Wednesday, July 18, 2018

How To Start a Business With Minimal Investment

My brother in law had a great idea.  Hell, everyone has a million dollar idea.  My mother in law has four, my barber has at least ten, and the guy that details my car begs me to invest in one of his many. 

Ideas don’t matter, they’re everywhere. 

The daunting and excruciating process of bringing an idea to a viable, profitable product or service is where all of the value is.  And that’s why so many people fail.  Because they don’t have the knowledge, patience, and drive to execute.  They don’t have the chops to get up and work through the pain and rejection every day to make it work.  They ultimately give up! 

Now back to my brother in law.  He had a million dollar idea.  Had no idea if anyone would buy it, but convinced himself that people would beg for his product and pay whatever he wanted, because he liked it.  He had no prior experience but somehow convinced his wife to pony up the 401K and credit cards to chase the dream.

And I’m sure you don’t have to be a rocket scientist to guess what happened next.  That’s because I guarantee you know someone that went through a similar process. 

Having no start up or project management experience, spending on the dream went out of control.  He started having some doubts about the sales forecast after obtaining some unfortunate information.  This was due diligence he should have done prior to starting.  His wife was freaking out because it had become a make or break situation for their future.  The fear and pressure was so insurmountable that he was hospitalized after a nervous breakdown.  And then they just stopped! 

I don’t think he has ever been so relieved over anything in his life.  He lost his house, wife and 401K and filed bankruptcy, but he was now a free man.  How did a dream turn into a prison sentence? 

The reason I am writing this blog today is because this all could have been easily avoided.  My favorite read that outlines the process of a proper start up once you are convinced of your million dollar idea is the “Lean Start Up” by   Eric Reis.

I’m sure most of you have heard of the book but if not, spend the 20 bucks and save your ass.  I won’t go into too many details but the two most important take-aways for me were the Minimum Viable Product and the Continuous Feedback Loop.   

The Minimum Viable Product (MVP) is the process of building the bare minimum product or service to test the market.  Hell, in some cases the MVP could be nothing but a phone call or sales pitch to see if anyone is interested.  If executed properly this should give you enough feedback to build the most basic model and that concept should be designed with as little capital as possible until interest and momentum can be built.

I have built several MVP’s over the years that gave me enough information to decide whether the idea had legs or not.  Some so ridiculous and aesthetically embarrassing that I don’t want to mention.  But guess what, they worked!  80% of them sucked but I had so little invested that dumping them was Ok.  The other 20% did well and 5% did great! 

Once your MVP has been established proceed to your continuous feedback loop of Building – Measuring – Learning.  This allows you to make adjustments and build upon your product INCREMENTALLY through continuous feedback.   If the model is working well, build on it.  If it’s working but not great make subtle changes, measure those changes and continue to adjust or pivot all together. 

Simply put, this process allows you to bring your idea to the market without going broke.  In other words, LEAN!  I’ve left out a ton of shit, so again, please spend the 20 bucks and read the book before you taking money out of your 401k.  Hopefully the wife will stick around too.

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Copyright 2018



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