bootstrapping pro tips for beginners
So. What exactly is, bootstrapping. But. Strapping, is about starting, and running your business through your own means without, the help of outside, investors. It's. Not about running a business with no money there's, always a need for some money but. There are ways to reduce, big, time the money you need to start your business, not. By not spending where, you should be spending but, rather by using proven techniques, to, evaluate what, you actually need to spend your money on that. Means learning, new ways of working to. Make sure your money is well spent as, you'll. See in this course being cost conscious, is only but part of the solution there. Are business, development, techniques that can have a real positive influence. On the, finances. Of your business they. Will have you doing what you are regionally, planned but, in different ways and at, the same time cut significantly, the investments, you need, bootstrapping. Is not only about avoiding, spending, money it's, also about taking actions. That cancel, the need for some spending there. Are many kinds, of bootstrappers. From, the hardcore, one to. The one that will use bootstrapping, techniques, to optimize his. Business, and run. His company more, efficiently, you'll. Have to define by yourself, what kind of bootstrapper, you want to be or need, to be since. A bootstrapper, does not plan on using money from outside investors, it will largely depend on the money you have versus. The money your, company needs, being. A bootstrapper. Is not about doing, it on your own with no outside, help to, prove the world something it's, about using techniques, that make possible a venture, that would not have been possible otherwise, by. The way most. Bootstrappers. Use, those techniques to start our company and get, to the size they need to attract investors, so, the two are not incompatible it's. Just different phases of the development of, a company, and using. Bootstrapping, techniques, during the entire life of the company is a good business, practice anyway.
You. There. Are five concrete, things that an entrepreneur should. Focus on when bootstrapping, a business, four. Of those pillars, are focused, on reducing, as much as possible the, financial, burden, of starting, a company and operating. It during, its infancy, the last, one is about the impact, that bootstrapping. Can have on the life of an entrepreneur but. More importantly, on how, to manage it the. First pillar we'll be looking at, is. Managing. Spending, we. Will be looking at the most significant. Costs, of starting, a business and, how, to keep them under control it's. About how you influence, the negative, side of your financial, equation the. Money going out the. Second pillar is about customer, acquisition and, customer. Retention which. Is ultimately about. Making money generating. Revenue, and influencing. The positive, side of the equation, the. Third pillar is about business management and what, mechanism. You, have in place to determine if you are on the right track or not and if, not what, needs to be done to get back on track this. One is part of our five pillars, because spending, too much time making, decisions, or potentially. Going, in the wrong direction is, a massive, waste of money and is usually one of the biggest if not the biggest startup, killer, the. Fourth pillar is about competency. Acquisition, a big, part of starting a company is about having the right competencies. Available, since, competencies. Means people, it, usually, also means big money to hire people money, that many startups, don't have so. We look into ways that enable entrepreneurs. To, acquire the competencies. They need through, different forms of compensation, models, which, ultimately reduce. Significantly, if not completely, the bill and the. Last pillar is about work-life balance in. The early life of a company, and moreso, of a bootstrapped, company, the, line separating, work, and personal, life will, be blurred at best, because. You'll be working a lot sometimes. From home you, might not be able anymore to make that and that could weigh on your venture, we'll. Look at some things you can do to, make sure that some boundaries, remain so. The, five pillars of bootstrapping. Include. Managing. Spending. Acquiring. And retaining customers. Managing. Business, acquiring. Competencies. And balancing. Work and life we'll. Take a look at each of these pillars in, the rest of this course. So. Let's tackle our first pillar managing. Spending, I guess. This is the most obvious one if you want to reduce your dependency. On money, coming from financial. Institutions, or investors. The. Best way is by far not to spend money if, you don't spend it you don't need it some. Expenditures, are more, significant. Than others when, you start a company and, the, objective, here is to take those significant.
Expenditures. And look, for ways to reduce them big time, typically. The, most significant. Expenditures, are your, own salary the, salaries, of your employees, office. Rent services. From professionals. Such as CPAs, or lawyers, and then. You'll have a large number of less, significant. Expenditures. Which, bunched, together, we, will present a large amount, not. Every company can start on less than $1,000. So the best way to reduce your dependency. On money is, to plan for alternative, ways to achieve your goals and make, sure you still get what you need to, make your business succeed so. We'll, be taking those significant, expenditures. And review. What options, we have to make them as small as possible and, reduce, significantly their. Burden, on the finances, of your company, in this. Chapter we will review in particular, how, to deal with all those expenditures, except. For the salaries, of employees for. That one will, dedicate an entire chapter. You. Have, you considered keeping, your day job while starting, your business, many. Entrepreneurs go. On the basis, that it's, one or the other and that, they need to be 100%. Available. And dedicated. To their business, to make it a success of course. 100%. Dedicated. People have, more chances, to see their business succeed than. People dedicated, only 30 percent of their time on their business. But. In some cases 30 percent of your time on starting. Your business is, better, than postponing, it forever because the risk of leaving your day job is just too high the. Personal, consequences of, such a decision, are life-changing, and. Require, careful planning, many. Businesses, start, off slower than expected and, when, the first contract is signed it's not necessarily. Going, to keep you busy enough, that it would require that, you're 100%, dedicated. To the job so, before. Getting into the decision, phase on quitting. Your job ask, yourself, the following question. To determine if it's a necessity. Do. You need to dedicate 100%, of, your time to the project from day one what. Are the concrete, things you will be doing on that first day and if. You're not clear if. It's not a lot of work then think, again is. There a way for you to organize the, first weeks or months, of your company, so that you can manage it while keeping your day job is. Timing, a critical, factor or is it okay to give yourself, a few more months in, order to do everything, you need for. Example take. Three months to do the work instead of two weeks if. Things you plan happen, later than expected will you still be able to wait longer before you start making money with your company, you. Can ask yourself, those questions and many more but if it's not a 100, percent necessity. And if, you do need to make a living, don't, take this step lightly think. About the consequences. Of having pressure on the personal, side on, top of the million things you'll be doing to get your business started. If. You can avoid that pressure do, so if, you have to take a little more time to get started but, keep a paying job do, not have that personal pressure do, so remember. That, plans rarely. Happen as planned, so be. Ready for that as well by not putting all your eggs in the same basket. You. Now, let's, look at office space and the first thing you need to define is what, type of space you actually need. Many. Of us want, to get office space before we even determine, why. We actually need it the. Primary function, of an office, is, to have a place to work with other employees, of the company to. Spend time face-to-face. With junior, members, of our organization that, requires supervision, or. To work in groups and work, more efficiently, than by sitting in a public space or virtually.
Those. Are very good reasons, another. Set of reasons often, quoted for, taking office space is, to have a place to welcome customers and, build. Credibility, or. To have another, address than, your home address on your website, or your. Business cards, that. Second set of reasons is more, about the idea, we have of a business, rather, than the, true business needs. For. Example we, want to have an office space to. Welcome, customers but, in reality is. Very rare that customers. Come to our office, for, whatever, reason, if, you have to meet come. To them and save, them the travel time and, organization. As well, as the need to justify, to their bosses why. They need to lose an entire morning, or afternoon, to. See a vendor, they. Might prefer having you come to their office and, present. Your goods and services, and if. You want to have a street address other than your home address you. Can use the services, of an online postal. Mail solution, for. A small fee sometimes, only $25. A month you. Can have all your mail routed. Through, one, of those companies and delivered. To you electronically. And you, will be able to put that address on your business cards. Those. Companies even help you manage your mail and choose what you want to receive a home and what, to send to the shredder. Before. You even get into the office space discussion, you, need to consider if you're able to work from home starting. Your business in your living room or kitchen is. The story of many, successful companies and, is after all the cheapest. Does. Your personal situation allow. You to occupy, the space without. Disturbing, the life of the people living with you if. So then give it a try, even before deciding, if it is or not a good option, another. Free option, if you cannot or do not want to work from home is provided. Across the country by business accelerators. That are looking, to, give a push to innovation. In certain, industries. Those. Business accelerators. Provide. Free office, space usually. In the form of a large open space where anyone, working. In that industry can come and sit down to work the, spaces are great since, you can work there alone, or with. Your co-founders, it's. Not a good place though if you want to have private, conversations about. Strategic, decisions, for your company, but it is a great place to network with. People in your field that work, on projects. That are very different from yours or even, companies, you could partner with in the future now. Let's, look at some options that, cost money you. Can rent a spot in an open space in, a co-working space, the. Cost per seat is not necessarily, going, to be much cheaper but since, you have no walls and that, you'll really be taking just a chair and some. Desk space the. Cost overall, will, be much smaller for you it's. A good alternative to subletting. An office, since, sublets, are usually, bigger and so, you, end up paying for space you don't need or at, least not yet, the. Last option is about sharing office, space with another company, the. Way those usually, happen, is that some. Companies, took, offices, much bigger than, what they actually needed, because, they expected. Their growth to be much bigger and are. Left for, an extended. Period of time with. Space they don't need and therefore don't. Use or are, stuck, with a lease at sooo gusty to get out of, the. Alternative, is therefore. To find another company, to sublet. Part of their office. Your. Companies then pay each of their share of the, office and both can share a kitchen and other amenities. This. Option, is cost-effective because, you're, getting the space you need but, for a lower price than you would get originally. Usually. For offices, located in the same area the price will be a relatively, cheaper, for larger offices, when, compared, to the square footage for example, at, least because larger, offices, are much, harder to rent so. By, subletting, an office you, can get a nice saving. When compared, to your own office for the same office size, so. In conclusion, depending. On your real business, needs there. Are a number of options, available to, you that, can cost much less than, renting, basic. Office space you. Have to think in terms of real benefits, of having office, space if you need any. You. When, you start a business you usually need, the services, of other professionals.
Such, As a certified. Public accountant. Or CPA, to. Help you meet, your financial, requirements. You'll. Also need a lawyer potentially. To help you with drafting, your terms and conditions, or first. Contract, or, NDA, and so on of, course. For, the simpler things listed, above you, can always go, on the internet and find, a solution to your problem. But. Usually, in the early life of a company, the, problem, is not about finding. The solution, on the internet rather. It's, the number of problems that you might have to look up on the internet, and the, expertise. You will have to build on subjects. That you'll only work on potentially, once. Or twice, in the life of your company. Most. Of us do that for, the simple reason that we don't have the means in the early life of our company, to hire professionals. In every, field to, answer our questions so, one. Of the ways to go about that is, through bartering. Bartering. Is the age-old, exchange. Of something, for something. Nowadays. We, are used to exchanging. Only money for products, or services, but your. Competencies. And your time are worth, something as well, redoing. The website of a CPA in exchange. For accounting. Advice or. Performing. An annual fillings is a great, way to get what you need without, paying, for it and without, spending endless hours on, the internet trying. To learn everything, a CPA knows which. By the way you, want because, the information, is so fragmented, on the internet that you'd have to rely on yourself to, be sit back together and we'll, never know if you're doing it right, you're. Not limited, to the services, of your company, but can use the full range of what you know and who, you know to, help other professionals. In exchange, for their work if. You see that you have a good contact, with someone and would, like to work with them don't, hesitate to, ask them, if there is a way you could help them on something, that could be counted, as compensation, for, their services, you'll, be surprised, at how many things, those professionals. Who, are entrepreneurs. Most of the time themselves have, in mind that they want to do but simply can't and maybe. You. Will do it for them in a total win-win, scenario. You. Along. With all the bigger expenses. You'll have all the smaller spans that happen on a day-to-day basis. Individually. They, seem insignificant, but. Put together they, sometimes amount, for all the savings, you've been focusing, on getting otherwise. So. It's very important. To overall, make, sure you control as much as you can the, money you spend a good. Way to know if a spend is worth doing is, to, ask yourself if it will be generating, business and pay, for itself if. You see a direct link of potential, business return, for that span then, go for it if. Not or if. It's not an indirect, way then, it might not be a good idea, there. Are not many indirect, ways to, make money and in, the early life of your company, even more you. Should be focusing, on direct, ways only. There. Are some, small things you should definitely, do though like. Having, a website even if, it's a small one but having, one is important, you. Should also have business cards business. Cards are very important, as they show, that you are always equipped, to, meet with customers and vendors they. Make you credible, many. People don't have one and think, that they dodged the bullet when they told their potential customer, that, they did not bring them today or, that they're getting reprinted. At the moment but, the first thing most business, people think, is that if you don't have them it means you simply don't meet a lot of people as part of your activities. When. You have a job that is internal, to your company, it is fine not to have business cards but, otherwise you, need to have them with you at all time and we're, not talking fancy. Ones or one-of-a-kind. Business, cards we're, just talking about plain, and simple, ones so. When, spending money on a day-to-day, basis, just, be conscious that, those pens in the end do. Add up to a significant. Amount it's, in the management of each one of them that you can make a big difference to, your bottom line and ultimately.
To Bootstrapping, your business successfully, but. Don't save on the important, stuff and get. The equipment you need to, successfully run your business. You. The, principle, behind the concept of linearizing. Your expenditures. Is simple, the. Later you pay for something and the, better you're off since. You have the time to make money to pay for it and will, therefore not, need investment, money to fund it so, for example, if there, is something you need from day one like inventory. Ask. Yourself, what portion, of that inventory you. Really need now and what, portion, of it you produce for other reasons then, immediate, need for, example. You, might need only fifty units of a certain product you sell but. You know that by producing, 200, right, away you'll, get a much better price and therefore, save. Money in the long run in. Total, you'll, have spent, much, more money but, per, product, you indeed probably saved, money, well. When bootstrapping, your business, you, should be more interested. By the total money you spend today first. Of all the, bill will be smaller even, if it will not be the best price you could get for 50 units of your, product, it has other, benefits, for. Example by. Producing. Only a small batch at a time you, can get customer, feedback before, you produce the next batch, so. Your, next batch will be, improved, and will help you further your business, another. Benefit, is that you will sell the first 50 units and that. Money will, fund the next 50 so. In, fact you, won't have to advance the full money for ultimately, the, 200, units of your product since, the first 50, will, participate. To funding, it all and if. You can't get money out of those first 50 then, celebrate, the fact that you did not have to produce 200. Units of them, the. Principle, here is that you, don't want to invest your money into something that will stay idle and not, be used to make money right now in every, shop we, go and with, every vendor, we speak there is always, the temptation to, take the smarter, choice the. One that will have as more for, a bundle we, don't really need but seems like the smarter choice in those, cases we need to stay grounded in, the present, think, about what is really needed now and not, in two weeks or two months or for.
That Matter the, entire year. When. You, pay for something makes, a big difference, to how you financially. Manage, your company, when. You deal with your customers and. With, your suppliers, you, need to manage the time at which everyone, is paid for. Example, even, if you sell your products, or services. This month if. You're selling them to businesses, you, could get paid at a later time, many. Companies, are used, to pay their suppliers 30, days after the invoice date and most. Companies, need, anyway, a few days to. Get your invoice, through, their administrative, processes. Down, to the payment, of the invoice, in. The exact same way you, will have time to pay your suppliers and when. You will buy something it, could take you up to a few days to pay them the. Situation, you don't want to be in is to, pay your, suppliers as soon, as you purchase from, them while, getting paid by your customers, a long, time after, invoicing, them a, terrible. Scenario, would, be to pay for the production of your goods now, wait. One month to, have them delivered, sell, them within one more month to a customer, which, will pay you again, one months later so. In total there. Would be three, months delay, between, the time you pay for the production of your goods and the, time you get paid by your customer. During. Those three months you. Will have to advance, the money on top of all the other expenditures. Of your company. The. Solution, of course as I'm sure you already understood, is, to get your customers to pay earlier, and to, pay your suppliers later, by. Doing so you will reduce, the length during, which you will have to advance the money and could, even reduce, that amount significantly. The. First thing then you should do on the, customer, side first is to have all your customers, to pay by default, at the, invoice date with. No extended, payment terms, some. Of them will ask to have 30-day payment, terms, and it, will be an element that, you will be able to negotiate with them during, the contract, signature. As, part of the financial terms of the contract. You. Can of course grant, them 30. Days payment, terms but, since by default, it is at the invoice date the, 30-day terms will affect only part, of your customer, base, for. The ones that ask for 30 days term, you, can ask for an advance payment it. Is usually very legitimate. To do it if you have to advance money yourself to, execute, the terms of the contract, on, the. Supplier side you, have to negotiate the payment terms with, each one of them and the, longer, the better if. It's a strategic supplier. Which, cannot be replaced easily then. You might not have a big say in the negotiation. But otherwise, you. Have to do it or at least try, by. Implementing. Such, actions, you can actually reverse. The effect, and if. We take our previous, example, you, would get your, goods produced, but. We'll have one month before you pay so. Would, in fact pay when the goods are delivered and, by, selling a month later with immediate, payment from your customer, or at, least getting an advance which. Is a partial, payment you. Will in fact have to advance the full money only for a month instead of three. That. Alone would divide the time during which you advance the money by three so. A great, way to reduce the amount of money you need to invest in, your business by, negotiating.
Favorable. Terms with, your customers, and suppliers. You. In. This chapter we'll, be talking about the positive side, of the equation, and how, to make money as fast, as possible, to reduce your need for investment. This. All comes down to, your customers, how. Fast you get the first one and how. You then line, them up until. Your company, has reached its next milestone. We. Usually have a tendency. To think about many, things before we get to, thinking, about acquiring, our first, customer. We. Sometimes want, to have everything, ready before. We set foot into. His or her office. We. Want to look professional and, have. A product, to show and sometimes. We see things as if we had to prepare our company, to, reach a certain level before, we speak to the outside, world, the. Problem, with this approach is that it, assumes. We, are going, to work for weeks if, not months. Before. We even gets to try to. Get in contact with, our first potential customer, and the. More we wait to, start looking for customers, the, more we postpone, the time we will sign the first contract, and start. Generating any, revenue. It's. Only then, that we, will know if all our assumptions. Were correct about our customers, in how. Our product, solves, their problems. You. Need to think about your first customer. Way, in advance of your product being ready as soon. As you know what your product should look like you. Need to start looking for your first customer. First. Of all most. Sales are made on a promise, more. Than on a demonstration. Whether. You're selling a product or a service, you. Might have to show marketing, material, or actual. Product, to your potential, customer, but. At, the moment of the signature, of the contract, you don't have to be ready to operate, on a large scale if. You are selling a product you, can start getting appointments, with. Companies, before. You even have. Ready. You. Can meet with them with, a single copy of your product, if. You are selling a product to consumers you. Can put a page online on, a website like Amazon. In, no time and just, with a few pictures and good copywriting. It's. When the first sale is made that, you need to react fast and get, your product ready and delivered. If. You're developing a, complex, offering. Like. For businesses, you. Could find a customer, who is interested, in participating. In. Your development. In, exchange for having a tailor-made, product. With, a very low price so, instead. Of developing, your product, on a set, of assumptions without. Speaking to any customer, and without, making any money you. Could find a company. Interested. In the product, and proposed. To develop it for them fitting. All their needs even the, very specific, ones and to. Do it for very low, unbeatable. Price. Some. Companies, are not interested, in that because they're, under pressure to, have something, that works right away but, other companies, are okay, to be early, adopters for.
The Potential, of seeing their problem, solved, on a condition. That they barely pay for it but. From your standpoint it, means that you can develop, your offering, with, real-life, customer, feedback, that, will surely meet the needs of other similar, customers. And on. Top of that instead. Of making no, revenue, you'll, be making some, revenue, even. If it's a fraction of what, you'd be doing with, your next customer. It's. A way more positive, outcome, than, working. In a bubble, until, your product, is ready. Another. Way still to find your first customer, is, to see if your current, employer, could. Be your first customer, what. Could be more favorable for, a first sale than, making it with a company, that knows you and with. Which you already have credibility. All you need to do once, you have officially. Announced that, you're starting your business is, to speak with the decision maker, if. You are starting, on your own to, propose consulting. Services, for, the same skills, you're using in your current, job, why, not propose to your employer, to take, you as a contractor, instead. Of hiring someone, to replace you, it. Might not feel different, from working there but, in fact it would be very different. First. From, a mindset, standpoint, for. Both you and your, employer, but. Also because, you'll have the Liberty to, talk about your business freely. And be, active online without having to wonder if it's going to be an issue with. Your current company, in. Any case my. Point here is that you cannot afford to, wait for, everything to be ready before. You start talking to customers. Before. You start making sales, to. Successfully, bootstrap, you need to start making sales, as soon as possible, even, if it means sacrificing. On. Price or paying. Extra, money to get small batches of, your product, you will not only be gaining feedback, from your customers but. They will also pay, you for, your product which, will have you started, with at least some, revenue, and as. A collateral. Benefit, you'll, see how good it feels to make that first sale and move, from concept, to business. You. Once. You have your first customer, you need to get more coming, through the door with. The power of the internet for example everyone can now have access to millions of, people with, very little means a good. Website and a good online strategy, is all you need to be operational. Every. Day there are millions, of people who are going online to either buy, something, or get, information, about something they want to buy, just. Participating. To those discussions you'll, be drawing potential. Customers, to your website or to your street address if that's what you want, there. Are today, very cheap solutions, to get a website online such. As WordPress, which, you can get configured, by a professional and even, learn how to do it yourself a good. Website coupled. With a good SEO strategy. For, search engine. Optimization, and you'll, see people by, the hundreds. Coming to your website within a few weeks. Another. Great way to get customers is, through articles. In online or, offline, magazines. We. All tend to think about press articles, as something, reserved, for the well-established companies. Or the, well-connected. But, we tend to forget that journalists. Themselves, need, to find every day every. Week in every, month content. To fill their pages, if. You take the time to serve them with some good content, about, your product, or service, you'll, be surprised, at how easy, it is to get a few articles, which.
Will Go a long way to get you known by, potential, customers, and as, a side effect improve. The visibility of your website. You. Need to make yourself as visible. As possible, and leverage. The tools of yesterday, as well, as today to, reach that goal, people. Are roaming, every day the press and the internet, to find products. They want and you, need to make yourself visible to them. You. In this. Section I want to speak about customer. Retention and, more. Specifically, of the importance. Of customer retention. Retaining. A customer, is not always possible. Sometimes. There are outside, factors, that are just too strong to fight against, such. As for example having a customer. Who, wants to stop having five, vendors for, the same product, and will, choose a nationwide, or, international. Provider, when. You're a local player. But. Many times there, is something, that can be done to retain, customers, and when, you see the efforts, that need to be deployed to, gain new customers you. Quickly understand. That, it's much cheaper to, invest. Time and money, into, retaining. Them, when. Customers, tell you they want to stop working with you it's, actually not always the case, the. First thing you need to do is to understand, why that customer, is willing to go. Through the effort of looking. For another vendor, spend. Significant. Time into. Exchanging. Emails, making. Phone calls or, even meeting with those vendors before, selecting one and on. Top of that they're. Taking the risk to just not, be happy, about the new vendor. In. Other words it is usually, very painful, for a customer, to change, his habits and for. You it means two things first. That. You need to understand, why, the customer, is going through so much effort, is. There something, you can do about it is. There something. You can change that could solve his problems, that. Could by the way be, feedback which, could be helpful for other customers, as well, the. Second that. Many times the, easier, solution. Is for your customer, to stay with you and many, times he will actually be wishing secretly. To, find a better solution with you if you are willing to listen and do something, about it, many. Times customers. Tell, you. Don't want to work with you to provoke a discussion and give, you an opportunity to listen and take action, and, if. You think about all the effort and money you're, pouring into, customer, acquisition, you'd, rather listen, to what, your customers have, to say and do, what it takes to keep them instead, of losing them and paying. The full price of replacing. Them with the new customer. You. Every. Entrepreneur makes. And will make mistakes. Mistakes. Are part, of doing something and the, only way to avoid them is to do nothing so. If, you're going to make mistakes make. Them as early on as possible. To limit their impact, on your business and the, least you can do is to learn from them when. You are working on a business, plan for example or developing. A product you. Are working, off a set of assumptions, those. Assumptions are based, on your experience. And the, experience, of other people, but, it's by no means a, guarantee that. Those assumptions are, right, this. Means that the only way to know if they are right, is to get in contact as fast, as possible. With, the real world in, front of customers and work, off their feedback that's. The, only real way to confirm, your assumptions, make. New ones and improve, your offering, in. This chapter we will focus on a technique, to develop an, offering, based, on customer, feedback in very, short cycles, that, is aimed at maximizing, the chances, of survival.
Of Your company. You. One. Of the most significant. Costs, of starting a business which. We have not discussed so far is actually, not a cost in itself but a work process, that, generates. Significant. Extra, costs, for the company. This. Work process, is the fact that we, tend to wait too long before, being able to know if we're, going in the right or wrong, direction. By. Waiting too long we, spend money on the operations, of the company paying. More rent more, salaries, and more, of everything, before we even know if, what we're doing makes sense or not if. It does then that's fine no, money has been wasted but. If it doesn't we're just throwing away our investment. Money, as. We discussed earlier we, know from, the beginning that we are going to make mistakes so. Instead, of working inside. A bubble, for, a very long time before, we speak with customers, and get their feedback we. Need to do the exact opposite, and get their feedback as early, as possible there. Is no logic, in working blindly, for, the longest time possible. Sometimes. We can be afraid to burst our bubble and, realize. That our project, is not viable. Sometimes. We can even unconsciously. Postpone. The time of testing, if our product, will be successful, when it, will hit the market, because, we feared, of the social consequences of being wrong. Many. Of us have a tendency to. Procrastinate when. It comes to speaking with customers. What. You need to do is actually exactly. The opposite, and meet. Those customers, as early. In the life of your project, as possible, to. Do so you, actually need to think about your product or service, or solution and, how. You can get a version of it in front, of customers as quickly as possible you need. To do that get. Their feedback and, start, working on the 2.0. Version of your product right away, that's. The version that has been tested, by real customers, who, paid for it and have, expectations. That. Version will have much greater chain, says to be a success, than the first one, those. Customers, need, to pay for the product if, they don't they'll, have low expectations. As many of us have with, free products, and so, you, won't get real feedback and could, be tricked into believing your, product, is good to go. Once. You have done that once. You, need to do that again and do, it continuously. During. The first rounds, of course you'll, get the biggest problems, with your product, out of the way but. As your customers, get used to your product and as. Competition, will, propose new things the. Expectations. Of your customers, will evolve and so. Will. Their feedback but. By working in, short cycles, you'll be strongly connected, to their feedback and will. Be able to adapt, quickly. Let's. Take a concrete example, let's imagine, you, decide to produce and, sell t-shirts and you. Want to have those t-shirts with, fun pictures, or phrases, on them, if. You want to go into the t-shirt, business you. Probably will want to buy those t-shirts in different, colors let's. Say five of them for example and the. Most common, sizes so. That will be another four, sizes for small, medium. Large and extra-large. You, might want to have a few pictures and phrases. To start, with maybe. Ten of them if. You count that you're, already, planning on, producing. Five colors, times four sizes times. 10 different types of, phrases. Or pictures, which, is equal, to 200. T-shirts, in total, and that's. Only on planning, to have one, t-shirt of each which. Is unrealistic. So. If you want to have even just five of each you. Are already looking at a thousand, t-shirts, then. You need to find a way to, reorder. And produce. Fast, new t-shirts, if one of them in particular is. More successful than, the others so. The. Short cycle way of doing, this would, be to test your plan on a single. Color with the most common size which should be either medium. Or large with. A single, phrase or picture, so. That's one, t-shirt then. You produce a certain quantity, of it even, 50 and you're, good to go to test your idea. Sure. Some, people will not like your product others. Would like it but would prefer it in a different color or size or with, a different phrase or picture, but. Some people will like it just, as it is and if, you chose the right size, statistically. You, should sell some of them then. All, you get to do is to make sure you have a way to gather feedback from, your customers, to, know what you should do next, the.
Cost Of this operation can. Be divided. By 10 or 20, and you, test your project, all the same, if. You want to read more about using such techniques, there's, a great book for you to read called the, lean startup, this. Book written by Eric rice is. More focused, on applying this concept to software, development, but. It's applicable to any, startup, in fact in his. Book Eric, rice illustrates. This technique with, his own experience. Of not applying it, and staying. In the dark for way too long before. Changing, the way he worked and improved. The performance, of his company. You. Ideally. You want to develop your product hand-in-hand, with your customers, to, let you know that it suits their needs, sometimes. When working with companies it would be possible since, you'll be able to partner with one of them and develop. A tailor-made, product. For them in, exchange for their feedback and guidance. But. In other cases it might, not be possible since, you'd be targeting, the masses, and that each person. Has his own opinion, which, might not be a good representation of, what most people want so. The, way to go about that is, to work in short cycles, as we, discussed earlier and to, put your product, in front of customers as fast. As possible, so as to get their feedback and, do a second, version that, better suits their needs, to. Do so you also need to think thoroughly, about what exactly you, want to put in front of them as a first product when. You think about your product there, are different kinds of features you. Have the key features, which, are the ones without which the, product, could not exist or will. Not make sense and, you have the nice to haves the nice. To haves are those. Features, that would be great on the product but are not a key trigger in the buying process and, those. Features can sometimes be the most expensive or, most. Time-consuming, to add to your product, and you, don't want to postpone the launch of your product, for, elements, that are not going to make such a big difference, also. Sometimes. We can get caught up in some elements of our products, that, we want to be made a certain, way without. Having thought through all the options available to, us or because, we think too much about the future for. Example if. We take a software, development, company there. Are some features that we would like to be on demand or automatic. Which, could require tons. Of development, hours but. Would be much cheaper and, quicker to, implement, if they, were done manually, and we. Think well we better have those automatic, or otherwise. With, large value. We'll never be able to manage it well. Guess what maybe. You should not be thinking too much about that future and focus, on having your product, on the shelves as soon, as possible, and think, about automating. This feature once, you have the volumes coming in and that. Is really not manageable. Another. Example, in a more product, related setting, would be if you had elements of the packaging, that you, wanted to be done in a certain way for, example. You could want to have a box that is exactly. The right size for the product, you're selling and, might. Have to have it produced specifically, for you that. Could cost a lot of money and would require you to find someone, to produce those boxes, for you instead.
You, Could imagine buying, the standard boxes, that are not exactly, the size of your product and find, a smart way to fill the box so, that your product seems like it's fitting, well inside, it many. Of us would like our products, to look as professional as, any product, we see in stores but. When we start a business we. Don't necessarily, have the resources, and time to, do everything perfect, the first time instead. Of trying to be perfect we, could try to be effective and focus. On the core elements, that will trigger the sell and get, the 80%, of important, stuff done and get, that product out there in front of customers here. We are talking about the Minimum, Viable Product. It's, not a downgraded. Version of, your product but. Just a product with the important, features, on and the. Visual aspect, can, be one of them if it's important, to attract buyers but. If, you are selling, a hardware, component. To, a manufacturer. Then. Luc's might, not make it into your list. Another. Great benefit, of working, in, short cycles, is that you, can use your business activity. As a way. To test, your business plan assumptions. When. Preparing, your business plan you have laid out the road to success you have, described, in words and in, numbers, what, you expect, to happen from. Inception, to success, whatever. Success, means to you at. The. Business plan stage those, assumptions are, either based on industry, statistics. Historical. Performance if, this venture is part of an established, company or, just guesswork. If you're working on something that, is completely new, just. Note though on this last point if, your assumptions. Are guesswork, because, you see your product, or company as, having, no competition, whatsoever, then. Think again many. Entrepreneurs see. Their ideas as very innovative which. They can be but, they can always be related. To another form, of business that, already exists, your, product, could be the evolution of another, product or the, replacement of a product and you, should then use the statistics, of that, product as the basis, of your business plan instead of complete guesswork. In. Any case for, your plan to happen as expected, you, need your assumptions. To materialize. In the real world as you, plan them if, they, happen differently meaning. More positively, or more negatively, then, you, have to investigate. To understand, why this is happening. You. Will potentially, have to adapt, your plan and make things happen quicker, than anticipated or. Alternatively. Reorganize. Things to manage a slower start so. You, should use the, short cycle management to. Test your assumptions as you, move forward with your plans. You. When.
You're Starting your business you need many different, competencies, some. Of them can, be completely out sourced, such as accounting. That you can give to a CPA, and some. Of them need to be kept in house, but. In the early life of a company, it is quite difficult to, have the money to, pay for all the competencies, you need you. Need to find ways to get those competencies, without. Having to hire them all and if, you do need to hire people then, you need to find ways to compensate, them, in a way that, can keep them motivated and. At, the same time be, realistic, from a financial, standpoint for. The company, you're running in this. Chapter we, will be discussing ways to compensate employees in. Ways, that, are affordable. For startups, in, particular. We, will look at ways to tie, the compensation. Of your employees, to, the success of your company. You. One. Of the ways to make it affordable, for startups. To get the competencies. They need is, through giving equity. To employees. Giving. Equity, means giving, them shares of the company so, that even if they get. A smaller, salary they, have the potential of making up for it big-time, if the company, is successful and, the, value of their shares increases. Significantly when. You. Get shares from a company, you're, entitled to, two things, first. You, can get a share, of the profits, of the company in. The early life of the company you might not get much of that since, the company, even if it is profitable, will. Most likely reinvest. Most of its profits, to grow faster, the. Second thing you will get is that the, shares of the company have. A value, and during. The first years, of a business the, value of the shares increase. At a very fast pace and a few shares can, quickly amount, to a lot of money there. Are many stories of employees, of Microsoft. Or Google or. Other, large corporations, that. Have received shares when the company was small and that, became millionaires, several, years down the road if. Your employees, believe, in your project, and the mission of the company they. Could be convinced, that they might get shares now of a future Google and that. Could motivate them to accept a small salary today, and bet, on the future of the company so. Then, a great way to get good people with, needed, competencies. For your business, is to offer them the salary, you can pay them plus, shares, to compensate, for the loss of salary, but. Which could turn out to be a big amount of money if the venture is successful. In. The same logic if you actually don't have any money to pay a salary and you do need one or two competencies. Badly, to start your business then, you might have to think about partnering. With someone, to, start your business this. Is kind of the same logic but in a more extreme, way where. That person, gets no salary, at all but, gets share in change this. Person, would be a co-founder. As he, or she would be in the same situation, as you that's. Another great way to add competencies. To your project, without spending, any money what. You need to make sure though is that this competency, is critical. To your project, and that you will reap the benefits, over the long run of getting. A co-founder. Because this person, is going to be there with you for every decision and down the road, when. You start sharing the profits of the company you. Will need to still see the value of that partnership, or, otherwise, you might not be very happy about the whole deal but. Many times it is a great way to get started and much, better than never starting, because you cannot afford to pay a salary, so. Equity, is, a tool, that is at your disposal and that you can use to convince people that they could take a cut in their salary today and make. Up that loss in the short medium, or long run with, equity, they will get. You. If you're. Not too thrilled about giving, away shares of your company or. If you need skills, right now that, will be easily serviced. By paid employees, in the short term then. You might want to consider, variable. Pay as an alternative. Variable. Pay is usually, proposed, to salespeople, as a way to tie their compensation. To, their performance. But. If you think about it you, can apply it to any role, in your organization, the benefit, of that is that the, compensation of, your team will, be tied to the success of the company and in, tough times it will go down and in, good times it will go up the. Way it works is that you sell a portion, of their compensation as, a fixed, salary that. Is a part of their salary that, never changes, and you'll always have at least to pay that part, then. You have a variable, part to their compensation which. Depends, on the achievement. Of a certain level of performance that.
Performance. Can be either individual. Through. The attainment of concrete, results, within their job or, through the collective, achievement, of certain objectives, to. Be concrete if, you have someone, in your company taking. Care of web, traffic it, could have the variable, part of his, or her compensation. Tied. To the level of traffic you see on the website you. Define, what the person, needs to achieve let's. Say for example. 100,000, people coming, on the website per month and that person. Would receive 100 percent of the, variable, element, of his, or her compensation. If, 100. Thousand people come. On the website, this month and sixty. Percent of it if sixty, thousand people came, the. Logic would be that there is a correlation, between the, number of people coming on your website, and the, business you make so, if that person reaches. His or her goal then, you know you, are making more money and you can pay him more salary. You. Can also set a collective, objective, that says that if, the company. A certain, milestone or, revenue. Level for example then. People get 100%, of, their variable, pay and if. The attainment is above or below, their. Pay will be adjusted, accordingly. You. Just have to make sure that the people you put on variable, pay have, an objective they can direct influence. If. They have no way of influencing. It then, they might not be motivated or, might, even be frustrated, because they'll, have a part of their pay that they cannot control or feel like someone. Else decides, for them what they're able to make but. Otherwise if, you choose a target, that is relevant. To the job of the person the, invariable pay is a great way to limit, the salaries, of your, employees, in, those first months when you're just starting doing, business and to, have their pay increase, with, the success of the company and since. This will have been defined, at the beginning with them they, could be okay with getting a lower pay at the beginning, and be, motivated, to give their best to, make the company succeed, and to get the benefits, directly on their paycheck by. The way I think that whatever the situation your, company, is in you, should consider having some kind of variable. Pay for everyone, in your company it. Is motivating. For many people, and even can, be some kind of a game to, know that you can work harder, and make, more money, this. Could give your employees, some kind of an entrepreneurial. Spirit. You. If, it makes more sense for you to work from home during the first few months of your venture, then. You need to take some actions, right, from the beginning to. Make sure your personal, life and work don't. Get mingled together. At. First you're, just working on your computer, writing, on paper and it's, not such, a big a deal but. If you're serious, about your business then. You'll be working long hours from, home and might, consider, in the evening, leaving everything, open, on the table so, as to start faster, the next morning. In. No time you, won't know the difference between your home and office. And will, have a hard time taking time off and relax, to. Be able to relax is very important, because as you will work on your company, you'll definitely, need to see people and change your mind regularly, to, stay as fresh and sharp. The. Risk if you've never relaxed is that you get so focused on your work that. You start becoming less, and less productive, with time because, you lose the energy you, once had so. Right, from the beginning you. Need to be organized, to get some downtime, between, your long hours, of work. First. You'll need to preserve some, parts of your home so that your, mind does not associate. Them with work. You'll. Very quickly see, that anywhere. You work for, a few days will, be labeled, in your mind as office, space so you. Want to make sure you don't label too many places that way. Choose. One spot where, you can work comfortably and, stay, there, preserve. Other areas, for a fun time or quiet, time, also. Think. About packing everything every. Evening when, you stop working so, that you, feel like you're getting a break from work and can, start fresh in the morning, your. Computer, is important. To think about as well you. Might have been using it in the past for entertainment. Purposes, but, it could become a work tool so you'll, need to take action, to ensure you can still do the things you like on it without, being reminded every. Other minute of your work, one. Way to do that is to have different, profiles on your computer, one.
For Work and one, for your personal life so. In the evening, log, off your work profile, when. You log in to your personal profile. There, should be no work applications. Work files or work, favorites, in your browser, also. Make. Sure you separate, your personal email address from your work one if. You have not done so already you need to by your URL. Or web, address at, your. Company, comm and put. All your work-related. Conversations. On that address. Because. You will be doing your work where, you live you. Need to create clear separations. Between the two so. That you don't end up thinking, about work all the time day, and night there. Are great technological. Ways to do that but, also simple. Things you can do in your day to day life so, as not to label, in your mind everything, you see has work-related. You. When. You are working on your company, or project you. Can be tempted to work day and night on it and sometimes because, you're your own boss and can, be on the verge of something big you can be tempted to work non-stop on this never-ending, job, well. You need to be weary of doing just that of course. You'll, have to work a lot but, don't forget to get out see. People and have, a social life it. Would get you fresher and you'll have over the long run more, energy, to make your venture a successful, one by. Working non-stop and not having a social life you, can sometimes, dry up quickly and not, have the energy required. In the medium term, having. Fun and seeing, people, is a necessity, you'll. Also see that by exchanging, ideas with your friends, family, and business, contacts, you'll, be solving quicker issues, that, you would have worked on for, a longer time if left alone so. Feel, good about continuing. To have a social life it's. One of those things that can seem like a waste of time in the beginning but, can bring many benefits in, the long run. When. Bootstrapping, you're pretty much on your own with not necessarily a, clear deadline, of what, you need to achieve and buy one in. Some, way this can be the hidden cost of bootstrapping, because. You end up spending a lot of time on a project, without, really making a breakthrough or waiting. Too long before realizing. That this project, in particular may. Not make it in the end so. The hidden cost of bootstrapping, is time it. Is the time that goes by while. We try and try and during which you're not making money or working. On another, project that, has more chances of success, so. The first thing you need to do at the very beginning, is to set, a deadline by. Which you need to have reached a certain milestone so. You can work towards, that once. You reach that deadline you can see where you are and decide. What to do next you can, then measure your progress and, decide, if you are on track or better. Than, expected and need, to set a new deadline and, a new objective it, is also a way to decide if it is time to pull the plug on this particular, project. Many. Entrepreneurs have. Had multiple, tries before reaching success, that's. Just part of being an entrepreneur you. Just have to make sure that when, you look at your own performance, you. Don't sugarcoat, things, and convince. Yourself that a poor, performance, is actually, a good one look. Coldly, at the numbers not. As a judgment of your own performance, but, as a sign of the viability, of your project, which, might not make it at all or might, make it but with much more time than anticipated, and with. Maybe too much time for you in particular so. In. Conclusion, don't. Pay the hidden cost of bootstrapping. From. Day one you, should define a timeline, set. A clear and measurable objective. And once. You've reached that deadline, sit. Down assess. Where you are compared. To your plan and choose. The best use of your time and that. Could be to continue further on, that path or choose. A different one. You.