May
28
Software Start Up on a Tight Budget
Part 4 of 5
Before you begin work to start creating your product, it is critical that you think through just how your business will operate. If you don't have this through through properly, your efforts could be for naught.
Before I begin on this section, let me remind you, there is such a thing as over preparation as well as under preparation. The approach I like is to spend the minimum amount of effort planning and building and get something out there for a minimal cost and see what happens. No matter how much preparation you do, your customer will always throw you a curve ball.
This is where you want to apply the 80 / 20 Rule. Essentially this is 80% of the benefit comes from 20% of the effort. What this means to your new business is that you should NOT strive to do everything you think you need to do. One way I gauge this is to start working on something and once I get most of it done and the work begins to become overly cumbersome, it is about time to stop and say "good enough for now." That is a rough rule but should give you a little bit of guidance. Another thing you can do is line up all the costs (in time and money) for each part of what you think needs to be done and remove the items that cost the most. Of course it is a little more complex than this as some things are not optional but the essence is that you won't do everything at the start and you should focus where the least amount of effort gives you the greatest value.
When mapping out how your company will operate, there is one thing you must focus on above everything else. This is NOT the product or service you provide. Yes, I said it, your product or service is NOT the most important thing to focus on. The most important thing for you to focus on is sales.
Believe me when I say, I am as surprised as anyone that these words are coming out of my mouth (or fingers). I have spent over 15 years as a technician, focusing on the product and service. I am not a sales person.
But cash flow is the life blood of your business. Without it, your business dies. And if you have great sales and a good product, your business will do much better than if you have a great product and poor sales. If you have a great product and good sales, you will probably get by but it will be hard to thrive. Also, with great sales, you will have great cash flow which helps you improve your product and services which can then be put into creating great products and services.
While I knew sales was important, I really had to have this lesson driven home the hard way. During the recent recession sales dropped off dramatically. We began to hemorrhage cash like a severed artery gushes blood. The net result was that we had to cut down our staff and go into survival mode. It was not a happy time for anyone and the stress was high. Some of this was due to unfavorable conditions. Most of it was due to a period of weak sales. Now my primary focus is on sales. I do spend a bit of time on product development but sales is my main job.
When we are young, we are taught that we must be perfect and that we are to be penalized for mistakes. As we grow older, we carry that mentality with us. But life doesn't work well this way. Instead, we grow more by taking risks, making mistakes and learning from them. As I like to say, fool me once shame on you, fool me twice, shame on me. So be brave and take risks (reasonable risks, you will have to judge what is reasonable) and be prepared to learn from mistakes and not make the same mistake the next time.
Failure is a part of the process. Take advantage of it. Experiment in small bits and get feedback early. Let your staff know it is OK to make mistakes as long as they keep growing and get better. This is how you evolve your product into something wonderful that your customers will love.
I sometimes look back at what our leading products used to look like. They started out as nothing special. But we kept improving, getting feedback from customers and evolving it. Now I look at what we have and am quite pleased. Of course, we haven't stopped. I see tons of opportunity for improvement and continually request feedback from customers. The best ones will be brutally honest and tell us what we really don't want to hear. But that usually helps us out the most.
Another piece of advice about evolving your products and services comes from Michael Masterson's book "Ready, Fire, Aim." If it ain't broke, FIX IT. If it is broke, get rid of it. What he means here is that you need to take your best products and services and make them better and take your poorer performing products and get rid of them. This way you spend your effort on the products that are doing the most for you and eliminating those that are sucking more resources from your business (time, talent and money). Move your best people onto your best products and services as you have the greatest potential for growth there.
In summary, start small and grow through experimentation, feedback and continual improvement. Be prepared to take risks and make mistakes. And focus on what you do best while getting rid of those things that are mediocre or poor performers.
Before I begin on this section, let me remind you, there is such a thing as over preparation as well as under preparation. The approach I like is to spend the minimum amount of effort planning and building and get something out there for a minimal cost and see what happens. No matter how much preparation you do, your customer will always throw you a curve ball.
This is where you want to apply the 80 / 20 Rule. Essentially this is 80% of the benefit comes from 20% of the effort. What this means to your new business is that you should NOT strive to do everything you think you need to do. One way I gauge this is to start working on something and once I get most of it done and the work begins to become overly cumbersome, it is about time to stop and say "good enough for now." That is a rough rule but should give you a little bit of guidance. Another thing you can do is line up all the costs (in time and money) for each part of what you think needs to be done and remove the items that cost the most. Of course it is a little more complex than this as some things are not optional but the essence is that you won't do everything at the start and you should focus where the least amount of effort gives you the greatest value.
When mapping out how your company will operate, there is one thing you must focus on above everything else. This is NOT the product or service you provide. Yes, I said it, your product or service is NOT the most important thing to focus on. The most important thing for you to focus on is sales.
Believe me when I say, I am as surprised as anyone that these words are coming out of my mouth (or fingers). I have spent over 15 years as a technician, focusing on the product and service. I am not a sales person.
But cash flow is the life blood of your business. Without it, your business dies. And if you have great sales and a good product, your business will do much better than if you have a great product and poor sales. If you have a great product and good sales, you will probably get by but it will be hard to thrive. Also, with great sales, you will have great cash flow which helps you improve your product and services which can then be put into creating great products and services.
While I knew sales was important, I really had to have this lesson driven home the hard way. During the recent recession sales dropped off dramatically. We began to hemorrhage cash like a severed artery gushes blood. The net result was that we had to cut down our staff and go into survival mode. It was not a happy time for anyone and the stress was high. Some of this was due to unfavorable conditions. Most of it was due to a period of weak sales. Now my primary focus is on sales. I do spend a bit of time on product development but sales is my main job.
When we are young, we are taught that we must be perfect and that we are to be penalized for mistakes. As we grow older, we carry that mentality with us. But life doesn't work well this way. Instead, we grow more by taking risks, making mistakes and learning from them. As I like to say, fool me once shame on you, fool me twice, shame on me. So be brave and take risks (reasonable risks, you will have to judge what is reasonable) and be prepared to learn from mistakes and not make the same mistake the next time.
Failure is a part of the process. Take advantage of it. Experiment in small bits and get feedback early. Let your staff know it is OK to make mistakes as long as they keep growing and get better. This is how you evolve your product into something wonderful that your customers will love.
I sometimes look back at what our leading products used to look like. They started out as nothing special. But we kept improving, getting feedback from customers and evolving it. Now I look at what we have and am quite pleased. Of course, we haven't stopped. I see tons of opportunity for improvement and continually request feedback from customers. The best ones will be brutally honest and tell us what we really don't want to hear. But that usually helps us out the most.
Another piece of advice about evolving your products and services comes from Michael Masterson's book "Ready, Fire, Aim." If it ain't broke, FIX IT. If it is broke, get rid of it. What he means here is that you need to take your best products and services and make them better and take your poorer performing products and get rid of them. This way you spend your effort on the products that are doing the most for you and eliminating those that are sucking more resources from your business (time, talent and money). Move your best people onto your best products and services as you have the greatest potential for growth there.
In summary, start small and grow through experimentation, feedback and continual improvement. Be prepared to take risks and make mistakes. And focus on what you do best while getting rid of those things that are mediocre or poor performers.
- Part 1 - Introduction
- Part 2 - Getting Yourself Ready
- Part 3 - Building Your Team and Product
- Part 4 - Selling and Growing Your Product
- Part 5 - Additional Reading
Posted By Aaron Bono
