Can you help me for a startup?
Instructions: How to get a self-financed start-up off the ground
Do you know the old saying: "Pull yourself out of the swamp by your own head?"
And this old adage even fits a lot of startups.
There is a term for it in English: bootstrapping. It means that you can set up your own company without outside capital and almost entirely without outside help. In this case, you only fall back on your own savings and reserves.
It's not easy, but extremely satisfying.
When Hiten and I started Crazy Egg, we thought we'd find an investor straight away.
However, that was not the case.
We had to set up Crazy Egg ourselves and invest $ 500,000 out of pocket in the company.
We presented our idea to over 30 investors and all of them rejected it.
Then they made us an offer to buy for $ 6 million, but we kindly declined.
Maybe we should have accepted it back then, but we were still young and optimistic.
We were able to turn Crazy Egg into a profitable company, but it took us years of hard work.
However, we learned a lot during that time and were able to use those lessons to attract $ 10 million in investments for our next company, Kissmetrics.
When we wanted to bring KISSmetrics onto the market, the self-financed company MixPanel stole the show from us. One thing became immediately clear to me: You have to be able to react quickly to changes.
In this article I want to share a few valuable lessons with you that I learned from starting Crazy Egg and KISSmetrics. You can use my experience to start your own self-financed business.
Here we go.
Your servantsto offer
If you have a great idea for a new app but don't have the programming skills, you need to find creative ways to get the money to buy a programmer.
According to Fundable, the majority of startups are self-funded. These companies have no investor or financial backer of any other kind.
You could work as a freelancer or a consultant to make money.
It's not easy, though, but doable.
Jon Westernberg, founder of Creatomic, earns $ 20,000 a month with his agency, but previously only worked as a freelance writer.
He knew he would need an additional $ 3,000 a month to develop his own marketing platform.
So he developed a side business for the real estate industry and then presented his idea to various real estate agents with the help of his email typing service.
He sent 500 e-mails, received 63 replies and was able to win 8 new customers in this way.
That way, he was able to secure the $ 3,000 a month he needed. He then put all of this profit into building up his agency.
He financed his agency entirely out of his own pocket!
I've done this before too. I invested the money I made as an SEO consultant back into my own business.
My first start-up failed, but I learned a lot from it.
If you want to start your own business, you should definitely consider freelance consulting activities.
A full 35% of all Americans currently work as freelancers.
79% of these freelancers say they'd rather work for themselves than in a traditional job.
Freelancing is therefore very much on the rise. Experts estimate that by 2020 half of the American labor market will be freelancers.
Particularly popular jobs are graphic design, web development, writing and IT consulting. But you can also choose a different area.
You just have to know how to market yourself well to be successful.
Find a suitable co-founder
If you have a co-founder, they should complement your expertise and have different skills.
Hiten and I have started several companies, including Crazy Egg and KISSmetrics. We take care of different aspects of the company every time.
Hiten is responsible for administration, employees and product development.
I take care of sales and marketing.
Our roles were not so clearly assigned at the beginning. We then realized relatively quickly that I didn't have much to do with personnel development.
Hiten then took over and does it really well.
Business founders need to work well together and each should have unique skills.
A 2015 study by Inc. shows that 68% of all business leaders are still working with their co-founders today.
Interestingly, 43% of these co-founders are always good friends.
This is also the case with me and Hiten, but I didn't know that it was commonplace.
Of course, trust is extremely important.
Your partner also has to dedicate himself fully to the start-up so that your company can grow.
You have to work a lot of unpaid overtime.
If the company fails, your friendship could suffer.
Starting a business with a friend can be a great idea, provided they both give 100 percent.
It's like a real relationship.
You could find a life partner, so your co-founder has to suit you and your start-up!
If none of your friends are suitable as a partner, you can search for a suitable co-founder on sites like Co-Founders Lab.
On Co-Founders Lab you can search for potential co-founders, consultants, freelancers and other team members.
Find a good advisor
Even if you and your partner have different levels of expertise, it is impossible for you to know everything that is needed to start a business.
A consultant can help you grow your business faster. However, this has a disadvantage.
Many consultants would then like to become partners in exchange for their consultancy activities.
When we secured the first investments for KISSmetrics, Hiten and I first hired a few consultants.
We thought that we would grow faster that way. So are we, but we didn't pay attention to the small print.
We made too many admissions at the time and limited our options too much. The growth of KISSmetrics was therefore limited from the start.
The graph below shows how such dilutions can occur over time.
If you hand over part of your company to a new consultant every time, your company will quickly be broken up into small pieces, like a cake.
And then our fictional founder “Ted” only owns 25% of his own company, no longer 100%.
That was our biggest mistake at KISSmetrics.
If you want to work with consultants, you have to be good at negotiating.
I don't mean to say that you should do without consultants!
The consultants from KISSmetrics were extremely helpful and important to the company.
Unfortunately, we gave too much of the company to these consultants too quickly at the time.
You have to make sure beforehand that the advisor is really worth his or her share.
Many founders are particularly interested in the connections and contacts their advisor has with service providers, lawyers and talented employees. But that shouldn't be all.
Your advisor must be by your side in the long term and help you with strategic decisions.
Outsource certain areas wisely
Especially at the beginning of a new start-up, you have to take care of everything yourself.
About product design, recruiting and marketing. In the beginning there is just you and your co-founder.
As the company grows, you should outsource certain areas to have more time for other activities.
However, if you hire too many new employees too quickly, the coffers will soon be empty again and you can go back to business.
Fortunately, there is the Internet. Here you can find help for your start-up.
Popular sites are Upwork, Freelancer, Fiverr and People Per Hour. Here you can find freelancers from all over the world.
The industry is booming.
You can find freelancers from any industry, even designers or advertising professionals.
Outsourcing certain areas often sounds tempting if you have the change.
However, if possible, you should always wait until you no longer have the time to do these tasks yourself. Then you can hand them in.
You shouldn't spend too much money too soon so that your company can grow continuously.
Thanks to the many online platforms, you can find a good freelancer relatively quickly these days.
If you don't have an overview of your expenses yet, you should do one as soon as possible.
You need to know how many fixed expenses you have each month.
This fixed expenditure includes, among other things, Rent, car, electricity and other bills that you can't do without.
You could get rid of your car, but you can't do without electricity.
The Buffer company is disclosing its finances. You can see the expenditure in the graphic below:
Your spending probably won't be that high. Buffer has over 70 employees and over 1 million customers.
You should keep your expenses as low as possible.
The expression “Lean Start-up” comes from Eric Ries.
Your start-up should always consider data and facts, but it also has to be able to react quickly. You need to do a customer research and then develop a prototype that can be tested right away.
You can't afford a big office and you can't pay big salaries.
When Hiten and I founded KISSmetrics, we didn't earn anything for a long time.
We only paid ourselves a salary when we were able to secure the 10 million financing. However, we have limited ourselves to $ 5,000 a month.
Since we were living in San Francisco at the time, it really wasn't a lot of money because the cost of living is so high here.
It should be clear to you that you cannot make “quick money” with a start-up.
If you are all about money, you won't get very far. You have to build up your company slowly with years of hard work in order to be able to earn a fair salary at some point.
If you're very lucky, you can build a multi-million dollar business.
75% of all startup founders earn less than $ 75,000 a year.
Entrepreneurs who have already started several companies earn a little more. But even in this case, it's still less than $ 80,000 a year.
Depending on the location, that's enough or not a lot of money.
You have to accept limitations if you want to found a successful start-up.
I no longer have a car and I no longer spend my money on games or the latest technology.
I only buy things that benefit my company.
This may seem a bit exaggerated to you, but it's everyday life for us entrepreneurs.
Invest in your brand
You have to accept restrictions and not spend too much money. However, you should invest in your own brand.
In today's competitive environment, a strong brand is worth its weight in gold.
Your brand can make all the difference. It attracts new customers and ensures enough attention with which you can differentiate yourself from your competitors.
B2B entrepreneurs believe that the brand is always a decisive factor when comparing different offers.
I've written a lot of articles on branding. Branding is so important because you have to gain the trust of your future customers first.
It's not expensive either.
You can have a freelance designer create your brand. You can find a designer like that on platforms like Upwork.
You can search for “logo design”, “web design”, or “email template design”.
Now you can compare different designers with each other.
You should choose your freelancer based on their experience, location, and ratings. You can find an affordable designer here.
You have to invest in your brand if you want to attract new customers. With a good value proposition and a strong brand, you can attract new brand advocates.
A brand advocate is a loyal customer who is so convinced of your company that they will happily recommend it to friends and acquaintances.
Such customers are especially valuable!
Customer recommendations are 150 times more likely to result in new customers.
By investing in your brand, you can gain loyal brand advocates who will promote your business for you.
Win customers with content marketing
I can only warmly recommend content marketing to you.
Isn't that surprising, is it?
Content marketing is particularly effective when you want to reach a new target group. 70% of all customers believe that companies that create helpful content are interested in real customer relationships.
You can create content yourself or collaborate with other writers and bloggers.
Back then, we hired the best bloggers on Technorati to promote Crazy Egg.
These bloggers got our premium product for free and wrote articles for Crazy Egg for it.
We were able to win new customers in this way and only had to send an email. Nothing more was necessary. We quickly got the costs for the premium plan back in.
You can also make a company or product video.
In this video you can explain how your product works and what advantages it brings. The video should only be 30-60 seconds long.
This video works like a commercial for your start-up.
Here's a great example from Mint:
When we made such a video for Crazy Egg, we saw the first results straight away.
The conversion rate is up 64% and we've made $ 21,000 more in revenue every month.
Videos are particularly popular. 92% of people who watch a video then share it with their friends.
With video marketing, you can sell more, faster.
Of course, blogging is still very popular.
After all, you're reading my article right now, aren't you?
You can come up with your own content marketing strategy, but you should always consider the preferences of your target audience. You need to create content that answers your customers' questions and solves concerns.
A 2017 study by Time Inc showed that 90% of customers want content that is tailored to their needs. You should fulfill this wish for them!
Self-financing a start-up is hard work!
You have to raise enough money and develop your product all by yourself. In return, you often have to offer your freelance consulting services to pay the bills.
But you don't need that much money to get your own business off the ground.
Many of the most successful companies started with less than $ 10,000.
Hewlett-Packard was founded for only $ 538 in a garage in Palo Alto, California!
That was a lot of money back in 1936, but today that buzzer is only about $ 7,500.
You should find a suitable co-founder who complements your own expertise and skills.
Of course, you can also take your company into your own hands, but this always involves certain risks.
You can also ask experts for advice, but it's not always cheap. You may have to promise them part of your business.
You should also be clear about which tasks should be handed in when the time is right.
In addition, you have to work on building your brand and control all your expenses.
Did I mention that you need to tell everyone about your new business at events and on social media?
Starting a new business is extremely stressful.
I speak from experience.
But I can also say with certainty that it is still feasible.
Nine out of ten start-ups fail in the end, at least that's what the statistics say. But your start-up could be successful and that's why you can't give up.
You need to learn from your mistakes and then use those lessons to your advantage.
Do you want to start your own business? Share your idea with me!
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