by Paul Jarvis
Your MVPr can be low in the beginning, as companies of one typically start with either just one person or a tiny team of two to three people with the abilities and skills to create what needs creating. These teams get larger only if more people are truly needed and if profits can support them. Profit happens when the business is making enough money to cover a salary for the owner(s); this is the “minimum” part of MVPr, as a company of one can be a full-time endeavor only when it’s making enough to support at least one person. Viability is when MVPr either continues to support that one person long-term or increases with time. The more viable your company becomes, the more your profits can truly grow. From there, you can choose to pay yourself more, to focus on scaling systems, to work less and keep paying yourself the same, to invest in the business further, or to grow based on the increased money coming in. In the end, the choice is yours.
Becoming a business that earns revenues predictably and consistently is a milestone for a company of one. MVPr is achieved with the least investment and in the shortest amount of time possible.
Quickly becoming profitable is important to a company of one because focusing on growth and focusing on profit are nearly impossible to do at the same time. For big companies, traditional growth requires investing in the future, and that usually means spending money on a sales cycle with the bet that it will pay off at a higher rate … sometime in the future. A focus on growth may require spending money on sales staff, paid acquisitions, increased support teams, or even a larger technology infrastructure to handle the hoped-for growth. The assumption is that, eventually, more spending will generate more profit.
Focusing on profit down the road doesn’t work for a company of one. A company of one begins quite small (one person, no office required) and spends only when profits allow it. Growth is much slower because it’s incremental from zero — a tiny amount of profit leads to a tiny amount of spending, which leads to slightly more profit and then slightly more spending, and so on. It’s a very gradual process.
With companies of one, exponential profit increases aren’t a core objective because just hitting profitability is usually enough. From there, you have choices — to grow, to stay the same, to take more time off, to scale systems — as well as the space to make those choices because your goal isn’t to make exponential profit, but simply to bring in profits greater than your expenses.
SIMPLICITY SELLS (QUICKLY)
According to entrepreneur and author Dan Norris, you don’t learn anything until you launch.
It might sound obvious, but a product is built to solve a specific problem. But as Dan points out, you won’t know how well your product solves that problem until people are actually paying for it and using it. Whether you’re selling cars, accounting software, or falafels from a falafel stand, these products exist to fix or address an existing and pressing problem. You can travel great distances quickly having a vehicle that goes much faster than walking. Keeping track of expenses and sales is important to every business — doing it with automated software beats using scrap paper. And falafels? They solve hunger (or guilty pleasure cravings).
Every minute you spend as a company of one in the ongoing development of a new product is a minute you aren’t seeing how well it solves a problem, and even worse, you aren’t making money from it or building toward your MVPr. That’s why getting a working version of your product released as quickly as possible is important: your company needs to start generating cash flow and obtaining customer feedback. Andrew Mason founded Groupon as a basic website where he manually typed in deals and created PDFs to email to subscribers from Apple Mail. Pebble, a smartwatch, started with just a single explainer video and a Kickstarter campaign (no actual product, even) that raised more than $20 million to fund its development; Pebble was eventually sold to FitBit. Virgin started as a single Boeing 747 flying between Gatwick, England, and Newark, New Jersey.
Once these startups were up and running, they were able to build from customer feedback and make positive changes.
In much the same way, companies of one need to continually iterate on their products to keep them useful, fresh, and relevant to the market they serve. So, launch your company quickly, but then immediately start to refine your product and make it better. When you launch a first version of a product, you’re guessing at a lot of things — how it’s positioned in its market, how easy or difficult it will be to reach your target audience and get its attention, and how willing people will be to buy it and at what price. But the good news is that once you launch the first version, data immediately starts to pour in. How are sales going? How are the reviews? How is customer retention? Are they so excited about your product that they are telling others? You can and must use this data to further refine your product to be an even better and more useful solution to the problem you set out to solve.
I can’t emphasize this point enough: finding a simple solution to a big or complicated problem is your strongest asset as a company of one. Your unique ingenuity can’t be outsourced to artificial intelligence or to a massive team. Your ability to problem-solve with simplicity will keep you and your skills relevant in any market. The benefit of starting small is that you can start with only a few customers using your product and you can speak to them directly — for feedback, suggestions, and improvements.
For a company of one to launch a new product, the process has to be simple. (If you recall from Chapter 1, this is a defining trait of companies of one.) Your launch should be simple in choice, simple in messaging, and simple in hypertargeting only one audience.
There are three elements to the psychology of simple, according to Harvard professor George Whitesides: predictability, accessibility, and serving as a building block. Being predictable means that simple products are easy to instantly understand. A product that solves a single problem, like a Casper mattress helping you get a good night’s sleep, is simple. Casper doesn’t make 108 styles of mattresses, they make three. Being accessible means being honest: Casper makes no over-the-top claims, but backs its product with solid research and overwhelmingly positive reviews from over 400,000 customers.
Finally, to serve as a building block is to build on an existing and understood concept. Casper didn’t invent a soft and rectangular piece of foam to sleep on and call it a mattress. They simply built off an existing industry, an existing product, and made it better. Everyone knows what a mattress is, so Casper doesn’t have to explain that; they just have to explain why their mattress is better. In effect, Casper doesn’t market mattresses but rather better sleep, with their mattresses being a means to that end. They’re consistent in this message across all media (social media, their blog, and any other advertising). The hyperfocused target market for a Casper mattress is younger people who are ready to upgrade their lumpy mattress but hate going to stores and talking to salespeople. These are the customers who’d rather buy online, with a guarantee that if they don’t like the product, they can return it (after 100 nights’ sleep).
Keeping your launch simple lets you avoid roadblocks in getting your product to market and then sharing it with the market. If it’s not simple, you’ll have to spend too much time first creating your product, and then explaining what it is and what it does. Simple lets you hit MVPr sooner and really start learning how your product is faring in the market.
FUNDING YOUR OWN PRODUCTS, VCS NOT REQUIRED
Let’s return to Ugmonk’s Jeff Sheldon, who wanted to create and sell a desk organizer called Gather. Selling physical products can be tough, as they involve a great deal of prior planning and then manufacturing agreements that can involve minimum orders and therefore large investments of upfront cash. This is why many product companies go after funding or bank loans or require a massive amount of capital to begin.
Not so with Gather, however: Jeff decided to test his idea for his new product by creating a crowdfunding campaign for it. This approach, he felt, would see how much his audience wanted Gather; if they did, they would raise the capit
al he needed to build it without the need to give up control to investors. And because he’d already spent a decade building an audience that was ravenous for his Ugmonk brand, Jeff’s Kickstarter campaign was able to generate over $430,000 (surpassing his original funding goal by 2,394 percent), garnering him more than enough to cover all the costs required to put Gather into production.
Jeff was now able to ramp up production to an existing audience for this product, and he got funding directly from that audience instead of from outside investors who might not have completely shared his vision. As mentioned earlier, the Pebble watch, one of the first smartwatches created, would not have even gotten off the ground if it hadn’t been for their crowdfunding efforts — which quickly became the most-funded Kickstarter project ever. (Even raising over $20 million from 78,471 backers, however, didn’t ensure Pebble’s long-term success.)
Not surprisingly, crowdfunding, as an alternative to raising capital from investors, is a growing trend in new businesses. It’s far easier to access than VC money, and it puts your idea directly into the hands of potential customers — if they agree with your idea, they’ll pledge money as a preorder. If they don’t, you’ll only have wasted time developing the crowdfunding campaign (the marketing and possibly prototypes), not months or years in product development.
It’s not as cut and dry, though, as “VC = bad, crowdfunding = good.” VC money can sometimes come with much-needed mentorship and even the required connections on which to build business relationships. Capital can also come with the business experience needed not only to create a product but also to run a company. It’s just often very tricky to find investors. As any entrepreneur will tell you, people who have money and who share your vision and are eager to invest in your idea are often hard to find.
While VCs are interested in their own profits and partial ownership of their investments, crowdfunding seems more aligned with companies of one — if the product idea solves a problem for an audience, that audience will become customers. Profit will be generated quickly and at the outset, allowing you to make choices about your business and how it will proceed based entirely on the money it’s making. If your crowdfunding is done right, it can be extremely beneficial, but bear in mind that crowdfunding isn’t always a surefire way to raise money: typically, only 35 percent of Kickstarter campaigns are successfully funded. Nevertheless, though crowdfunding is still a niche, it was responsible for about $6 billion in money raised in 2016. Olav Sorenson, professor of management at Yale University, believes that crowdfunding is best suited for consumer-facing products, and not as likely to succeed for business-focused products.
Crowdfunding is also a little more meritocratic than traditional ways of raising capital. Research from Harvard Business School shows that investors — who are predominantly white males — prefer ventures pitched and run by people like themselves, i.e., other white men. By contrast, women excel with crowdfunding, according to research from PwC and the Crowdfunding Center: they are actually 32 percent more successful at hitting their fundraising goals than men.
Consider the case of Katherine Krug, the CEO of a company called BetterBack, which has raised more than $3 million in crowdfunding for its devices that help anyone with lower-back issues from sitting at a desk. With no outside investments influencing her, she’s able to completely control the direction of her company. Katherine, who famously turned down a Shark Tank deal, believes that crowdfunding is an ideal platform for female entrepreneurs to secure the capital needed to develop new products. She’s also found that crowdfunding is more liberating for companies of one, as too many VCs tend to consider $500,000 or even $1 million companies just too small to invest in. BetterBack operates without an office and with a small team spread around the globe. Katherine herself works from various parts of the world, spending each quarter in a different country. Her business, and how she leads her employees, are more focused on personal growth than on exponential profit increases.
CAPITAL ISN’T ALWAYS REQUIRED
Sometimes, if your idea for a business or product requires a substantial influx of funds to start, it could be that your idea is too large or too complex. And sometimes you should start a business only when people are asking you for something and are willing to give you money for it.
Derek Sivers began CDBaby — which sold for $22 million in 2008, while it was doing approximately $250,000 a month in net profit — by accident when he began selling his own band’s CDs on the internet. Friends asked if he could sell their albums for them as well, and as more people asked, a revenue model began to form and Derek’s CDBaby business was born. But in the beginning, it required no capital to start — just an idea and the time it took to execute it well.
CDBaby never took on investors, even though there were weekly offers from outsiders who wanted to invest. Derek didn’t need CDBaby to expand quickly because it was profitable from the start and it focused on serving its audience, not expanding its own profit margins. He didn’t have to please anyone but his customers and himself. Every decision, he feels, whether it’s to raise money, to expand a business, or to run promotions, should be done according to what’s best for your customers. Derek spent $500 to start CDBaby, made $300 in his first month and $700 in the second, and was profitable from that point on.
Customers typically don’t ask a business to grow or expand. If growth isn’t what’s best for them, maybe it should be reconsidered. Because when you do focus primarily on your customers and their satisfaction, as we saw in Chapter 7, they’ll tell everyone about you.
Crew, back in Chapter 3, started with a one-page website and a form to collect information in order to manually match freelancers to businesses. When the demand became too large to handle manually, they invested in building custom software. When they launched another product, Unsplash (royalty-free stock photographs), they did so in a similar manner: they bought a $19 Tumblr theme and uploaded ten high-resolution images taken by a local photographer. Within three hours, the first low-fi version was launched. They did the work manually until a scalable system was absolutely required, then invested in it with their profits. Now, a few years later, more than 1 billion photos are viewed per month through Unsplash (and it’s now a profitable business, although it is VC-backed at this point).
This may sound obvious, but businesses need to solve problems for their customers. Whether it’s selling a mattress that helps customers get a better night’s sleep or stock photographs, a business succeeds only when it’s viewed by your audience as useful. So your first goal, as a company of one just starting out, is to figure out the best way to solve a specific audience’s problems, and then get to work at doing it quickly and cost-effectively.
By starting out small, a company of one can put all of its energy into solving problems for real people rather than into growing large enough to maybe solve problems for people one day. This approach also gives your relationship with customers a strong foundation: by eliminating bureaucracy and the friction of large infrastructures, you can interact with, listen to, and empathize with your customers directly.
For example, if you’d like to sell an online course that teaches people how to run an online business, then it’s faster to offer that advice as a one-on-one consulting service first. That way you don’t need to wait to turn a profit until you’ve filmed all the videos, developed or set up an online course platform, and built the audience required to make money from online courses. Profit can happen as soon as you get your first customer paying you for individual instruction.
Halley Gray, founder of Evolve + Succeed, has found that most people who start a new business by themselves make the mistake of believing the products should always come first. Instead of developing a product, which can take a lot of time (and sometimes cash) to develop, new founders can start almost immediately by offering their product idea as a service first. This is what Danielle LaPorte did with her “Fire Starter Sessions” after she was fired from the company she founded and then went out on her
own. By offering services first, she was able to generate income almost immediately, as well as prove that there was a market for her products when her one-on-one service-based work took off. By doing this, she learned a great deal about her audience and determined what they wanted from her, so when her products were launched, they sold very well and her million-dollar-plus business was born.
LAUNCH QUICKLY — AND LAUNCH OFTEN
Too often we believe that we get only one chance to launch a product or a business, that the first splash is all that matters. If it doesn’t become massively profitable right away, we think, then it’s doomed. We somehow feel that there’s magic in the first time we open our (sometimes digital) doors to the public.
The problem with this thinking is that most launches aren’t massive successes. Yes, they can be slightly profitable (if everything goes right), but often things don’t pay off as quickly as we hoped, because we’re still mostly guessing in the beginning. We guess at the intended audience, the positioning of the product, and the value that audience will assign to what we’re selling. WD-40, the well-known everyday lubricant, is literally named after its thirty-nine failures and one success. Originally it was created for the aerospace industry, but it became so popular with employees using it for other tasks that it was brought to retail, where it thrived. GM launched an electric car (the EV-1) in 1996, but found it was too “niche” and scrapped the program; twenty years later, in 2017, their Chevrolet Bolt (also an electric car) was the Motor Trends Car of the Year. Only after you’ve first launched can you then start to measure data and collect key insights: what worked, what did not, how was it received, and how could it be positioned differently?