt is probably going to be paying anywhere from 4 to 12% interest on that debt.
Now, someone who gives away a third of their business for $5 million, five years later, when they sell it for a hundred million dollars, that initial investment would have cost them $35- $40 million at the end of the day.
Don’t focus on growth
Wait, what? Don’t focus on growth? Are you serious?
This is so counterintuitive to what everyone talks about. You go to any conference and it’s all about growth.
Instead, in the early days, we focused 100% of our energy on churn. We made it our mission to make every single customer happy. This did two things.
First, we wanted to keep our customers for life.
And second, it helped with our word of mouth marketing. Because we didn’t have a true viral app like a Zoom or a Slack, we needed our customers to brag on us to their friends.
And they did!
Now that I consult with other Saas companies, the first metric I ask from them is their churn. This is the biggest indicator on whether or not they’re going to be successful in the next 10-15 years.
For bootstrappers, we are focused on keeping the business, It has to eventually pay us in order to sustain it. We aren’t in the business of buying as many customers as possible and eventually flipping it.
So keep your churn rate low and your customers happy. And you’ll have a successful business.
Hire as soon as possible
Hire yourself out of the business as quickly as humanly possible. This is something that can be hard for founders because they are used to doing all the things.
Hiring can feel like a big hit to the ego.
First, the faster you can hire yourself out of the business the faster you can do other things inside of the business.
Second, the faster you can get people who are smarter than you to perform specific tasks, the faster the business will grow.
For instance, are you the best person to run Facebook ads? Probably not. Can you find someone who can code better than you? Absolutely.
The beauty of being a co-founder is that the value comes from the equity you’ve gained inside of the business, not necessarily whether or not you are a salaried employee or not.
Hire those people out as soon as possible. This is the benefit of delaying your salary as long as possible. You can hire these people much sooner and grow the business much faster.
Choose a scalable technology stack
For long term success, you need to build a technology stack that is going to be scalable. And I believe that you have to refactor every 3 years.
Now some technical founders and CTO’s will say that you need to refactor every year. Or that refactoring a continuous process.
But many bootstrapped founders in the early days won’t be doing high growth. That was us in the early days of Time Doctor. In fact, we let our product live on it’s own for about 5 years.
And then one day, our product crashed for 72 hours and we lost about $1 million in ARR. Ouch! It was an absolute disaster and it was due to us playing a game of Russian roulette, thinking that the technology stack could survive when we should have paid off our technical debt.
Now don’t pay down your technological debt every single year. That’s a bad expenditure of capital.
I like to take the MacBook Pro model, I have one right here, they redesign their shells every three-ish years. Why do they do that? Because they realize that it’s a lot more efficient to be able to change the insides of a MacBook, as opposed to the outside.
So they do a redesign every three years and they basically say, “Well, what is the next three years of computer development going to look like? What does that outward shell need to look like? What does the physical package need to look like?”
You need to think about that same thing when you think about your technology stack. So do an audit every three years with your technical team and figure out what technology will be the norm in the next three to five years.
And then you need to build for that technology stack. And this process needs to be continual.
Ignore your competitors
Ever since we started Time Doctor, we’ve spent very little time worrying about our competitors. .
It is generally going to be a losing battle for you.
Now, I’m not saying you should totally ignore what’s going on inside your space, but you don’t want to obsess over every little feature that your competition releases.
Perhaps you want to hire a single person inside of your company to observe trends, new technology, new markets that are developing and things like that. Someone who interacts with customers and prospects on a daily basis.
This person should be thinking about where the business is going to be in 3-5 years, not what’s going to happen tomorrow.
By focusing on these broader concepts, you’re going to become an industry leader, and not the person playing second fiddle to your competition.
Invest in SEO early
If you are planning on owning your business for more than 10 years, the only form of marketing that should truly be investing in is SEO, Search Engine Optimization.
A lot of people talk about how SEO is dead. It is anything but dead. At Time Doctor have been investing in SEO since day one, and it is absolutely the best return on investment in terms of ad spend of any other source of advertising that I have come across.
It’s the old adage of buying versus renting. So when you’re purchasing Facebook ads, you are renting leads, you are purchasing leads this month.
When you invest in SEO, you are buying leads and you’re buying the dividends of those leads into the future. Not to say that we don’t invest in advertising, of course we do, you need a multifaceted funnel in order to actually effectively build a bootstrapped SaaS product.
But at the end of the day, if I had to whittle our success down to one single marketing strategy, it would be SEO, because now we get hundreds of thousands unique visitors a month. All from SEO.
Invest 10% of your budget in long balls
Last but not least, is to invest 10% of your product development budget in long balls.
This is innovation that might pay off in a couple of years – not necessarily right away. Obviously there is no guarantee, which is why we don’t allocate a majority of our budget to it.
For instance, we’ve built an AI engine for insights into work. For instance, if you’re a salesperson, we can tell you this is what the average person’s sales day looks like, and break that down into how good and bad salespeople spend their day. That way you can make the requisite changes to improve and become a better salesperson.
Over to You…
This is everything that I’ve learned about bootstrapping Time Doctor to an 8 figure business. In the comments below, let me know what strategies are working for you.
That way we can all learn together.
Greg Digneo writes for TimeDoctor.com, a time monitoring and productivity monitoring software designed for tracking hours and productivity of remote teams. If you would like to see where you and your team are spending your time during work, try Time Doctor free for 14 days.