My first two startups weren’t successful, just like 90% of them. They weren’t a failure either, but the return on investment was not enough for me to keep working on them. Looking at the silver lining, I haven’t lost a few years of my life but invested them in not making the same mistakes again in my new ventures.
You can have as much business education as your brain can hold or read a whole library full of business books, but starting a company is a bit of a gamble and there is no safe bet on it. Unless you have millions of euros to adapt the market to your idea -many bad ideas have been successful just because they spent millions in marketing convincing everyone-, there is nothing that can stop you from failing. Still, there is nothing that can stop you from trying again if you plan and react accordingly.
The following is a list of key startup tips for low-budget, self-funded or bootstrapped startups wanting to be successful, if you have millions then this may not be for you, but for the other 99% of us, here we go:
35. Motivation is not everything
In a corporate job it is quite frequent to hire someone just because of their intelligence and motivation to learn, you can then invest two to six months training them and then you’ll have a super productive worker. In a bootstrapped startup you cannot afford that. Time spent training someone is less time a co-founder has to work on other things, and there are just a limited amount of hours a day and a huge list of work to do. A co-founder in a bootstrapped startup must not waste any time. Partnering with A players will give you many more chances to be successful, disregard B and C players. Yes, even B players, you may not feel it matters at the start but it will do in the mid-term when things start to get serious and complicated.
34. You need to be educated but also have professional experience
I’ve always believed anyone can learn anything. No one taught me how to make websites and after many years of investigating and self-teaching myself, nowadays it pays my bills and builds my businesses. But there are some skills I wouldn’t have been able to learn by myself or in any University or book.
One of my failed startup’s main weak point was not because of having an uneducated team, we all had University careers in Finance, Marketing, IT and so on. Our main mistake was most co-founders didn’t have enough professional experience per se, which implied not knowing how to work in a professional environment: the purpose of meetings and what these should be based on or how to carry them and conclude them; how to plan their tasks; the importance of time and how to manage and prioritize it; how to report or inform up and down the ladder; when to communicate and when to keep something to yourself; when to ask for help; when to document; how to organize information… Basically how to work professionally in a team. These are things you can only learn by practice in corporate or professional environments and nowhere else. It’s a day-to-day subconscious training that your partners must have or you’ll end up wasting lots of precious time until they acquire it.
33. Working remotely is evil
It is very dangerous to work remotely and not have face-to-face interaction often, even for big companies such as Yahoo. A startup’s beginnings are uncertain and everything needs to be extremely nailed and planned. For a startup to work remotely and keep up, all co-founders need to have a lot of discipline, be experienced in working remotely, know their tasks very well, know how to manage themselves, have everything planned and report shortly but constantly. That’s usually very hard and has an exponential curve as the project size increases. If there is just one team member who doesn’t have these qualities, it can affect the whole team, specially in startups where teams are small and each person means a huge percentage of the whole company.
32. Everyone gets their hands dirty
You don’t want manager-only partners in a small startup, you want everyone in there to work. In the same way, you don’t need a Finance or Executive guys. It takes very small time to deal with the finances of an early bootstrapped startup as well as the direction so do it yourselves and save a big chunk of shares and a head in the board. Every partner should be worth it. You should ask “What would happen to the startup if this guy wasn’t here?“, if “I guess we could manage it ourselves” is the answer then get rid of him.
Now that we got rid of unnecessary bodies, it’s important to know that everyone needs to allocate some little time to be his own manager. Which takes me to:
31. Do not micromanage
if you have time to micromanage, you are not busy enough
Let other co-founders do their tasks and take their decisions in the fields they have been assigned. If you need to micromanage, then you can either do a better job than them (Why aren’t you the one assigned to their tasks?) or you don’t trust them (Why did you partner with them in the first place?).
30. More than two is too many
A startup requires a lot of working hours and one of the biggest time wasters is taking decisions. An individual can make a decision pretty quickly, two people take longer, three even more, and so on… The more people allowed to take part in decisions, the more time is wasted deciding and sharing new points of view. So you will be deciding on which of the brilliant eight different approaches you should take, then adapting it to everyone’s taste and deciding again on the refined options while you could already have finished the first one, executed it, tested it and found out if it worked to change it, improve it or leave it. Better iterate quickly than spend a lot of time to find the perfect one.
If you really need to found a company with more than 2 people, a good way to work effectively is to delegate departments and responsibilities completely: the Tech guy will decide and do Tech stuff, the Sales guy will decide and do Sales stuff and so on. And once a week everyone reports to the team on decisions taken and which where successful and which weren’t. Steve Jobs wanted to become CEO so he could make decisions without the need of a sign off, and he was right, that made Apple move forward much quicker than its competitors. In my case, one of our biggest startup mistakes was allowing everyone to take decisions in Tech issues, which just delayed the project even more and forced scope-changes way too often, which lead to not getting things done.
29. Share the same amount of passion
Every co-founder should believe in the startup at the same or similar level. Unmotivated partners will eventually drag other co-founders down, or will leave soon hence wasting time to reorganize. Always study people before you partner with them, if they are going to take “building a company” as a hobbie keep away from them. Same goes for people without persistence, their motivation won’t last long.
28. You must sacrifice part of your current life
It is not possible to start a business while keeping your previous life intact. If you have a full-time job, go to the gym every two days, spend a few afternoons with your girlfriend, another few with friends, go out on Friday and Saturday night, play football on Sundays and still manage to sleep eight hours a day, you need to sacrifice something in there.
A startup is not a hobby. Many experts assure that you need full-time dedication for a startup to succeed. In my opinion and experience, you can actually run a startup while working full-time, but dedicate no less than 20 a week normally which means saying goodbye to half of your life, sleeping less than healthy and start working your ass off. It also depends on the ambition of the project, but you should always multiply by three what you thought it would take initially, estimating time is one of the things we humans suck at.
So say goodbye to weekends, or to that comfy couch when getting back from work… If this scares you, wait a few months in your full-time job to save some money and prepare your personal life. You should consider yourself getting married to your business partners.
27. Don’t live stressed all the time
A popular reason to start your own company is to have more freedom and live a happier, less stressed life. So while it is good to have stressful moments while working in your startup, specially during the initial push, if once you start rolling you see you are constantly stressed and suffering you may want to take things easier, chill or give it a break. Don’t let your startup grab you down because that’s not what you where looking for in the first place!
26. The concept of fairness
When deciding company shares, they need to be fair. If the most accurate distribution is 30-70%, go for it, don’t make it equal just because “it’s easier”. In cases where there’s just a little difference, such as 40-60%, just go 50-50% and give extra perks in compensation (pay extra hours, never pay with shares). I won’t elaborate longer because this brilliant text by Joel Spolsky says it all: Forming a new software startup, how do I allocate ownership fairly?
Find out exactly how many shares you should have in this Co-Founders Share Calculator (click Use this template below Co-Founders Pie Chart).
Also, remember you can do 30-70% profits but 50-50% decision taking so no one feels their opinion doesn’t count.
25. Yes, you can start a company with friends
You can, my third startup is doing fine, we broke even and started making profits in less than half a year. And my co-founder is a former flatmate and very good friend. While we both allow many flexibility amongst us and an occasional slack, we also like to put pressure on ourselves to go further and work harder and smarter. I prefer working with friends after all because it gives me enormous peace of mind to know that I can trust them. Other key points you must look for in your business partner regardless of friendship or not:
- He is an A Player: really good at what he does
- His talents compliment mines: we make a powerful combination
- He is extremely motivated: he craves for success and the future
24. Keep up the morale
I’d say the most popular topic in meetings with my business partner is just talking about how great our startup is and how great our future will be. And while sometimes I thought we where just wasting time bragging, it worked great to keep motivation up specially during those low moments where a lot of work has been done and no profits are coming in.
Most startups start with high motivation and passion, but these go away as time goes by. As more work and work is invested and no results are seen, people start to get tired, unmotivated, slow, negative and uncreative… This is why you need to keep pushing the motivation up. Cheer talk is not a time-waster but a productivity boost, a battery energizer. Any small good news is great news, talk about it and repeat it often, congratulate your partner now.
23. Crave it
As Napoleon Hill says, cultivate a “burning desire” to succeed. It takes real effort, will and mental strength to get it real, you want to make the desire of success to burn in the inside of you and feel as if it is something you can’t keep living without. As another excellent quote states:
22. Accept failure
Did you fail? Great! You are one step closer to be successful! Always take failure by its silver lining. Failing is not a bad thing, it’s a valuable lesson. Every successful human being has failed (some really lucky exceptions apply). Learn from your mistakes so you don’t repeat them again and go for the next one, don’t stop, get up and try again.
21. Stay away from negativity
There’s always that kind of people that will roll their eyes and look down at you. RUN away from them, they are the envious and pessimists, they want everyone around them to fail so they feel more important and will stab you in the back, lie and criticize everything you do.
20. Don’t believe in luck
Don’t try and mimic Mark Zuckerberg, Bill Gates or Steve Jobs. They are one in a million and you will probably won’t be the next lucky one, so focus, be patient and work.
19. If something stinks, it’s probably shit
Trust your gut.
18. There must be clear profits
I’ll keep this idea really simple. Before starting any work in your startup’s idea, fill in this formula:
CompanyProfits = Profits - Taxes - Expenses - CostOfClientAcquisition MyProfits = CompanyProfits / NumberOfPartners - Taxes - TimeSpentWorking
If your profits as an individual are not very clear: STOP. You must see the profits punching your stomach, you should see the figures and go “Fuck yeah!“.
When I do my business plans I always do two of them: the Optimistic and the Pessimistic, because I know the Real one is in the middle of the two. If the Pessimistic one is really bad and the Optimistic one is just a “Meh” or “Not bad I guess“, that idea either goes to the bin or gets more thought.
17. Beware client acquisition costs
You may have a great product and think you have a good sales margin, but check how much it costs you to find a client. In my case, we had a 5€ to 20€ profit margin per sale, but once we calculated how much we spent getting that sale, the profit went to between 1€ and 4€… Take taxes out of that and divide it per number of partners… it was nothing, we had to sell thousands to make it for minimum salary. Plus the market wasn’t big enough, there’s always a certain amount of potential clients.
16. Don’t rush it
Since I was a kid I always wanted to start a business and I would jump on board of any business proposition blindly just because I didn’t want to miss any opportunity or because I couldn’t say no to a friend or because I just wanted to start as soon as possible. But don’t worry or get overly excited, a lot of opportunities will come more often than you think. Just be patient and say No until you feel it’s the right one.
15. Go for the MVP
On low-budget startups, always go for the MVP (minimum viable product), don’t build a product full of bells and whistles, start small and deliver quickly. It will help you test the worthiness of the idea and you’ll be able to judge and decide if you should invest more time and money on it or not. Don’t wait until everything is perfect to evaluate how your idea fits in the market because you may have already spent your savings by then.
14. If you bootstrap, do it right
If you can do it yourself, do it. If you can’t, learn how to
My startup was on a very tight budget, most of us where quite recent graduates and didn’t have nearly any money to invest and we made great efforts to come up with the money to bootstrap. Yet, we spent it in very avoidable costs. It took us months to save money yet days to burn it out.
Setting up the business
In Spain it is quite expensive to found a startup, you need to pay monthly fees and do lots of legal and financial paperwork which usually require an accountant. If you are not even live, don’t waste time and money, keep that cash and spend it on what you really need. No police will knock on your door because of not having a company registered. Wait until you make your first sale.
Hiring a lawyer
Renting an office
Another huge mistake we made was increasing our recurring costs by renting space in an office. We didn’t even have a website yet and most of the co-founders didn’t even had that much work to even justify being in an office every day for more than an hour. The big part of the job was building the website (me) and I actually worked better from home.
We got 500 business cards for each, mobile phones for the sales guys, several domain name combinations and TLDs (just in case someone tried to impersonate our still non-existing brand), a few hundred euros in company and trademark registrations, web audit security certificates and nearly a brand new iPad since some co-founders thought going to sales meetings with a netbook made us look cheap and untrustworthy…
90% of those costs where avoidable, at least at that time, our business operated 100% online and we still needed 4 months to get the website running! It is as important to focus on making profits as it is on cutting costs, always look at ways to reduce costs.
13. Don’t work hard, work smart
Give me six hours to chop down a tree and I will spend the first four sharpening the axe. —Abraham Lincoln
My business partner brought this one up a few weeks ago, and he is totally right. This is the approach we have been taking since we realised time is a valuable resource. We’d often spend time thinking on how to optimize our time and save some minutes of work here and there than actually working on it. Because you only have a limited amount of hours a day and in the long term, if you want to scale (which you do), you will need to value time as gold. If you can code a small app in 4 hours that saves you 10 minutes every day, do it! It’ll be worth it in 24 days.
12. Have a realistic dream
You don’t need to become Google to be happy. Aim at something you can achieve that will still make you happy before you go crazy.
11. Do something that scales regardless of dedication
You should try and focus on a product or service were working hours is not what makes your startup grow because even if you are lucky and successful enough to grow, you will also grow your expenses hiring more people and bigger offices to get the job done, you will eventually reach a limit (everything’s got a limit, be it potential clients, social evolution or changes in the industry) and shrinking a business will be more complex and expensive than growing it. A web design company gets paid money and scales based on the amount of projects it gets. Which means you will need to work more hours or hire more people to get more money and grow. On the other hand, a SaaS can scale exponentially.
10. Don’t invent new things, improve existing ones
While it may sound revolutionary, unique, game-changer, out of the box, and many other buzzy adjectives, creating a new product is hard and that’s the worse nemesis to success. Which is exactly what you are looking for. The difficult part in creating a brand new product is not producing it, you can get a team together and get it done. But getting the clients, the ball rolling. People will not have the need to search for a new unknown product they don’t even know about. You will need to spend thousands in promoting your product everywhere and advertising to them that they really need that and creating the need in them to get up and spend money on you. If you have the budget to do it, great. If not, enter a market where someone else has already cleared the path for you and there’s people aware of your product’s existence who will search for it.
It may sound tough to compete in existing markets but there’s a few very easy approaches you can follow to take some market share from your competitors easily, improving what they offer.
- make it better
- sell it cheaper
- add features
- remove features (simplify)
- localize it by
- providing better support,
- translate to local language,
- place it closer to where they are
9. Don’t aim too high or big
In my first startups we were inexperienced, had no time, had no money. Yet we dreamed big and wanted to compete with a multi-billion business. Each one of us was doing the humongous work you’d assign to a team of five, and part-time. It took a year to get the product ready and by then we had made so many changes and pivoted so much it was not exactly useful and made less sense than we thought, we all ended up exhausted and with just one product. All eggs where in one basket.
It’s better to work on 5 small projects that give you 200€ each that one that gives you 1,000€. With small projects you will generate cash-flow sooner since you can start monetizing your first one while you work on the second one… and so on. Also, if one fails, no problem, you still have other businesses to pay the rent.
8. The power of passive income
Another thing you want to consider is how much maintenance/support work will your idea need. Ideas that don’t take much time once they are live give you time to work on a new project while giving you passive income, ideas that require you to keep working full-time on them mean that you will need to dedicate to it and won’t be able to launch anything else.
7. Do not waste time with investors
Investors waste you time by having more meetings than before, taking their own decisions while questioning yours, force you to report to them periodically, put unnecessary stress and pressure on the team and most importantly take a huge insulting cut of your company’s income which impacts your personal profits hard. And all of that just for more money at the start. Are all these burdens really necessary?
6. The good thing about investors: honest feedback
We wasted many hours every week pitching our concept to investors, entering startup competitions and asking banks and Universities for loans instead of getting our shit together and launching the product. None of the investors ever made us an offer which, to be honest, was the best hint we could get to realize that either the idea or the team weren’t working. Getting honest feedback is hard so I guess the only reason why you would look for investors is to get an honest view from an experienced outsider. Their offer (or lack of) will tell you if your startup is worth it.
5. You are not Mark Zuckerberg
Facebook, Google, LinkedIn… we all know about them and their incredible success. But don’t compare yourself to them, the odds of becoming “the next Facebook” are one in a billion. Don’t waste your time reading books on their stories, on how “they started with just a 10 year old computer in some dirty garage“, on how they made their first billion. Learn from people which are less known, “real people” and most importantly, learn from their mistakes so you can avoid them.
4. Forget your dream, go for the money
If there’s just one tip of advice you must follow, this is the one. Don’t follow the dream at first, follow the money. Common mistakes when starting a company are having one of these motivations as your main one:
- Blind passion on an idea that’s stuck in your mind
- How “cool” you sound by saying you are an entrepreneur/director/founder/CEO
- To make a better world
- To wake up late or work from home
A company must make money, if not it’s not a company, it’s just a time-waster, hobby, crap. Period. Eventually it will become unsustainable. The first reason you want to have is:
- MAKE DAMN MONEY
But hey, don’t just work for the sake of it, you must also have a secondary motivation and enjoy what you work on. The first principle must be of economical nature, the second something that you love and motivates you… But remember: make money.
3. Plan to re-plan
In preparing for battle I have always found that plans are useless, but planning is indispensable. —Dwight D. Eisenhower
Keep planning, never stop. Always have a plan but don’t be afraid to pivot, just re-plan. Plans are not made to stick to them, but they are very useful to structure your mind, organize your time and show you an overall point of view of the current situation. Also, don’t build 50-page plans, your business plan should be kept simple and should fit into one single A4 page.
2. Don’t be romantic about your idea
Once you start your project, if you see it doesn’t work, keep trying a bit more, it usually takes longer than expected to make it work. But if it doesn’t work after a while then STOP. I usually give it a year (your mileage may vary) and reasons to quit are because the startup grows too slow or doesn’t make enough money.
Don’t stick to an idea that doesn’t work, look for something else and pivot there. You hopefully already have an organized army of talented people craving for money, you just need to change the idea. Even at early stages and during the whole life of the startup, keep thinking on new business models, even if it means doing something completely different. Evolve to survive. Always keep thinking on the next idea.
1. Study entrepreneurship
You don’t need an MBA to succeed in business but just being a MIT engineer will hardly get you anywhere. Learn and read about business and startups specially if your profession is something else. Here’s some inspiring and helpful sources for building a startup:
- Personal MBA (book): A master class in business that you can take anywhere
- BrightJourney (formerly OnStartups, forum/QA site): Lots of tips and answers to everything related to startups
- Think and Grow Rich (book): A must read classic for anyone wanting to succeed in business and life
- Creating a profitable business (video, 30min) by David Heinemeier Hansson (creator of Ruby On Rails and 37signals partner)
- Quora: How did you make your first million dollars?
This is an article I had standing as a draft for a long time and decided to publish today so while everything stated is true, some facts about my situation might be a few months old.
Photo by Heisenberg media