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2013 is slowly drawing to a close, and 2014 stretches out ahead of us. The world of online microbusiness is being shaped and buffeted by surrounding industries, by startups, by internet marketing, by rapidly increasing rates of code literacy.
In this post we’ll look at some of the strongest emerging trends in the world of online microbusiness. We’ll define and explain all of the following: microstartups, solo builders, the decline of new SEO-based businesses, the self-publishing boom, the rise of SaaS microbusinesses, and the increased technical literacy of entrepreneurs. Let's get to it.
A microstartup is a microbusiness that looks very similar to an early stage startup. It may have one or two founders, but rather than being optimized for rapid growth, a microstartup is structured so as to deliberately stay in this ‘early startup’ phase. This optimizes for impressive profits relative to staff size, but deliberately throttles the growth of the business.
The goal of a startup is to eventually become a company. If the startup achieves that goal, the founders must hire a team to keep up with the startup’s massive growth. They transition from makers to leaders. They move into a nice office, work extremely hard, bear a great deal of responsibility, and hopefully become very wealthy in the process.
Microstartups are inherently designed to avoid this trajectory, to stay small and highly profitable while keeping the founders firmly in the ‘maker’ role. This is achieved by throttling the growth of the business, usually in one of the following ways:
- Focusing on a market so small that grand scale is not possible. For example, building a web app for high-frequency traders, or an online retail store for the coaches of Olympic athletes, or a mobile app to track tornados. The scope of the market means that a huge roster of staff will never be necessary.
- Squeezing a big market. An amazing productivity app potentially has a very large market, but selling the app for $75 would squeeze the market down to a small size. An online store for men’s fashion could grow very large, but what if only a limited number of each item were available?
- Maximizing the value of each customer/user. By charging a niche market a premium to use the product or service, large profits are possible, even with a relatively small user base. Microbusinesses often focus on targeting successful businesses who have more money to spend than individual consumers.
It would be difficult for one developer to single-handedly maintain the infrastructure used daily by 100,000+ users, or 1,000,000+ users. But 500 users is much more manageable.
If you love the idea of creating a high-tech software startup but dislike the idea of having to scale up, raise funds, hire staff and become a manager, a microstartup might be a better path for you.
It has never been easier for an ordinary person to learn how to build websites, blogs, and web and mobile applications. It seems like a new online service to teach people how to code pops up every day.
Because of this, more and more people are single-handedly building their ideas alone. Like an artist or an author, they conceive of an idea and bring it into reality with their own two hands. For Solo Builders, there is nothing quite so satisfying.
Professional developers are also realizing the power that is held in being able to build both back-ends and front-ends.
- Asterank was created by Ian Webster over the course of a year (with some help from the open source community).
- Buildbox.io was created by developer Keith Pitt.
- Instapaper was created by Marco Arment.
- DuckDuckGo was created by Gabriel Weinberg.
If you love the idea of working alone to build something from scratch, but don’t yet have the skills to do so, there are many places to start:
Decline of SEO
Google’s recent decision to obfuscate keyword data has made it harder than ever to build businesses based solely around performance in search results. Business models primarily based around keyword research (niche sites and affiliate sites in particular) will start to decline in popularity as SEO becomes more difficult. Though niche and affiliate sites will always exist, they will probably never be as popular as they once were.
Niche sites usually revolve around creating content targeting a long-tail search term, and then evaluating how effectively the site is drawing in searchers for that keyword. Now it is much more difficult to see the keywords that are bringing visitors to your site. Though it is still possible to do SEO, it’s no longer as straightforward.
I hope that this will lead to a renewed shift towards building so-called ‘authority’ websites and blogs. Websites that are successful because of the useful information they provide and the strong brands they build, rather than their success at funnelling search visitors into advertisements and affiliate links.
Boom in Self-Publishing
More and more people are turning to self-publishing as a microbusiness. There are authors writing and selling fiction eBooks on Amazon, as well as authors using services like Leanpub to sell non-fiction or technical books.
Because authors keep a great proportion of profits, they can write books for a small, niche audience, and still make a living. Roy Osherove earned $11,000 from his book Notes to a Software Team Leader before it was even finished. Other niche books on Leanpub include Scraping for Journalists and The Homebrewer’s Guide to Watir.
J. A. Konrath, one of the world’s most famous self-published authors, just posted total earnings of over $1.5 million. His and similar stories of success have inspired thousands of aspiring authors to self-publish. By cutting out many of the costs associated with traditional publishing (professional editors, graphic design, marketing, bookstore placement, and many more), authors can make a living selling much fewer copies than they’d need with a traditional book deal.
The meteoric rise of high-tech companies (companies like Google, Facebook, Airbnb and recently, Tesla) have led to more technology covered in the media. Powerful laptops, tablets and smartphones are ubiquitous, and technological education is no longer solely the domain of CompSci graduates. Even when microbusiness owners don’t know how to code, they are more likely to be comfortable working with developers and managing development projects.
Microbusiness owners are more likely than ever to contribute the UI design, front-end code or back-end code to their microbusiness. Free or low-cost coding courses have made this easier. The technical literacy of entrepreneurs of all stripes is higher than it’s ever been.
Software Eating the Microbusiness World
Entrepreneur and investor Marc Andreessen said that software is eating the world. Industries are being transformed and disrupted through software (web and mobile applications). Amazon has disrupted the publishing industry, Netflix has stridently surpassed Blockbuster, iTunes revolutionized the music industry and PayPal has transformed online payments. Microbusinesses also reflect this trend, with strong moves towards software microbusinesses, in particular, Software as a Service microbusinesses.
Software as a Service refers to software hosted on the web. Many services that would have traditionally been delivered via desktop applications are moving to SaaS. Some of the benefits include:
- easier, vendor-side updating
- no compatibility issues
- accessible anywhere
- simple delivery (go to a URL)
- can be built with simpler technologies
Even the internet marketing world, usually a little behind the curve in terms of technology, is catching on. Dane Maxwell has created The Foundation, a training program to teach entrepreneurs how to develop SaaS products for high-value niche markets.
SaaS products are special because customers can sign-up, pay for and use the software without any intervention from an administrator. The software is written so that it is useful for the buyer, and it works automatically. Buyers usually pay a subscription fee to have access to use the software. The predictability of recurring income helps SaaS businesses to be one of the most resilient and high value microbusiness types.
The opportunities are unbounded for software to make life easier for people in industries that have not traditionally had good tech tools. Is there awesome software available for doctors? Teachers? Vets? Pharmacists? Investigators? Lawyers? Auctioneers? Auto-mechanics? Probably not yet. Perhaps you’ll be the one to build it.
We’ve covered a lot of ground in this session. If you’ve been reading along but are still on the fence about actually launching a microbusiness, you have little to lose by trying. Launching is a muscle, and creating and launching something small could, at the least, be a gateway to something bigger.
If you launch something as the result of reading this series, please share it in the comments. I’d love to see what you made!