GrubHubMike

Bootstrapping Series: Surround yourself with good people

Since you've read my previous post you understand the delicate tension between do it yourself and having a big team around you.  Since you are such an entrepreneurial rouge, though, you're thinking you can figure it all out yourself.

Even so, it helps to surround yourself with experienced advisors.  These are the people who can tell you what parts of an income statement an investor looks at, why your financial model is completely harebrained, current market expectations for similar products, trends in your industry.   Basically, you want a group of people who understands the strategic aspects of running a business

In addition, you need to network and surround yourself with peers. These are the folks who make the day to day stuff easier because they've all done what you are doing now.  They can help with setting fair employee compensation, recommending good vendors, advising in HR disputes, the time of day to go get a business license.  Basically your peers will help turn the dozens of projects you need to do in a week into a manageable set of work.  Not to mention this is the group of people that you end up playing poker with. So get to work!

Bootstrapping Series: In a pack or lone wolf

I'm continuing my series on  bootstrapping an internet business. Growing a business is mostly about getting the right people and getting out of the way.  But, before you go hiring a pile of people, you've got to figure out if you want business partners.

Two equal partners is a good idea. The fact is, employees, investors, customers, and founders each have a different set of interests in a business.  Ideally, one spends a lot of effort aligning these interests.  But the reality is, as a founder, it is extremely helpful to have one other person who has perfectly aligned interests.  An equal partner has the same motivations when it comes to company valuation, employee compensation, customer offerings as I do.  On the other hand, you'll never give away as big a chunk of your equity as you do the day you give 50% of the business to a partner.

You'll make mistakes by yourself.   Making decisions alone is dangerous.  The typical hierarchical structure in an organization has a single CEO on top.  That isn't bad in itself, but its important not to be making unilateral decisions.  Basically, the top guy needs somebody who can call "bullshit"

You'll make mistakes in committee.  Too many folks in the room isn't going to help you make good decisions either.  Having 3 equal partners is dangerous. Having more is going to fail.  Its too difficult to align the interests of all those people. Some of whom won't work as hard, or be as committed, or have as much talent. 

Bootstrapping Series: Perfection is the enemy of growth

Last week I started the series bootstrapping your business. So if you are reading this, you probably have a business up and running and are wondering what to do next.

The thing to do next is improve.  But don't be a perfectionist. Trying to get everything perfect can lead to two extremes: pointless frantic activity or analysis paralysis

Frantic activity comes from that voice in your head that tells you to add 10 more features by this weekend.  Or to sell 3 more products.  Or to write one more email. Or research one more product.  The solution to this problem is to take a moment and intentionally slow down.  Take a moment to think about where you are trying to get and what your goals are.  Its much better to have a limited number of directed hours than a whole bunch of aimless ones.

Analysis Paralysis is the opposite problem.  This comes about by second guessing every statistic. By thinking about the consequences of consequences of every possible contingency.  If you have a team that you work with, you'll have lots of long pointless meetings.  The solution to this is to just get 'er done.  Don't worry about getting the most customers possible. Worry about getting just a few more. 

Next week I'm going to talk about People!

Bootstrapping Series: Full Time vs Part Time

I'm continuing the series bootstrapping your business. Its really important to run a business full time.

When I started thinking about my hobby as more of a business I was still doing it part time and doing a "real job" full time.  I was very busy, but not overwhelmed.  I distinctly felt that I could continue to work on the idea, make sales, and improve the product on about 20-30 hours a week.

I had a conversation with a pretty successful acquaintance who told me: "I'm not particularly smart. I haven't gotten very lucky. My idea isn't really brilliant or very unique.  The only difference is that I decided to risk it all and jump in with both feet."  He went on to point out that by putting all his energy towards his business meant that there were two critical facts:

1) There was a greater than zero chance that he would make money
2) His job every day was to improve that chance.

Not long after that I quit my very lucrative job and started selling my product like a madman.  That first month I made $485.  Very stressful.  In addition to my friends points above, I'd add the third benefit to going full time:

3) You discover ways to improve your business that were previously unknown when you spend all your time working on it.

I've become a huge proponent of making the jump.  My advice is this:  Quit your job before it is wise. Before you are making a lot of money.  Before the idea is finalized.  Nothing special happens on the back burner.

Tomorrow I'm going to talk about perfection.

Bootstrapping Series: Spend the Money

Last week I started the series bootstrapping your business.  First you created a product.     Then you  sell it.  Now, you gotta spend some money.

One of the most stressful parts of bootstrapping a business is the available cash.  I was extremely aware of the bank account balances on an hourly basis.  Over time I got comfortable with having the bank account approach (but never drop below) $0.  Once we started doing well, it was really hard for me to spend the money.  I developed sort of a scrooge mentality. 

Disciplined spending is very important.  Ongoing investment in advertising is much more effective than flash in the pan techniques.  Its pretty easy to objectively identify the things that will benefit the business. So do it. And spend the money.

Most entrepreneurs (including myself) pay themselves too little too late.  There are a lot of benefits to paying oneself an appropriate salary as early as possible.  First, burnout happens faster on $0 salary!  Second, the discipline of running a business at a profit is very important.  Even if that profit is entirely the owner's salary.  Third, the pressure to get investment is lower when you pay yourself a competitive salary. 

Bootstrapping Series: Secrecy is for Sucks

You're bootstrapping your business.  You've got a great idea. 

Keep it Secret! Keep it Safe!

Hell no! Shout it from the rooftops!

The very best thing you can do for your business idea is share it with smart people who will challenge you to make it better. Every entrepreneur and investor I know gets annoyed by the statement "I've got a great idea, but I can't share it with you"  Who cares!  How stupid.  If the only thing your business has going for it is the fact that nobody knows what you are doing then how are you going to sell it? 

Patents are extremely expensive and difficult to enforce, let alone get issued.  Most patents being filed these days are by big companies trying to cover their ass, not by innovative entrepreneurs that are interested in creating a business.  Ask yourself what you expect to get out of a patent? Does some fairy show up and say.  "Good idea! Good Patent! Here's a pile of money!"  Doesn't happen that way. 

On the other hand, a wise entrepreneur seeks advice and expertise all around them.  The things that will prevent your success will be a complete surprise.  Besides, hard work is a better defensible position than secrecy.  Fact is, nobody else cares about your idea as much as you do. Very few people are going to put the effort in to taking that idea to profitability.

Next week, lets talk about spending money!

Bootstrapping Series: Making a Bunch of Sales

You're bootstrapping your business.  You've created a product.     You've sold it once.  Now, you gotta sell it a bunch

Once you've sold a few times, you come to the same realization that all those who have become before have had.  Selling a product to a lot of people is the most important thing you can do for your business.   Creating a product takes a certain fixed cost.  Selling needs to happen again, and again, and again.  Making customers happy and getting new customers quickly becomes the primary focus of almost all businesses.

There are 3 keys to selling something a bunch of times: Improve your sales skills, create a consistent message, refine your product

Improve your sales skills. Most of sales is about tailoring your message to the audience. Is this a relationship sale? Is it a hard sale? Is it a soft sale? Do you talk about ROI, or do you talk about being there for the customer.  Does the product fix an immediate problem or are we looking at a long term relationship.  Learn how to ask for the close boldly. Learn how to shut up once the sale is made.  Sales for Dummies is the right book for this.  It helped me make my first 100 sales. Read it!

Create a consistent message.  Spend some time improving the materials and communications that you use to sell.  They need to be consistent around a theme, and consistent over time.  Ultimately, as a salesperson, your head needs to be on getting to the close. You can't spend a lot of time trying to remember your materials, or guessing at questions, or making excuses.  The message needs to be tight, consistent, and convincing.  It needs to support your efforts, not be the effort.

Refine your product.  Over time, aggregate all the feedback you get during your sales pitches. Look for patterns. Identify opportunities.  Then, refine the product.  Strike a balance between having a knee jerk reaction to every piece of data and ignoring your prospects as uninformed overopinionated idiots.  Internalize the feedback over time. Act deliberately on it.

Tomorrow's Bootstrapping Series Post:  Secrecy is for sucks!

Bootstrapping Series: Make the First Sale

Yesterday I started my series Bootstrapping an Internet Business  with the topic of Creating a Product.
Today I want to talk a little about making that first $1.  

As soon as you've got a product that is barely worth selling go sell it to someone.  Don't wait till its perfect.  It won't get perfect until you've tried to sell it a few times, so that's a waste of time anyway!  Its a long journey from the idea to the first $1.  But, its very satisfying.  And, as soon as you sell something, you've got customers.  And once you've got customers, you have the most valuable data available about how to make your product better.  

You'll soon realize why the sales department in every job you've ever been in over-promises your products.  When you are sitting their with a prospective client, you'll find yourself promising away all your upcoming weekends and evenings with features that will "be available any day now"  

Ironically, the first sale (unless its an enterprise sale)  has very little do do with your business or your product.  It has a lot more to do with having the guts to go ask for somebody's money.  If its a B2B play, your first few sales will probably be from one entrepreneur to another; you'll get lucky with a few folks willing to take a risk on you.  B2C sales have more to do with presentation and your apparent legitimacy than anything else.  

So get out there and sell it!

Tomorrow, I'll write a little bit about growing from making that first sale to getting to the first 100 sales.  Turns out it takes a little more than moxie.  

Bootstrapping Series: Creating a Product Somebody is Willing to Pay For

The first step of bootstrapping a business is creating a product somebody is willing to pay for.  One needs a laser focus to get from an idea to that critical first $1. 

Its easy to get distracted here.  How do you know what is worth doing vs leaving for later?  At this point, its all about creating future benefit and increasing upside.  Later on, once you are making money, its more about reducing risk and downside. Patent applications, legal frameworks, employment handbooks, municipal registrations, etc  are all about reducing risk.  Do the absolute minimum necessary to stay legal.  Don't get bogged down.  Focus on the upside.  Get a product worth selling. Everything else comes later. 

When it comes down to it, you gotta spend cash, equity or your own time to get a product made.  Your own time is by far the best. Engineers have a huge advantage: they don't need seed money and don't need to figure out a tricky equity distribution.  If you can't do it yourself, get some seed money.  No more than $25,000 (otherwise its not really bootstrapping). The worst option is to use equity.  It can be really tricky to figure out a fair amount of equity to give up for product development. Its also really difficult  to get a motivated engineer who is an employee instead of a partner.  Of course, that is an option too, get a partner who can make the product.  That's what my co-founder did.  Tricky bastard :) 

Tomorrow I'm going to write about Making the First Sale

Bootstrapping an Internet Business

I gave a quick 15 minute presentation about getting funding for an internet business at BarCamp Chicago a couple of days ago.  There was a nice long Q&A session afterward.  A lot of the questions people asked me were more about starting out with a business. Specifically, people were interested in 'booststrapping' . I wrote about this before, but I thought it might be a good series topic.  So over the next 4 or 5 weeks, I'm going to write about bootstrapping an internet business.  Here are the topics I'm thinking about:

Create a product somebody is willing to pay for
Make the First Sale
Sell it a bunch of times
Secrecy is for sucks

Disciplined Spending
Full time vs Part time
Perfection is the enemy of growth

In a pack vs lone wolf
Surround yourself with good advice
Hiring First employees
Hire Slow

Bootstrapping Effect #1: Investment and Valuation
Bootstrapping Effect #2: Competition
Bootstrapping Effect #3: Attachment

Somebody in charge

You'd think that when you hired another person, the number of unattended items would decrease. But there always seems to be something that gets handled by a committee of people "when they get to it"  This is a terrible way to get stuff done. 

Teams and groups function much better than kings and servants.   But some single person needs to take ownership of a project.  Not necessarily the big boss.  Just somebody who is responsible for seeing something from beginning to end. 

The reality is that this won't ever happen for every possible task in an organization.  That is where strategy and prioritization come in.  But, hopefully, all the truly important things will have somebody in charge.

Need... more.... calories....

For the third year of marathon training in a row I've made the same mistake of trying to lose weight early in the season.  The logic is that if I put so much work into getting faster for this frickin' long run, I might as well just carry a few less pounds all that distance. 

Problem is, I've put on about 10 pounds since the start of my serious training program. Its a common problem for marathoners. We put on weight as we ramp up the miles.  Part of it is muscle. But part of it is the body holding on to every calorie just in case you try to toss in a long run. 

Every year this happens and I cut down my calorie intake to compensate.  Big mistake.  Calorie deficiency during an endurance training program sucks.  Tired is not the word.  Bone weary, that comes closer.  I was totally exhausted this week.  So, I guess its time to get serious.  Time to start planning loads of lean calories and up the ante on sleep.  Good by social life! Hello summer marathon training.

And no more beer. Only hard whisky for me until December!

Stand on principle; Swim on style

The last few weeks have been all sorts of interesting for me at work.  Our company has grown in size. And with that growth, we've seen a few of the things that one would expect as an organization gets larger.  Friction betwixt departments that develops from difficulties in communicating; evolving a new company culture as new personalities enter the organization; helping our new folks feel comfortable and our old salts excited about the change. 

I alluded to the fact that when one is committed to hiring really talented people, one must be willing to accept that there will be differences in opinion. Everybody will be a little bit uncomfortable.  I came across this quote yesterday:

In matters of style,swim with the current; in matters of principle, stand like a rock. -Thomas Jefferson.

So, that is great, but what is style vs principle in the context of where I work?  Actually, as I reflected on this, I was happy to be able to think about our core values as the matters of principle.  In addition to that, there are just one or two things within my specific work domain that I really adamantly stick to.

I guess the upshot of all this is that I'm realizing that most of the heated discussions in the office are more about style than principle.  Allowing these kinds of discussions and decisions to just happen instead of controlling them.  Further, exercising dominant control isn't strong leadership its acting out of a sense of being threatened.