I gave a talk at Dropbox called "How to start a business without quitting your day job" that I think delivers a lot of the punch on this page without the weird culty vibe. Give it a watch (for free, obviously) if you like: https://www.youtube.com/watch?v=J8UwcyYT3z0
Thank you for sharing. For quite awhile now I've had in the back of my mind that I want to develop some kind of side business. I'm perfectly happy at my full time job, and incredibly busy ... but I've always been the kind of person to spend my free time tinkering with hobby projects. It would be nice to pour that time into something that generates a little extra cash and has the potential to blossom into a small business.
Trouble is ... my ideas suck. Either I have a really good idea that requires inventing new technology, or I have a niche idea that I can't fathom how to monetize or market. I'll take your points about being boring to heart and hope something finally springs to mind under those constraints. But as of a month or two ago I already realized that I needed to tone my ideas down, and after all that time with it in the back of my mind ... I still have nothing. Frustrating.
Thanks for that, I watched it and probably wouldn't have found it if not for your comment here!
I think that for a lot of people who might try small businesses, the "use of surplus energy" is intermingled. Maybe you want to make some cool piece of software (because you just want to); and you want to use it to do something creative (because fulfillment); and you want it to also be a business (because you want more money).
In that case it's much harder to focus on the "boring" part. (I am assuming of course that there exist things that are "boring" in the business sense but still allow for some satisfying creativity and/or fun hacking. For instance CoderPad gives you plenty of room to do cool programming things, if doing those will make you happy. You just might have to book them on the lifestyle/happiness ledger. The bingo-cards thing, maybe not so much.)
Very neat, I have always intuitively followed these constraints and I have noticed that they keep me out of trouble. I don't shoot for the stars, I shoot to create value and make a bit of some money. That said, I end up passing on a lot of way more interesting / world changing ideas, for more boring ideas.
I highly recommend considering consulting/freelancing when looking at starting a company. Hourly rates generally price in an expectation of not having work full-time, so you work less than 40 hours/week to begin with. Drop an hour or two of commute every day on top of that and it's a big win in terms of time that can be spent on a startup or side-project.
Of course consulting requires more in terms of people skills - you're basically "interviewing" every time you find a new client. But I think in some sense that's a hump to get over either way - there aren't many startups that don't benefit from founders having soft skills.
Sort of an orthogonal point to the article, of course.
In addition to the time and flexibility advantages, consulting will also give you some transferrable business skills and practice with the basics. You get experience with things like accounting, sales, and marketing which are all essential for your startup.
If you cannot even run a single-person consultancy successfully, you probably shouldn't try a startup.
Thanks for reading / commenting on the post. Just wanted to say I massively agree with you; it's exactly how we got started, and could afford to test these various business ideas and our agency business is what funds our tech. Everyone else has already mentioned the issues with focus, maker/manager schedule, etc, which are all valid in my experience.
However I have one more for you: the businesses that buy from you as a consultant are very unlikely to buy your product.
Why? Because if they need a freelancer / consultant / agency to do the work for them, they don't understand the work enough to do it themselves (or don't have enough time). Therefore any self-serve solution tends to be met with blank stares and confusion. Likewise, the people who use our product on a self-serve basis are typically not a good fit for our agency.
Been doing it for 2 years. Funnily enough I just had a discussion on this topic with my current CTO/co-founder (I'm the business guy).
Pros:
- indeed you bill much more per hour, so in theory spend less hours.
- your work actually gets implemented, because you bill much more per hour. Generally "project management" is much better because they are buying a product and are incentivised to get a return on their investment.
- you deal with CEOs/managers as a peer, and learn (faster) from successful CEOs as a result.
- you will rapidly learn to sell. How do you differentiate yourself from the other 1,000 consulting outfits out there? How do you justify charging 5x what that Bangalore outsourcer is charging?
- it's a series of small successes that give you a boost psychologically when the product is so far away and the startup side seems not to be progressing.
- you think you're different because you're not taking money from "these risk-averse people" who "don't understand" your product. You'll get there the hard way but own everything at the end! Once this feeling becomes less important to you, you are ready for seed investment.
Cons:
- by far the biggest is the time suck, and focus suck. You're context switching constantly. My first CTO quit in part because he was consulting as well, and the product got nowhere for months because we invested too much time in our main client. This time around I'm the only one consulting, CTO is full time on the product. It's still exhausting and inefficient, and he's justifiably annoyed when I'm unable to do startup stuff because I'm focusing on clients. Client takes precedence because you cannot screw up with them, you're delivering a professional product at certain standards. The business stuff is very important, more than it looks, and so the product launches later, sales happen later, marketing happens later, etc. which hurts the company because time is also a currency, arguably your most precious. The dynamics are well depicted in the movie Primer, where one of the group is working full time to pay for the others to build their time machine experiment. Watch the group dynamics when he returns home late at night.
- at some point you'll have to cut off clients, when your startup takes off. When this happens, if you were actually good at consulting, it's going to suck for them. If you are professional and ethical, this hurts you as much if not more as it hurts them, you grow to like a good client.
- Clients quit without notice. In my case, one sold to a larger group, another ran out of money. Then you're scrambling to fill the gap and spending time doing consulting sales instead of startup sales, because cash is king.
- should probably point out: what you bill and what you do is not exactly the same. If my client wants me on site for a 1h meeting, I'll probably commute half an hour there, then have lunch with the PM afterwards, then commute back to my office - total 3 hours for 1 billable. On top of which you are now on the Manager's Schedule [1] and have important opportunity costs from not having blocks of time to yourself.
A nice parallel is when I was a student and many of my colleagues had this idea in their head that they could be "everything" - have a phenomenal career, be a helicopter parent always there for the kids, retain a cool and active social life with Facebook worthy trips. After a few years they all ended up picking one of the three, because there's only so many hours in the day, and sleep deprivation actively harms your ability to think, which is a prerequisite to making progress in at least two of the above. You can't be an MD at Goldman and know what your kid was up to at school today.
Money buys you the time to focus on the startup and that's much more valuable than it looks. Of course this comes up on HN all the time, I just wanted to add a bit of flavour and an extra data point.
I was given the exact advice few years back. If I could go back in time, I would have given myself a couple of years more at the job while trying to carve out a earning-product on the side.
I followed the consulting path, but now I would caution against the consulting/freelancing path, unless one was building a consulting-agency. Theoretically everything sounds good, but has many problems in practice.
1. If you are successful at consulting, it means money (and potentially a lot of it). It takes stupidity, insanity and courage to leave the money on the table when work keeps pouring in. For last 6 months, I have halved my work hours to 20-25 per week to work on developing products. That was not an easy decision ( I still work total of 50-60 hrs per week). I had a few ideas that fizzled out quickly and now I can't say what exactly I'll be working on - I still have a few good ideas that I need to try.
But last 6 months part-time consulting did make me miss out on the money and opportunity cost. And the pressure mounts every day because I gave myself 1-1.5 years to try out.
I might be trapped too because if I fail at products it makes sense to start a consulting agency instead of searching for a job.
2. You might think - "I'll earn from consulting and invest in products". Really! That did not work for me. Bad hires, management-stress, and lack of focus was pretty evident. Not saying it won't work for others - but less likely to work if you don't invest focused time in products. I just let many go(in a nice way) and decided to start afresh.
3. I worry constantly and this also pushes me hard to do more work. I haven't made a successful cut into products, I am losing out my years and the opportunity cost is way too high compared to being an employee. My life is much better as a consultant-freelancer in absolute material terms, but this is not what I headed out for.
4. Hard to do justice to consulting project and product both. When I was doing multiple consulting projects, it was easy to switch between those. But now for some reason, its hard not to think about my product when I am also developing someone else's product. On one hand you want your customers to be successful and on the other hand you envy them and crucify self because you made the product work for them but haven't done it for self. That is just a feeling, but it hurts!
There are positive points for consulting - One gets exposed to the world of business, paces up, upgrades self, learns stuff like selling and negotiating. These can be done as an employee too (but slower).
If one starts on the side as an employee, there is only one issue to take - Getting out of the comfort zone and focusing on one thing. Employee is very comfortable in that setting and finds it easier to blame others/circumstances for failures. As far as that attitude can be avoided, starting up while being an employee is still a better thing.
P.S: Freelancing/Consulting is not a bad path - its wonderful, just check priorities.
hey man, can you give some advice about how to start consulting? My day job is a hardware engineer for a semicon company. I write software models for HW devices so we can estimate their performance before fabricating them. Mostly involves C++ and analyzing data. I am not sure most companies would hire some consultant as opposed to just hiring them in-house. Can you elaborate your field of expertise and how you got started? thanks
Nothing really new here that isn't covered in Lean Startup materials.
>We've spent millions of dollars ... so you don't have to.
This two person company that's had, from what I can tell, a hand full of clients, has spent millions of dollars testing their marketing? I find that a little hard to believe.
That said, their Playbook page is pretty cool and informative, even if seemingly most of it is behind a paywall. It'd be nice to have more information about how these ROIs were calculated. If it's a sample size of three it doesn't mean much. Or whether it was done in combination with other things, and how long those results were measured for also matters a lot. As it stands right now it just sort of comes across as marketing bullshit because it's impossible to tell how meaningful the ROIs are.
The case studies are also pretty weak. Your solution is two sentences? Really?
Hey, author and one of the co-founders here, michael taylor. Thanks for checking us out and taking the time to comment! We definitely are standing on shoulders of giants here; I sleep with Lean Startup under my pillow. We just saw this blowing up on HN and I'm personally pretty excited because it's the first time I've had anything on here. Didn't even expect it as a marketer, so that's awesome.
We've actually just hired our 15th person and for the past 2 years we've worked with 70+ startups and spent around $2m. That's not counting one client who spends about $40k a day on FB ads. Before that I worked at Efficient Frontier (now part of Adobe), Travelzoo and ShopStyle. In each place I managed or optimized multi-million dollar budgets; the learnings from which I applied whilst building our playbook, and I apply every time I write a post.
ROI for our playbook is calculated based on the average of the experiments we've run. Looking at the numbers we've averaged about 2 concluded tests per tactic, but those numbers are highly skewed; there are some that have run 10+ times, others that have never 'run' (just things I've tried before but don't have conclusive data to hand, or things I've read about in blog posts). Either way, this data should be taken with a pinch of salt and used directionally; while eventually we dream of being able to build a recommendation engine that auto-prioritizes these tactics, the reality is that we'll need a lot more people using the system (hence the incessant blogging). :-)
Beware if you think after reading this you know all about starting a startup. This is just 10% of material - mostly surface knowledge. Read a book such as Running Lean to get more in depth knowledge.
The biggest issue for me is to identify meaningful problems in the first place.
I mean, when I work for other companies I can crack down on problems they identified and have customers for and often I have good solutions for them. But finding these problems is hard.
Totally get that. You've already got a great way to identify the meaningful problems - it doesn't come out of thin air, but out of your experience working with people, clients, etc...
That's the point of Step 1: Wanna know what problems a client is facing? Ask. If you don't ask, you'll never know what solution to build.
Great writeup. Very informative, speaking as someone new to the realm.
It seems it's only applicable to business models that rely on getting revenue directly from customers (i.e. buying subscriptions or widgets).
Do you have any thoughts about how you might test an idea where your service is free, but you get revenue through advertising to your users? It would still be very valuable to get some sense of how useful users would find your site, how often they'd visit, etc..., but you don't really have a strong test (i.e. will they pay?)
Well I can give an example from an old startup I worked on in the past. We wanted to see if a CRM for job seekers would be useful. But we didn't build it so they could come. We repurposed Trello as a CRM, got a group of job seekers on board from Reddit, and proved there was value in the idea. Then we built it.
The proving of willingness to pay came from surveys of those and subsequent users that said "yes, i would pay X per month for this"
Post a job listing on your local Craigslist for the closest category to what you want to work on. Something like:
"Local educational startup looking for K-12 school teachers to survey"
I've done it multiple times for startup ideas and user testing. I've always got numerous replies. Most people are more than happy to have an email dialogue and many are also open to meeting in person to test your app.
If I take up more than 30 mins of their time, I usually get them a $5 Starbucks gift card or buy them lunch (I don't tell them ahead of time).
If you don't have the network, you have to build it. There's no real way around that. If you want to start a business and need to stress test your idea like this, you'll need to do outreach. Whether that's cold outreach or attending events or joining the right groups and communities, it's all about the legwork.
But the point is you can still do that on your own time without making huge sacrifices. Taking the concept of "go out and talk to people" too literally just serves to prevent you from actually finding and reaching your ideal audience.
Need to know where to start? Angel List, LinkedIn, Meetup, and the like. Write some cold emails. You can always build a network, and you should if you want to start a business.
Best way i found to find people to evaluate my business ideas was putting up cheap ads on internet. Started with Adwords five years ago.
Then you drive them to an landing page where you ask for the sale. But right before the purchase, you specify that the product is under development and will be shipped at an specific date. Thanks your "almost costumer" and collect his email for a future launch.
I think the internet is your best tool here, specially if you have some bucks to spend.
Great post Michael. Despite what people say about vanity metrics, I think proving people want what you're going to build before you build it is incredibly important.
I heard Flexport did this by getting 300 companies to sign up before Ryan (the founder) wrote any code.
Eliminating risk isn't entirely possible. You could create a website for DoorDash/Ladder or Flexport, get traction, build Version 1 and then get told NO but I bet statistically you're more likely to have success with this method than building V1 first.
As an example, Optimizely got something like a $2-$4k commitment to pay without writing any code.
Again not everything works out this way. Snapchat, for example, would be a terrible example for this methodology but it works for some ideas.
Thanks! Yeah I agree; I'd still be happy if I never made the next Snapchat. I'd rather make little fun businesses that make money and can grow without too much insanity.
1. I like the blog post. It may sound similar to the methodology in Lean startup, Y Combinator, and a bunch of other stuff but so what. It is clearly written and specific.
2. I have no idea what ladder.io does! I looked at the web page, and it is very slick, but I still can't figure out what you do.
Quite a difference.
You have a "real time tactic database". Is that the same as a listicle on the top 5 areas to spend marketing $?
You offer continuous testing. Is that Google Analytics?
Good question! Lots of people don't know what we do from our site, but it's actually working pretty well at the minute; our conversion rate is 19% for that page! We've been trying to improve the copy but we haven't been able to beat it yet.
Basically; we started as a growth hacking agency and then built our own platform for keeping track of what we tested (and what worked). If you want a free trial + demo, just sign up on the site and we'll walk you through it.
What this article suggests is just one way of starting a startup. It won't work for everyone because for some of us, other's people's problems are only worth solving if the problem also troubles me or the solution somehow deeply interests me.
After all, for some the point of starting a startup is not only about business and money, as a software developer I want to build an application I love, and see it appreciated by others by making it a product and profitable business.
If you have read Paul Graham's essay, you'd know there's another way, the so called "organic ideas", i.e., to build a product that you love and useful to yourself, then sell it to others who have similar needs. To me this is a better way (albeit riskier), in the end of the day if I fail, I still would have a lot of fun and learnt useful skills, rather than just failed to fill a market gap.
What a truly heinous product. I've known a number of people who have been stalked, I can't begin to imagine the harm a stalker could cause with this kind of app.
Is quitting your job for your own startup idea, when working in tech, really that big of a deal? Especially if you are a software engineer? You'll probably end up doing the same thing as on a corporate job but for yourself while learning a lot of new things about building software (marketing, sales, design, etc.) and about yourself (grit, character, etc.). You are still gaining experience. If shit hits the fan, with all digitalization going on everywhere, finding a new job won't really be that big of an issue.
For some it is, for others it isn't. Remember that not every potential entrepreneur is in the same boat. Some are non-technical founders. Some just graduated college and are flooded with debt. Others are risk-averse.
But they all want to do something big. The test-drive concept is to go into building your new startup with data-backed reasons for why it's the right thing to do.
It helps you justify your decision to yourself and those around you. It's not just the job, but the people involved. At the end of the day, the entrepreneur is NOT the only one affected by the decision of starting a new business.
Not really sure if I want to give this one away as I want to use it more myself but https://nugget.one/ seems to be applicable here. They claim to do most of the filtering for ideas for you showing market size, how to reach them etc...
Thanks for the resource! Though I would argue it's still not quite comparable to actually talking to and getting feedback from your target customer base. That's where you hear about the real pain points firsthand, and that is invaluable for validating your business idea.
well, I wish I had read this article before quitting. Now my freelancing is experiencing delayed payment/possible default and had little progress on my idea. Would love to hear some advice
you could re-title "How to make sure you talk yourself out of taking a risk and keeping your job" isn't the limitus test from zuckerberg you should have this burning desire to change the world in this particular way, and the burn should be so intense that you wouldn't even consider for 1 second keeping your job.
Zuckerberg ran his test drive in college. He reached his audience, sold them on Facebook, it worked, so he quit and did it full time. His burning passion was already validated when he took his huge risk. What we argue is you don't have to have a platform built out to get the same validation.
Niantic was an internal startup at Google before spinning out into an independent company in 2015. By that point they already proved out their business idea with a cult hit game called Ingress, off which Pokemon Go is based. So technically yes, you're right :)
[+] [-] akanet|9 years ago|reply
[+] [-] fpgaminer|9 years ago|reply
Trouble is ... my ideas suck. Either I have a really good idea that requires inventing new technology, or I have a niche idea that I can't fathom how to monetize or market. I'll take your points about being boring to heart and hope something finally springs to mind under those constraints. But as of a month or two ago I already realized that I needed to tone my ideas down, and after all that time with it in the back of my mind ... I still have nothing. Frustrating.
[+] [-] biztos|9 years ago|reply
I think that for a lot of people who might try small businesses, the "use of surplus energy" is intermingled. Maybe you want to make some cool piece of software (because you just want to); and you want to use it to do something creative (because fulfillment); and you want it to also be a business (because you want more money).
In that case it's much harder to focus on the "boring" part. (I am assuming of course that there exist things that are "boring" in the business sense but still allow for some satisfying creativity and/or fun hacking. For instance CoderPad gives you plenty of room to do cool programming things, if doing those will make you happy. You just might have to book them on the lifestyle/happiness ledger. The bingo-cards thing, maybe not so much.)
[+] [-] foxhop|9 years ago|reply
[+] [-] highd|9 years ago|reply
Of course consulting requires more in terms of people skills - you're basically "interviewing" every time you find a new client. But I think in some sense that's a hump to get over either way - there aren't many startups that don't benefit from founders having soft skills.
Sort of an orthogonal point to the article, of course.
[+] [-] byebyetech|9 years ago|reply
[+] [-] morgante|9 years ago|reply
If you cannot even run a single-person consultancy successfully, you probably shouldn't try a startup.
[+] [-] 2michaeltaylor|9 years ago|reply
However I have one more for you: the businesses that buy from you as a consultant are very unlikely to buy your product.
Why? Because if they need a freelancer / consultant / agency to do the work for them, they don't understand the work enough to do it themselves (or don't have enough time). Therefore any self-serve solution tends to be met with blank stares and confusion. Likewise, the people who use our product on a self-serve basis are typically not a good fit for our agency.
[+] [-] crdb|9 years ago|reply
Pros:
- indeed you bill much more per hour, so in theory spend less hours.
- your work actually gets implemented, because you bill much more per hour. Generally "project management" is much better because they are buying a product and are incentivised to get a return on their investment.
- you deal with CEOs/managers as a peer, and learn (faster) from successful CEOs as a result.
- you will rapidly learn to sell. How do you differentiate yourself from the other 1,000 consulting outfits out there? How do you justify charging 5x what that Bangalore outsourcer is charging?
- it's a series of small successes that give you a boost psychologically when the product is so far away and the startup side seems not to be progressing.
- you think you're different because you're not taking money from "these risk-averse people" who "don't understand" your product. You'll get there the hard way but own everything at the end! Once this feeling becomes less important to you, you are ready for seed investment.
Cons:
- by far the biggest is the time suck, and focus suck. You're context switching constantly. My first CTO quit in part because he was consulting as well, and the product got nowhere for months because we invested too much time in our main client. This time around I'm the only one consulting, CTO is full time on the product. It's still exhausting and inefficient, and he's justifiably annoyed when I'm unable to do startup stuff because I'm focusing on clients. Client takes precedence because you cannot screw up with them, you're delivering a professional product at certain standards. The business stuff is very important, more than it looks, and so the product launches later, sales happen later, marketing happens later, etc. which hurts the company because time is also a currency, arguably your most precious. The dynamics are well depicted in the movie Primer, where one of the group is working full time to pay for the others to build their time machine experiment. Watch the group dynamics when he returns home late at night.
- at some point you'll have to cut off clients, when your startup takes off. When this happens, if you were actually good at consulting, it's going to suck for them. If you are professional and ethical, this hurts you as much if not more as it hurts them, you grow to like a good client.
- Clients quit without notice. In my case, one sold to a larger group, another ran out of money. Then you're scrambling to fill the gap and spending time doing consulting sales instead of startup sales, because cash is king.
- should probably point out: what you bill and what you do is not exactly the same. If my client wants me on site for a 1h meeting, I'll probably commute half an hour there, then have lunch with the PM afterwards, then commute back to my office - total 3 hours for 1 billable. On top of which you are now on the Manager's Schedule [1] and have important opportunity costs from not having blocks of time to yourself.
A nice parallel is when I was a student and many of my colleagues had this idea in their head that they could be "everything" - have a phenomenal career, be a helicopter parent always there for the kids, retain a cool and active social life with Facebook worthy trips. After a few years they all ended up picking one of the three, because there's only so many hours in the day, and sleep deprivation actively harms your ability to think, which is a prerequisite to making progress in at least two of the above. You can't be an MD at Goldman and know what your kid was up to at school today.
Money buys you the time to focus on the startup and that's much more valuable than it looks. Of course this comes up on HN all the time, I just wanted to add a bit of flavour and an extra data point.
[1] http://www.paulgraham.com/makersschedule.html
[+] [-] anupshinde|9 years ago|reply
I followed the consulting path, but now I would caution against the consulting/freelancing path, unless one was building a consulting-agency. Theoretically everything sounds good, but has many problems in practice.
1. If you are successful at consulting, it means money (and potentially a lot of it). It takes stupidity, insanity and courage to leave the money on the table when work keeps pouring in. For last 6 months, I have halved my work hours to 20-25 per week to work on developing products. That was not an easy decision ( I still work total of 50-60 hrs per week). I had a few ideas that fizzled out quickly and now I can't say what exactly I'll be working on - I still have a few good ideas that I need to try. But last 6 months part-time consulting did make me miss out on the money and opportunity cost. And the pressure mounts every day because I gave myself 1-1.5 years to try out. I might be trapped too because if I fail at products it makes sense to start a consulting agency instead of searching for a job.
2. You might think - "I'll earn from consulting and invest in products". Really! That did not work for me. Bad hires, management-stress, and lack of focus was pretty evident. Not saying it won't work for others - but less likely to work if you don't invest focused time in products. I just let many go(in a nice way) and decided to start afresh.
3. I worry constantly and this also pushes me hard to do more work. I haven't made a successful cut into products, I am losing out my years and the opportunity cost is way too high compared to being an employee. My life is much better as a consultant-freelancer in absolute material terms, but this is not what I headed out for.
4. Hard to do justice to consulting project and product both. When I was doing multiple consulting projects, it was easy to switch between those. But now for some reason, its hard not to think about my product when I am also developing someone else's product. On one hand you want your customers to be successful and on the other hand you envy them and crucify self because you made the product work for them but haven't done it for self. That is just a feeling, but it hurts!
There are positive points for consulting - One gets exposed to the world of business, paces up, upgrades self, learns stuff like selling and negotiating. These can be done as an employee too (but slower).
If one starts on the side as an employee, there is only one issue to take - Getting out of the comfort zone and focusing on one thing. Employee is very comfortable in that setting and finds it easier to blame others/circumstances for failures. As far as that attitude can be avoided, starting up while being an employee is still a better thing.
P.S: Freelancing/Consulting is not a bad path - its wonderful, just check priorities.
[+] [-] dbancajas|9 years ago|reply
[+] [-] imrank1|9 years ago|reply
[+] [-] bbcbasic|9 years ago|reply
[+] [-] whamlastxmas|9 years ago|reply
>We've spent millions of dollars ... so you don't have to.
This two person company that's had, from what I can tell, a hand full of clients, has spent millions of dollars testing their marketing? I find that a little hard to believe.
That said, their Playbook page is pretty cool and informative, even if seemingly most of it is behind a paywall. It'd be nice to have more information about how these ROIs were calculated. If it's a sample size of three it doesn't mean much. Or whether it was done in combination with other things, and how long those results were measured for also matters a lot. As it stands right now it just sort of comes across as marketing bullshit because it's impossible to tell how meaningful the ROIs are.
The case studies are also pretty weak. Your solution is two sentences? Really?
[+] [-] 2michaeltaylor|9 years ago|reply
We've actually just hired our 15th person and for the past 2 years we've worked with 70+ startups and spent around $2m. That's not counting one client who spends about $40k a day on FB ads. Before that I worked at Efficient Frontier (now part of Adobe), Travelzoo and ShopStyle. In each place I managed or optimized multi-million dollar budgets; the learnings from which I applied whilst building our playbook, and I apply every time I write a post.
ROI for our playbook is calculated based on the average of the experiments we've run. Looking at the numbers we've averaged about 2 concluded tests per tactic, but those numbers are highly skewed; there are some that have run 10+ times, others that have never 'run' (just things I've tried before but don't have conclusive data to hand, or things I've read about in blog posts). Either way, this data should be taken with a pinch of salt and used directionally; while eventually we dream of being able to build a recommendation engine that auto-prioritizes these tactics, the reality is that we'll need a lot more people using the system (hence the incessant blogging). :-)
Hope that helps explain where we're coming from?
[+] [-] suyash|9 years ago|reply
[+] [-] k__|9 years ago|reply
I mean, when I work for other companies I can crack down on problems they identified and have customers for and often I have good solutions for them. But finding these problems is hard.
[+] [-] stefanmancevski|9 years ago|reply
That's the point of Step 1: Wanna know what problems a client is facing? Ask. If you don't ask, you'll never know what solution to build.
The quitting of the job can come later :)
[+] [-] gricardo99|9 years ago|reply
It seems it's only applicable to business models that rely on getting revenue directly from customers (i.e. buying subscriptions or widgets). Do you have any thoughts about how you might test an idea where your service is free, but you get revenue through advertising to your users? It would still be very valuable to get some sense of how useful users would find your site, how often they'd visit, etc..., but you don't really have a strong test (i.e. will they pay?)
[+] [-] stefanmancevski|9 years ago|reply
The proving of willingness to pay came from surveys of those and subsequent users that said "yes, i would pay X per month for this"
[+] [-] pragmatic|9 years ago|reply
Also I don't think my network is big enough to hit up a significant number for a new software idea aimed at a specific niche (ex used cars sales).
Those are the pieces I've never been able to put together in all my time with the Lean Startup methodology.
[+] [-] callmeed|9 years ago|reply
"Local educational startup looking for K-12 school teachers to survey"
I've done it multiple times for startup ideas and user testing. I've always got numerous replies. Most people are more than happy to have an email dialogue and many are also open to meeting in person to test your app.
If I take up more than 30 mins of their time, I usually get them a $5 Starbucks gift card or buy them lunch (I don't tell them ahead of time).
[+] [-] stefanmancevski|9 years ago|reply
But the point is you can still do that on your own time without making huge sacrifices. Taking the concept of "go out and talk to people" too literally just serves to prevent you from actually finding and reaching your ideal audience.
Need to know where to start? Angel List, LinkedIn, Meetup, and the like. Write some cold emails. You can always build a network, and you should if you want to start a business.
[+] [-] marcofloriano|9 years ago|reply
Then you drive them to an landing page where you ask for the sale. But right before the purchase, you specify that the product is under development and will be shipped at an specific date. Thanks your "almost costumer" and collect his email for a future launch.
I think the internet is your best tool here, specially if you have some bucks to spend.
[+] [-] marcosdumay|9 years ago|reply
That is not really the hard part. It is a great excuse, and I use it myself to convince me I shouldn't look. But it's not really the hard part.
[+] [-] sogen|9 years ago|reply
[+] [-] free2rhyme214|9 years ago|reply
I heard Flexport did this by getting 300 companies to sign up before Ryan (the founder) wrote any code.
Eliminating risk isn't entirely possible. You could create a website for DoorDash/Ladder or Flexport, get traction, build Version 1 and then get told NO but I bet statistically you're more likely to have success with this method than building V1 first.
As an example, Optimizely got something like a $2-$4k commitment to pay without writing any code.
Again not everything works out this way. Snapchat, for example, would be a terrible example for this methodology but it works for some ideas.
[+] [-] 2michaeltaylor|9 years ago|reply
[+] [-] inputcoffee|9 years ago|reply
1. I like the blog post. It may sound similar to the methodology in Lean startup, Y Combinator, and a bunch of other stuff but so what. It is clearly written and specific.
2. I have no idea what ladder.io does! I looked at the web page, and it is very slick, but I still can't figure out what you do.
Quite a difference.
You have a "real time tactic database". Is that the same as a listicle on the top 5 areas to spend marketing $?
You offer continuous testing. Is that Google Analytics?
[+] [-] 2michaeltaylor|9 years ago|reply
Basically; we started as a growth hacking agency and then built our own platform for keeping track of what we tested (and what worked). If you want a free trial + demo, just sign up on the site and we'll walk you through it.
Thanks for the interest!
[+] [-] shanwang|9 years ago|reply
After all, for some the point of starting a startup is not only about business and money, as a software developer I want to build an application I love, and see it appreciated by others by making it a product and profitable business.
If you have read Paul Graham's essay, you'd know there's another way, the so called "organic ideas", i.e., to build a product that you love and useful to yourself, then sell it to others who have similar needs. To me this is a better way (albeit riskier), in the end of the day if I fail, I still would have a lot of fun and learnt useful skills, rather than just failed to fill a market gap.
[+] [-] nikatwork|9 years ago|reply
What a truly heinous product. I've known a number of people who have been stalked, I can't begin to imagine the harm a stalker could cause with this kind of app.
[+] [-] lilcarlyung|9 years ago|reply
[+] [-] stefanmancevski|9 years ago|reply
But they all want to do something big. The test-drive concept is to go into building your new startup with data-backed reasons for why it's the right thing to do.
It helps you justify your decision to yourself and those around you. It's not just the job, but the people involved. At the end of the day, the entrepreneur is NOT the only one affected by the decision of starting a new business.
[+] [-] morgante|9 years ago|reply
Except the part where you get a paycheck.
The opportunity cost of quitting your job is thousands of dollars a week. That's a big decision to make.
[+] [-] pawanpe|9 years ago|reply
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