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Lenny's Podcast: Product | Growth | Career
10 lessons on bootstrapping a $200m business | Patrick Campbell (ProfitWell)
Feb 19, 2023
01:13:37
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Quick takeaways
- Establish a clear tempo framework for shipping to ensure alignment and continuous improvement.
- Evaluate funding approaches based on business goals and models.
- Regularly review and adjust pricing to optimize revenue per customer.
- Balance strategic and tactical retention efforts to reduce churn and increase customer loyalty.
- Apply first principles thinking to break down complex problems and develop targeted solutions.
- Implement customer research to optimize product-market fit and drive growth.
Deep dives
Focus on Tempo Framework Rather Than Org Design
Real professionals prioritize shipping at a high frequency. It is crucial to establish a tempo framework that aligns with the mission, metric, and guiding principles of the organization. This ensures that everyone understands what good looks like in terms of shipping and allows for continuous improvement in alignment.
Considering Funding Options for Startup Success
Bootstrapping is suitable for lifestyle businesses aiming for cash flow, while seeking funding is essential for companies aiming for billion-dollar annual revenue. Startups should evaluate their goals and models to determine the most appropriate funding approach.
Implementing Pricing Strategies for Growth
Pricing is a crucial lever for growth. It is recommended to implement regular pricing reviews, making adjustments at least once a quarter. By focusing on pricing metrics and value-based pricing, companies can optimize revenue per customer and drive expansion revenue.
Tapping into Strategic and Tactical Retention
Retention efforts should encompass both strategic and tactical elements. While strategic retention involves product development and customer experience, tactical retention addresses payment failures, cancellation flows, and offboarding. Balancing both aspects is essential for reducing churn and increasing customer loyalty.
The Importance of Product Tempo and Alignment
Establishing a clear tempo framework is crucial for product teams to ensure alignment and efficient shipping. Defining what good looks like in terms of shipping frequency and quality helps to maintain a high-output team and avoid misalignment with leadership.
The Significance of First Principles Thinking
First principles thinking involves breaking down complex problems into fundamental components. Problem-cause-solution is a helpful framework for implementing first principles thinking. Companies can identify problems, determine their causes, and develop targeted solutions based on the underlying principles.
Prioritizing Customer Research for Better Decision Making
Customer research is essential for understanding customer perception, needs, and pain points. Despite its importance, many companies overlook or underestimate the value of customer research. Implementing regular customer conversations, surveys, or studies can provide valuable insights to optimize product-market fit and drive growth.
Leveraging Competitive Intelligence for Business Success
Focusing on competitors is crucial in a competitive market. With an increasing number of competitors and market saturation, companies must be aware of their competitive landscape. Developing a competitive intelligence program and staying updated on competitors' strategies can provide insights for differentiation and informed decision-making.
Analyzing Lessons from US Intelligence for Business Puzzles
Applying problem-cause-solution thinking, similar to intelligence analysis, empowers businesses to solve complex puzzles and make more informed decisions. By breaking down problems into causes and aligning solutions accordingly, businesses can address challenges effectively.
Recognizing the Impact of Competition and Market Conditions
Today's market is highly competitive, with an increasing number of competitors and rising customer acquisition costs. Companies need to adapt their strategies to navigate this dynamic landscape and focus on differentiation, customer-centricity, and continuous improvement to succeed.
Importance of Understanding Competitors
Understanding competitors in the market is crucial for any business. It helps identify strategies, gather intel, and predict customer needs. Profitwell successfully used intel-gathering techniques like white label NPS surveys to gain insight into their competitors' customers and stay ahead.
The Power of Middle-of-the-Funnel Strategies
While top-of-the-funnel and bottom-of-the-funnel efforts are common, the middle of the funnel is often overlooked. Building a pool of leads in this stage, through freemium offerings and inbound media like podcasts and videos, can create a strong awareness and engagement. Prospect interactions in the middle of the funnel lead to higher willingness to pay, lower churn, and increased expansion revenue.
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Product Product Podcast - The Biggest Mistake People Make When It Comes to Product Retention
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Customer Research - Dovetail - The Collaborative Insight Platform Your Whole Team Can Use
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Brought to you by Vanta—Automate compliance. Simplify security: https://vanta.com/lenny | Amplitude—Build better products: https://amplitude.com/ | Dovetail—Bring your customer into every decision: https://dovetailapp.com/lenny
—
Patrick Campbell is the founder and CEO of ProfitWell, which he bootstrapped and sold for over $200 million. In this special episode, we explore 10 big ideas from Patrick, including tips for hiring employees who align with your company values, creating winning pricing and retention strategies, determining the right time to raise money, and more. Whether you’re just starting out or looking to scale your SaaS business, this must-listen episode offers practical and actionable advice that will help you avoid missteps and think differently.
Find the transcript for this episode and all past episodes at: https://www.lennysnewsletter.com/p/10-lessons-from-bootstrapping-a-200m
Where to find Patrick Campbell:
• Twitter: https://twitter.com/Patticus
• LinkedIn: https://www.linkedin.com/in/patrickccampbell/
• Email: pc@patticus.com
Where to find Lenny:
• Newsletter: https://www.lennysnewsletter.com
• Twitter: https://twitter.com/lennysan
• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/
Referenced:
• Douglas Atkin on LinkedIn: https://www.linkedin.com/in/doatkin/
• Patrick Campbell’s guest post on Lenny’s Newsletter: https://www.lennysnewsletter.com/p/saas-pricing-strategy/comments
• ProfitWell: https://www.profitwell.com/
• The Cadence: How to Operate a SaaS Startup: https://medium.com/craft-ventures/the-cadence-how-to-operate-a-saas-startup-436aa8099e8
• Edward Snowden on Twitter: https://twitter.com/Snowden
• The Flywheel: https://www.hubspot.com/flywheel
• High Output Management: https://www.amazon.com/High-Output-Management-Andrew-Grove/dp/0679762884
• Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts: https://www.amazon.com/Thinking-Bets-Making-Smarter-Decisions/dp/0735216355
• Powerful: https://www.amazon.com/Powerful/dp/1939714206/r
• The West Wing on HBOMax: https://www.hbomax.com/series/urn:hbo:series:GX5nwgQDNJZ6aoQEAAAHJ
• Notion: https://www.notion.so/
• Descript: https://www.descript.com/
• Coda: https://coda.io/
• KTool: https://ktool.io/
• Tweet Hunter: https://tweethunter.io/
• Apple Watch Ultra: https://www.apple.com/apple-watch-ultra/
• Loom: https://www.loom.com/
In this episode, we cover:
(00:00) Patrick’s background
(05:12) Building a team
(07:38) How ProfitWell handled a conflict using their guiding principle, the most charitable interpretation
(10:41) Why new hires need to fit in with the company culture
(12:19) The bootstrapping vs. funding debate
(13:38) When founders should think about raising funds
(18:08) When and how companies should make pricing changes to their products or services
(23:46) Strategic retention and tactical retention, and why the latter is often missed
(28:48) Why people don’t want to pay for a SaaS analytics tool
(29:56) The importance of mission metrics for shipping
(34:42) First-principle thinking, the “5 whys,” and Patrick’s alternative approach
(40:21) The importance of frequent customer research
(43:15) Simple strategies for doing customer research
(46:13) Understanding your competitors
(51:06) Why veterans make great hires
(54:08) Why local strategies are more effective for some companies
(59:21) Why the middle of the funnel is the biggest opportunity
(1:04:54) Lightning round
Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.
Get full access to Lenny's Newsletter at www.lennysnewsletter.com/subscribe
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