The Short Story
Planning is good. Doing is better. You’ll find out how to know the viability of your value proposition in one weekend, and more importantly, you’ll learn uncommon ways to access vast amounts of cash without having to ask your grandmother or move back in with your parents.
The Long Story
“Give Me a Chance to Create a Fever and I Will Cure Any Disease.”
―Parmenides
So, do you want to become a big-time entrepreneur or the master of your own life and launch a sweet little business on the side? Both endeavors are great.
Creating a successful business is comparable to a fever. You’ll be taking on insane amounts of risk in the hope that you will become profitable before it all pulverizes you, much like the body raises the host’s temperature to destroy the parasite in the hope that the latter will die before the former.
Overall, it’s good pain. It never gets easier; you’ll just get better. You’ll learn so much about yourself, about the world, about humanity, about relationships, about creating beauty but also about destroying prototypes, relationships, beliefs. It’s beautiful. It’s hard. It’s rewarding. I congratulate you dearly on your plan.
If you keep reading, I’ll give you uncommon pieces of advice that you won’t read anywhere else. I won’t discuss how to become profitable or grow your business. The chances are, you know it better than I do, but I will present ways to access cash flows for when shit hits the fan, or if this has happened already.
We’re not going to talk about business plans, forecasts and drawing imaginary lines that might not materialize. If you’re an obnoxious degenerate that is impervious to risk or stress, then this will resonate with your core. It resonates with me. If not, maybe you’ll still get benefits from one or two ideas presented here, at your own risk, mind you, otherwise it might be fun to read for entertainment purposes.
I got this idea from this girl who’s a partner at a big professional firm. Although she’s quite at the top of the banana tree over there, she dreams of starting her own natural soap business, and she asked me how to do it, which gave me the idea to put the answer I gave her on paper.
Prelude: Start With Why
“If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.“
―Antoine de Saint-Exupery
First things first—why do you even want to launch your own company? Do you want to make lots of money? That’s not the best way. There are ways to make lots of money that don’t involve the pain and suffering it takes to launch a company off the ground; e.g., learning to code and getting a job at Google will yield more results short to midterm.
Also, why do you need lots of money? Are you sure you really want to? Or did other people give you the impression you need to? Are you using money to divert from obvious character flaws that you don’t want to work on? In my experience, I just never met anyone interesting that needed to make lots of money. I know fascinating people that have a lot of money. I also knew them before they had it, and they were already captivating.
Speaking for myself, creating a product that makes people’s lives better while keeping their minds strong and healthy is my reward. Also, Marco’s Grounds has done nothing but burn my personal cash—better said bitcoins—so far and will continue doing so for quite some time. I mentioned it in this post, along with a way to evaporate your cost of living. Further, when things get hard—and they will—your longing for money is not going to keep you on the boat. The only thing that’s going to keep you onboard is the longing for the vastness of the ocean.
Speaking about me still, I’ve found that it’s incredibly easy to sell to others the product that I made for myself first. When you know everything about your product, launching and marketing it becomes trivial. You’ll know there will always be one customer—you. Then, it’s just a matter of finding other people like you. It’s a big world. You will find them.
Act One: The Testing
“We have a strategic plan, its called doing things.”
―Herb Kheller
Let’s assume you have a product that you think is going to hit big. That’s a bad idea right off the start. It’s far better to have several okay products than to have just one you think is the holy grail. A reason for this is that having only one product will make you idealize it way more than it deserves, and you might become biased. With your clouded vision, you might not be wanting to disinvest from an obvious loser. Anyway, let’s assume for the sake of an argument that that one product you have is hotter than Louisiana Hot Sauce.
Step 1—Don’t Wish It Were Easier Wish You Were Better
“They tried to bury us. They didn’t know we were seeds.“
―Dinos Christianopoulos
Wouldn’t it be great to have a bit more certainty? Well, you can by building a three-page online store; i.e., sales page, frequently asked questions (FAQ), and checkout, over the weekend and putting a $150 ad on Google AdWords linking to it. Assuming a cost per click of 50 cents, you’ll have 300 clicks and can draw real conclusions. If you object to this by thinking that 300 clicks are not enough, just remember that 300 clicks mean roughly 6,000 to 30,000 views. It’s enough. More and you’re just looking for ways to postpone.
If you want to go ahead, I recommend WIX (with this link, you get $150 worth of Google Ad credit courtesy of WIX). Trigger happy weekend cowboys like Shopify a lot. Shopify is good. PepsiCo is on Shopify, for example. But WIX and their premade templates can get a three-page store online and running in half a morning of joyful entrepreneurial creation. It takes a bit more time on Shopify, especially if it’s your first rodeo. Also, WIX is relatively foolproof. You can get a functional, mobile-friendly, and most importantly, ultra-responsive site with zero coding experience or need to hire web designers. You can fuck-up a lot and WIX will still wash away your coding and designing sins without you even noticing—foolproof.
It’s okay if you don’t have a product or even a prototype to sell yet. Just put your value proposition on Google AdWords and monitor traffic, adds-to-cart, and, more importantly, checkouts on your site. If you need pictures of your product that you don’t have yet, get some that have a creative common sharealike license; that way, you won’t infringe on anyone’s copyrights. Or hire someone on Fiverr to do you a rough design (you get one free order with this link).
You could go with Facebook ads or YouTube ads, but frankly, these are more advanced, require more finesse, and most importantly, are not meant to monitor existing interest. They are intended to create interest. Google AdWords is for people who are already interested in your stuff. They just don’t know they’re going to buy from you yet. It’s a bit like bringing a girl home from the bar a couple of minutes after meeting her. You didn’t sweet-talk her into going home; she was already interested in going home with someone.
Am I actually telling you to defraud customers by selling products that don’t exist? Absolutely not. You want to have a real-looking store where actual customers can check out your product and buy it for real money, but without taking real money. When the prospective customer clicks “Buy” on your site, you’ll redirect them to a page explaining that this is a test store, you are gathering market size for your soon-to-be product, and they can leave their email address if they want to be informed about future go-to-market activities. You can tell I’ve spent a bunch of time lately with consultants as I’m even starting to talk like them—more on that later.
The reason for doing this is twofold. First, you will monitor real purchasing intent. It’s easy to ask friends if they’d buy your product. They’ll probably say yes to be nice to you. They’ll probably even buy it to be supportive. You can’t create a business counting on your friends. Entrepreneurship is a solo trip—or at least it should be. Ben&Jerry’s are rare. Most people resent or will resent having one or several cofounders.
Sometimes, you’ll hear people tell you that founding alone or running things alone is a mistake, and you need cofounding. They’d tell you that two heads are better than one. Mostly those people are venture capitalists that want to divide and conquer. It’s much easier to instigate doubt, fear and uncertainty in three people until one folds, than it is to manipulate a sole founder. Also, what you have when you are sole captain is unparalleled speed. It’s not about control or greed. Go to IKEA alone to buy a couch, for example, or go with your significant other. Now do the same exercise with four other people. You’ll understand how being the sole decision-maker can 10x or even 100x decision speed by ten times or even a hundred times and vaporize decision fatigue. Also, you’re very likely to love your significant other more than you love your cofounders.
That was a bit of a long aside on solo riding the chaos. Let’s get back to selling stuff to your friends. Long story short, you shouldn’t. It’s harder to get real money from strangers, and that’s why you should do it—don’t-wish-it-were-easier-wish-you-were-better kind of thing.
By monitoring how many people click the “Buy Now” button, you’ll be gathering real data on real intent, even without taking people’s money. By the way, if, for some reason, you cannot technically create a mock checkout, it’s okay to take real money from people as long as you refund them right away and explain what you’re doing. If volumes are high, credit card companies like PayPal and Stripe might give you a little slap on the wrist, but that’s as far as it goes. You’ll find that most prospective customers will salute you on your idea and entrepreneurial high spirits and be happy to be part of the edgy launch.
We said the benefits are twofold? Where’s the second benefit? Well, we’ll get there, hypothetical reader with pertinent questions. We’ll get there.
Step 2—the Bite You Can Chew
“The first principle is that you must not fool yourself, and you are the easiest person to fool.“
―Richard P. Feynman
The second insight you’ll get from this is enormous. By running low-budget ads on Google AdWords, you’ll have a rough idea of your cost of acquisition (how much money does it take to get one customer). Then you subtract that from your expected customer lifetime value (LTV), and you get a good idea of profitability. If you don’t have any possible idea of your LTV, find data for your category and apply it to you. There is no reason for your competitors to be better at retaining customers than you are.
Further, Facebook allows some of the most insanely accurate targeting on the planet. If you’re looking for middle-aged small business owners interested in ballet, rifle hunting and low-carb diets, living in Belgium in a two-bedroom apartment with a river-side view, Facebook will have your back. Of course, you need a business account for this, which you can get if you register a legal entity with Facebook Business Suite. Anyone has access to targeting with Facebook. Still, the targeting is several levels of magnitude more sophisticated for businesses. I’d recommend registering a legal entity with Facebook for this. There’s no need to spend money on Facebook; business.facebook.com will give you audience sizes for your niche before actually starting to run ads or pay. You can always come back to running paid ads later.
Once you determine your audience, you can multiply that number by your theoretical price to compute your theoretical market size. For example, say your product would appeal to 100,000 people, and you sell it for $39. Then your market size for that product would be $3.9 million. Of course, this is highly approximate, and it’s going to be wrong. But you just need to be roughly right.
You’ll get a good idea of the real cost of acquisition and potential market sizes by doing these two things. I would say this is far better than any theoretical model. Cash is king, and nothing beats real orders for real money.
Act Two: The Financing
“Anyone who lives within their means suffers from lack of imagination.“
―Oscar Wilde
Some people call this seed financing to let you know that they are in the startup financing world. Most of those people also ride bikes with one gear.
Anyway, the naming convention is irrelevant. Now, we have our market size and have genuine intent: we’re ready to get this show on the road. There’s just a tiny detail we forgot. We are cash-flow challenged. This can be for various reasons. You might just have no money at all, or you might just be short a couple of thousands or tens of thousands.
If you have no money at all and are not 22, there might be things that should be taken care of first. Do you use money to cover insecurities? If so, you might want to work on fixing those insecurities for good first. On the other hand, if you don’t have money because you don’t earn enough, I suggest getting a job or a better job and saving a bit of money. Nothing gets money as fast as employment for most people. But, I’m also not into telling people what to do with their lives. I’m more about presenting ideas and ways to do things.
This method applies conceptually to amounts as high as your theoretical burrowing capacity (the amount of money people are willing to lend to you).
Step 0-the Self-Employed Consultant
“Many a false step was made by standing still.“
―Chinese Proverb
If you’re very young and have no capital accumulated in your pension fund, just jump to step 1. You can always revisit this section later.
Ideally, this step should happen many moons before the launch; optimally, it should even be two to three months before you need the money. Many jurisdictions in Europe (don’t hold me on this for North America as I don’t know) will allow individuals to withdraw parts or even all of their pension fund to create a sole proprietorship and skyrocket themselves into self-employment. Just be aware that rockets fly very high but also have a tremendous failure rate. A sole proprietorship is a type of firm that is not separate from the person founding it. It’s a bit risky to raise capital or sell products as you are liable for everything and anything with no limits. You can cover yourself by buying insurance, however. But we’re not going to do that.
Where I live in Switzerland, it’s not possible to withdraw from pensions to found full-blown companies (independent companies separated from the founder), so if you live in Switzerland, you’re going to have to be a bit creative when it comes to structuring. Other jurisdictions are a bit more lenient. The below should cover both cases.
We’re going to found YourAdvisory Sole. That sole proprietorship firm is going to only provide business intelligence services to YourBigBusiness Ltd., the company that makes the soaps and for which you don’t have enough capital and that you also control. That way, you’ll have a legitimate entity to document your activities as a self-employed advisor and unlock the funds from your pension. The reason for this is that most jurisdictions want to see real sales with real cash hitting the bank before releasing your pension.
Is this risky? A lot of people would say it is. I would say it’s only as risky as your inability to turn your venture into a value-generating behemoth—simple. More conservative people will tell you to finance with investors or save more money and then launch yourself. Those are fine pieces of advice.
Investors come at the price of not doing what you want, and let’s be real: the last reason to get investors is for money. You get investors for access to markets, for expertise, for relationships, etc. Currency is the lesser point. I’m writing this post so that you know you have options—risky options, hard options, but options nonetheless.
Waiting is fine. It just has a cost, too. Doing nothing bears the cost of missing opportunities; it’s just that many people don’t even see the opportunity, so they don’t realize they’re losing.
There’s a saying in business: “don’t let a guy with a 100k salary talk you out of a multimillion-dollar idea.“ I don’t know about that. It’s a bit provocative on the income part. People can make excellent arguments, regardless of their income level or education. Frankly, you don’t know where that guy making 100k will be in five years. For example, I religiously listened to advice from a guy on YouTube selling $1,000 a month worth of product at an early stage of MG where it grossed more than twice that every day. It was good advice; we’ll talk about it someday. Also, I don’t think there are multimillion-dollar ideas, anyway. There are, however, multimillion-dollar teams of people executing plans, reacting to performance and redefining action. Ideas are worth nothing. Execution is everything, but I digress, again.
This is your call. Just don’t let other people tell you what to do. They don’t know you as well as you do, and they surely don’t know what you can do. To be honest, you might not even know how much you can do yourself. I guess that you can do a lot. Maybe not in one day, week or month. But there’s a lot you can do in one year, two years or five years.
Step 1-Last Credit Rating Hero
“Birds born in a cage think flying is an illness.“
―Alejandro Jodorowsky
Assuming you have an excellent credit rating and are impervious to stress or risk, then this step might yield substantial benefits. If you are around 30, with an okay pension that you can couple with this step, then you’ll be raising about $150-250k in capital just by yourself without counting savings, sale of assets, your grandmother, etc. Needless to say, this is huge.
I’m a bit reticent into writing this since I don’t think more money is better, but as I mentioned before, I don’t believe in withholding information while claiming moral superiority. The information is here, as are the risks and benefits. For instance, when I founded Marco’s Grounds and other companies—more on the other ones later, I suffered from too much money more than from lack of currency. This made me spend outrageous amounts on useless stuff; e. g., $26k for give-away commercial t-shirts that I then lost in the middle of the Atlantic, “promotional” helicopter rides, producing insanely costly prototypes to change them n times per month until launch, etc. The fuckups were plenty. I’m even leaving some so that you don’t totally discredit me as a complete idiot.
There is a growing consensus around lean management when it comes to creating and growing companies. Some people even believe less money can be a huge driver of success for startups. I think so too. This is similar to what happens to the human brain when deprived of food for a significant amount of time. Lack of money hardens companies and entrepreneurs, heightens creativity, and overall creates greatness, or you’ll just fail. Either option is good. Succeeding is good. Failing fast is good, too. The real danger is veiling failure with copious amounts of cash, thus turning it into a long-drawn descent into darkness. But I digress.
Here is the step without further ado: sign up for as many credit cards as possible and get personal loans. Following our example from before, you’ll have access to roughly 10-15 credit cards with a $10k credit limit on average, and you might have access to uncollateralized loans of up to $250k. At the same time, you want to sign up for a free Revolut account. We could just go for a personal loan, but that comes with interest. Heavily borrowing from credit cards while repaying it in full within one month gives you access to instant cash at no interest.
Suppose you don’t have access to these numbers—get into a fast cash scheme. The best quick cash scheme I know is to get a job. Nothing makes money faster without money than working for someone else. After working a couple of months, you can then apply for loans and credit cards.
Isn’t it more comfortable and less risky to get financing from investors? Yes. It is. But there are no free rides. This is a high stakes high-reward endeavor. Anyone can do it, but it’s not meant for everyone. Besides, raising capital with a business plan, zero sales, zero proof of concept, unknown customer retention, etc., is a stupid way to go about these things. It’s literally the opposite of buying low and selling high.
The gist of the exercise is to load the Revolut account with money from your credit cards. You’ll then use the funds in the Revolut account to finance operations. This method has no cost since you can load Revolut accounts free of charge. Just be aware that the system will break at some point, and Revolut will freeze your account. If this happens while funds are in the account, I recommend walking to an ATM and siphoning your account by hand, then placing the funds in another account. This works. Once Revolut or a similar bank has blocked you, you can close the account and reopen a new one. This works, too, for a limited amount of time. By the way, none of this is even slightly illegal. Revolut opened your account, and the credit card company gave you a credit card. This just annoys them, and they’ll refuse service at some point, but it’s the system they created. Let them sort it out.
If you still don’t have enough cash flow with all the above, there’s at least one last thing you can do. Do you remember that company you founded? We called it YourBigBusiness Ltd. And do you remember your store where you sell your soap? If you even need more cash, you can—maybe you shouldn’t, but you can—use the full balance of all your credit cards to purchase the soap from your company store. Your company will later refund those transactions. This will give you access to funds that you wouldn’t otherwise have access to. The money will instantly get into your company bank account if you’re in good standing with Stripe and your business is legitimate and accredited. Stripe is the gateway between your bank account and the credit card companies. Treat your relationship with them as you would your A-List customers. Stripe matters, and they are excellent in speed, efficiency and service. The cost of this is the fee Stripe takes. The percentage decreases with volumes. Also, using American Express seems to be cheaper than other credit cards. Needless to say, if you don’t repay the amounts owed to the credit card companies fast, you’ll be charged high credit card interest rates.
Isn’t this just gambling with other people’s money at this point? No, as that’s what banks do. This is a game of skill, not a game of luck. You are borrowing time and funds for short-term cash injections. The outcome of this is merely dependent on your skills.
Step 2-the Bargaining Chips
“You shoot your arrow, and then you paint your bullseye around it, and therefore you have hit the target dead center.“
―Brian Eno
We validated market size and profitability potential and found ways to access enough capital to finance almost anything by completing all the previous steps.
If you apply this for a couple of months, you should have customers, markets, real-world cost of acquisition, average order value, and LTV.
If you need more capital to scale and create that colossal company you always dreamt of, now is an excellent time to start talking with big game hunters. Hunting rabbits is one thing. Hunting elephants is another thing. Generally speaking, people who hunt elephants don’t like to track with people who hunt rabbits.
It’s one thing to go to investors with business plans and imaginary profitability; it’s another thing to go to investors with real orders. It’s yet another level to talk to investors when you have both customers and retention. That’s the position you want to be in. You want to be in a place where taking $1, $2 or $5 million sounds like you’re doing a favor to them.
But remember what I told you almost one year ago in one of those monthly wrap-ups that I send (sign up here if the heart desires)? The investor willing to put $200,000 in your company in a first round of financing will be looking for a $2 million exit not much later, thereby forcing you to scale—and forcing you to pick up the phone when they call.
Investors see companies as devices to create money. Entrepreneurs see companies as instruments to create outcomes for people and money as the fuel. There’s nothing wrong with investors wanting to make money, but they might divert you from your vision.
I recommend being very Swiss in this matter. Stay neutral and independent for as long as possible and try and tame your ego. Being the CEO of a huge company and going to shareholder meetings doesn’t trump being the sole founder of a smaller company and doing whatever in the great name of fuck you want—pardon my colorful language.
Act Three: Death of Democracy/Reclaiming Complete Ownership
“I can’t give you a surefire formula for success, but I can give you a formula for failure: try to please everyone all the time.“
―Herbert Bayard Swope
I recommend reading Small Giants by the great and fascinating Bo Burlingham. I reread this book last year because I was worried about creating a monster that I’ll always have to feed. I failed. But you might succeed. If you ever want to create a company or restructure an existing one, this is a great first read. If the idea of spending five hours reading a book scares you, read faster. Here’s an introductory post on how-to.
Not wanting to become huge is very counterintuitive as every startup under the sun seems to be looking for financing as if more money would be the answer. It’s not. Sales are.
There’s very little pressure to scale when only you are paying for everything. The more, the merrier applies to friends, plates at family dinners, and weight on the barbell—not to investors.
One of my best friends runs a 900-person company in an extremely competitive industry. Everybody offers the same service. Competition is on price alone. When we were younger, he always told us that he wanted power—the more, the better. Well, now he has power over all those people, but none over his own life.
Be careful what you wish for—you might get it.
Also, I’m writing this paragraph sounding like I know which way it’s going to be. I don’t. I just know that if I can help it, I’d go live in a tent and drink rainwater before I let investors in. I still might end up being forced to take money, but that’s going to be a last resort.
That’s it for now. You know easily more now than 95% of first-time entrepreneurs. Now, it’s just a matter of making many small mistakes while preventing big mistakes.
