Author Matthew Cheng
Date November 14, 2025
Status Draft

The Prosumer SMB Thesis

Building hyper-customized software for small businesses at consumer price points

Section 1

The Core Insight

The Claim

Small businesses are being started by people who aren't "business people" - they're operators who need software that works like consumer products (fast, simple, no sales calls). Traditional SMB software assumes enterprise buying behavior (long sales cycles, committees, demos) which doesn't match reality for small and even mid-sized businesses.

Why SMBs Buy Like Consumers

The recent spike in small business formation is driven more by unemployment and less by business acumen. Decision makers are solo operators, not committees. They're prosumers, not enterprise buyers.

  • Single decision maker = shorter sales cycles
  • Speed matters: "live quickly" beats "perfect in 6 months"
  • Less sophisticated buyers = need handholding, but also less demanding
  • They think like consumers making a Netflix decision, not CFOs evaluating enterprise software

The Economic Shift: AI Changes Unit Economics

The math:

  • Old model: $150K engineer ÷ 2000 hours/year = $75/hour
  • Old model: 40 hours to build custom site = $3,000 per customer
  • New model: 1 hour of dev time + $2 AI cost = ~$100-200 per customer

As an example, classic FDE-model SW businesses need to make 6 fig MRR per contract to even justify the costs of supporting the FDE cost to maintain that customer.

This makes hyper-customization economically viable at prosumer price points ($39/month instead of $180/month).

<1hr
Custom site development time
$39
Monthly price point
15-30x
Cost reduction vs traditional dev
Section 2

Why Now?

The Technology Shift

Production-quality AI coding tools emerged mid-2025, dropping custom software costs 15-30x. This crossed the economic threshold where hyper-customized software becomes viable at prosumer price points.

What changed: Pre-2025, AI could write code snippets, not full applications. Post-2025, AI can write production-ready apps end-to-end (kind of. there's a lot of hand holding needed... see further below)

### Why Incumbents Can't Compete
We're starting with the pet care space, as an example vertical.

  • Business model lock-in: Companies like Gingr, pet care SaaS ($155-180/month) can't drop to $39 without destroying margins
  • Technical debt: Legacy codebases built for enterprise can't support rapid customization
  • Strategic focus: PE-backed companies want bigger contracts ($500-2000/month), not volume at $39

Classic innovator's dilemma. They're locked into their model. I'm not.

Market Opportunity

PE firms are consolidating multi-location chains, but independent facilities are still being created. Why? Because pet boarding (and similar services) are relationship-driven:

  • Pet owners care WHO is taking care of their dog
  • Trust matters more than brand
  • Local reputation > corporate chain
  • Human connection is the moat, not software

My positioning: I serve the independents PE doesn't want. I'm ON THEIR SIDE.

Section 3

The Wedge: Pet Boarding

30-Day Goal

By Dec 14, 2025: 1 paying customer (proof of concept), stretch 3-5 (proof of repeatability)

Product status: Already built. Ready to onboard customers TODAY. Product is NOT the constraint - distribution is.

Current State (Nov 14, 2025)

  • 151 leads scraped (4 cities: Asheville, Bend, Bozeman, Grand Junction)
  • Sales motion ongoing (1 onboarding call booked within first 2 days)
  • PawReserve booking system: Built and functional
  • Pricing: $39/month
  • Status: Ready to onboard same-day

CAC Target

$350-550
Current CAC estimate (not real)
<$50
Target CAC (6-12 months)
$507
LTV (13 months × $39)
Section 4

What I'm Actually Proving

The 3 Bets

Bet 1: Distribution

Can I acquire customers <$550 CAC using cold email + calls + inbound?

Test: 200 emails, 50 calls by Nov 30

Success metric: ≥0.5% conversion rate

Section 5

The Meta Thesis: Why This Scales

What Makes a Vertical "Good" for This Model?

  • Owner/operator or small teams (2-10 people)
  • Trust-driven service business (not transactional retail)
  • Core workflows: CRM + Invoicing + Inbound + Booking/Scheduling
  • Can afford $20-80/month (2-4 clients covers software cost)
  • Segmented market (not winner-take-all)
  • "Sweaty business" (labor-intensive, can't be fully automated)

How Customer #1 Helps Win Customer #100

Shared infrastructure: 90%+ backend reuse (booking engine, CRM, invoicing, admin dashboard)

Shared components: 70%+ frontend reuse (calendar UI, booking flows, forms, email templates)

What's custom: ~30% - Business logic, terminology, workflow routing, industry-specific features

Key insight: This means vertical #2 takes 30% of the effort of vertical #1. By vertical #5, just tweaking config files.

Examples That Fit

🐾
Pet boarding, grooming, training
🏠
House cleaning services
💪
Personal training, fitness
📚
Tutoring, education