Idea to Exit in 2 Years | Lessons from Selling a SaaS at $55K MRR

Listen Up! IH - Episode 9

"Audience research to me is the most important thing in a business"

👆 That's Arvid Kahl's most important insight after building and selling a SaaS company that changed his life.

Arvid Kahl is the co-founder of FeedbackPanda.com — a software tool that helps English teachers provide feedback to their students in a convenient manner.

He started the company back in 2017 with his life and business partner Danielle Simpson.

Within two years, they had grown the business to $55K MRR and eventually sold it to SureSwift Capital.

SureSwift Capital's tag line is — Dream Exits for Bootstrapped Founders.

And it was a dream exit for Arvid. In his own words, he sold the company for a "life changing" amount of money i.e an amount that has elevated Arvid & Daniel into a "post economic" state of mind.

He even announced it on Indie Hackers in a post titled - We sold our SaaS

Back in December 2019, just 1 month after the exit, Arvid appeared on the Indie Hackers podcast hosted by Courtland Allen.

They discussed the success of Feedback Panda, the importance of Audience Research, and how to build a sellable company.

Some Lessons👇

Feedback Panda — The Product 🐼

Feedback Panda is a software solution that helps freelance English teachers provide feedback to their students. Freelance teachers often teach their students 1-on-1 and and are expected to provide individual pieces of feedback to every student on every lesson.

Feedback Panda helps them build custom feedback templates for lessons, and save almost 2 hours of manual labor everyday - they can even share these templates with each other!

The Audience 👩‍🏫

Feedback Panda has a very specific audience.

Large Chinese companies hire native English teachers for young Chinese kids.

It is a fast growing market with thousands of new teachers getting freelance opportunities every year. VIPKid is a great example of such a company. Their teacher requirements are pretty simple - a bachelor's degree, some teaching experience, and eligibility to work in North America.

It is an ideal opportunity for teachers to make good money, working from home, doing what they love.

Most of these teachers hang out in Facebook Groups. They discuss their problems, their solutions and guide each other through the chaotic world of freelancing.

These groups are like a water cooler for these teachers - a place to relax and indulge in some light banter.

Daniel was an active member of these groups.

She taught English as a side hustle to supplement her income as an Opera singer.

She contributed to the discussions, interacted with other members, helped them with their problems and shared her own struggles with the community.

She understood the problems of the community first hand.

The Problem🛑

The biggest problem they faced was providing personalized feedback to every student on every lesson.

If a teacher taught 20 students in a 10 hour day, providing feedback for each lesson would often take them more than 2 hours everyday.

That's 2 hours of unpaid work but Danel built some workarounds for herself to get past it.

She had raw systems around word documents and excel sheets. And she was sharing them with her peers, but there was nothing concrete that would solve their problems in an effective manner.

The Solution✅

Daniel discussed these problems with Arvid.

And being a software engineer, Arvid jumped on the problem.

If there's anything you do repeatedly, you should automate it using code, right? That was the idea behind Feedback Panda.

They had a templating engine built into the product. Teachers could make templates for feedback that could be reused infinitely.

Feedback Panda reduced their efforts by almost 2 hours everyday.

And it was collaborative, so they could share templates with each other as well. There were network effects built into the product from day 1.

Marketing Strategy🔥

Facebook Groups

Arvid & Daniel were very careful to not push their platform too hard on to people.

Very early on, they started by just replying to people in the comments and sharing links with people who were already facing the problems Feedback Panda would solve.

That strategy worked well for very early growth. It gave a spark to the word of mouth publicity that will come later.

Teacher Interviews

Their marketing strategy was very social media focused. Once they had some traction, they started a weekly interview series called VI Panda.

Every week they would pick one teacher who would be inspirational to their userbase and do an interview with them. This helped them build positive vibes within the community.

"These stories were so engaging that people found their way into our subscriber base." — Arvid Kahl

Checkout a recent VI Panda interview.

Referrals

They had referrals built into the system from very early on.

Teachers would recommend the product to other teachers and would get a commission for it. Another example of network effects built right into the product.

Lessons📑

Arvid feels they made a mistake by not hiring someone for customer service.

It was something that took up a lot of time and prevented him from doing deep work. He couldn't code as much as he wanted because he had to attend to customer complaints. Moral of the story: he could have easily hired someone to do it and focused on the one thing he loved the most - writing code.

$5/month customers aren't worth it.

They had 2 pricing plans - $10 and $5.

They soon realized that the 5 dollar customers were difficult to serve. Those customers were more price conscious and wanted to extract every penny they spent. The customers who were willing to pay more had less demands and were easier to please and build features for.

So, they killed the $5 plan and eventually raised the price to $15/month.

But they grandfathered every existing customer to the $10 plan forever. Something which is not advised by any expert, but it helped Feedback Panda build goodwill within the teacher community.

How to Build a "Sellable" Company💸

Arvid and Daniel had never thought that they would sell Feedback Panda one day. But they had always built the company so that it was easy to sell.

The idea is to automate as much of the work as possible. Make the founders irrelevant, hire people or build resources so anyone else can run the company smoothly.

Things that made Feedback Panda Sellable:

Arvid documented everything. The code, the businesses process, the customer service complaints. Everything.

He made an 11 hour video of himself doing a code walkthrough. Explaining every tiny detail about the codebase. It was meant as documentation for future developers to get up to speed on Feedback Panda.
They automated everything. Every single step, on every single level, there was automation. If something would break, it would automatically come back up. If there were errors they would be automatically reported.

Because they hadn't hired anybody, they invested heavily in automation.

And before long, Arvid & Daniel had built a solid, reliable, resilient system that made it very easy for them to hand over.

Indie Hackers Pitfalls🔨

Arvid feels Indie Hackers often fall for the hammer and nail problem.

Because of their education and training, they are more inclined towards on the technical side of a product.

The people side, or the behavioral side of business is not taught in any computer science course or coding bootcamp.

So, when they see a problem, they want to solve it immediately by writing code. They don't first do any audience or market research.

Once they have a product, they look for Product-Market fit.

Product market fit is a very unnatural concept. Arvid advocates for a Market - Problem - Product fit.

Audience research was the most important thing that Daniel and Arvid nailed with Feedback Panda. It helped them in every stage of the business —

Initial Idea
Decide Features
Decide on Marketing Messaging

Courtland made a very important point —

"...the audience that you’re building for, the market that you’re targeting, that’s the hardest thing to change. It’s the thing that you have the least control over. If you build the wrong product, you can change that. If you have the wrong business model or pricing plans, you can change those.
If your distribution channels aren’t working out, you can change those. If your team is not right you can hire new people, but if the market that you’re targeting doesn’t exist, or if the problem you’re trying to solve isn’t a real problem, then there’s really nothing you can do about that. You can’t conjure a bunch of people out of thin air who have the problem you’re trying to solve..." — Courtland Allen

Ideal Audience Size📊

According to Arvid, the ideal audience size lies in the goldilocks zone — it should neither be too large nor too small.

If you are entering a large market, you will have to compete with gigantic players with large funds. Eventually you will get beaten. That's competition you can't fight.

And if you entering a market that is too small, like a few thousand people, even if you have one or two people competing with you, suddenly nobody makes money in the market. Customer acquisition costs become unreasonable for both of you.

The audience for Feedback Panda was both large enough and small enough to be good for a bootstrap business.

Arvid has a detailed post on his blog on how to determine the size of a SaaS market. He gets deep into B2B, B2C and B2B2C business models, and how you can gauge the market size for each type of business. There's a chapter dedicated to this in his best selling book Zero to Sold

Final Words of Advice for Indie Hackers🤗

"... I think everybody should try. Everybody should start something that they really, really care about. I think building a business has never been as easy as today...

If you want to impact the life of other people, and if you want to impact the value that they can create by enabling them, then you should start a business. Then you build a product. Then you should find the problems and solve them, and make people get more capable than they were before. I think that’s the purpose of all business, all entrepreneurs should go for that. I would hope that everybody tries and starts the thing. Not everybody will succeed, but everybody could." — Arvid Kahl

Thanks for Reading🙏

Listen to the complete episode on the Indie Hackers podcast.

Arvid is the best-selling author of "Zero to Sold" , it is like the Bible of Boostrapping.

His upcoming book is titled -- "The Embedded Entrepreneur".

Funny thing is that if you listen to it carefully, this podcast is a foreshadowing of both his books😀

He did a phenomenal AMA on Indie Hackers, check it out here -- I went from selling a $55k MRR SaaS to writing books in public. AMA!

Every week, I listen to the best podcasts around Indie-Hacking and share the most actionable and inspiring tips from some awesome conversations.

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https://www.indiehackers.com/series/listen-up-ih

ICYMI: Last Week I wrote about Dru Riley's story of Growing from 0 to $20K MRR with Winning Trends.

Thanks to Seth King for editing this post.

Photo credit Aalok Atreya on Unsplash

Cheers,
Ayush