Start a Business: Will Anyone Buy Your Product?

This month we’ve been sharing our thoughts on starting a business: the first step to starting a business, how to figure out if you can money with your idea, and whether or not its the kind of idea that you can execute.

But even if you’ve gone through all of those steps, you still don’t have a business. You have an idea. And if you can’t get people to pay for it, you have nothing.

So this post will talk how to test your idea—or what some experts have called finding product / market fit.

Ask Your Network for Feedback
This is where a lot of would-be entrepreneurs wanting to start a business tell their friends and family about their idea and ask what they think.

Not surprisingly, most of them say, “Yeah, that’s a great idea. You should definitely start that business.” Or, “I would definitely buy that.”

Now you’ve got the validation you were looking for. So you open up for business. And if you’re really lucky, you succeed. But we wouldn’t bet on it.

Even if everyone tells you they like your idea and would buy it, you don’t have a good business until people pull out their wallets and pay for your product.

Sloppy ResearchTake, for example, Michal Bohanes, who had a great idea: people will pay for the convenience of a ready-to-fix meal, delivered to their home. It’s just the kind of thing busy moms and dads would pay for, right? 70% of the 250 people he surveyed said they would pay for that service. In-depth interviews showed people loved the idea. So Bohanes created a website and launched Dinnr.

He was in business. In the first week, he sold 12 orders. They hit a high of 23 orders on Valentine’s Day. But things never took off.

It turns out Bohanes wasn’t solving a problem that customers really cared about. Even though a lot of people told him they like it. (Read that link above. It’s worth your time.) There was no real pain point he was solving.

So go ahead and ask your friends and family what they think. But don’t believe what they tell you.

Validating Your Idea with Actual Customers
To find out if your idea is commercially viable (will people buy it?), don’t ask customers if they would buy, ask them to buy. There are a couple of ways to validate your idea with potential customers. Entire books have been written about this single step in starting a business.

How to Test Your Idea with Adwords
The first way to test your idea in the “real” world is to set up a website or landing page that features your product or service. You don’t need to spend a lot of money on its creation, but it does need to look professional—remember you want anyone who visits the site to see that your new startup is trustworthy. But you don’t need to pay thousands of dollars to get up and running. This is a test. So a good website template (Unbounce and Leadpages are both good options, or WordPress if you want a multipage site) and an inexpensive but professional looking logo design will be enough for now.

Next you’ll need to set up an Adwords account and deposit $100-200 (If you use Bluehost to host your site, you should be able to get an Adwords coupons for $75-100 to get you started). Once you’ve set up your account and written an ad with your product offer and a link to your landing page, set the bidding option to Automatic Bidding and Maximize Clicks. Also, set your geographic area to your own country or state. Google may recommend a bid target, set yours a bit below the recommendation and see what happens. If you don’t get any clicks after a few hours, raise the bid by 10-15¢. Repeat this process until you see clicks start to come in.

Next, set up conversion tracking in Adwords (and paste the script onto your conversion page so you can track how the ad does). The Adwords process can get pretty complex, but for this test we just need the basics. An ad set to run for specific keywords that your customers are searching online and the code that tracks who buys.

Now watch your webpage and your Adwords account. If your product idea appeals to the people who click on your ad, you should be able to sell on your site. If you don’t have a finished product, you should be able to collect contact information for interested customers who want to hear back when you launch.

For a more in-depth primer on how to test with Adwords, check out Tim Ferriss’ book, The 4-Hour Workweek (Chapter 10).

A few Cautions with this Approach:
If you are only collecting email addresses rather than selling your product, you don’t really know if customers will pay for your offer. You only know they are interested. This can be indicative of success, but like Dinnr, it can be misleading. It’s best to ask for the buy.

Second, if you choose the wrong search terms or create a poorly performing landing page, this can affect your results negatively and you won’t know if your product meets a market need. Working with someone who has been through the process before to make sure you get the results you are looking for, may be worth the money.

Or, if you already have your product or service, you can try this…

Launch Your BusinessLaunch Your Product and Iterate Fast
Some ideas are so simple that it’s actually just as time consuming to set up a web page and Adwords campaign as it is to set up the actual product website. This was the case for 7 Day Startup author Dan Norris, who got his business up and running, with paying customers, in less than seven days.

The key is to launch and iterate quickly. Create your product and get it out there. Launch a small Adwords campaign, pitch to your email list, or use some other way to get the word out (yes, this is harder than I’m making it sound). Ship. Then improve it as you go.

That’s the path that Shayna McHugh, founder of Espresso English, has followed with some of her ebooks and courses. On at least one occasion, she pitched a course to her email list, then when several customers signed up, she had to produce a new lesson every day until the course was completed. She sold the course first, and was paid to create the product for her customers (you can hear her talk about it here).

A Caution with the Launch and Iterate Approach:
Once you build a particular product, it’s very easy to get stuck trying to make it work, even if it doesn’t solve a market problem. You figure you’ll try just one more idea. You just need to get it in front of the right customers. And so you spin your wheels on an idea that isn’t going anywhere. As Kauffman Fellow, Paul Kedrowsky, once said, “Once you build something you are dead.”

Launch Your Business as a Service
If your product isn’t ready or you don’t have the money to build it, you can always launch your business as a service and take on customers who will help pay to develop the product as you work for them.

This might work for someone developing a niche software product. You get hired by a company that needs that product or service, and in the process of doing it for them, you build your product to the specifications of your first customer (your employer). There are some potential legal issues with this approach, if you’re not careful. You may also find that you spend all of your time providing the service, and none creating your product. However, it is a viable way to start a business, create your product, and test it in a real world situation.

As Paul Ahlstrom and Nathan Furr wrote in their fantastic book, Nail It, Then Scale It, “The greatest mystery to entrepreneurs is not the invention—it is the market insight that leads to innovation and market adoption.”

When you start a business, it is critical to figure out if the market will adopt your idea. If it won’t, start looking for a new one.

 

Photo credit: NASA

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11 Quotes for Startups and Small Business from Eventbrite Founder, Julia Hartz

Julia Hartz Startup QuotesJulia Hartz is the cofounder and President of Eventbrite, the online ticketing company that helps anyone (not just big musical acts) open their own box office for events. Before starting Eventbrite, Julia worked in the television industry working at MTV and FX Network on shows like JackAss, The Shield, and Nip/Tuck.

Julia left her television career shortly after she met her future husband, Kevin Hartz, a Silicon Valley entrepreneur (he founded Zoom and had worked with PayPal). When he asked Julia if she wanted to start a business together, she said yes and hasn’t looked back. In the eight years since, Eventbrite has grown into an amazing company—with more than 500 employees, offices around the world, and $1 billion in ticket sales in 2014.

Along the way Julia has had a lot to say about the challenges of building a new business and building a great culture. Here are a few of the things she has said that we think will inspire other startup founders:

“I had to learn how to ask for help. Everyone always thinks it’s brave to go out alone, but I think it’s even braver to put yourself out there in front of others, and to figure out how to work together.”

“The culture in your company will carry some of your DNA as founders. For example, I can’t keep a secret to save my life. We have an open-source culture.”

“[One] of the obstacles we faced in the beginning [was]—and still remain our same obstacles—is focus. There are so many different ways you can take this, and yet through the tenure of Eventbrite we committed to being focused on the ticketing… I think it’s been a real challenger; an obstacle in itself to not get too distracted by all the possibilities.”

“Walk the walk: model to your team what you find most important in the way you think, behave, and make decisions.”

“First and foremost it’s important to choose the right partner. I feel like Kevin is a natural-born entrepreneur and I’m a natural-born operator, and we just so happen to get together. I think it was sort of fortuitous that we were able to start Eventbrite together, but looking back in hindsight I think it’s so incredibly important to choose the right partner. That can make all the difference in the world, honestly.”

“Time and again, we learn that it’s foolish to take culture for granted or merely trust your good intentions to win the day. As with any other crucial aspect of a growing business, you need the right technology and tools.”

“I didn’t want to dictate the culture. I didn’t want to get in the way of brilliance happening. If you want to build a sustainable culture, you have to have a strong philosophy and then let people do with it what they will and be okay with that.”

“It’s important to ask for a lot of advice, seek a lot of mentorship, and actually listen to all the data inputs that you’re getting. It can be overwhelming… often times entrepreneurs will be siloed and be heads-down and will not want to seek outside advice. That can really hinder the outcome of their product.”

“People aren’t expendable and I didn’t want to have to correct any hiring. I wanted to get it right from the beginning.”

“Culture is absolutely so key to keeping you centered in those moments of disaster. When you create a great culture you are creating a family, you are creating something that ultimately keeps you centered… so it’s really important to think about how you are building your team.”

“Creating a strong company culture isn’t just good business. It’s the right thing to do, and it makes your company better for all stakeholders—employees, management, and customers.”

—Julia Hartz, Co-founder and President of Eventbrite

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Logo Design News This Week (5.4)

It’s Friday again and that usually means that we take a quick look back at all the news from the world of logo design from the past seven days. Today is no exception. So here’s what caught our attention:

Morning Edition Logo DesignIf you’re like millions of other Americans, you spend a portion of your morning listening to NPR’s news show Morning Edition. This week the show unveiled a new logo on Facebook which is only a little ironic as logos are visual and radio has no visual content. So while millions will listen to the show, few will ever encounter the logo. We like the rising sun motif (a big departure from the coffee cup logo you probably never saw), though it’s not exactly original as it is already in use by NBC’s Today Show and CBS’s Early Show. More than a few conservatives are bound to note the resemblance to the Obama Campaign logos and read that as more proof that NPR is a liberal news outlet.

New Jacobs Cracker Logo DesignJacob’s Biscuits is rolling out a new logo design on its packages of crackers (and adding several products previously under other brands to its lineup). The new logo removes the yellow band from across the top and upgrades the font to something a little more high-class. It also adds a new tagline: Baked to Delight. The new packaging features photography that reminds me I haven’t had lunch yet. These new crackers might got well with Brodies Tea which also reported has cool new logo.

Last year we told you about the King’s College rebrand that cost £300,000 (about $460,000). You can see that logo here. Well, angry students opposed to the new look (and new name) have forced the administration to back down. One assumes there won’t be a refund on the money spent on the new logo. Ouch.

Cheatriots Logo DesignWith the reports this week of cheating by someone (Bellicheck? Brady? The ball boy?) who deflated 11 of 12 footballs below the league’s mandatory pressure, it was only a matter of time until we saw the re-emergence of this logo from the last time the Patriots were caught cheating. Keep it up New England and sports fans will hate you more than the Cowboys some day.

Jamestown Jammers LogoIn happier sports logo news, the Jamestown New York Baseball Club finally announced its new name and unveiled their logo—the Jamestown Jammers. The team had announced a move to Morgantown, West Virginia, but appears to have had second thoughts and will be returning to play in Jamestown in May 2015. The logo appears to be an angry, baseball-playing grape—which is exactly the cool/weird kind of thing we love in minor league baseball. And look at this: the Nashville Sounds have a new logo too!

Canadian donut maker, Robin’s, has a new logo. That’s supposed to be a red breasted robin, not a chicken, though when you see the logo, you’ll understand the confusion. That’s the kind of logo we expect to see in baseball!

Sonos Logo DesignWe’re big fans of Sonos. It’s become our go-to for music during the work day (and on the weekends as well). So we’re digging this new look for their logo designed by Bruce Mau. The logotype itself doesn’t appear to have changed but the backgrounds associated with it do a great job of signaling “music” and “sound”. It’s a nice piece of design work.

We also like this new Singtel logo.

MLK Day Google Logo DesignGoogle celebrated Martin Luther King Jr. Day with a new logo design created by Ekua Holmes, a painter famous for using bright vibrant color and materials like photos and news clippings to create a unique collage-look. It’s a great piece of art and even works as a logo. From Dr. King: “Injustice anywhere is a threat to justice everywhere.”

Did we miss anything? Let us know in the comments:

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Start a Business: 8 Questions to Ask to Find Product / Founder Fit

Product Founder FitWe’ve been writing about the first steps to starting a business over the past few weeks. In case you missed them, we’ve covered stuff like figuring out if your idea will earn enough money to support you and the number one thing you should do.

Now that you have an idea and you’ve successfully determined that your idea could conceivably (if all goes right) produce enough income to support you, it’s time to take a closer look at your idea and figure out if this is something you really, really want to do. Experts like Chris Dixon and Brad Feld called it Product/Founder Fit.

This is the time to get brutally honest with yourself.

Is this an idea that you are excited about? Will you get bored with this business before you make it successful? Do you have the skills to get your company off the ground?

Without Product/Founder fit, it will be that much harder to find success.

Let’s say you have an idea for a new email app that solves all the things that bug you about gmail and hotmail. But you don’t know how to program an app. In fact, the only thing you know about email is how to open yours. But your idea is fantastic!

It probably won’t matter how good the idea is. Your skills don’t match your idea very well. That’s not to say you won’t succeed. But it will be tough.

On the other hand, imagine you notice that your neighborhood doesn’t have a Greek restaurant. You just happen to make the best tzatziki and souvlaki in the world. But more than that, you’ve managed a restaurant before and you have several friends who will hire you to cater their events. You’re excited about the potential opportunity in front of you and can’t wait to get started. That’s Product/Founder Fit.

Here’s our list of eight things that you should consider (as a startup entrepreneur) to make sure your idea for a new business fits your ability and desire to build it:

1. Passion for the idea. 
There is some debate about whether passion for the idea is absolutely necessary to start a business. It’s not. But if you have passion for solving the problem your product or service is designed for, you’ll be ahead of the founder who doesn’t. Because you’ll care just a little bit more about the details. And the people who need your product or service. When things get hard, your passion keeps you going. So while it’s not a requirement for success, it certainly doesn’t hurt.

How you define your idea may help you find the passion. It’s our guess that Mark Zuckerberg isn’t very passionate about helping people play Farmville and CandyCrush, or share the latest listicle and cat photos. But he is passionate about technology and building a great company. He’s passionate about dominating the social media world. So what are you passionate about and how does that give you an advantage?

Knowledge2. Knowledge and skills to build your idea into a business.
Entrepreneurs often think they can do things they’ve never done before. Most of us over-estimate our abilities. But that doesn’t make it true. Have you managed people before? Have you built and scaled a software application? Have you worked in sales or created a sales team? Be aware of your skill set and what you can actually do well. If your business idea requires you to take on projects you have no experience with, your chances of failure go up. Again, it doesn’t mean you’ll fail. Just that success is harder. (This may be a good time to find a co-founder who can compensate for your weaknesses).

3. Do you have the money?
Startups don’t have to be expensive. But they’re usually not free. If your idea for a business is an online application, you might be able to build it for a few hundred dollars. Or a few thousand. If you require an office or retail location, your new venture may be several thousand dollars or more. Whatever your situation, you need enough for your startup costs, plus enough to carry you through until your revenues cover your costs. If you don’t have the money, you should rethink your idea. Click here for a simple primer on estimating your operating costs.

4. Do you have the time?
If you’re working on your startup idea at night while you work your day job to pay the bills, how much time can you put into the new venture? How long will it take you to build your product (double your initial estimate—these things always take longer than you think). If you’re working on the new business with all your time, how long until you run out of money? It can take hundreds, maybe even thousands of hours to get a product built and out to market. Do you have enough time to build yours?

5. Do you know the right people?
You can build a business without the help of anyone, but knowing the right people can make things a lot easier. Let’s say you want to start an employment recruiting business (headhunting). Who’s in your network? Do you have relationships with several businesses with recruiting needs? Do you have a way to connect with potential recruits? If you have a product idea that will sell through retail stores, do you have a relationship with a wholesaler or store buyer who can help get your product on the shelves? The right people can grease the skids for your startup.

Even if you are starting a relatively simple business, you’ll still need help from a few people. At some point you’ll need an attorney, an accountant, and someone to help with logo design and a website. You’ll need suppliers, partners, and of course customers. A good network gives you a big advantage.

6. Can you build something that other people want?
Ultimately this is part of finding a fit with the market, but while your idea may appeal to some customers, the real question is, can you create the solution? I met a group of smart people who found a real market problem in medical recruiting. Potential customers expressed a real pain point that wasn’t addressed by the market. Not only that, the existing solutions are very expensive. Customers unanimously said they would buy the solution. But the team just couldn’t build the product. They spent lots of time figuring out how the product would work. Even trying prototypes. But when it came down to releasing the product, they couldn’t get it done.

Start a Business Now7. Do you have the skills to market your business?
Entrepreneurs ready to start a business often focus on their core competency. Take for example the woman who chooses to start a bakery because she make great bread. Really good bread. And her pie recipes aren’t too bad either. But once the bread is in the oven, how will she attract customers? Do you know how to build an email list and write a regular newsletter? Have you ever designed a retail store or shelf display? Do you know how to find potential partners who can help get the word out? Can you come up with an offer that will bring paying customers in the door? Don’t overlook what it takes to market your business idea.

8. Do you have the ability to focus until everything is done?
This may be the most important point. Startups can take years to become successful. Is your idea compelling enough that you won’t quit before you succeed? Many businesses fail because the owner loses interest in the idea long before the idea has time to succeed.

If you answered yes to most of the questions above, then you probably have a pretty good fit with your product. You don’t have to be an expert in every thing. Maybe you have money, but need help with marketing. As long as you recognize where you are weak, you can find someone to help.

But be brutally honest with yourself. Do you have the Product/Founder Fit you need to start a business? Now get started.

Photo credit: Next Twentyeight, Tellatic, and rawdonfox.

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7 Quotes for Startups and Small Business from TaskRabbit Founder, Leah Busque

Leah Busque Startup QuotesIs there something that you need to get done, but you can’t get to it, or you don’t want to do it? That’s exactly the problem that Leah Busque had in 2008 when she was on her way to dinner and remembered her dog needed to be fed. The thought, “Wouldn’t it be great if someone could pick up dog food for me while I’m at dinner?” spawned the idea for TaskRabbit.

After working seven years as an engineer at IBM, she quit her job, cashed in her pension and decided to see how far she could take the idea of matching people with skills and extra time with opportunities for work. It turns out she could take it pretty far—today more than 30,000 people use TaskRabbit to get odd jobs done.

And people have noticed. Busque has raised nearly $40 million from venture funds and has been named one of Fast Company’s “100 Most Creative People in Business.” And The New York Times called TaskRabbit “The Next Big Thing in Tech.”

TaskRabbit can be used for just about any task from picking up groceries to mounting a television on a wall. Basque reports that one user dropped her keys in a lake and posted a task for a scuba diver to help find them. And she got her keys back.

As she has grown her business, Leah has had a few things to say that we thought might inspire other entrepreneurs and small business owners. Check out her advice for startups:

“Don’t overthink it and don’t be afraid to make mistakes. When I was first starting out, more decisions than I care to admit seemed like life-or-death situations, when in reality, each choice has brought TaskRabbit closer to building the strongest business and community possible.”

“Don’t be afraid someone will steal your idea; the reward is exponential verses the risk. Gather a good group of mentors and advisers early on. And if you have an idea you are really passionate about, see how far you can take it.”

“…keep a notebook next to your bed. Some of my best ideas have come to be by waking me up in the middle of the night. Because of this, I keep a notepad next to me while I sleep. When something comes to me and I wake up, I quickly write it down so I don’t forget. Then, when I wake up, I’m extremely motivated to bring whatever idea it is to life!”

“Just because you can do something doesn’t mean you should do it.”

“As a founder and CEO, editing the team is necessary and making quick decisions is critical for the integrity of the team.”

“I wake up every morning with a singular goal—to push my company as far as I can that day… My approach is to choose specific and actionable items to complete each day to move us closer to these goals, and to encourage everyone on my team to do the same. This keeps us on track for accomplishing the big picture.”

“There was a huge learning curve from building a product to building a company. When I first started, I was just building the technology and platform. Quickly I needed to get a grasp on fundraising, marketing, financing and operations. I’d never even taken a business or economics class, so early on everything felt like a black fog; I didn’t know what was in front of me.”

—Leah Busque, Founder and CEO of TaskRabbit

 

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Logo Design News This Week (5.3)

Friday is here and as usual we take a look back at all the news from the world of logo design and share the stories that caught our attention. Here’s what we noticed this week:

New Ziploc Logo DesignOur first item this week looks just a bit like our first item from last week (you might have to squint just a bit)—blue and triangular. Ziplock unveiled a new logo design this week. It’s not a drastic update, but the font is made a little more playful. The balance of the word mark on the triangle is better, and the letters have a bit more character. But there’s something off about the whole design—maybe the shape of the P. Maybe the alignment of the word on the triangle. Something.

The Great Lakes Brewing Company has a new logo.

New USA Swimming Logo DesignUSA Swimming unveiled several new logos in order to create a more consistent look and feel across several levels of competition supported by the organization. Each of the designs is intended to show the power and speed on display by amateur swimmers. We like the variety of the swimmers in each of the mark, but the logos are muddled by sponsor logos at the top as well as the Champion Series mini-logo that sits under each of designs. You can see all six designs at the link.

Ave Maria Press (a publisher of catholic school books and books used in worship services) is celebrating its 150th anniversary with a new logo.

Bonham Texas Logo DesignLast week we showed you the new logo for the city of Austin Texas. This week the city of Bonham Texas gets in on the new logo business. It feels very Texan (and very American) and like the Austin logo, features a star. Unlike Austin’s design, the Bonham star isn’t anywhere near the actual location of the city within the state of Texas. We expect that most of Bonham’s citizens will like the new design.

Enterprise Rental Car and Europcar have been in a legal battle of the rights to their very similar looking “e” logos. This week Enterprise came out on top.

New Headline News LogoCNN’s Headline News unveiled an updated logo design this week. If you’re like most people, the only time you see HLN is in an airport, so we share the new logo with you here. The new logo keeps the stylized speech bubble, but separates the H and L back into separate letters. And the new font is significantly thinner. We’re not sure what’s up with the clipped extender on the L and the tight spacing between the L and N, but whatever. Look for it in an airport near you.

Tennis star Andy Murray has an ugly new logo.

Boston Olympic Logo DesignThe Boston 2024 Olympic Committee unveiled a new logo to help represent their bid for the games. And it is almost completely different from anything we’ve seen before for an Olympic symbol. Most nominating cities use multicolor images trying to invoke torches, rings, and athletics, but we’re at a loss as to what this icon is. Maybe a discus? Armin at BrandNew suggests it might be a laurel. Who knows? That said, often breaking the mold of the expected is a good move. And we like it, despite it’s lack of personality.

Really like the new mark for Super Natural British Columbia.

Electrolux Logo DesignWe saw several items this week about the update to Electrolux’s logo. The company kept its icon (designed by Carlo Vivarelli and used since 1962) but swapped out the font for a simpler, san-serif typeface. We don’t intend the next line to be a criticism, but we can’t look at this icon without thinking of a bikini. And now we bet you can’t either. We’re trying to figure out what it really is. No idea, other than a 50 year old icon that the brand ought to keep. Especially if they start selling swimwear.

Did we miss anything? Let us know in the comments.

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Want to Start a Business? Here’s How to Figure Out If You’ll Make a Profit.

Start a Business BannerOver the past couple of weeks we’ve been sharing our thoughts on starting a business, why you might want to do it, what experience you need, and the most important thing you need to do. But none of that means anything if you can’t eventually make money with your new startup.

In fact, the biggest reason people who want to start a business don’t is that they are afraid to trade their dependable income for months (maybe even years) without a paycheck.

We don’t blame them.

Who wants to go home to their spouse and announce that they just quit their job so they can work on that crazy idea they’ve been talking about?

“How will we pay the mortgage?”

“Or buy food?”

So if you’ve got the idea for your startup and you’ve started working on it, it’s time to figure out if you can make a living at it.

Before we go any farther, let’s just say that if you’re living in a dorm room and working on an Internet business, it is possible to create and launch something without regard to whether you’ll make a profit (we’re looking at you, Mark Zuckerberg).

But for most entrepreneurs, starting a business means giving up an existing job (if not at first, eventually) or career. It means scrambling to make enough to pay for expenses.

It’s tempting to think you can follow your passion and make a business out of it. It’s one thing to love collecting comic books or coins, quite another to make a living at it. The same is true for programming website, baking pies, and making socks.

Will your new business earn enough to meet your individual needs?

To figure it out, you need to do some math.

NOTE: WHAT FOLLOWS IS NOT A FORMAL FINANCIAL PROJECTION. IT IS SIMPLY A QUICK CHECK TO SEE IF YOUR BUSINESS IDEA HAS THE POTENTIAL TO SUPPORT YOU.

1. Know how much you need to earn to pay your bills.
The first step is to know how much money you need to live each month—how much do you spend on housing, food, entertainment, retirement, and everything else you buy? How much can you cut out while you are building your business?

Maybe it’s $2000 a month. Maybe it’s $5,000. Everyone will have a different number.

As you add up your expenses, be realistic. There’s no point in figuring you can live on beans and rice if you don’t like beans and rice.

Once you know your number, we need to figure out whether your business idea will bring in enough revenue to support you. As you work through the numbers, be realistic. Don’t count on miracles. You might get one, but you don’t want to plan on it.

2. Create a forecast of expenses.
Open up your spreadsheet (both Google and Apple offer free software for this) and estimate how many products or hours of service you can sell each month.

Start a Fudge BusinessLet’s say you have a phenomenal fudge recipe and every time you share it with someone they tell you that you need to open a fudge business. You like making fudge and decide this is a great idea (for other business ideas, simply replace fudge with your product and its expenses). Here’s how to do it:

Estimate how many batches of fudge you can make and sell in a month. Maybe its three batches a day that each produce four boxes of fudge. 12 boxes a day x 6 days a week x 4 weeks a month = 288 boxes.

The next step is to figure out a cost of goods. Add up how much it will cost to make all that fudge. The price of chocolate, sugar, marshmallow, and so on. For this example let’s say the cost per batch is $10. So the cost of goods per box is $2.50. (This is not the price you will charge, just how much it will cost to make each batch).

Next, you need to add up the expenses that your business will incur. There are fixed costs (like payroll, internet service, salaries, accounting, and rent) and variable costs (like advertising, packaging, and sampling). The lower your fixed costs, the more flexible you can be. It’s a good idea to double your estimate for advertising as these costs tend be higher than expected.

Let’s say you have a retail store and sell about half of your fudge over the Internet. You’ve got a modest budget for online advertising as well as delivery. Here’s what that spreadsheet might look like at this point:

Start a Business Sample Financials

If you do the math, you’ll see that in addition to the $2.50 in ingredients for your fudge, you also have expenses that add up to $1620.00 or $5.63 per box.

We didn’t include these in our example, but there are other expenses you’ll want to include as you create your projections, stuff like phones, returns and spoilage, shelf placement fees, sales tax, packaging, and employment taxes (as a self-employed fudge maker, you’ll have to pay both the employer and employee contributions). Include everything that you reasonably expect to pay each month.

3. Create a cash flow statement.
Next you’ll want to take a look at how and when you collect your money. If you are selling your fudge online or in your retail store, you’ll likely collect the money before you ship your product. But if you sell through a retail partner, they will not pay you upfront for your fudge. Rather, they’ll sell the fudge and pay you at the end of the month (or maybe after 60 days). If your business operates like this, you’ll need enough money to pay the bills for the first couple of months until the bills get paid.

Financial Projection4. Figure out your startup costs.
You’ll also need to make a list of all the things you’ll need just to get started. Kitchen appliances. Pots and mixing bowls. A logo design. A website design. These costs aren’t part of your monthly financials, but you need to buy this stuff before you even make your first batch. If you borrow money to cover these expenses, you’ll have to pay that back over the next few months or years. Your financial projection should include a line item for these loan payments.

5. Now add it all up.
The last step is to add it all up and see if the business makes sense. Remember, this is a pretty basic look just to decide if the business idea is a good one (not an official financial projection).

The costs for our fudge come to $8.13 per box. If we sell each box for $20, that brings in $5,760. Not bad. But when we subtract out our expenses, we’re left with $3,420 in profit every month. How does that compare to our income number from step one? If we said we could live on $2000, this business might make sense for us. But if we need $5000 a month to meet our expenses, we need to make some adjustments. Either we need to raise prices (which will reduce sales) or we need to lower costs. And if we can’t do either, we need to look for a different business idea.

A few things to keep in mind.
Stop-Thinking-Start-DoingIt’s one thing to say we can sell 288 boxes of fudge a month, but it’s quite another to actually do it. If you’ve never sold a box online before, how do you know that you can do it before you launch? How will you attract customers to your website? If you plan to sell through a retail partner, how many boxes are they willing to pre-order? If you sell through your own retail store, how much foot traffic will you get—if 1 in 20 people buy a box of fudge, you’ll need 5760 people to visit your store to sell all the boxes. Is that reasonable?

If your costs (ingredients, rent, salaries) increase, can you raise prices or increase production to grow enough to cover these inevitable increases? If not, your profit will gradually decrease until you don’t have any.

How much time will you have to spend working on things like packing up boxes, dropping off shipments, and contacting potential partners versus making fudge? Will you have time to run your website, do the bookkeeping, and marketing? If it takes 8 hours to make your product, how will you find the time to grow your business?

If your business idea is to provide a service, like creating websites for your customers, you can follow the same steps above, but you need to think about your product a little differently. Are you selling your time by the hour or by the project? Plug those numbers in along with the associated expenses and revenues and run the same projection.

Does this exercise help you think through whether you should start a business or not? Let us know in the comments.

 

Photo credits: Elana’s Pantry and 401(K) 2012.

 

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13 Quotes for Startups and Small Business from Noah Kagan

Noah Kagan Startup QuotesNoah Kagan is the founder of AppSumo, a website that provides daily deals for startups. But he may be better known as the man who missed out on a $100 million Facebook fortune because he was fired eight months after joining the company. You might also know he was employee #4 at Mint.com. Or maybe you know him as Austin’s biggest fan of tacos.

Whatever you’ve heard about him, you probably know that he’s a hustler. In order to prove that anyone can start any business doing just about anything, he challenged himself to make $1000  in less than 24 hours selling beef jerky—without using his existing network. In just nine hours he made more than $3000 in sales and $1,135 in profit.

Kagan applied that same hustle when he started AppSumo, creating the website in a single weekend and reportedly outsourcing the development to a team in Pakistan for just $60. The site was almost immediately popular, grossing more than $1 million in its first year. AppSumo has undergone a bit of a transition from its earliest days and now offers a free suite of tools that helps businesses get up and running and has nearly 1 million subscribers.

From Facebook to Mint to Gambit to AppSumo, Kagan has seen just about every challenge faced by entrepreneurs. And he’s been generous in sharing his experiences and advice. Here are a few of our favorite things he has said that we think other entrepreneurs and small business owners might be inspired by:

“My favorite business book of all time is experience.”

“A common pitfall is people over-thinking their name when they’ve made no profit. People just want the solution and could[n’t] care less what you’re called.”

“The secret to success… is work. That’s it. It’s hard and tiring, but if you want it, you can do anything.”

“When you hire people, there are three types of employees: 1–Grower. Someone who starts when the company is small and improves/adapts their skills as the company scales. 2–Show-er. Someone who can be good for the company where they are now but NOT where they are going. 3–Veteran. They’ve done it before and it’s second nature for them to teach you how to do it in your company.”

“To be in the 1% you have to do what the 99% won’t.”

“…constantly ask yourself: how can I make the company more valuable? You do that and you will never get fired (unless you do something really stupid or the company goes out of business.”

“A true measure of an entrepreneur/successful person is how they deal with adversity.”

“If it’s hard for you to see to people in your social network who know you, expect it to be more difficult with strangers.”

As an entrepreneur, you need to be very confident in your ability to generate ideas and opportunities. If you only have one idea, don’t start a business. Why? Because even if you launch your business and protect it until you lunch, as soon as you’re successful you’re going to have ten people trying to copy it.

“A startup can focus on only one metric. So you have to decide what that is and ignore everything else.”

“There is one key difference I’ve noticed among successful business owners and the ‘wantrepreneur’ crowd. One group is waiting for the right ____ (fill in the blank). And the other group decided to make things happen for themselves. Period.”

“Setting goals is always a good thing. They help you to have something to look forward to. But it’s the journey/process/in-between or ‘the liminal’ that is rewarding. It’s a 2 for 1 special.”

“When you start a business, it almost never ends up where you plan or expect it to be. You have to continually tinker with what you’ve built.”

—Noah Kagan, Founder and CEO of AppSumo

 

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Logo Design News This Week (5.2)

Here’s the latest news from the world of logo design—all the new brands, updated designs, and controversies about the artwork used by companies to brand their products. This is the stuff that we noticed, tell us about what you saw in the comments.

Coach.me Logo DesignLift, the app that was designed to help you reach your goals, not matter how large (run a marathon) or small (remember to floss) has a new name: Coach.me. And with the new name, they also have a new logo. It somehow seems appropriate that the app designed to help people change has changed. The new logo is certainly appropriate (the megaphone icon might be used by a coach yelling from the sidelines), but we’ll miss the more feminine and friendly feel of the old logo (which you can see here).

Enfield has a new logo to promote recycling. Its’ a design disaster, but if it gets people to keep their newspapers out of the garbage, who cares?

Business France Logo DesignThere’s been a lot of news from France this week (see below) so let’s take a look at the new logo for Business France, which was formed by the merger of the French Agency for International Investment and the French Agency for International Business Development. The two agencies are really two sides of the same coin, which is a pretty good way to describe this new logo design.

Pixar’s upcoming movie, The Good Dinosaur, has a new logo. See it at the link.

Austin Texas Anniversary Logo DesignWe saw a few city logos this week. We are generally skeptical of the ability of a logo to capture the essence and feel of a city and we’ve written about that quite a bit on this blog. There are exceptions and this new logo for the City of Austin Texas is one. It brilliantly captures the flavor of Austin (and note the star in the logo is about where Austin is on the map). Very nice design. Wish we could say the same thing for this new logo for the city of Bristol Connecticut, which got a minor update (changes to the fonts) and added a gear icon because, well, Bristol and gears, right? What gears have to do with “all heart” is beyond us. Lastly, check out this new logo for the City of Covington. We want to dislike it, after all, it doesn’t really capture anything about Covington in the way the Austin mark does for Austin. But then, there it is waving at us, and we don’t hate it. One imagines that it won’t be long before we see a version with a naughty hand gesture… and right on queue there it is in the comments.

Seth Godin on the difference between a logo and a brand. We couldn’t agree more. Here’s where to get your inexpensive but attractive logo design.

Jazzercise Logo DesignThese days there’s Zumba, and Ripped, and Boot Camps, and Insanity, and P90X, and the 7 Minute Workout, and PiYo, and the list goes on. Here’s the one that started it all way back in the 80s (okay, not really, but it was one of the first): Jazzercise has a new logo. Who even knew they were still around? The new identity is part of an effort to revitalize the brand and win over customers used to those other exercise programs.

Quick Burgers Logo DesignThere are a lot of places in the world where you can get a fantastic hamburger. Unfortunately, France and Belgium aren’t among them. At least not if you visit Quick, the European burger chain. We’ve had the opportunity to “dine” there once. Never again. Fortunately they are a bit better at logo design than they are at making hamburgers. This update to their logo is a good step forward for the brand. The symbol is much more simple, losing the “house” element of the icon—although Americans might confuse the Q for Intuit’s Quicken logo. They’re not the same, but the color and letter… Quick. Lousy burgers, acceptable logo.

Romanian soccer team, Steaua Bucharest has a new clip art logo after being stripped of their name and emblem by the courts. And in other sports logo news, check out the new mark for the Croyden Rangers.

Je Suis Charlie Logo DesignWe like to show off the latest Google logo designs at the end of this weekly column. We didn’t see any new Google logos this week, however Google added a “Je Suis Charlie” logo to their page in France, honoring the slain cartoonists and showing solidarity with the French people after the terror attacks in Paris. Kudos to Google for this move.

Did we miss anything? Let us know in the comments:

 

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Another Thought on Starting Your New Business Now—A Follow-up to Yesterday’s Post

Balloon and Business230 years ago yesterday, two balloonists—frenchman Jean-Pierre Blanchard and American John Jefferies—took off in a hot-air balloon from Dover England in an attempt to be the first to fly across the English Channel.

Blanchard wasn’t exactly what most people would consider an expert. His first flight in a balloon was just nine months earlier. And the first successful manned balloon flight by anyone was only three months before that. Blanchard had successfully flown in a balloon just four times before the attempt to cross the English Channel.

The two balloonists had planned for a long flight and had stocked the balloon with plenty of unnecessary supplies, adding significant weight to the balloon. Stuff like anchors, a hand-operated propeller that didn’t work, several casks of brandy, and silk covered oars that the duo planned to use to row themselves through the air toward France.

As the journey progressed, the balloon never rose to a safe cruising altitude. Blanchard and Jefferies were forced to throw everything possible overboard in a desperate attempt to lighten the balloon. The pair was so desperate that they even threw most of their clothing overboard.

Before the trip began, there were doubts that the balloon would carry both of the men and their supplies across the channel, so Jefferies, who financed the trip, had to promise that he would jump overboard in necessary.

Fortunately for him, it didn’t come to that. The balloon landed safely in France, just outside of Calais (which made the pair honorary citizens, despite the fact they landed dressed only in their underwear).

What does all of that have to do with starting your new business?

You don’t need to be an expert at something to give it a go. Blanchard had ascended in a ballon just four times before attempting to cross the channel. Chances are you already know more about the business you want to start than Blanchard knew about flying a balloon.

The important thing isn’t experience, it’s willingness to try something new. Just start.

Also note, that when things didn’t go as planned, Blanchard and Jefferies had to make quick adjustments, throwing everything that wasn’t critical to surviving overboard.

You’ll do the same thing as you start your new business—improvising to get enough altitude to get to your destination—even if it means throwing your pants into the sea. You just do whatever it takes.

Whatever it is that you want to do—from opening a food truck to building an online software product, it’s time to get in and take off.

Start your new business. There’s no better time than now.

(And if you need a logo to help brand your new venture, you know where to go.)

 

Photo Credit: Heartlover1717.

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