The Cost of Bootstrapping Your App: The Figures Behind DropSend (part two) 13 Mar 2006
40 comments Latest by Stephanie
Just to recap …
This is part two of a two-part series, based on a talk I recently did at The Future of Web Apps in London (an 800 person event we put together, aimed at encouraging European developers to get rockin’). In part one, I covered:
- Making sure your app is financially viable
- The figures of what we actually spent on DropSend
- How to build your team on a budget
- How to scale on a budget
How to keep it cheap
When you’ve got a small budget, you need to watch every penny. Here are a few tips that saved us a load of cash:
- No stationary. For some crazy reason I thought it would be really cool to have DropSend business cards and letterhead. There goes £1000. Dumb.
- Don’t get new machines. You don’t really need a new laptop, no matter how bad your G3 iBook seems
- No luxuries - It may be tempting to splurge some cash on nice dinners for clients or business class seats, but forget about it. It’s not necessary and it’s not going to help you afford the web app any time soon
- Cut your features. The less complex your app is, the quicker you can build it. Not to mention that it’ll make it easier to use
- Check yourself before you spend £25. Anything above this, ask yourself if it’s really necessary
- Barter your services. Does one of your suppliers need a website? Great! Offer to trade them a website for their services.
- Use IM or Skype instead of the phone
- Do as much as you can yourself before your outsource. For DropSend, we did: wire framing, marketing, testing, bookkeeping and copy writing
- Get friends to help with usability testing. For DropSend, we offered some buddies free beer and pizza to help out, which was a hell of a lot cheaper than formal user testing (which I’d avoid anyway).
- Shop around for everything. Our first hosting quote was £12,000 per month!
Pessimism has it’s place
I want to encourage you as much as possible, but being occasionally pessimistic is important. If you plan for the worst in your cash flow predictions, and you can still stay in business, you’re good to go. I would plan for the following two things to happen:
- You’ll go 10% over budget
- You’ll go 3 months over schedule
Just plan on these things and make sure your cash flow can survive it.
Holy crap! Lawyers are expensive
One thing that really caught us off guard was how much it costs to take care of the legal stuff. Sure, we need a couple contracts written up, but how much could it be? "A lot", was the answer. Here’s the bare minimum you’ll need for your app:
- Terms of Service: £1000
- Contracts for freelancers: £800
A great way to cut down on these costs is to barter with your lawyer. Offer them a free site in return for a Terms of Service document. Also, take them up on that 1-hour free consultation!
No matter how much you’re tempted, don’t just copy and paste your competitor’s legal documents. If something goes wrong, you could jeopardize your whole company.
Cheap software is your friend
A fabulous way to cut costs is to use cheap (or free) software to help you manage the project. We use the following:
- Project management: Basecamp
- Bug tracker: Trac (you can subscribe to an RSS feed of commits - super cool)
- Meetings: Skype and AIM
- Version control: Subversion
- LAMP (Linux, Apache, MySQL and PHP)
Cheap hardware is your pal
In order to cut costs and speed things up, we bought a cheap £200 Linux box from the local computer store and used it as our dev box. Once the co-lo was setup, we moved it into there, but starting out on a cheap dev box an easy way to get things moving.
How to not spend money on marketing
I’d highly recommend not spending any money on marketing initially. Once your app is profitable, feel free to plow some money into traditional advertising. In the meantime though, take advantage of:
- Word of mouth
- Making your app viral in some respect (but be careful not to annoy people)
- Write articles or books
What about venture capital?
You need a very good reason to seek venture capital in today’s market. However, there are certain reasons why it might be a good idea. Here’s a couple scenarios where you might need VC:
- You need to expand very quickly and you can’t afford to
- You need very expensive hardware
- You need to have a physical presence in more than one place
- You need important connections to arrange partnerships that a VC firm can help you with
However, if you don’t have to do one of those two things, why would you give away 25 - 50% of your company?
If you don’t remember anything I just said …
- Don’t spend money unless you absolutely have to
- Bring down the costs by bartering
- Cut your features so you can build quickly
- Be realistic, if not slightly pessimistic, about your cash flow
- Plan for scalability but don’t obsess
Thank you for listening. I hope we’ve saved you some of the pain and suffering we went through when we built DropSend. On a side note, I’ve just finished 37signals new book Getting Real, and it’s got some more excellent ideas on how to build on a budget. Good luck!
As always, feel free to agree or disagree below.