Tighten your laces, bootstrapper
It's important to know when, where, how and why we spend money in the early days. Hell, in the later days too. But, it's important to know where those dollars are going. It's a common story in silicon valley of startup founders who overspend. This typically starts out from the idea that the only way to make money is to spend money, "It takes money to make money." Which has always struck me as such a lazy ideology, all to often adopted by people who are looking for an excuse to stay comfy in their cubicle. The idea that only people with access to capital are successful, rich families and investors, is often short sighted. And annoying. In silicon valley it has been a common practice for entrepreneurs to work really hard on selling a few old guys on being an investor way before they have sold one person on being a customer. Justification? Sales team, marketing team, product developers, paid for lunches, kegs of beer and everything under the sun.
It's a scary thing I tell you, how many zombie startups that are now starting to get their life lines pulled. You know, the companies that have never made a profit and some unfortunately never have even made revenue (even scarier). What's a business without customers? I couldn't tell you. But I will tell you this, like the commercials with people shooting themselves from cannons warn you at the bottom of the screen, "please do no attempt at home". Please do not attempt, anywhere. Please do not overspend, seek investors before customers or run a zombie "company". Please underspend, turn down investors until it is the only way to increase your level of success, get customers from day zero and always, always, always seek profits. Without profits not only can you not pay your bills, you can not make money. If you don't want to make money and are cool with being underfunded, one quarter away from shutting down and owning equity with no value...start a non-profit. Zombie Startups to me are like non-profits, except they have no social mission. You know, the startups with a really quirky app that is free and you can't imagine ever paying for it. Ever.
Behind every zombie startup is an old guy with a gambling problem.
So, how do you avoid becoming a zombie startup? I'm glad you asked. First and foremost, you need to make money. By making money I mean, profits and by profits I mean having low costs and high earnings. If revenue - costs = profits, then the rule of thumb is to increase the first and decrease the latter. Be scrappy. You need a sales person, be it. You need a marketing person, become it. You need a product developer, learn how to. Below are 7 things you can do to become more scrappy and bootstrap your company into profits.
1. Become your salesperson - One of my best friends is one of the best sales people I know, this guy will take you from "Why is he smiling so much?" to "Take my money". The best sales people have confidence and confidence comes from experience. A lack of fear of being told 'no' because they have heard it so many times and know it won't kill them. So, sell your product before you try to bring someone else aboard to.
2. Don't hire - Everyone goes on and on about creating a good team, ignoring that you need to pay these people. Don't hire anyone until you not hiring someone is limiting the amount of profits you earn. When it does come time to hire, use contractors first. This easily allows you to ramp up and scale down quickly, while testing people out to see if they have what it takes.
3. Use Free Stuff - There are so many supporting tools that are free out there. From Google Docs, Survey Monkey, Mail Chimp, Skype. Research all the free tools that are at your disposal for every function you want to implement before you start paying for a paid service. My experience is that 9 times out of 10 there is a freemium service that can be utilized.
4. Test things - Before you pay for them. If you want to pay $500 to reach 50,000 people on Facebook on your first time using the service, stop. Test it out with a few dollars and then increase the amount over time. What's the rush? Dip your toe in first.
5. Be efficient with your time - Always look for better ways to minimize the time it takes to complete a task while maintaining the quality of your product, service and output.
6. Protect your cash - Like your first born. Always look for coupons, free credits, buy used stuff and if you can trade people for services you need. The barter system still works!
7. Network - I hate to sound cliche, but your network is your net worth. If you are constantly surrounded by people who can't teach you anything worth while, imagine what happens when the competition is surrounded by people who share information that helps them grow their business.