Distinct and Direct, Part 3

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

NOTE: This appeared to be a Q&A session. Although the questions did not come through on the recording, I speculated on what some of the questions might be based on Seth’s answers.

Q: How should I use a lawyer or procure legal help?

A: A legal document might be an important marketing tool in certain business cases but do not overpay for legal assistance. The important thing to keep in mind is not get sued in the first place. Having well-crafted legal documents alone will not necessarily lessen our chance of getting sued.

There are two things we can do to help ourselves not get sued. One is to write the contracts and agreements in clear English, so both parties know what we agreed on. That dramatically decreases the chance because most of the time people sue because they are hurt and angry. If they know what they signed up for, they are less likely to feel hurt and angry when things do not work out. The number two thing is to put a clause that says we will settle all disagreements by binding informal arbitration.

Q: What imprinted gifts or promotional items should I use?

A: Most of the imprinted stuff is junk. It is invisible, unremarkable, and not very memorable. The point is, it doesn’t have to be some fancy thing from China that imprinted. It can be an object. It could be anything, and we are just always giving out this object with a story attached to it. That is the icebreaker we can use to be memorable, as opposed to all that trade show junk. Those junks mean absolutely nothing.

Q: How should I name my business?

A: There are two general approaches to naming a business. We can start with two kinds of names, names that mean something and names that do not. Names that do not, Amazon Starbucks, Nike, and some other fancy varieties, do not mean anything until the company comes to exist. The others are names that immediately tell us what the business is about. If we come up with a fanciful name, it is a blank slate, and we get to fill it with meaning.

The bad news is, during the beginning years, we must explain what we do. If we come up with a name that means something, we do not have to explain too much at the beginning. The names that have obvious meanings can be good for the customers who need to get to know you, but the investment community might not think as much. That is because many investment superstar companies started with non-obvious names (Yahoo!, Google, and so on).

Depending on how we need to fund our businesses, the position in the minds of the investors and journalists can shift based on which name we pick. Another thing to note is that URL still matters because a lot of people do not know how they work. There is still more value for consumer brand URL that ends in dot com. Anyway, the easiest way to get a domain is to take two English words and put them together because the length is not an issue as long as we can remember it. In the end, it depends on how big we want to be and how we want our customers to perceive us early on.

Finally, “Fly closer to the sun. Nothing bad will happen, I promise.”

Distinct and Direct, Part 2

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

NOTE: This appeared to be a Q&A session. Although the questions did not come through on the recording, I speculated on what some of the questions might be based on Seth’s answers.

Q: How should we grow our tribes and followers using the social media?

A: It is essential that we do not rent our friends from Facebook. We need to have a direct and controlled connection with our friends and us. That group of friends and fans must get bigger over time. For many of us, email is still the best tool for managing those connections. Once we build this email list with hundreds or thousands of connections, people who want to hear from us by email, that becomes our asset going forward. Also, when we have the connections established with our friends, we do not need middle-men or agents for others to find us. In the future, what we need are more people who have a point of view and are worth following.

Q: How much money should I have saved before launching a venture?

A: It depends on the peace of mind that our family and we need. The basic suggestion for the typical person who wants to do this is to act like you have no money now. Eat black beans and brown rice every single night, never go to a restaurant, never go to a movie, moved to a smaller house, sell your car, and just cut your costs to zero while we are still making a primary income. Take the eighty or ninety percent of the income made and pay it into an account. Get the account to a number where our family and we will be happy for x number of months without any income.

We might have to do this for several years before the amount of money in that account is big enough. We are still eating black beans and brown rice, so we are paying the price early, not paying it late. There will come a day when we say the combination of my freelance income, my project income, and my savings is greater than the costs needed for launching this venture. At some point, we can say that we do not need the security of this paycheck. Leap only after being prepared and do it with the support of our spouse and family.

Q: How can I leverage the existing customers?

A: It would probably depend on the industry and our businesses. It is easy to imagine that there is this magic customer that can do much of the selling for us. Rather than solely relying on the perceived beachhead to attract new customers, it is more important to do what we can to keep the existing customers and add more value to what they do. That is because cash flow beats beachhead on any day. We will be in a much strong position in a negotiation if we can walk away.

Also, see if we can ship and add value to our market on early on. Instead of taking three years to write a book then found out we need to write daily blogs for months/years to build awareness and exposure for our books. There is almost nothing that is worth waiting a year for if the alternative is to go for a week and interact with the market. Trust takes time to build, and the number of fans takes time to build up. We need to start now to interact with the market through daily shipment. Spending time to build the big and important work is fine, but it’s not going to be worth waiting for if we have not already built our way to the audience base we need.

Distinct and Direct, Part 1

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

NOTE: This appeared to be a Q&A session. Although the questions did not come through on the recording, I speculated on what some of the questions might be based on Seth’s answers.

Q: What to do when the industry I am in is declining or failing?

A: Seth would argue that, in almost every failing industry, the people in the top get hurt last. If we are in a leadership position, it is possible to milk this cow for a long time by committing to marketing ourselves quite aggressively. We might also need to change certain parts of how we conduct our business to adapt to the changing market environment. It is still possible to continue to do things to increase our market share as the size of the market shrinks. That was the number one point.

Point number two is that the decision to quit an industry is a strategy decision, not a moral decision. If we decide to quit and to do something else, we should make that decision because we want the thrill of scaling and a growing market, not because we cannot think how to make our existing business sustainable going forward. If we love what we do, keep doing it and grow it differently because most industries do not disappear just overnight.

There is no question that, within a declining industry, more opportunities tend to tend to belong to the person with a track record. In those industries, people become more conservative, so they are more likely to give those opportunities to people who are perceived to be a safe choice. If we are in a declining industry (or a sinking Titanic), we do not need to quit it today. However, we need to see that it is in disarray and the deck chairs are up for grabs. If someone, who is calm, stands up straight, walks in, and starts collecting deckchairs, no one is going to question them.

Q: What does it mean that new venture or brands make no money?

A: No money means every time someone pays us, we put it back into growing our company. What market likes to buy is expensive stuff from cash cow brand leaders. Buying from the cash cow brands represent a safe choice, the one that will not get blamed. That is why the insurgent brands never spinoff cash. Insurgent brands always put the cash into becoming the cash cow brands. After they become the cash cow brand, most of them cease to become interesting. That is because their customers do not want them to do things that are new and risky. Those brands suck because their customers suck.

Rather than waiting for investors to fund our business, it is more productive to do our dog-and-pony show for customers. The dog-and-pony show is going to be very similar for both audiences, but the customers can give us money tomorrow. When customers give us money, we do not have to pay it back like with the investors.

The ShipIt Journal, Part 2

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

The ShipIt Journal, now in free PDF format

  • At some point, we define all events and activities that need to happen. We exhaustively list every dependency and everything that everyone must do. The goal is on the first day to be clear with everybody about what all those dependencies are and to rip out every dependency that is there. We want to move the thrashing all the way to the first day.
  • The lean approach to startup involves building a minimum viable product. Minimum viable products (MVPs) allow us to iterate and produce versions of the products that are “less bad” than the previous versions. If our product is less than viable, we will likely launch something that has no chance to capture the hearts and minds of our audience and to extract the value we need. Building an MVP also requires us to hang out with the potential customers and find out whether this is something they might want. Sometimes those customers can come in groups. We might not know our MVP will resonate with which group, and sometimes we must pick a group to focus our effort.
  • Who becomes our competition gets back to the fear? On the day we launch, we now have competition. By outlining our potential competitors, we have one less reason to hesitate to ship.
  • “Plus It” and “Minus It” allow us to fine-tune our offering for two reasons. First, it is more likely we are going to finish our project. Second, it can make us more likely that we will become the best in the world at something. When we start with “This is not for you,” it makes it much easier to be remarkable. It makes it much easier to be the best in the world because it is not aiming for the impossible task of being there for everybody. After it is shipped and in the hands of people with whom we have built a relationship, we can now do more legitimate testing to see what we should add as opposed to trying to guess what we can take away.
  • For many projects that produce work that matter, we would often be doing the things for the very first time. By putting ourselves in a position that feels foreign and might not work, it requires emotional labor. What professionals do is they stay professionals by regularly doing things that require emotional labor. They are regularly doing things that are outside of their comfort zone. That is why we are doing the project, and it is all about we are doing this because we have never done it before.
  • Shame is the project killer. The fear of shame is what people used to keep us in line. We often use one hundred words to answer a ten-word question because the other ninety words are designed to distract the person who asked the question. Just get to the ten words because we have nothing to be ashamed. We can trump the shame by being meaningful and by going into the world by doing something that needed to be done in the first place. Project after project, we learn to ship. Over time, the foundation of thrashing and shipping gets stronger, and we get better at it. Suddenly our dreams become projects, and our projects become businesses.

The ShipIt Journal, Part 1

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

The ShipIt Journal, now in free PDF format

  • To use the ShipIt journal, we need to do this with everyone on the team at the same time. Everyone on the team uses the journal to track their projects, and it works the best when in print. It is very important to involve pen and paper because people act differently when they must write something down.
  • The purpose of the ShipIt journal is closely related to the idea of the dip. If we care enough to fill out the journal in pen and tell the truth on every page, there is a good chance we will ship our project because we committed. If we do not care enough to ship your project, we should not waste time to fill out the journal for this project.
  • The ShipIt journal helps the team to do the “thrashing” earlier on during the project, instead of later. “Thrashing” in the early phase costs much less to the organization than “thrashing” later in the project. Thrash at the beginning and then take people off the project until we launch.
  • Every project needs to be manageable, finite, time-dated and doable.
  • Every project needs to have the name of one person who oversees making this date happens.
  • We need to confront our fears by writing them down in the journal. All these emotions need to be brought up early, so we can be clear about what this project is about and what it is for.
  • Along the way to get this project to ship, we are going to have to make compromises. Every project needs to pick some edges that it stands for and those it does not care about.
  • Every project needs to decide who are we trying to please or who is our customer.
  • Every project has devil’s advocates. We write down the comments from devil’s advocates, so we do not need to discuss them again. “The Devil is doing fine, and he doesn’t need an advocate.”
  • We need to identify a list of people who can stop or disapprove the project, if any. Those people may introduce compromises into the project, so we need to stay aware of their opinions.
  • We need to write down and understand fully what a “perfect” project looks like. We also need to be 100% clear about what “good enough” looks like. Perfect should not be the same as the definition of good enough because perfect is the enemy of the good. We cannot be in the business of shipping on a regular basis if perfect is our only option.

Building the Trust

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

  • When we sell, we need to match the right thing to the right medium. Take Amazon as an example. In the early days, Jeff Bezos figured out what Amazon needed to sell to stand a chance of succeeding.
  • First, selling something online means it needs to be something we do not have to touch it to know what we are getting. Second, Amazon needed to be able to carry many items. If it is going to be the best in the world of merchandising, it needs a huge variety to defeat any other store. Finally, Amazon needed to price it so that the customers know they are getting a discount. Amazon wanted to work with customers who are willing to trade the satisfaction of touching something and the gratification of getting it right away, in exchange for variety and discount. When we go down that list, books became an obvious choice for Amazon. When we think about what we want to sell, we need to keep in mind the medium that is going to be a natural fit.
  • At the heart of all transactions, it is trust. We are more likely to trust a store if we can visit it, see the items, and take it with us when we leave. We are more likely to trust a website if we can try our free samples before we pay. The transactions on-line vs. off-line are fundamentally different because our trust varies fundamentally different depending on the medium. Again, this means that we need to make sure the merchandise or service matches up well with the medium or channel.
  • Selling certain merchandises can require some “taxes” paid up front. For example, selling fashion to the major retail chains typically requires the designers/sellers to put on a fashion show. For the fashion industry, the shows are the medium that fits well with the goods. Without seeing the fashion on display at the fashion shows, the store buyers will not likely respond to the designers. This method of selling maybe absurd to some, but those are the “taxes” we need to pay to participate in that industry. These are all complicated pieces that fit into what story we are telling the current and prospective customers.
  • Every organization needs someone who can run the operations, and that is the chief operating officer (COO). In the beginning, that person who runs the operations is the entrepreneur herself. Over time, the entrepreneur needs to let go of the operations so that the company can operate on its own without her intervention. The COO’s job is to do the operations stuff, so the entrepreneur does not have to do. As a result, the entrepreneur can add value elsewhere in the organization, such as marketing and innovation. The COO’s might not run operations the same way, but they will run an operation that is effective and more. The entrepreneur and the COO build trust with each other.
  • A COO’s job is to use the money the organization has and the promises it is making to make the promises come true. With a COO, the entrepreneur’s role is to run marketing or innovation and leave the operations to the COO. The COO needs to be able to tell the entrepreneur if he/she is making a marketing promise that the organization cannot keep. The COO also must have the authority to take the resources from the organization, if those resources are needed to keep the promises made to the customers. If an entrepreneur is serious about getting rid of the day-to-day operations and focus on the higher value stuff, the entrepreneur must be able to work with a trusted COO.
  • An advisory board is a different entity from the typical corporate board because it serves two functions. One function is to give us advice, and the other is to make us look good to other people. We need to be very clear with ourselves and with the board member about its purposes. If people say yes to be on our advisory board, we should give them the recognition by making a big deal out of our advisory board or else do not bother having one. The other alternative is to leverage this group of people who will tell us the truth. In that case, the question is should they meet as a group or should the entrepreneur engage the board members individually. We need to figure out what we want the relationship to be between these advisors and the work we are doing.

The Dip

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

  • In our society, something is valuable when it is scarce. When we are the best in the world, the benefits are outsized. By being the best, people talk about us and what we do with other people. The world is not the whole wide world but the little place that our customers care about. Best also means the one option I will pick for whatever reasons at the time. The goal of what we are building is to be the best in the world.
  • There are two things about quitting. First, quitting is underrated that we quit things all the time. Second, we quit the wrong things at the wrong time. What we need to keep in mind is that we should not start anything unless we plan to invest what it is going to take to finish it. Do not start a project unless we are prepared to go to the end. There may be all this thrashing that happens at the beginning. Once we passed the thrash moment and we commit, we are going to finish it. We know getting through the dip can be very hard, but that is why we have chosen to do this. We will deal with the hard part of getting through the dip because, when we get on the other side, it will be worth it.
  • They are projects that are cul-de-sacs/dead-ends that are never going to get better. One way you know it is a dead end is to ask the question “Has anyone ever done this before by persisting their way through this in the way I am doing it now?” It is possible to be the first one to accomplish something, but, in general, it is a good approach to sign up for a path where we know there is an outcome.
  • The dip-quitting strategy says it is imperative that we quit everything we are not prepared to push through the dip. It also says we need to quit early when it is cheap as opposed to quitting late when it is expensive. Because early failures are all but certain, we need to have a process in place as a learning organization. We need to anticipate failures and be able to learn from failures so that we can improve.
  • There is a trust shortage in the market, so the goal is to figure out how to be on the list so that people will call you first. Building trust can be a multi-year process of owning a tiny market as opposed to running from one opportunity to another hoping the trust-building process will be short. Often, we fall into the trap thinking our work and us share the same identity. It is about how do we put our work on the line, not ourselves on the line. What are we willing to do to speak up for our work, even if that requires us failing along the way? It is a long process for many worth-a-while endeavors.
  • Sometimes when we fail, we need to look for the fear that kept us from succeeding. We need to know where our fear is and why we are protecting it. Some people cannot run very fast and get less done because they are so busy protecting their soft spots. When somebody keeps jumping from one quick thing to another and get stuck, it usually comes down to the fear. It is almost never about our talent; it is usually about why we are sabotaging our talent not going through the dip. Often, if we can somehow let go of our guard and expose that soft spot, we just might put ourselves in the position to do our best work.
  • When we get to a dip, we have only a few supporting options. We can have a rich uncle, a well-financed partner, or the third option. The third option is a business model that get us small sales to keep us in business while we continue our project work. Often, we need to have small dip projects to pay bills, so that, over time, give us a platform to do bigger dip projects. We must make sure there is alignment between our resource and our customers, as well as how big a difference.

Cash Flow

In the podcast series, Seth Godin’s Startup School, Seth Godin gave a guided tour to a group of highly-motivated early-stage entrepreneurs on some of the questions they will have to dig deep and ask themselves while they build up their business. Here are my takeaways from various topics discussed in the podcast episodes.

  • Instead of relying on venture funds, it is best to get our customers to fund our business. Find those people who care enough about what we are building, so they pay us up front to make sure the project gets built. Once we have a steady stream of customers, we now have the money to build the next project. If we do not run out of cash, no one can tell us what to do.
  • When hiring employees for our business, we want people who align with our goals and vision. We need to think about what we want people to want and how do you tell a story about that. What we know about money is that, past a certain amount, money is no longer a motivator.
  • What is fair to the people in the organization is generally transparent, but not completely. That is because open-book management is fraught with issues in a growing company. We must make sure that people understand what equity means the same way we do.
  • How to finance our business? The rule number one is never signing a personal guarantee, especially for an amount that is more than what we can comfortably afford to pay. Rule number two is to be intentional and establish the discipline. Always have two numbers in place: 1) how much money to spend on the venture and 2) how much time we give ourselves to ship. Once either number is up, we stop and do not continue to feed the black hole.
  • Always maintain a clear picture of how much money we had and how much money we needed. Raising money can be time-consuming, it is better to spend the time on doing the work. Conserve and treat all money raised like it is the last money we are ever going to have. That kind of discipline is much better than always wondering where our next dollar is going to come.
  • Cash flow is so critical to managing It is quite possible for a business to go under from having too many orders. As a bootstrapping entrepreneur, we should keep track of one critical measurement. That is “how many days can we still stay in business?” If the number were getting too low, we would have to take on a project or some freelance work to raise some money fast. And when there was enough of a cushion, we could now go back and invest time on the original work.