The Bootstrapped Founder - Build a Calm Business — TBF #148

Dear founder,

I have started working on my “next big thing.” Today’s issue contains the first installment in a 10-part series tentatively called “Building a Calm SaaS Business.” Over the next two months, I’ll share something new every week, and you’ll be the first to read it here.

As to what the “thing” is, I can’t be concrete because I don’t know. It could be a book, a course, a live musical performance (well, kind of unlikely…), or maybe a video series; we’ll all find that out together. This is why I want to invite you to give me any and all feedback on what I’m writing in public. Tell me what you want to know, and I’ll make it happen.

You’re most appreciated.

Oh, and before we get started, I’d love to give a huge shoutout to my friend Prado who is running the amazing Pradologue newsletter. Prado is a lover of books and empowering people. I highly recommend checking out his newsletter. Start with this issue about curiosity, rockets, and finding the perfect person to answer a question.

Also, please feel free to check out Burb, the indie sponsor of this issue.

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If you're not building a Calm business today, you're making your entrepreneurial journey harder than it needs to be. Calm companies focus on profitability and sustainability. They succeed by growing slowly and deliberately, calmly adapting to changes in the market without the need for a soul-sucking "grind to total market domination."

I'm not a fan of hustle culture. When I hear the word "grindset," I get very skeptical about the person using it. Too many self-declared "productivity experts" think that working extremely hard is a surefire recipe for success — and that perspective does more harm than good.

It results in panicked founders, hectically jumping from one experiment to another, waiting for success to strike eventually. They fear the perceived extreme hyper-competitive nature of business so much that they become extreme versions of themselves: neurotic, anxious, nervous, and unable to rest. Over time, their businesses start reflecting those symptoms.

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Fortunately, it doesn’t have to be that way.

You can build businesses calmly and sustainably. This approach is particularly interesting for Software-as-a-Service companies due to their high margins and low maintenance costs.

What is a Calm Company?

Let’s start with what calm businesses are and what they’re not.

A business is calm when it’s running calmly when things are working well and stays calm when things change.

A calm business is not a static business. It’s not a boring business, either.

Calmness refers to the mindset that impacts how you run the business, from the humble idea that spawned it to the glorious day of being acquired for millions.

At its core, calmness is about sustainability: sustainable goals, structures, and decisions. Where conventional startups are expected to reach hypergrowth through massive funding, calm businesses focus on revenue —and ultimately profit— from day one.

What kinds of businesses can be Calm?

This focus on profitability limits which businesses can be calm. A calm company generally works best if it tackles a well-defined problem that can be solved better in an iterative fashion. Endcrawl is a great example here: they didn’t revolutionize the film industry, but they definitely made it much easier to create, maintain, and render end credits for movies. What started out as a simple Perl script is now fueling the credits of acclaimed productions like Hamilton or Nomadland.

That’s the power of sustained iteration. Building something that’s better — even though it might not be too different from the alternatives in the market. You don’t have to reinvent the wheel. A calm business takes it upon itself to refine a particular type of wheel for a specific kind of customer. Most calm companies are successful because they pick a well-defined niche and serve it to the best of their ability.

Software-as-a-Service businesses are particularly aligned with the calm business approach: they’re often built around niche products, solving well-defined critical problems by offering a solution that fits the existing workflow of a validated market. Similarly, businesses offering productized services fit the model as well. Any business with some control over churn and customer retention can be a calm business.

Service agencies often struggle to employ this model because of the fluctuating nature of their client roster. But it can be done. A calm business isn’t about implementing a particular business model; it’s about striving to build a sustainable business that experiences slow and steady long-term growth. Any business can be calm. It’s just easier for some and harder for others.

It boils down to your endgame. A product built to serve and empower a niche market for many years to come can definitely be calm. If you’re trying to disrupt the global financial system within the next two years, you might need a different, more speculative approach. It’s possible to build a calm company that seeks to change a whole industry, but you’ll have to fight the expectations of one particular group you won’t be able to avoid with that kind of business: investors.

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Let's take a quick look at this issue's sponsor, Burb. Community is an incredible foundation for any business. The only problem: building a community business is hard. There are countless different tools to manage, on top of your responsibility to create content and engage your community members. That’s where Burb comes in — it’s the only toolset you need to operate and grow courses and membership communities on Slack, Circle, and Discord. When you try Burb, it’s free for up to 100 members and free for your first month for over 100 members. Grow a community-first business with ease on Burb.

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What funding options exist for Calm businesses?

Every business needs money. The way you get it and what strings will be attached to it make all the difference.

For a Software-as-a-Service business, there’s a high chance you’ll be able to completely bootstrap your entrepreneurial efforts. The components needed to build a Minimum Viable Product to test and verify your assumptions are incredibly cheap, often offering extensive free tiers to make prototypes quick and affordable to build. Let’s look at Endcrawl again: all they needed to get started was a 400-line Perl script, a place to host rendered video files, and an email account. This may have been cheap back in the day, but it’s even more affordable today.

But eventually, running a business becomes more expensive. And even though SaaS businesses are usually high-margin endeavors, you don’t need to cash in your life savings to run marketing experiments. There are funding options out there that align with the goals of a calm business owner. Calm Funds finance through a mix of equity and profit-sharing and usually come in once some sort of product-market fit can be shown. Where traditional Venture Capital employs massive cash at the idea stage and sometimes even before that, calm funds focus more on sustainable businesses without capping their upside as revenue-based financing options would. Calm capital funding sits between traditional venture capital and regular debt options.

You’ll find that calm funds employ something similar to a Share Earnings Agreement, where the fund takes a capped percentage of “founder earnings” above a particular threshold. That allows the founders to build a business without fearing for their livelihood, and the fund starts benefiting at the same time as the founders when they begin taking dividends. This funding aligns calm founders with investors who want to put their money into sustainable businesses.

What kinds of goals can a Calm Founder have?

Alignment is at the core of the calm business approach. When you’re building your own business and have no investors that want you to reach total market domination within two years, you can think about building a business that fits your own lifestyle.

The moment you’re accountable to investors that want you to grow as much as you can at all costs, your personal founder goals might take the back seat. Not every founder wants to build the next unicorn. I bet we’d all like to have built the next unicorn, but actually going through the motions, diving headfirst into the nebulous future of trying to disrupt a whole space? Not many founders want to sacrifice everything for a slight chance at succeeding with such a grand endeavor.

Most founders want to build a business that pays their bills, is fun to work on, and creates wealth along the way.

Most founders want to reach financial independence without exhausting themselves in the process.

The term “lifestyle business” fits perfectly for calm companies. Many founders who choose this approach to entrepreneurship have set their business goals to align with their personal goals. There is no need to spend a decade of your life serving the institutional investor overlords for a slim chance of a colossal IPO or similar exits. You don’t need to be a billionaire to enjoy your life, and you don’t need to toil away years doing things you don’t want to do. You can enjoy the business you’re building right here, right now.

In his book “Life Profitability,” the SaaS founder Adii Pienaar talks about a value-driven approach to building a rich life AND a successful business. And just as we don’t need chaos in our personal life, our business life can be calm and sustainable. In fact, they need to be that if we want to have an enjoyable personal life at the same time.

What does a calm business look like?

So, how does a calm company operate?

Here are the fundamental assumptions and priorities that impact how a calm business works:

1. Profitability over funding.Revenue is vanity, profit is sanity, and cash is king. Calm business owners understand that they’ll sleep much better with money in the bank and as little debt as possible. They focus on finding a profit-generating way of selling a product or service as soon as possible. For Software-as-a-Service businesses, that’s almost exclusively a subscription model, as it’s much easier and cheaper to retain an existing customer than to find a new one.
2. “Customer-funded” over external capital. While outside money can amplify a calm business’s growth, it’s neither required nor a priority. A calm business focuses on revenue streams that originate inside the company: the best funding your business can have is “customer funding:” revenue that comes from your own sales.
3. Staying calm over being calm. Entrepreneurship is a risky business. That’s the nature of building things that didn’t exist before. You can’t guarantee that it will ever be smooth sailing, but you can work on staying calm at the helm when the storm comes closer. A calm business has built-in redundancies and contingency plans in place that help when things explode.
4. Documentation over constant guessing. Documentation is a critical ingredient in becoming more resilient: when a process is documented, it becomes easier to execute, and you’ll make fewer mistakes. A well-documented business functions like a franchise: where there is a manual, you can delegate tasks. The better —and earlier— you codify your process into Standard Operating Procedures, the easier you’ll be able to hand jobs to freelancers, employees, and when it comes to self-service customer support, even your customers.
5. Automation over manual work. One benefit of focusing so much on documentation is that it quickly lets you spot opportunities for automated systems. Those systems, in turn, add more resilience to your business — after all, a job done by a machine allows you to focus on the things that require human intervention.
6. Continuous improvement over risky experiments. Learning from your customers and adapting to market needs are such human activities that you’ll be focusing on. A calm business stays calm because it’s in constant contact with the world around it. Establishing feedback cycles with your customers —past, present, and future— allows you to sense when your offering loses alignment with reality. The earlier you can steer the ship back into calm waters, the less chaos you’ll have to deal with. That’s why calm founders avoid extremely risky bets and pivot as soon as possible.
7. Iteration over disruption. Humanity needs solutions to gigantic problems like climate change and genetic diseases. But the global economy also needs highly effective newsletter referral systems and movie credit rendering tools. A calm business aims to provide a significant improvement in a niche market, relentlessly optimizing its product to make the lives of its users as easy as possible. Small steps, regularly taken and reliably validated, will allow for a calm and sustainable business trajectory.
8. Building a sellable business over planning to go public. Calm businesses are great acquisition targets. A well-documented business that can show high-margin profits is a highly sought-after asset. People will pay significant sums of money to own and operate such a business. And since a calm business is sellable —a result of being highly automated, well-documented, and built to create sustained profits over time— you’ll have no trouble finding an acquirer for your SaaS.
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Building any business is going to be tough. No matter if you run it as a calm business or in a more reckless way, there will be unexpected challenges, and every day will require you to be at the top of your game.

But with a calm mindset, you can escape the hustle culture hell and focus on building your wealth, reputation, and a sustainable business simultaneously.

So, stay calm.