The formula for whether you have a business

by Daniel Batten on October 12, 2009

Many commentators and business books focus on creativity’s show-ponies: marketing and product. Creativity with cashflow while less sexy – is what lets you grow a company that looks big on virtually nothing.

A friend once told me that his father had told him “recipe for business bliss: buy a product for $9, sell it for $10. Recipe for business misery: buy a product for $10, sell it for $9.” Often the easiest way to move from misery to bliss is to reduce your outgoings. This is particularly vital when you are a young startup, and never stops being particularly vital.

These are examples of things that you can do for yourself, which got our dollar going 50% further in our startups.

  1. Get advise for free  board and advisors paid only in options
  2. Hire only top staff: pay them 80-90% of market rates then made up the difference (and then some) with options.
  3. Negotiate, negotiate, negotiate. Always get more than one quote, always let the supplier know your vision and that you want a long-term partnership, always bargain. This can save you 30-40% on today’s rates.
  4. Use students: My current site complete with ecommerce-engine and audio-product was developed for $3000 including all artwork. Interview students by giving them a real problem to solve and recruit the best one to be your IT support for $20/hour. They can do your website too. Once you are out of start-up phase, don’t do this – but in the meantime it’s the right strategy. Use free supporting tools like Mailchimp for newsletters.
  5. Offer modest hourly rates to top up-and-coming people, but make them realise it’s an ‘apprenticeship’ where they get to soak in everything they will need to start up their own company.

This only works if in every relationship you add more value to them than money alone can using currencies that partially or fully replace money. The currency could be the likelihood of future business, fun, a ‘piece of the action’, job-references or training. It’s about making the value they get from you apparent to them in a way they would not otherwise have seen.

Once you have an otherwise viable and sustainable business proposition, innovative use of cashflow is often the simplest way to the ultimate way to move from business-misery to business-bliss

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