I dropped this tweet today which got a lot of attention:
My #startup mentoring summation: no matter who you are or what your model there is *some* way to make revenue early. Do it. #leanstartup
I honestly believe this goes hand in hand with the true discipline of the Customer Development Process. The idea here is really simple: don’t start a company around something you think is a good idea, rather start it around something that someone else indicates he or she will pay you for. That’s the true essence of the MVP — it’s the least product someone will pay you for right now.
Where I’ve tripped myself up in this equation is around the standard logic that you have to go into business doing something you are passionate about. I’m just not sure about that. It makes for great online courses from authors and gurus but I’ve done it and at least in my case it didn’t pay off. There are a few reasons for this.
Hello, visionary Chief Sales Officer.
As the startup founder you probably have the product vision and are the most adept at selling that vision. If you ever intend to make money you are going to have to sell a lot of what you know because you’re the one who really gets it. Therein lies the problem — if you are spending all your time selling who exactly is spending all of his or her time on the doing, making, performing or whatever else it is that your company gets paid for?
You can’t do both at the same time. It’s very hard to strike the appropriate balance because when you land your first big client you don’t have the money to hire anyone else and you spend all your time delivering on that first sale. When you do that your pipeline dries up. Then your first client pays on Net 30 or Net 45. You deliver, you wait for cash, you get back into selling and you face a nasty cash gap.
The point is that you won’t really get to do what you are passionate about, at least not for awhile, because you have to sell what you are passionate about before you get to do it. Whenever you are doing it you don’t get to sell it (as much; there’s the art of the upsell that I will discuss at some other point).
You are not the customer!
Now, I don’t think you should hate what you are starting a business around, but you just aren’t the customer. You might be solving a problem or set of problems you had or have but that still doesn’t make you the customer. The customer is the person (hopefully many persons) who pays you money to solve her problem. It doesn’t matter if you think you’d pay you to solve your problem.
Make money to stay alive.
My opinion differs from many people at this point. I agree that hardcore focus is important in the early stages of a company. I also agree one should not get distracted “chasing” revenue. However, I disagree with the notion that one should not accept any revenue that in some manner validates some manual or grossly inefficient manifestation of the startup’s MVP. A lot of times that’s some kind of consulting that sort of, kind of, looks like what you intend to do later. I’m not saying hang out a big marketing banner about it, but if the opportunity presents itself to make some cash I think you should take it.
Mind you I’m not saying make that part of your business vision or even mission, but rather use that cash as a way to keep doing what you are doing for as long as possible so you can keep bootstrapping. If you are like 90% of businesses you will get no angel investment*. If you are like 97%+ you will get no VC investment*. That’s why I think you should take the money!
If you can rework your early business model around making early revenue then DO IT. Stay in business. Live to fight another day. As a friend and colleague from my first startup said while addressing the rest of the team (in our garage-office), “No margin, no mission.”
Agree or disagree?
* I’m estimating here and not using references. These numbers are based on conversations I’ve had with academics and investors, not based on research.