Online resources and communities like Indie Hackers help first-time founders launch products and services every day. You don't need a ton of prior experience to get started, and you don't need a business degree to earn money selling what you make.
What you do need, however, is to understand what questions to ask and how to look for help — and that understanding includes the business terms that founders use to discuss their problems, ask for resources, or share their learnings.
This glossary gives you a broad overview of the terms and concepts you'll find throughout your journey as a founder. Brush up on them now or bookmark for those times when you come across something you don't know. Learning these business terms will help you lay a strong foundation for building and launching your product, applying insights from other founders, and participating in the Indie Hackers community.
Creating two versions of the same product or piece of content and offering each to a separate, randomized batch of potential users to determine which version produces better results.
The act of a larger company buying a product or startup.
Alpha and beta product versions
An alpha version of a product is one that is only used for internal testing, without being offered to outside users. A beta version is typically released to a limited number of users or for a limited amount of time in order to generate feedback and identify bugs not caught in internal testing.
Annual recurring revenue; for subscription-based business models, ARR equates to the amount of revenue generated each year from monthly or annual subscriptions.
A marketing method where a company offers a commission to other businesses or website owners to market their product; can also be a revenue model for businesses who operate as affiliate marketers for other companies' products.
Business-to-business or business-to-consumer; refers to who a company's primary customers are (e.g., a business that sells its product to other businesses has a B2B sales model).
Founding and growing a business without any funding from outside investors; from the phrase "pulling yourself up by your own bootstraps." (Ex: "Bootstrapping My Side Project into a $1.4MM SaaS Business")
The amount of money a business spends over the revenue it generates.
A framework for understanding how a business is structured, who its customers are, and how it generates revenue.
Customer acquisition cost; the amount of money spent on marketing to gain a single customer. Calculated by dividing total marketing expenses in a single time period by the number of customers gained during that time period. (Ex: $2500 in Q1 marketing expenses/3000 paid users = $0.83 CAC)
To cancel or unsubscribe from a product subscription or marketing campaign. (Ex: "In a subscription service, churn is always your biggest concern. I need to focus on customer service to reduce churn and deliver value that is promised."—@JesseNeugarten)
The proportion of people signing up for a product who cancel within a specific period of time; can be a key indicator of product satisfaction. Calculated by dividing number of churns by total subscribers within the same time period. (Ex: "Most churn occurs when our customers switch jobs or take parental leave."—@daniksimpson)
The practice of reaching out to potential users who have not yet expressed an interest in the product. Often occurs one-on-one through emails or phone calls.
The creation and distribution of high-quality content (blog posts, videos, infographics, social posts, etc.) to educate and nurture potential leads. A key component of inbound marketing.
Opening pre-sales to generate enough revenue to create the end product, often through sites like Kickstarter or IndieGogo. A form of user validation as well as a bootstrapping strategy to fund a project without being indebted to investors.
The publishing of marketing content (by means of a marketing channel) to a company's target audience.
Using one's own product, often as a means to optimize user experience and value in subsequent product releases. (Ex: "Even large enterprises dogfood their own products."—@sanj)
A brief, 10-second description of a product or service that clearly explains what it is and what problem it solves.
The practice of creating fun incentives (points, scoring, prizes, awards, etc.) to begin or continue using a product. (Ex: "New users would automatically be assigned a “rank” and two or three “missions” they needed to complete in order to move to the next level, every mission had a step-by-step tutorial on how to complete it, and every time a user got to a higher level they’d get rewarded with a new rank and a shiny badge icon."—@Othmane)
A marketing business term referring to a product's pre-launch marketing strategy, including how to describe what a product is, how it will improve users' lives, and why it is a better alternative than other competitors.
A clearly defined set of data that indicates growth over time. (Ex: subscription sales growth can be measured month-over-month [MoM], quarter-over-quarter [(QoQ], year-over-year [YoY].)
The overwhelming suspicion that everyone else in a certain industry or community knows what they are doing and you are the only one who does not. A common roadblock for founders, and often completely false — but powerful nonetheless. (Ex: "Pushing Past Imposter Syndrome to Turn My Passion Into a Business")
A marketing strategy and practice that involves developing a relationship with potential leads, gaining their trust over time by providing value through education and nurturing, and selling the product only when the customer is ready.
A type of affiliate marketing, or a marketing method where a company offers a commission to a well-regarded and influential person or business to market the company's product.
A new version of a product that includes updates or optimizations based on user feedback. (Ex: In today's business market, all products must be iterative in order to achieve any kind of evolving success.)
Key performance indicator (KPI)
The type of data that will indicate if an objective or goal has been reached. (Ex: The KPI for web traffic might be number of inbound links or page views; the KPI for sales might be number of onboarded users or monthly revenue.)
A simple webpage with the single purpose of collecting user contact information, often by offering something of value (a guide, an e-book, a checklist, etc.) in exchange. (Ex: "The Anatomy of a Great Landing Page")
Lead generation/user acquisition
The process of gaining new leads who have the potential to become customers. (Ex: User Acquisition Survey: What Works, What Doesn't?)
The process of determining how likely each generated lead is to convert and become a satisfied customer. Often used to triage leads and focus the most energy and effort on those who have the highest potential for successful conversion. (Ex: "If you can find people who are already using new technologies, [use that] as a first qualifier. Then a second would be are they already paying for something. Those are the people who are most likely to try something new and are willing to pay for you to solve their problems." —@jordantcarlisle)
Using minimal resources. Used to describe businesses and founders who minimize investment of capital and/or time. A natural pairing with bootstrapping. (Ex: The Lean Startup)
A common business buzzword for potential business decisions that do not require much risk or investment of resources but yield a high probability for success.
A medium by which awareness and knowledge of a product reaches its intended user. Today, marketing channels might include blogs, social media, paid search ads, paid social ads, email, TV, radio, etc.
Monthly recurring revenue; the amount of revenue that a subscription product generates each month.
Minimum viable product; a product that contains only what is absolutely essential to help solve a customer's problem. Building an MVP helps founders conserve time and investment in unnecessary resources, allowing them to launch and iterate as efficiently as possible. (Ex: "Great Minimum Viable Products: Examples and Best Practices")
A newer business term for the method of building a web or mobile app with little-to-no coding, often through the use of external tools and APIs. (Ex: "Bootstrapping My 'Company of One' Without a Line of Code")
Objectives and key results (OKRs)
Popularized by Google, OKRs are high-level goals a company aspires to achieve each quarter (objectives) and the success criteria by which the company can determine if goals have been met (key results).
A third-party vendor that receives a business customer's payment via credit card or ACH and securely issues that payment to the business without releasing confidential financial information, often for a small fee.
Making alterations to some aspect of a business model (usually product offering) based on learnings from experiments, user interviews, and/or feedback. (Ex: "Why I'm Pivoting Readory After 2 Months, 2k+ Users, and Two Top 3 Product Hunt Launches")
The risk a startup faces when the majority of its users come from a single channel; this raises the question of what happens if Google changes an algorithm or Facebook modifies its advertising policy, for example.
Different prices offered for a single product based on the number of features "unlocked" at each tier. (Ex: "At this point we only have one pricing tier, but we'll be introducing another higher price point once we add some more features. The trick is really figuring out which features will give us the best bang for our buck and add tremendous value for the users."—@bootstrapCHILA)
The ease with which a product is able to solve the problems and tend to the needs/desires of its intended market. A poor product-market fit indicates either a shortcoming in the product or a good product that is being marketed to the wrong users.
The percentage by which revenue exceeds expenses; calculated by dividing profit by total revenue.
Project management tool
Popular among developers, a SaaS tool that helps manage all the tasks and players involved in complicated work projects such as building, testing, marketing, and releasing a product. (Ex: Basecamp, AirTable, JIRA, Trello, Asana, etc.)
One of the first steps in product development; the process of evaluating whether a problem is substantial enough to merit a product to solve it, and if the proposed product would actually solve this problem for the user. If both these criteria are met, typically the product is validated and can move on to development. (Ex: "How to Validate a Business Idea")
Product vs. service
A product is a digital or tangible good of innate value (including software, project management tool, etc.) that can either be purchased outright or accessed via a monthly subscription. A service, such as consulting or design, involves trading hours of human labor proportionally for dollars. A key differentiation is that products are often scaleable and lend themselves better to growth, while services are difficult to scale.
The achievement of making enough money to cover basic living expenses; technically profitable, but not at a level for long-term sustainability.
The percentage of users who continue to use a product (without churning) in a specified time frame.
Return on investment (ROI)
The amount of revenue generated following a decision to invest resources in marketing or product optimization; expressed as a percentage. There are many ways to calculate ROI, but the simplest is to divide profit-minus-cost-of-investment by cost of investment. (Ex: if a marketing campaign costs $500 but generates $4,000 in revenue, the return on investment would be 3,500/500 = 7, or 700%.)
The structure for defining revenue; how a product generates money. (Ex: one-time purchase, subscription, feature-based pricing, fee-for-service, etc.)
A time that a business could continue to operate without revenue flow before having to shut down. (Ex: "I find it hard to give 100% on 2 different projects. I'm tempted to save enough to give myself a runway of a year or more but curious to hear how you're going about it."—@ctrlaltdylan)
Software as a service; cloud-based software offered through a subscription model and online access point rather than as a downloadable, installable product.
To grow a business or product quickly to meet market demand; includes effective investment of resources.
Scratch your own itch
Develop a product that solves your own problem. If your problem is not unique, you have thereby self-validated the product and its potential to meet a need in the larger market. (Ex: "Becoming My Own First Customer and Growing to $20K per Month")
A project created outside of one's full-time job, often for supplemental income or with the goal of transitioning to the project full time once it becomes sustainably profitable.
Search engine optimization; the practice of optimizing web content so that it returns high rankings and position in search engine results.
Simple, Lovable, and Complete; an alternative to an MVP as proposed by Jason Cohen of WPEngine, a SLC (pronounced "slick") is a product that is very simple in offering, but complete and well-designed enough that customers will still want to use it.
In bootstrapping, the practice of growing by replicating successes on a gradually larger scale, reinvesting resources as revenue grows. Coined by Rob Walling of Drip.
The collection of tools, frameworks, and technologies that a dev founder uses to build his or her product.
The value inherent in revealing business information that might typically be considered private, such as salaries or revenue numbers.
Trough of sorrow
A period of time after a product's initial launch where novelty wears off and sales drop. Rebounding from the trough of sorrow is considered a positive indicator of a product's long-term viability and potential for growth. (Ex: "Escaping the Trough of Sorrow and Growing to $5K/Month")
A specific situation in which a product could potentially be used.
Praise, complaints, or suggestions for improvement from a product's existing users; valuable as it allows founders to learn about actual use cases and identify areas for improvement.
See Product Validation.
Value proposition/unique selling proposition (USP)
Often articulated by a company itself, the differentiating factor(s) that makes its product unique and thus better/more valuable to the user than the competition.
The flow of all the steps from product creation to customer delivery; value streams are often expressed in visualizations like infographics.
A group of companies and customers all centered around a specific industry. (Ex: "Our goal is to become the largest platform in the world used to recruit any position in any industry. Today we operate in just technology and finance, but later this year we're expanding to additional industry verticals." —@AdamVettery)
The potential of a product or piece of content to experience exponential growth, often through online sharing or word of mouth referrals. Virality often comes as a result of launching or publishing the right material at precisely the right time.
Word of mouth
Generating unsolicited and organic referrals from happy customers; the original marketing strategy.
What business terms did we leave out?
As the indie startup industry continues to grow, so does the list of terms that go along with it. Laying a solid foundation for yourself starts here; consider it an investment in your success as a first-time founder.
Stay on top of the current business terms in your industry and their slang-versions by reading blogs, listening to podcasts, following along with thought leaders on social media, etc. Learning how to use these terms is an important part of the process, and you can establish yourself as an authority in the founder space by using them well and effectively.