The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future - Chris Guillebeau (2012)
Part II. TAKING IT TO THE STREETS
Chapter 6. The One-Page Business Plan
IF YOUR MISSION STATEMENT IS MUCH LONGER
THAN THIS SENTENCE, IT COULD BE TOO LONG.
“Plans are only good intentions unless
they immediately degenerate into hard work.”
—PETER F. DRUCKER
Jen Adrion and Omar Noory graduated from the Columbus (Ohio) College of Art and Design in 2008. They both began freelancing as designers, in addition to Jen teaching at their alma mater and Omar taking a design job at a studio in town. Based in a tiny apartment, they were making ends meet and working jobs related to their degrees, but just one year after graduation, the feeling of burnout from the world of commercial design was inescapable. “Should I have gone to med school?” Jen wondered. “What if accounting would have been a better fit? It was strange to be feeling this way only a year into our careers.” On a drive back from Chicago, they talked about other things: an upcoming trip to New York and a plan that they hoped would lead to other travels.
When they got home, Omar looked around for a nice map to help chart their upcoming adventures. Long story short, they couldn’t find one that they loved, so they decided to make their own. They stayed up late at night, working on their ideal map while talking about all the places they hoped to visit. When they finished the design, there was just one problem: The printer they wanted to use had a minimum order of fifty units for a cost of $500. It was a lot to spend when they only needed one map, but the project had come to mean more than just a print, so Jen and Omar each put down $250. They loved the final result and hung one of the maps on the wall … leaving forty-nine maps with no obvious purpose. They gave a few out to friends … and still had forty-four. Finally, Omar asked a crazy question: Would anyone want to buy the remaining prints?
They made a one-page website, added a PayPal button, and went to bed. The morning after making their work available for purchase, they woke up to their first sale. Then they made another sale, and then another. Thanks to a surprise mention on a popular design forum, they sold out of their first print run in ten minutes and had tons of messages begging for a reprint. Could this be the answer to designer burnout?
Over the next few months, Jen and Omar introduced more styles and acted on new ideas: a New York City subway map, for example, and a neighborhood-themed map of San Francisco. The plan was to grow steadily but not introduce new products without a valid reason. As good designers, they understood that everything in the store had to be essential. They also understood that although some customers would make more than one purchase, the best way the customers could help was by referring other buyers and fans.
Nine months in, both of them had quit their day jobs to work full-time on the business. “This project has totally restored our passion for design,” says Omar. “It feels so liberating to have creative control. It’s been an incredible opportunity for us to grow as designers. I feel like our work has progressed more in the past year than it ever has.”
Jen and Omar began with an idea, kept costs low, and didn’t wait long before stepping forward with a product. Then they adapted to the marketplace response (make more maps!) and built each new product carefully. “It’s funny, because we’re both obsessive planners,” Jen told me. “But this project had almost no planning whatsoever in the beginning, and now it’s our full-time work.”
The Action Bias
Plan? What plan? Many of our case studies showed a pattern similar to Jen and Omar’s: Get started quickly and see what happens. There’s nothing wrong with planning, but you can spend a lifetime making a plan that never turns into action. In the battle between planning and action, action wins. Here’s how you do it.
SELECT A MARKETABLE IDEA. In Jen and Omar’s case, the idea was as follows: Maybe we’re not the only ones who like nice maps. Would other people like them enough to buy one from us? A marketable idea doesn’t have to be a big, groundbreaking idea; it just has to provide a solution to a problem or be useful enough that other people are willing to pay for it. Don’t think innovation; think usefulness.*
When you’re just getting started, how do you know if an idea is marketable? Well, you don’t always know for sure—that’s why you start as soon as you can and avoid spending much money. But for more ideas, check out “Seven Steps to Instant Market Testing” on the next page.
Seven Steps to Instant Market Testing†
1. You need to care about the problem you are going to solve, and there has to be a sizable number of other people who also care. Always remember the lesson of convergence: the way your idea intersects with what other people value.
2. Make sure the market is big enough. Test the size by checking the number and relevancy of Google keywords—the same keywords you would use if you were trying to find your product. Think about keywords that people would use to find a solution to a problem. If you were looking for your own product online but didn’t know it existed, what keywords would you search for? Pay attention to the top and right sides of the results pages, where the ads are displayed.
3. Focus on eliminating “blatant admitted pain.” The product needs to solve a problem that causes pain that the market knows it has. It’s easier to sell to someone who knows they have a problem and are convinced they need a solution than it is to persuade someone that they have a problem that needs solving.
4. Almost everything that is being sold is for either a deep pain or a deep desire. For example, people buy luxury items for respect and status, but on a deeper level they want to be loved. Having something that removes pain may be more effective then realizing a desire. You need to show people how you can help remove or reduce pain.
5. Always think in terms of solutions. Make sure your solution is different and better. (Note that it doesn’t need to be cheaper—competing on price is usually a losing proposition.) Is the market frustrated with the current solution? Being different isn’t enough; differentiation that makes you better is what’s required. There’s no point in introducing something if the market is already satisfied with the Solution—your solution must be different or better. It’s significance, not size, that matters.
6. Ask others about the idea but make sure the people you ask are your potential target market. Others may provide insignificant data and are therefore biased and uninformed. Therefore, create a persona: the one person who would benefit the most from your idea. Examine your whole network—community, friends, family, social networks—and ask yourself if any of these people match your persona. Take your idea to this person and discuss it with him or her in detail. This will get you much more relevant data than talking to just anyone.
7. Create an outline for what you are doing and show it to a subgroup of your community. Ask them to test it for free in return for feedback and confidentiality. As a bonus, the subgroup feels involved and will act as evangelists. Giving builds trust and value and also gives you an opportunity to offer the whole solution. Use a blog to build authority and expertise on a subject. Leave comments on blogs where your target audience hangs out.
KEEP COSTS LOW. By investing sweat equity instead of money in your project, you’ll avoid going into debt and minimize the impact of failure if it doesn’t work out. Jen and Omar started with a total budget of exactly $500. In another part of Columbus, Ohio, Amy Turn Sharp runs a handcrafted toy company. Startup cost: $300. Nicolas Luff in Vancouver, Canada, started with only $56.33, the cost of a business license in 2000. In New York City, Michael Trainer started a documentary business for $2,500, the cost of a camera—which he later sold for a profit.
Most of these people are solopreneurs, running a light operation by design. But larger businesses with multiple employees also opted to keep the initial costs as low as possible. David Henzell, the agency founder in the United Kingdom whom we met in Chapter 1, started his new partnership for $4,000. Scott Meyer and a business partner, whom we’ll hear more about in Chapter 9, started a South Dakota media firm with four employees for under $10,000. The point is that the numbers may vary, but wherever possible, keep costs low.
GET THE FIRST SALE AS SOON AS POSSIBLE. In Louisville, Kentucky, I talked with Nick Gatens, who told me about a small photography project he was working on. Nick worked full-time in information technology for someone else’s business and had been trying to break into doing something on his own for a while. The “something” wasn’t working yet, though. “I’m not sure I’ve got the right site design or the right message for visitors,” he told me in the coffee shop where we met.
I’m always curious about other people’s projects, so I flipped open my laptop and asked for the URL to take a look. “Well,” said Nick, “I don’t actually have the site up yet.”
I’d love to tell you that I gave him some brilliant advice, but I didn’t have to say anything at all. Nick stared down at his coffee cup in realization of the obvious: For the project to be successful, he needed to get started. The other people we were hanging out with encouraged him too, and he left the coffee shop determined to make progress quickly.
I was in Kentucky that day on a fifty-state book tour, and when I made it to West Virginia a few weeks later, I saw Nick again. This time, he had an excited look on his face and an important update: “I got the site up, and I made a sale!” A stranger had followed a link from somewhere on the Internet and paid Nick $50 for a print. If you’ve never sold anything of your own before, you may wonder, What’s the big deal? He sold one $50 print. But I understood immediately: The first time you make a sale in a new business, no matter the amount, it’s a very big deal.
In the weeks between Kentucky and West Virginia, Nick had figured out the real culprit behind his delay. “That conversation made me think about why the site wasn’t up yet,” he said. “In my head, it was all technical: I had to tweak the design and fix some errors in the code. But being honest with myself, I realized it was really that my fear was still holding me back; the technical stuff was just an excuse. What if I don’t sell any prints, or what if nobody likes my work? After realizing why I was stuck, I went home and made the site public that same evening. Within two weeks, I had sold that first print.”
Other interviewees told countless versions of this story—about how hard it was to get started but how rewarding it was to receive that first sale. “Once the first sale came in, I knew I’d succeed,” someone said. “It may not have been completely rational, but that single sale motivated me to take the business much more seriously.”
“I was doing a live presentation and opened the shopping cart for our first product launch,” someone else said. “I saw orders coming in and literally said out loud, ‘Yes, this is it!’ It was huge for my momentum at the time.”
Therefore, the question you need to ask is … how can I get my first sale? Competition from other businesses is a problem for another day; the greater problem you face is inertia. Nick won the battle against inertia by getting his site up and running, and was rewarded with the sale.
MARKET BEFORE MANUFACTURING. It’s good to know if people want what you have to offer before you put a lot of work into making it. One way you can do this is through surveys, as we saw in the last chapter—but if you’re adventurous, you can also just put something out there, see what the response is, and then figure out how to make it.
A friend of mine did this with an information product aimed at the high-end car industry. He offered a specialty guide that sold for $900 … except he didn’t actually create it before he advertised it in a magazine. He knew it would be a lot of work to put together the guide, so why do the work if no one wanted it?
Partly to his surprise, he received two orders. The cost of the ad was just $300, so that represented a $1,500 profit if he could actually create the guide. He wrote to the two buyers and said he was developing a new and improved “2.0 version” of the guide and would love to send it to them at no additional charge as long as they could wait thirty days for it to be finished.
Of course, he offered to refund their money if they didn’t want to wait, but both buyers chose to wait for the 2.0 version. He then spent the next month frantically writing the guide before sending it to the eagerly waiting customers. Since he knew he had a success on his hands (and it helped that he actually had a product now), he placed another ad and sold ten more over the next few months.
Maybe you won’t do it that way, but make sure there is sufficient demand for your product or service before spending your whole life working on it. That’s why it’s so important to get started as quickly as possible and why the first sale can be so empowering.
RESPOND TO INITIAL RESULTS. After an initial success, regroup and decide what needs to be done next. Jen and Omar responded to demand by adding more maps and carefully creating new products. One year in, they made the decision to stop doing their own fulfillment. “Going to the post office was fun when we were first getting started,” Jen said. “But then we had to do it three to five times a week, and it got old.” They decided to subcontract their shipping to a local warehouse and ended up saving several hours a week.
Decisions like these may sound like a no-brainer (Why should two designers spend their time making post office runs?), but implementing them can take a lot of work. In Jen and Omar’s case, it wasn’t just a matter of hiring the local warehouse to do their shipping; they also had to complete the daunting task of syncing their online shopping cart with the fulfillment house.
Finally, it’s good to pay attention to what created the initial success even if it seems accidental or coincidental. In Jen and Omar’s case, it may have been a fluke the first time they were featured on a major design site, but what if they could make that happen again? It did happen again, over and over, because they built relationships and pitched their new projects in a low-key, commonsense manner. This is a process we’ll look at more in the next section of the book.
In a microbusiness built on low costs and quick action, you don’t need to do much formal planning. Mostly, you need the elements we’ve discussed throughout the book: a product or service, a group of customers, and a way to get paid. Check out the One-Page Business Plan template on this page for a helpful tool.
Freely Receive, Freely Give
As you think through the questions of freedom and value, the most important one is, “How will this business help people?” This isn’t simply about being generous, because as a business helps people, the business owner gets paid. Some people design an entire for-profit business around the social component, others shift to focus on it as they go along, and still others integrate a social project within a for-profit business.
Apartheid came to an end in South Africa in 1994, ending nearly half a century of white-only rule in Africa’s most economically developed country. Nelson Mandela was elected the first black president the same year, and the country began a slow process of creating true equality for its “rainbow nation” of people. In addition to the negative association of apartheid, South Africa was known for many good things, one of which was its popular prize-winning wine. The wine region of the Western Cape is older than California’s. South Africa provided the royal courts of Europe with wine for over 350 years, and South African vines were used to start the Australian wine industry in 1781.
Yet because of apartheid, the $3 billion wine industry had less than 2 percent black ownership despite the fact that blacks represented 80 percent of the country’s population. Enter Khary and Selena Cuffe, a husband-and-wife team from the United States who found a way to create a highly profitable business that supports black vineyard owners in South Africa. Selena, the CEO, explains it like this: “This venture merges my passion for entrepreneurship with social justice. The greatest benefit is that my personal and business goals are identical: positively changing people’s perception of the African continent and helping to reinstill a sense of family and connectivity into the lives of the people that our business touches.”
In Tel Aviv, Israel, Daniel Nissimyan founded a paintball distributor called Matix Ltd. The business stood out to me because of his unique client base: “We sell extreme sports equipment to enthusiasts in Israel and neighboring countries, and also to the Israeli defense establishment for training purposes.” Despite the sudden appearance of a number of competitors that sprang up in response to the growth of paintball in Israel, business was good. Matix Ltd. was clearing six figures in income and had sewn up exclusivity contracts with key suppliers, thus thwarting the new competitors.
Daniel went back and forth between Israel and the U.S., and his previous venture was a non-profit that taught karate to children with developmental disabilities in Southern California. Paintball was fun, but Daniel wanted something that combined the non-profit model he started in California with the sports business he ran in Tel Aviv. He found the answer in a new venture called Green Collar, a project that will reduce landfill waste inefficiency while also tapping an overlooked energy source. The goal is to work with municipal governments in both Israel and the Palestinian Authority in an effort to solve common problems and advance joint interests. Here’s what Daniel has to say:
Much more than with Matix [the paintball business], I wake in the morning feeling I’m making the world a better place, and that I don’t need to suffer for it. I don’t need to volunteer my time to another NGO or donate money; I instead have focused my best efforts to make the world a better place for my country and my children—and I will also be compensated for it.
Whether you follow Daniel’s model of designing a business around a social cause (and being paid for it) or find a way to incorporate a community project into your existing business, many entrepreneurs find this to be a critical, fulfilling part of their work.
The 140-Character Mission Statement
Let’s break down the planning process into a very simple exercise: defining the mission statement for your business (or your business idea) in 140 characters or less. That is the maximum amount of text for an update on Twitter and a good natural limit for narrowing down a concept. It may help to think of the first two characteristics of any business: a product or service and the group of people who pay for it. Put the two together and you’ve got a mission statement:
We provide [product or service] for [customers].
As described in Chapter 2, it’s usually better to highlight a core benefit of your business instead of a descriptive feature. Accordingly, you can revise the statement a bit to read like this:
We help [customers] do/achieve/other verb [primary benefit].
Focusing like this helps you avoid “corporate speak” and drill down to the real purpose of the business as it relates to your customers. Here are a few examples:
If you have a dog-walking service, the feature is “I walk dogs.” The benefit is “I help busy owners feel at ease about their dogs when they’re not able to be with them.”
If you sell knitted hat patterns, the benefit is something like “I help people be creative by making a hat for themselves or someone close to them.”
If you make custom wedding stationery, you might say, “I help couples feel special about their big day by providing them with amazing invitations.”
How about you? What is the 140-character (or less) mission statement of your business idea?
Jen and Omar followed the $100 Startup model: Focusing on the specific combination of their unique skills, they made an interesting product that other people also valued. They gave their customers what they wanted without hiding their real lives: Their website contains blog entries on their home life, complete with cat photos—but doesn’t go into all the details of making prints that most customers would find irrelevant.
They chose a marketable idea and were encouraged by their first day of sales. They kept costs low, bootstrapping out of their tiny apartment and not borrowing a single dollar. As the business grew rapidly, they regrouped, taking stock of what was working (make more maps) and what wasn’t (stop going to the post office all the time).
Most important, instead of thinking about it forever or filling up a binder with projections, Jen and Omar took action.
“Plan as you go” to respond to the changing needs of your customers but launch your business as soon as possible, with a bias toward action.
Nick’s first print sale provided far more motivation than the $50 he received. As soon as possible, find a way to get your first sale.
Follow the Seven Steps to Instant Market Testing (or the market before manufacturing method) to gauge the initial response.
Use the One-Page Business Plan to outline your business ideas quickly.
To avoid overcomplicating things, explain your business with a 140-Character Mission Statement.
*I’m grateful to Jason Fried from 37signals for this idea.
†Parts of this section are based on the advice of Jonathan Fields, the smartest guy I know in market testing. Learn more at JonathanFields.com.