3 Genius Business Ideas We're 'Borrowing' From Syed Balkhi

Intro (0s)

• Syed Balkhi bootstrapped a company to a billion-dollar valuation without external funding.
• Unlike others, Balkhi provides specific and actionable business opportunities.
• The ideas presented are practical and have a high chance of success if executed well.
• The discussion includes insights on personal finance and a social experiment involving people's financial goals.
• Microplastics have become a concern among wealthy individuals.
• Joe Gebbia, the co-founder of Airbnb, was observed only drinking from his own glass water bottle.
• Balkhi noticed this and started drinking only glass water to avoid plastics.
• Balkhi's previous appearance on the podcast was well-received by the audience.
• Balkhi built his empire starting from a WordPress blog called WP Beginner.
• He identified popular WordPress plugins and businesses, acquired or invested in them, and grew his company's revenue to over $100 million.

Offshore bookkeeping (3m30s)

• Syed Balkhi is a bootstrapped billionaire who built his company without external funding.
• He grew his business by being a "Barnacle on the whale," meaning he attached his business to a growing industry (WordPress) and rode its wave of success.
• Balkhi believes there is a massive opportunity in product high services with offshore markets, especially in industries with a high TAM (Total Addressable Market).
• He suggests taking this model and going to town, rather than spending years building software that may or may not work.

Level it up with reseller and white label (6m0s)

• Created a landing page using HubSpot's landing page tool to collect emails from people interested in a survey about founders' finances.
• Tracked traffic sources and conversions to see how much revenue came from the survey and each traffic source.
• Shared the landing page on Twitter and got thousands of people to give their emails.
• Invested in a company called Seahawk Media that offers custom WordPress development, website maintenance, and other web-related services at affordable prices.
• Seahawk Media also offers white-label services, allowing other agencies, hosting companies, and businesses to resell their services and add on revenue.
• Bookkeeping is another example of a large market that can be turned into a product/service offshore market.
• Accounting firms can set up offices in countries like Pakistan, India, and Latin America to provide basic bookkeeping and financial tasks at a low cost.
• The key to success in this model is the reseller and white-labeling model, which allows businesses to resell or add on the services of offshore talent.

Sourcing your outsourced talent (9m30s)

• White label a service by partnering with an existing agency or team.
• Offer add-on services to your customers without building your own team.
• Example: WPBeginner partnering with Seahawk Media to offer professional website design and maintenance services.
• Extend this model to other industries, such as bookkeeping, by white labeling the services of a specialized agency.
• Charge a markup on the services and pay the agency a portion of the revenue.
• Use recruiters to constantly search for and filter talent.
• Focus on finding the top 1-5% of talent, rather than the average person.
• Have a system and process in place to intake and filter resumes.

Barnacle on the Whale: Quickbooks plugins (13m0s)

• Syed Balkhi, the founder of WPBeginner, recommends creating add-on services for existing platforms like QuickBooks and Zero apps to generate extra revenue without additional work.
• The new generation of talent from countries like the Philippines and India has significantly improved in English proficiency and technological adaptation, making them valuable resources for businesses.
• Acquiring and optimizing a portfolio of undervalued or mismanaged apps within these ecosystems, each generating a few million dollars in revenue, can lead to a successful business.
• Balkhi is interested in investing in such opportunities and believes that the potential lies in developing software plugins or agencies that manage services within these ecosystems.

The most powerful idea of our generation (20m0s)

• Open source is one of the most powerful ideas of our generation.
• It gives freedom to anyone from anywhere in the world to look at the code and learn from it.
• Allows new programmers to read code from the best programmers in the world and contribute back to the project.
• Contributed code can be used on millions of websites.
• Syed Balkhi believes open source is a great business opportunity.
• Open source companies can make money through various means such as:
  • Selling premium support and services.
  • Offering cloud hosting for the open-source software.
  • Creating a marketplace for extensions and themes.
  • Selling white-label versions of the software.
• Open source businesses can be very profitable.

X but open source (x= popular platform) (23m30s)

• Open-source software is controversial as it challenges traditional business models by sharing code freely.
• Open-source software provides advantages like affordability, self-hosting, and freedom from censorship, appealing to users in specific countries and situations.
• The long-term value of open-source software lies in its vision and community support, serving as a unique selling point in competitive markets.
• Successful open-source businesses often monetize through services, add-ons, premium versions, or support while keeping the core product free.
• Open-source alternatives to popular closed-source software can thrive by focusing on cost-effectiveness, affordability, and community growth.
• WordPress, Shopify, and Chrome's success is attributed to their large contributor base, which drives continuous improvement and innovation.

Creating disproportionate value (28m30s)

• WordPress powers 40% of the internet but its revenue is not as high as Shopify, which is valued at $100 billion.
• The collective market cap of the WordPress ecosystem, including companies like GoDaddy and WP Engine, is likely larger than Automattic, the proprietary company founded by WordPress creator Matt Mullenweg.
• Automattic, valued at $3 billion and once at $7 billion, is the steward of the WordPress open-source project.
• The speaker used WordPress for his business, which reached hundreds of millions of people and generated millions in revenue, while paying only $300 annually for WooCommerce, a WordPress e-commerce plugin.
• In contrast, Shopify would have charged 5-10% of revenue, costing the speaker tens of thousands of dollars per year.
• The speaker emphasizes the importance of providing disproportionate value to customers, making the business "stickier" than competitors who charge more.
• Costco is an example of a business that offers incredible deals to customers by selling goods at cost plus 10% and negotiating low prices with vendors.
• Costco's membership fee of $120 per year is a small price to pay for the savings customers can achieve.

Flavors of capital funds (32m30s)

• A subscription service for open-source software could offer access to various tools at a lower price or at cost plus a small percentage.
• OSS Capital invests in open-source projects with engaged users and a large market, helping them come to market and potentially disrupt established companies.
• Open-source software can be forked and customized to create specialized versions that cater to specific needs, making it disruptive in various industries.
• Syed Balkhi's OSS Capital thesis involves investing in open-source alternatives to expensive software, such as C Le.
• A "flipper" Venture fund model is proposed, where investors invest with the intention of exiting at the Series A round, capturing the valuation lift from seed to Series A.

Is $10-50M the perfect amount in the bank? (40m30s)

• Syed Balkhi considered selling his company's shares for a 30% profit but didn't due to perception issues and the difficulty of overcoming them.
• Balkhi questioned the actual benefits of incremental wealth and the purpose of money beyond a certain point, as he felt he was already living his desired lifestyle.
• He posed a question on Twitter asking people how much money they thought they needed to live their desired lifestyle, with options ranging from $0 to $1 million, $1 to $10 million, $10 to $50 million, and $50 million and above.
• Balkhi's personal threshold number for a comfortable life was $10 million, and he emphasized that his motivations for work were enjoyment and productivity rather than material desires.
• He suggested that the biggest unlocks at higher wealth levels might be the ability to travel privately and make significant charitable contributions.
• The level of convenience increases with the size of a private plane, but the cost-effectiveness may not be worth it for everyone.
• Taylor Swift's use of a contracted service for a long-distance flight demonstrates that owning a larger private jet may not always be necessary or financially sensible.

First you own your things, then they own you (46m30s)

• Money improves the quality of life up to a certain threshold.
• $10 million is a threshold where one can tell most people off and not need much from anyone.
• $50 million is another threshold where one can fly private safely and without much thought.
• At $30 million, one can afford a really sick house in an expensive area.
• It's important to have perspective and not let the goalposts keep moving.

The true cost of luxury (48m30s)

• The cost of maintaining a large house can be overwhelming, leading to feelings of being owned by one's possessions rather than enjoying them.
• Holding costs, such as property maintenance and opportunity costs, should be carefully considered when making financial decisions.
• The income range between $200,000 and $500,000 can be a "golden handcuffs" zone, where individuals may feel trapped due to the financial comfort it provides, making it difficult to take risks or pursue other opportunities.
• Personal preferences and personality traits play a significant role in financial decisions, as some individuals may find contentment with a modest lifestyle while others may prioritize financial success.
• The tweet suggesting that $250,000 a year is enough to live a rich life is considered out of touch, especially in expensive areas like California or New York.
• After taxes, the actual take-home pay from $250,000 a year may be around $175,000-$180,000, making it challenging to save a significant amount of money annually.

Paid marketing vs. acquiring resellers (53m30s)

• Acquiring a business with existing customers can be a cost-effective growth strategy for subscription businesses, especially in competitive markets.
• Reselling products or services can be a lucrative business model, as resellers can sometimes make more money than the main company.
• Acquiring resellers and bringing customers in-house can boost revenue and increase profit margins, as demonstrated by companies like HubSpot and Zendesk.

Compounding goodwill is the best form of compounding (59m0s)

• Syed Balkhi emphasizes the importance of understanding the pain points of the audience when building successful solutions.
• Acquiring Groove, a help desk software, enabled Syed Balkhi to cross-promote his other solutions and reduce costs for customers.
• Compounding goodwill, which involves giving without expecting anything in return, is considered the best form of compounding.
• Syed Balkhi admires Guy Spear, a value investor, for his generosity and ability to build a network of talented individuals who support each other.
• Balkhi describes himself as a shrewd negotiator and a disciplined and firm manager who balances being a nice person with capturing value in business.
• He stresses the significance of compounding goodwill and building long-term relationships rather than maximizing short-term gains.
• Balkhi suggests setting a threshold during negotiations and not exceeding it, even if it means leaving money on the table.
• He emphasizes the importance of respecting others, even if they have wronged you, as illustrated by Adam Sandler's story of overcoming a professor's criticism to become a successful actor.