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💸🔥 How we avoid wasting time on unprofitable projects

There are endless ideas one can implement, but time is limited. So we have to pick wisely.

After I switched from my agency business (with 30 employees) to my SaaS business (with 0 employees) I nearly make the same profit ($ 32K monthly) but without all the stress, headache, responsibilities, organizational tasks, and constant effort.

https://media.giphy.com/media/a9RgWy99d17RC/giphy.gif

Choosing the right business model and project idea is the most important step with the greatest impact on your career as a founder. And because my co-founders and I discuss new business ideas regularly, I realized, that we need a systematic approach to drop unsuitable ideas quickly.

So, based on my past experience, I’ve set up 7 criteria, which every idea needs to pass. I will not continue any project that fails one of those points. This way we go through a more structured process and don’t get caught in the initial euphoria of a new possible project. Evaluating an idea without getting caught up with details is not easy. That’s why I came up with those 7 rules which always keep us on track.

Disclaimer: Business ideas contradicting the following rules can certainly be successful as ideas like Airbnb made it to the top of the game. But these ideas would be dropped according to my criteria. Our aim is not to find revolutionary business models and grow a unicorn but to bootstrap passive income-generating solutions.

📈 Has product-market-fit been proven by something similar?

Having a brand new idea or business model can be great and probably has the chance to become a billion-dollar project. But let’s be honest... the chances are very, very low. If nobody on earth could prove product-market-fit with a similar idea yet, I would not try it. I am not saying, that you should just copy an existing product. But you could take an existing product, tweak it, improve it and apply it to a new niche. You could for example copy a SaaS which has been developed for enterprise customers and optimize it for smaller teams or a different (geographical) market.

💼 Is it B2B?

This is a really simple one. Being successful with a digital B2C product is more difficult and most likely requires bigger amounts of investment in marketing until it starts generating revenue. Another alternative would be C2C, but here you got the same problem. Marketplaces often require big investments to kick off, because both parties need to become active on the platform at the same time, fast. Otherwise, the other party will jump off quickly.

Another major reason why I chose only B2B ideas: Companies got a lot more money and are ready to invest it. That's how companies grow their business. None-business clients are very picky, are paying less, and often demand more support, which means more headaches for you.

⌛ Can the MVP be developed within ≤ 3 Months (MAX)?

Every project has the risk of failing. Most of your projects will fail. That's the harsh truth. Keeping that in mind, you should favor ideas that can be validated quickly. 3 Months is the time that I am willing to pay to validate a promising idea. This way I can potentially launch 4 projects a year and increase the chance of succeeding with at least one of them.

🧑‍💼 Can it be managed without employees?

To scale a business it is often necessary to hire employees at some point. But I prefer ideas that do not require employees, at least not in the early stages. After running a software agency with more than 30 employees I have decided to ditch business models, which require having employees in the early stage. Having the right skills to manage a team efficiently is something, that not many of us have. Hiring employees means having a lot more responsibilities, organizational workload, and emotional connections, which can be a burden. As a single founder or a small team of co-founders, you have less time spent on meetings, discussions, and explanations. Onboarding employees bring on overhead that costs valuable time and money that is rare in the early stages of a startup.

📞 Can it work without doing active sales?

I personally don’t enjoy doing manual / active sales. Pitching a product to a business by cold calling or emailing without automating the full process does not feel right to me. Especially if you don’t have any employees. Some product ideas require you to do this and can not survive by just doing marketing. So I decided to ditch these kinds of product ideas for myself. I would probably think this over if I would have a co-founder who is highly skilled in doing this kind of sale.

https://media.giphy.com/media/B1GGvvqTe33oDFCyaR/giphy.gif

But as long as that is not the case, I would rather prefer having a product idea, which can be marketed through SEO, social media, and paid ads.

❤️ Can I identify myself with the product?

The chances are pretty high that you will have some sleepless nights working on your product while being completely desperate and pessimistic. To survive these phases of your project you need to have a connection to the product. You should be proud of the idea when telling someone about it. If it is purely about the money you will give up during your low. Being motivated usually boosts my productivity to > 10X. And that matters a lot. Seeing continuous progress with your business reduces the risk of giving up at some point, as you might feel stuck and get pessimistic otherwise.

🔥 Can it be built with Firebase?

It is no secret that I love Firebase. We’ve just achieved $384K ARR with our SaaS Aplano and it is completely built on Firebase. You can check out my last article about our journey here.

By using Firebase, I am able to build and validate products insanely fast, without the hassle of managing a dedicated Backend. After coding many apps with- and without Firebase, I realized, that the advantages overweigh heavily. The combination of Firebase Realtime Database and Firebase Cloud Functions makes it possible to implement a huge range of different applications in a short time. In case an idea requires an SQL database and therefore can not be realized with Firebase, I just drop it.


I hope these points will be valuable to you and help you invest your time in the right projects. As I said, these rules don’t apply to everyone. Make sure to take your own preferences and goals into account.

If you want my advice or opinion about your product idea, just drop me a comment and I will give you my honest feedback!

And don’t forget to follow me on Twitter 😎

@gregorian000

  1. 7

    Congrats on your ARR progress thus far. Nice well written post. Thanks for sharing!

    Truly agreed with your comments/criteria, except for the firebase bit (which btw, I don't know too much about so pls forgive me) - just coz I have reservations about being locked into any one proprietary platform (where possible), especially Google's after being affected by their product changes 3 times in the past 4 years now (Google Plus & SSO decommission, Google Maps removal of free tier, Google Trips retired, etc.). Gotta have at least one other comparable alternative I can switch to quickly without too much re-engineering.

    Re the B2B bit, I have this impression that businesses tend to buy from similar size companies or bigger. Are you currently seeing headway/uptake from companies much larger than yours?

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      You can use Supabase which is an alternative. But the point OP is making about having a managed system that takes care of auth, data, and provides serverless functions is a very good, and unappreciated, one.

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      I've also had bad experiences with Google stuff, now I avoid them as much as I can. Their main income source is basically ads, not the products they offer us, so they don't really care.

      Google killing a product is just a matter of time.

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      Thank you Chris for your feedback! I agree that is definitely a disadvantage. But we thought deeply about it and decided, that the advantages and slickness of firebase overweighed. Firebase wasn't always part of Google, so it might be, that they are still able to do a lot in a self-sufficient way. You should have a look at it ;)

      About the company size part: you are definitely right, there is a strong correlation between the size of the provider and user in B2B. Most of our clients have around 30-50 employees. Our biggest client has about 900 employees. But we don't have many of those.

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    I love checklists like this. They help you organize your learnings, prevent making mistakes for crucial decisions, and provide constraints that lead to creativity. Super smart. I have a bunch of checklist for various things in my life, both work and personal.

    One alternative to a "B2B" constraint is a "High ARPU" constraint. (ARPU = average revenue per user.)

    Businesses are generally easier to target because they have much more money than consumers, and therefore spend much more money than consumers.

    But really what matters is the problem you're solving — there are some problems no business will allocate money to solve even if they have tons of money, and there are some problems consumers will spend tons of money to solve even though they're relatively broke.

    For example, consumers spent a ton of money on education. Literally hundreds of thousands of dollars for college degrees, and frequently thousands of dollars for courses and trainings. My ex-gf charges $15,000/person to teach her in-person training program. It's only four weekends out of the year, and she has about a hundred people sign up every year. They're joining because they want to learn, and consumers will pay big bucks to learn because they trust that new skills will help them earn more money in the future.

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      You are totally right, that should be the main prerequisite of every product idea in the B2B sphere. It should either solve a major pain point or help the client to generate more revenue (short- or long-term).

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    Great read. Very curious about how you think regarding where to find your first 10 customers if cold calling and so on is not an option. Are you looking at channels before deciding? What channels do you like the most? Would be great if you could expand a bit on that.

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      Hi Marcus, sure: we got our first "real" customers through paid ads in the past. Google Ads to be specific. By using the google keyword finder we were able to spot the right keywords to bid on. Including some competitor names :P

      For the private alpha testing phase, we asked out some local friends who had small businesses.

      In general, I think it is pretty easy to validate an idea by using paid ads. Facebook, Google, Twitter, and Reddit ads are often good options. SEO is more of a long-term game and requires some time. But as always, it depends on the idea.

      Another option would be through your social media community or through platforms like producthunt. But that also requires some work and build-up process in advance.

      If we come up with a great idea but have no clue how we could successfully market it at the beginning with a small investment, we ditch the idea. Having a marketing strategy before starting the development is crucial to us.

      What are your favorite channels Marcus?

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        Thanks for your response. I haven't tried paid ads yet and do not have a large following. For now I'm just focusing on cold-calling and emailing and communities to try and get the first 10 users.

        Might have to start looking into ads to see if it's something that I can try out as well. I also agree that SEO is a long term play and it feels strange to start doing SEO before you have found your 10 first users, do you agree?

        It's kind of what I was looking for that you do have another filter that there should be a clear way to market this idea otherwise you ditch the idea.

        Are you testing this marketing idea before you start building? I've found that finding the marketing channel is the hardest part and for my next project I also want to have found a channel where I can hopefully get my first 10-20 users from.

        p.s The application that I'm building is tailored towards website agencies and it's probably not something that they actively search on Google for "Website feedback tool for web agencies" kind of thing. But maybe I can try some social media ads? What do you think?

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          In that case, ads might be the right path for you. If you can create a short animated video that explains your product that would be an awesome way to start. If you want to keep it simple in the beginning, just try out image ads with a screenshot inside a MacBook
          mockup and a catchy headline. (Try out at least 5 different variations of the headline + screenshot and compare the performance)

          BTW: You can target people working in an agency pretty well through Facebook. ;)

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            Thanks a lot for being so helpful. If I have never run Facebook ads before do you have a good resource that I can learn from so that I can test this channel?

  4. 2

    Those are solid principles, but how do you find ideas for those B2B businesses?

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    @gregorian Thanks for writing the article. This combination of criteria really helps a lot.
    However I see a problem with Firebase for EU business: It's not GDPR compliant if you put information of e.g. employees into it. I know that Google uses language to suggest it might be ok, but see e.g. https://www.heise.de/news/Gericht-Deutsche-Webseiten-duerfen-keine-US-Cookies-setzen-6288818.html

    1. 1

      Thanks for the feedback and for sharing the link.
      We enable Firebase, as soon as a company registers and with that accepts our "AGB", "Datenschutzbestimmung", and "Auftragsdatenverarbeitungsvertrag". With that we are on the safe side of the German and European law :)

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        You might (?) be ok if you write Firebase into your TOS / AGB. However the hospital using your software and putting in their employee information is in violation of GDPR.

  6. 2

    Great read! I think not being mission critical as well is good - especially when you’re a B2B one-human band.

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      Good point to keep in mind

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    Closing the B2B sales can be a time-consuming process, need internal connections, difficult to identify the key decision-maker, go through their hierarchy, customizations, integrations, needs to know their budget, etc.

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      I think it depends. If you would try to sell Salesforce to Mercedes Daimler, yes, I agree with you. But these companies usually don’t work with brand new startups. Targeting small and mid-sized businesses, or smaller departments, in the beginning, works best, I believe. These companies or teams are often very agile when it comes to trying out new tools.

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        Sure - that makes sense.

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    good read, could be a time saver!

  9. 1

    This is really helpful. Thanks!

  10. 1

    I agree with most except firebase but that's just personal preference. Out of aws, azure, gcp/firebase, azure is by far the best option for me.

  11. 1

    What an awesome post, David! Thanks so much for sharing! 🙏🏻 And also, thank you for taking the time to respond thoughtfully to the comments. You rock, dude. 💪🏻

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      Hi Brandon, thanks a lot for the feedback man! This keeps me motivated to share more posts like these. :)

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        I hope you do! Looking forward to it. 👍

  12. 1

    Hi, thanks for sharing this. I'm curious about validating the idea. Is 3 months enough to develop and validate it?

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      Hi there, it really depends on the product/idea. We try to pick ideas, where it is possible to develop them within 3 months and then validate them afterward. Some ideas can even be validated before developing them. Just create a landing page, run some ads and see, if people try to sign up.

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        Ah, i see. Thanks a lot for this. I really appreciate it.

  13. 1

    Nice pointers, David!

    Now you can simply validate it at https://buymeadomain.com by raising "domain-name round" funding.

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    Do you think it is okay to build SAAS without code

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      Do you mean by using a no-code platform builder or a by hiring external developers?

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        using a no-code platform builder

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          Hard to say. I am not that much into no-code. But I doubt that you could create a complex SaaS that generates money without coding.

  15. 1

    I sometimes feel like a lone voice in the wilderness when I make this point, but if you like Firebase (56 MM Google search results), and you use AWS or want to use AWS, the AWS equivalent is Amplify (5 MM Google search results), which recently introduced a tool to create React components from Figma, and does all the DB, auth work for you.

    1. 2

      Hi Julian, thanks for sharing! I checked out Amplify and I am not a big fan of it, to be honest. Also, I am usually writing a lot UI / UX code myself and don't require a frontend UI library. But when I do, I would prefer something like AntDesign, which has a much bigger community :)

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    You don’t need to drop ideas that require SQL, just use supabase.

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      Supabase is really cool, and I thought about including it in the post. But it is not “mature” enough in my opinion. Before using it heavily in production and completely relying on it's in infrastructure, I will probably wait another 6 months :)

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        This comment was deleted 10 months ago.

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          Ah...there many situations where SQL overall is far superior to Mongo. Especially Postgres that also has support for unstructured data. Obvious example are situations that involve complex joins (ex. many-to-many relations) that are naturally modeled in relational database.

          Can you implement them in Mongo? Yes but the complexity usually doesn't scale well - you essentially end up replicating things that relational database are good by introducing foreign keys to join data in Mongo. There are many posts on this where once the data model got sufficiently complex, the effort to maintain it in Mongo was no longer worth it.

          People who shill Mongo unconditionally simply lack technical depth to correctly use SQL / relational databases.

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            This comment was deleted 10 months ago.

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          There's a lot of use cases which require SQL, especially if you're trying to do complicated things w/the data. (And believe me, this is understating it. There are CTOs who could make 10-page posts about all the advantages SQL has over Mongo at scale. But this is the tl;dr version).

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            This comment was deleted 10 months ago.

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              It's fair to ask for a citation, for a CTO type making this case for why you should choose SQL over Mongo.

              I also said there were lots - so here is one, linking to a simplethread blog post.

              https://news.ycombinator.com/item?id=19497817

              Hacker News has other threads basically repeating this, but the linked article (the one they are discussion) makes the central points well.

              To sum up, they are: loss of transactions – loss of relational integrity (foreign keys) – lack of ability to enforce data structure – and custom query language leading to the loss of the sql tooling ecosystem.

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                This comment was deleted 10 months ago.

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                  You can actually do everything with SQL and also with NoSQL. It just depends on the "how". Some tasks are a lot easier with SQL and some with NoSQL. (Plus, you should keep the database costs in mind with services like firebase. These vary heavily on the structure and way of storing and fetching the data.)

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                    This comment was deleted 10 months ago.

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    This comment was deleted 6 months ago.

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      Hi Yossi, thanks for the feedback!
      Haha, B2C products can be very successful as well! B2B is just our preference based on our past experience :) I wish you good luck with it. Let me know when you release it!

      I have checked out Supabase and it looks very promising. But in my opinion, it is not ready for production yet. I would not build my business around it (yet). The fact, that it is open source is really cool. I think it would be great if other companies like DigitalOcean would provide a Supabase setup / tier. Because I would not want to host that complex stack myself on a custom server in case the hosting company behind Supabase goes down one day.

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