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#111/111: Anything You Want

Some will already know Derek Sivers from his blog sivers.org. Sivers started CDBaby, a CD distributor for independent musicians, in 1998. He sold it 2007 when the company had $100m in revenue. He tells his story of CDBaby in detail in this book and it’s quite interesting.

Sivers was a musician before starting CDBaby and he created a small online shop for his CDs and other musicians asked him if he can offer their CDs, too. After a while more and more musicians asked for distribution and CDBaby grew. He said that after a while he talked to his first employee and said that they maybe need a second employee and he don’t want to grow the company.

It’s quite funny how he found a perfect opportunity but didn’t realize then that it was one. One main objective or like Guy Kawasaki would say the mantra of Sivers was to help musicians. Everything should help musicians to distribute their CDs.

If you are the owner of a company you can do with it anything you want. You don’t have to follow some strict rules or even some “common sense”. Sivers avoided lots of formalities and did just the stuff he wanted. For example, often people think that CEOs are handling the business deals - Sivers never wanted to do that - he looked for persons who were motivated and good at doing deals and let them do the work. But he enjoyed coding and thinking about improving his business and this was what he did.

He also talks a lot about delegation and overdelegation. At one point he delegated nearly everything to his employees, even the profit-sharing plan. After a while somebody said to him that his employees take all the profit, which wasn’t really into his intention. The result argument lead him to leave the USA and work alone from the UK.

Anything You Want is a really interesting story because he talks so much about things that gone wrong but it never appeared that he was unhappy in retro-perspective. I think the main points are that you should somehow help other people in providing products or services to them and that you can do anything you want with your business. All in all a real nice book, quite short but insightful. Do what makes you happy!

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#95/111: Do More Faster

What is it about?

The techstars program is famous and so are Brad Feld and David Cohen. They talked to lots of members and mentors of the techstars program and let them write small articles on different subjects. How did it work out?

What can I learn?

Concentrate on doing one thing good: So you work on your product and want to compete with some big company. What will you do? Provide more features than their product? Nice try, you already lost the battle. Mature products, like Microsoft Office or Matlab are crowded with features. If you want to compete then you should focus on doing one thing unexceptionally great. You don’t have to resources to implement millions of features and you won’t stand out.

Decide and execute fast: What is the huge advantage of startups / small companies against big corps? Agility. If you can decide and execute fast, you should. I saw small companies which had structures like big corps. This lead to slow deciding and executing and killed them, at last. Don’t waste time on bureaucracy and execute now.

You don’t need VC: Some people think that you aren’t a real tech company if you don’t get any VC money. That’s not true. Firstly, you have to understand if you need money and what the implications are. No outside money means more freedom later on. You may start faster at the beginning but it can happen that you build your product, get lots of customers and then get kicked by your VCs and get $100k for three years work.

Conclusion

I’m frankly disappointed by this book. It got great names on and in it but it doesn’t reach my expectations. It’s hasn’t much substance, most tips are superficial. The format isn’t the problem here, other books like Joel’s Best of Software Writing I did a great job in collecting articles and publishing them. No recommendation.

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#76/111: Four Steps to the Epiphany

What is it about?

Do I really need to introduce this book? You probably know Steve Blank, you probably know Customer Development by now. In this book he talks about the whole process of finding your market product fit.

What can I learn?

Understand your market type: There are different market types and each one needs different strategies. There are new markets, niche markets and existing markets. This sounds trivial but isn’t well understood. A common mistake is to act like in an existing market if you are really (creating) a new market. For example, you investing millions in mass advertising even if you are creating a new market. This won’t work. Remember the Technology Adaption Cycle!

Understand your customer: Yes, you know this by now. However there are some one cool questions. If you want to know if your prospects has a real problem ask if them would deploy your product if it was free. If they say no, you are quite sure that they won’t be your customers so soon. The second cool question helps you to find out how much they would pay. Ask them if they would pay $1,000,000 ($1,000 for B2C products) for your product. Often they will say “Sorry, but we could pay $600,000 at max.” - Bingo! If they say yes, you have to increase the amount the next time.

Learn, Learn, Learn: A startup is about learning. Learning about your market, learning about your company, learning about your customers. There are no standardized methods for your new market. Learning about your market is the purpose of your startup. After you have discovered enough, you can grow and establish processes. This is where you leave your startup phase and become a “real” company.

Conclusion

Four Steps to the Epiphany is actually really nice. Steve Blanks describes each step in detail and provides lots of work sheets. He focuses mostly on expensive B2B software solutions. You have probably to adjust some methods for B2C or mass-market B2B products. Great book.

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What is it about?

Andrew Warner interviews Dane Maxwell who founded Zannee which offers tools and services for real estate brokers. He talks about building a nice lifestyle business, direct mail marketing and testing ideas.

What can I learn?

Test ideas with squeeze pages: A simple method to test product ideas is to build a single page website with information about your future product and a subscribing function if your prospects are interested. You can be sincere, write that you consider building this product if X people will subscribe to your email list. To promote the page you can use online ads. If you have gathered enough people, you will have a client basis which jump-starts your new business.

Decrease the purchasing risk: There is a saying: no one ever got fired for buying IBM. Your company probably isn’t IBM, so you have to build trust. A major action is decrease the purchasing risk. That means, you are going to offer testimonials, money back guarantees, demos and of course a mailing list where people can subscribe. In this mailing list you offer them useful information (articles, book summaries, how to lists, etc.) and slowly build trust.

Use case studies: Another method is writing real life case studies. Talk with your customers about how your product solved their problem. If possible try to quantify these results. Whats more compelling than Our average customer saved $5000 a month using our product?

(via How To Build A Profitable Lifestyle Business In Web Apps, Info Products And More – with Dane Maxwell | by mixergy.com)

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#57/111: The New Business Road Test

What is it about?

How can you increase your probably of success? John Mullins takes a scientific-like way to explore why startups fail and how it can be fixed. Each major point is illustrated by case studies and a short section “what investors want to know”.

What can I learn?

What are your goals? Before starting you should define your goals. Do you want to build a multi million dollars company or a lifestyle business? Do you want to work 80h/w or rather 25? This is the general framework to later decisions.

Market and Industry: Often these two things are not really understood. Your market exists of your customers. Your Industries are your competitors. Often there are great markets but the industry sucks. A example are restaurants. There are a mass of people who have to eat every day but the industry is gigantic and competitive. There are lots of restaurants or people could cook for themselves. That is, you market should be acceptable and your industry.

Obey the Critical Success Factors: If you have chosen your market and industry, you have to identify the industry’s Critical Success Factors (CSF). What is really important in your industry? For example, you can’t build a successful news site if you don’t have topical and good content.

Choose a great management team: Your management team should be complementary to you. Firstly, you have to know your strengths and weaknesses. If you suck at finance look for a smart CFO. If you suck at managing people, look for a smart COO/CEO. You don’t have to do anything for yourself and probably better don’t.

Conclusion

This is a pretty good book. The New Business Road Test is well structured and each chapter includes case studies which support Mullins’ assumptions about starting a successful business. The book is very practical and definitely worth reading if you want to start a business. Recommendation!

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What is it about?

Mike Butcher, TechCrunch Europe Editor, writes about lame startup thinking (in Europe). In my experience there is so much truth in this article, it’s a must read.

What can I learn?

Learn about money: Firstly, do you really need outside money? If you don’t want to put most of your money into the idea don’t bother asking other people. If you will need money you should know how much. Furthermore, if you look for angels, look for angels who can help you build your network. Before pitching these investors ideally you should have build some mock-ups or better a product or ideally a product with customers and revenue.

Your company is your product: Don’t outsource your core competency. Do not do it. If you aren’t a product person look for a person how is and make them CEO or learn the stuff for yourself. You should iterate your product and test it often. What do your customer think? How is the user experience?

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How to Take your Start-Up to the Next Level


What is it about?

Aaron Patzer, founder of mint.com, talks about how he got from an idea to $170 million in just three year.

What can I learn?

Don’t be secretive: Aarons first idea was a goal setting software. Instead of building it in stealth mode, he decided to talk to people. Only about one in eighty of these people found this idea appealing, so he discarded it. Later he hasn’t gone secretive. He showed mint’s UI to lots of people and optimized it over time.

Build a prototype: If you are raising money, looking for customers or hiring people, a prototype is real advantage. People can actually see your idea in action, click around and feel the experience. Would you rather listen to a 10 minutes sales pitch or playing around 10 minutes with a new software?

Leverage your success: If you are once in the news, try to stay there. Mint got a pretty clever idea. They gave away free mint mojitos at the Techcrunch 40 and were eventually elected as people’s choice. Then they talked to other journalists if they won’t want to interview the people’s choice winner. And so on.

(via Carsonified)

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#51/111: Predictable Success

What is it about?

What are the ingredients for a successful business? Les McKown thinks money, people and structure. You can see a illustration of his business cycle theory below. On the x-axis is time and on the y-axis success.

(Picture from Les McKown’s Blog)

What can I learn?

Whitewater: While you are growing things get more complex. Your company slows down. To get to the next stage you have to introduce some processes and structure to manage your company.

Predictable Success: In this stage there is a equilibrium between entrepreneurial zeal and structure. This is the ideal state and theoretically you can be in this stage forever. An important key attribute in this stage is ownership and self-accountability, i.e. your employees are accountable for results. You focus on people instead on processes.

Treadmill: Your company gets into this stage if processes take over risk taking and entrepreneurial zeal. Processes become more important than people and individual gaols. To get back to predictable success you have to cultivate personal development. Focus on results rather than on compliances.

Conclusion

At the beginning, Les McKeown writes that he became an accountant and learned that financing are is the most important factor for a company. I was really disturbed and though: That’s why accountants don’t start companies. However, later he revised his answer. In Predictable Success, McKeown describes each stage thoughtfully and with examples. It’s a real pleasure to read this book because he tells a lot of his own experiences as a business owner and consultant. A clear recommendation for everyone who want to know how to a company transforms over time and how to achieve predictable success.

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#48/111: Seizing the White Space

What is it about?

What have Amazon, Hilti and Hindustan Unilever in common? Each company revolutionized its business model. Mark W. Johnson studied these and more companies and found a process for business model innovation.

What can I learn?

What’s the job-to-be-done? Don’t ask your customer what he wants your product/service to be. Find out what tasks he have to do. This allows you to use your expertise to build a better solution. This will be your starting point.

How can you satisfy it? Now it’s time to build a company around your product. What are your key resources, your key processes and how can you make money out of it?

Let’s take the first business model of Amazon for example. The job-to-be-done was offering a wide range of books. You can only make profit, if enough books will be sold. Also the warehouse costs have to be reduced. Furthermore, people want to read their books as soon as possible.

To ensure that you are going to sell enough books, you have to build a platform. So the key resources and processes are the technology for warehousing, IT infrastructure for the website (channel) and a partner for shipping.

Change is hard: Often there’s a discrepancy between your company and your new business model. If possible, take the easy way and build a new company. It will save your lots of time, discussions and compromises.

Conclusion

I really like Seizing the White Space. It is more practical than Business Model Generation which focuses more on building a meta solution. There are lots of interesting case studies with uncommon companies. Furthermore, I like Johnson’s approach of Customer Development, i.e. searching a solution for the job-to-be-done and then building the rest of the company around it. Great recommendation for everyone who wants to start a company and solve a job-to-be-done.

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#46/111: Startup

What is it about?

If you want to start a business, you need an idea and a business model and money. Elizabeth Edwards focuses about the latter. She shows you how to cut your personal expenses, how to calculate your financial numbers and why venture capital isn’t always the best option.

What can I learn?

Is your business profitable? Before starting your business, you should check if your business model can generate enough profit. How high is your initial investment and how much does it cost you monthly to operate your business? The next step is to calculate your profit on this basis. How long does it take you to break even, i.e. you aren’t losing money anymore? You should reject your idea if it will take longer than two years.

Capital can be expensive: Before you are going to look for venture capitalists, you should think about your need of outside capital. If you can do it alone, go for it. If you can’t do it without outside money, she recommends you to thoughtfully calculate your costs. Don’t forget to include your opportunity costs for searching investors.

Know your metrics: A business runs on numbers. You should monitor your industry key metrics (e.g. page impressions for social sites) and of cause your ordinary indicators like sales, costs and profit. Even if you aren’t a numbers person, learn how to read your key numbers.

Conclusion

This book is an accumulation of tips but lacks the explanation of why you should do they. This is a bit of a downer. The good parts of Startup were clearly the financial and legal knowledge. If you start your business in the US this information is possible pretty valuable. Lastly, besides of the financial and legal advice most advice is out of other books like Made to Stick or Business Model Generation. I would recommend reading those, if you want to deepen your knowledge.