My son is going to start playing t-ball this spring. It’s for 4 and 5 year olds – so they don’t keep score. They don’t track hits, errors, runs, etc. Which makes perfect sense since the point of t-ball is to learn the basics: where to stand, what it’s like when the ball is in play, what base to run to, etc. Keeping score, playing to win – these just get in the way of the purpose of t-ball.

Meanwhile, my favorite baseball team (sorry Tigers – you’re my five year old’s favorite team) the Chicago White Sox are 10-16, and only one game out of last place in their division – a division where they were expected to compete for first. The problem is their hitting. How do I know this? Well thanks to the Sun-Times and their kick-ass stats team, I know that the Sox haven’t “scored in the first three innings in 12 of the last 13 games and has scratched out all of 41 runs in the last 17 games.” Why does this matter? Because it’s the White Sox job to play AND WIN games. The owners of the team have invested substantial money in the manager, coaches and players with the purpose of winning.

So what exactly does this have to do with business? Well ask yourself – is the purpose of your business to win it all (i.e. achieve success) or is the purpose of your business to improve your skills (i.e. learn something)? Your investors and I hope you know the answer – it’s to win – to achieve success. So if you’re planning on winning – you better keep score – and not just wins and losses – but all the little stats that create wins and losses. The wins and losses follow from things like how many runs a particular pitcher gives up – and the batting average of the hitters. The success (wins, or money) follows from good work (hits, strike outs, or a fiercly effective email campaign).

Seems simple right? Except it isn’t. I’ve given advice to dozens of startups and very few of them know how many visitors their websites are getting. Few of them know how their average customer would rate them on a scale of one to ten. Ask yourself – how many emails did you send out? How many people opened them? How many visited your website? Etc. Etc. Etc. If you’re not paying attention to these fundamentals, you can’t improve your number of wins. You become a victim to your actions – not the master of your actions. This can be damned ugly. If you’re in the majors – pay attention to the score and learn how to make informed decisions to improve the score.

Are you playing in the major leagues or playing t-ball?

Here’s a quick way to tell the difference – have you been given money for your effort? Are you getting paid? I pay for my son to play t-ball – if he learns to hit – awesome. If he doesn’t at least he’ll have fun. Paul Konerko from the Sox? He gets $12,000,000 a year. He better get some hits. You should too.

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I just read a funny article: 6 Giant Blind Spots In Every Movie Alien’s Invasion Strategy

While reading the article, it occurred to me that the article’s advice to would be alien invaders also contained some interesting ideas that would be helpful to first time startup entrepreneurs.  With all apologies to the article’s author, S. Peter Davis, here are my 6 lessons startup entrepreneurs can learn from alien invasions.

6 Lessons Startup Entrepreneurs Can Learn from Alien Invasions

#6. Wear something – i.e. the basic basics will save your bacon.

Davis makes the point that a lot of alien invaders make the mistake of failing to wear clothes – thus making them susceptible to our local germs, or even things like water (recall the aliens in Signs).  When you think about it, wearing clothes is one of the most basic things we do.  It’s pretty straightforward – not complex at all – and failing to do it costs the aliens their whole invasion.

Lesson #6: Focus on the basic basics.
There are desperately simple things that are so basic they’re basic.  The basic basics if you will.  I’ve seen lots of first time entrepreneurs fail to do these basic basics. Simple things like:

• spell checking documents (seriously fucking spell check your fucking documents)
• having contact information in your signature block
• having an effective to-do list
• planning out your day (or at least portions thereof)

The list goes on and on.  The common denominator: simple, basic stuff.  Failing to focus on the basic basics can cost you big time.  Ask yourself, am I spending time focusing on executing the basics – like putting on clothes.

#5. Do your research – on everyone.

In alien invasion movies, the alien’s lack of basic research on the place they’re invading leads to catastrophic failure (like checking out if the planet they’re invading is covered 75% by something which will destroy you – like water).

Lesson #5: Research your attack

It’s damn hard to be successful in sales without doing your client research.  Client research comes down to more basic basics:  planning what you’re going to say BEFORE you call a client taking notes during client phone calls defining objectives and outcomes before you meet with clients (are you trying to understand their needs or close the deal – you better have done one before the other).
Simple fundamental research can prevent massive failure.

#4. Don’t Attack America First
The aliens can’t seem to resist taking on Uncle Sam first – on the theory that planets are like prisons and the best way to survive prison is to find the biggest guy and kick his ass.  Trust me, this doesn’t work in prison. The biggest guy will kick your ass – twice just to prove his point.

Lesson #4: Take on the little guys before the big guys.

If there are a few major potential clients who’d absolutely make your company crazy successful – you might want to practice on a few smaller less important clients first.  Work the kinks out where the stakes are low.  That being said – you can’t duck the big dog forever and when it’s time to face the champ – go for it.  Just be prepared.

#3.  Don’t Wait for a Counterattack

Every alien invasion movie features a big old pause where the aliens – having almost completely beaten us into submission – take a break and wait for our next move. This never works out.  Given enough time, the humans come up with something crafty – like glasses of water.

Lesson 3: Define the next move and take it.

I’ve seen first time entrepreneurs end a sales call, whether that’s a meeting or a phone call, and they think things have gone great. Then we talk:

Izzo: So how’d the call go?

Entrepreneur : Great, they love us.

Izzo: So what happens next?

Entrepreneur:  They’re going to think about it and get back to us.

Izzo: So what exactly are they thinking about?

Entrepreneur: I don’t know.

Izzo: So when are they going to get back to us.

Entrepreneur: I don’t know.

Izzo: I bet you’re still waiting for that girl from high school to give you a call back on that prom date aren’t you.

Know exactly what the next move is, when it’s going to happen, and take the lead in making it happen.  That client who’s “thinking about it” isn’t going to call back – neither is that girl in high school.

#2. Call for Backup

Having had their initial attack force defeated, the aliens tuck their tail between their legs and call it a day.  When really, having thoroughly softened us up – and having been exposed to our big winning move – they should come back next week and REALLY invade.

Lesson #2: Don’t go it alone.

Even if you’ve planned the phone call, practiced with other clients, and are prepared to set the next move – have you practiced? Have you talked to anyone about your plan? Somebody who doesn’t work for you and therefore feel obligated to blow sunshine where it doesn’t belong?
You have resources all around you – mentors, former teachers, former bosses, even the Starbucks barista – who’d be willing to look at your pitch, practice the sales call, or just give you feedback on your clothing choice.  Great entrepreneurs, indeed great people, are NOT brilliant loners – they are resource optimizers.  They take whatever resources are around and use them for maximum effect. Gates had Ballmer.  Jobs had Woz.  Bandit had Snowman.  Call for backup.

#1. Exhaust your Alternatives.

The aliens always seem to want our stuff (water, gold, unobtainium- something).  Except most all of those things are available on other planets which are not populated with angry little hominids who have thousands of nuclear weapons.

Lesson #1: You have options.

Entrepreneurship is all about overcoming obstacles – finding the why not where others see the can’t.  As a first time entrepreneur you can’t stop at your first defeat – or your fiftieth.  Figure it out make adjustments.  Make radical changes.  Can’t sell your product? Have you tried giving it away?  Can’t do that? Have you tried giving it away? Can’t do that? Have you found somebody else who wants it (i.e. changed your target market)?

Remember – only you can prevent alien invasions – and poor execution on your business. I’m off to have a glass of water.

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Mark Kramer of Kramer Communications has a great article on Forbes, The 10 Questions You Should Never Stop Asking.  In the article, Mark (we’re not really on a first name basis) details some of his experiences acting as an Interim CEO of a couple of magazines in Philadelphia. It’s a really great article, and all of his questions are dead on.  The implicit assumption of his article is that people started asking these questions at some point, and then stopped.  In my work with and study of small startups, it seems these questions don’t get asked initially.  If they did the business may never have started, or certainly would have started smarter with a better chance of succeeding.

The questions he brings up cut to the core matters I address at Bizdom U, (as well as in my saucy presentation at TEDx).

The Three Questions You Should Start Asking

Kramer’s first three questions (I’m rephrasing slightly) are:

• What is your purpose for existing?
• Who is your target customer?
• Why does anyone need what you’re selling?

I’m going to take these one at a time.

What is your purpose for existing?

First-time startup entrepreneurs often confuse their business’s purpose in existing with what the entrepreneur hopes to gain from the business.  To use a technical term, this is a Big Ass Mistake.  Your business’s purpose is most assuredly to help customers satisfy a need – not to bring you personal, spiritual, or emotional fulfillment.  If you think that’s why YOUR BUSINESS exists, you’re mistaking your purpose in life (fulfillment) with your business’s purpose (satisfying customers).  Confuse this at your own peril.  If you keep this straight, you’ll keep your business focused on the customer and helping the customer.

Who is your target customer?

You can’t help people, or more appropriately satisfy customers, if you don’t know who they are and what their needs are.  It’s a struggle, but you’ve got to disavow yourself of the notion that your business will appeal to everybody (or some equally ridiculously large subset of everybody).  It can’t, it won’t, and it shouldn’t.  It will appeal to certain people with common demographics or psychographics and those are the people you need to have in mind and help.

Why does anyone need what you’re selling?

Get out, talk to customers.  In person.  Face to face.  It’s uncomfortable in the digital age, but it will give you deep insight into what clients really want and how to best give it to them.  Mark nails it when he says “I have rarely seen a company fail if management literally spoke to customers and gave them what they want.”

A bonus word to educators, consultants, incubators, etc.

If you’re in the position where you’re advising someone on starting up a business, make sure you’re encouraging your advisees to ask these questions.  Push them on these questions.  Hard.  Really hard.  The kind of hard that leaves a bruise.  That hard.  We do no service to people if, in the interest of protecting their feelings, we are not blunt, direct and honest in questioning whether they’ve plumbed the depths of these questions and come up with honest answers.  In my opinion, this is the great failing of entrepreneurial education, consultation, advising and incubation: the unwillingness to give honest feedback to someone and tell them their idea (as currently formulated and researched) is most assuredly crap.  In the interest of being kind, and not ‘crushing someone’s dream’ we let them blindly soldier forward to their doom.  If I see someone running headlong toward the edge of a building, I’m not going to encourage them.  I’m not going to try and support them in their dream of flying.  I’m going to yell “Hey, asshole, you can’t fly!” We all need to be willing to be that direct and blunt.

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Over at the Art of Manliness, there’s a great series of tips on running a meeting.  The Art of Manliness, despite the off putting name (to some people – me, I get it), is overall a really excellent blog – and an example of how to build a community of common interest. The common interest on Art of Manliness revolves around shaving with a straight razor and drinking cocktails (both of which I can get behind).

My favorite tip from the many is:

Summarize the meeting. At the end of the meeting, quickly tick off a list of everything you have accomplished and resolved to do. Delegate tasks and make sure everyone is absolutely clear on what their individual responsibilities are. Don’t ask for “other business.” You’re just opening a can of worms. Remember, if it’s not on the agenda, it’s not going to be discussed.

I’ve been to lots of meetings dominated by lots of talk which feels productive.  It’s only later, when absolutely no action has been taken as a result of the meeting, that you realize not only was the meeting ineffective, but you’ll never have that hour of your life back.  You’ll be on your death bed, and your dying words will be “If only someone had set some action items.”

In the comments share your meeting horror stories or tips.

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I wrote the following tips for my current batch of entrepreneurs, but thought they might have more general application here.  Email is like a hammer: it’s a great tool when used effectively, and f*ing painful when it isn’t.  Enjoy!

Email.  We use it every day.  But are we using it as effectively as we can?  Probably not, if we’re not doing the following:

1. Use Reply All: Before I came to Bizdom, I hated Reply All.  I thought all it did was clutter up my inbox.  Now? I realize it’s the reason my inbox isn’t cluttered – it’s informative.  If I’m cc’ed on an email, I want to know how the conversation is going and whether the issue’s been resolved.  When I cc someone on an email, I want them to be part of the conversation.  Maniacal use of ‘Reply All’ helps this immensely.  Do it as a matter of common practice.
2. Informative Subject Lines: There’s a reason newspapers, blogs, and various other forms of media use headlines – it lets the intended recipient know what the communication is about.  It allows them to skim the headline and prioritize.  When you recycle an old email for convenience sake, you’ve made the subject line useless.  And ultimately put your own convenience over that of the recipient, which leads me to my next point:
3. Put yourself in the shoes of the recipient: You want something from them, make it easy for them to give it to you.  You want them to read the email? Make sure the subject matches the content.  You want them to do something after they read the email? Ask.  An email with a document attached could mean “I need you to review this immediately” or “I just wanted you to have a copy of this” or “Hey look at me! I can use attachments!”  Without a direct call to action, you’re making it difficult to get the recipient to take any action, much less the action you want them to take.
4. Use a signature block: If someone wants to follow up on your email, make it easy for them to contact you.  Give them your email address, phone number, address, HAM radio call sign, whatever it takes. Signature blocks automatically added to your email achieve this in a no muss, no fuss manner.

When I was improvising, one of the big moments of self discovery I had was when I realized that everything we do onstage looks like a choice, so we should be conscious of that choice and make it a choice.  When it comes to something as mundane as sending an email, this same principle applies.  Ask yourself – what result am I trying to obtain with this action, and have I done everything to make that result obtainable. Have I given it 100%?

Some of you do this consistently and regularly, and clearly get what I’m talking about.  To you, I offer nothing but praise and encouragement.  Your efforts matter and you will be effective.

Some of you will think I’m an email maniac who’s obsessing about some minor points.   To you, I ask – faced with the choice of communicating effectively and communicating ineffectively, what would possibly justify choosing the ineffective route? Effective people take effective action – that’s what makes them effective.

In the comments, please share your email pet peeves or opportunities for excellence.

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My friend, the incomparable Margaret Hicks, has started her own business giving tours of Chicago.

A Smart Idea for a Business

It’s really a great idea for a lifestyle business.  It leverages her knowledge (she’s trained as a docent, and has done tours for other companies) and her skills (she’s funny, engaging, and smart without being smarmy).  It also leverages the natural resources available in Chicago (interesting sites, stories, and an abundant tourist population) all of which she can access at basically zero cost.  Zero cost natural resources? That’s the type of thing business dreams are made of.

A clever idea to raise money for your startup

Margaret’s really gone from being a smart cookie, to being a whole tray of steaming hot cookies made by your Nana with her fund raising strategy.  She’s having a “Help Me Build My Business” party.  For $20 her guests will get booze, beer and great food (her husband is a pro grade cook).  I was so enamored of the business idea and the fund raising idea that I kicked in $50.  And I can’t even make the party!

Why this is a clever idea

I’m a big fan of bootstrapping, but also calling in all your resources.  By having this party, she’s calling in her resources in a fun way that won’t burn out those resources.  It’s the Girl Scout Cookie Principle:  ask people for small favors and give them something great in return and you can tap those people again and again. Girl Scout Cookies raise funds for the Girl Scouts without tapping out the resource (all those aunts, uncles and people at work).  Why doesn’t it tap them out? Simple, they get a benefit above and beyond the ‘donative’ benefit and the incremental hit is so small they barely notice.  Do you remember how much you spent on Girl Scout Cookies this year? I don’t, except when I tuck my gut into the car, and next year I’ll get hit up by the same tiny Trumps for cookies and willingly fork over my moolah.  Brilliant.

It also taps into the Kid Rock Marketing Method: relentlessly promote your product to whoever will listen – particularly if those people express positive interest in the product.  If you went up to Kid Rock after one of his early shows and told him you liked his music, he’d thank you and ask you if you were coming to the next show.  If you were, he’d ask if you were bringing anyone.  If you were, he’d ask if you wanted to sell T-shirts (giving you a T-shirt in return).  Obnoxious – hell yeah.  But that’s because we live in a world where self promotion is frowned on.  Are you starting a business? Do you want it to survive, succeed and possibly grow? Are you telling people about your business?  If you answered “yes” to the first two questions, why are you answering “no” to the third question? Networking is as much about getting the word out as it is about asking for stuff.  Start getting the word out.

Margaret’s doing a great job of conceiving this business, funding it, and getting the word out to her potential supporters and evangelists in one swell foop. Check it out at ChicagoElevated.com.

Have any clever fund raising ideas? Ever been sucked up into someone else’s promotion efforts? Ever sold a Kid Rock T-Shirt? Chime in on the comments.

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Easy quick no brainers to be better than everybody else*

1. Have a kick ass email signature.

Make it easy for people to contact you.  So automatically put your email address, phone, twitter, website, etc. in your email signature.  That way, someone wants to contact you after reading your email, all the info they need is right there.  A discreet quote is fine, but not necessary.

2. Apologize for interrupting people.

Time’s short, so you may need to cut someone off and get to the chase, but do apologize and give them a chance to continue.

3. Say thanks, and please.

Extremely effective in business communications.  Someone does you a solid, thank ‘em.  Need something from someone? Be courteous enough to ask nicely.

4. Bonus Tip: Know how to end conversations.

It’s classy and clean to make it clear that the communication is over, whether that’s phone, face to face or email.

*better at everyone else at communicating, which is the key to everything. While these may seem like simple random tips, these will put you ahead of a ridiculous number of people.

What other simple things can you do that put you over the top?

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While looking for a good definition of a scalable business I came across two great articles.

First, from Sacred Cow Dung, a wonderful explanation with killer graphs.

Then, from Briefing.com, a great explanation.  No graphs, but a brilliant quote:

“Many Internet business models didn’t pass basic tests of credibility. For example, sites with pure advertising models are usually unable to answer the most basic question about growth: how big can you get? The reason is that growth is entirely dependent upon increased page views, either by more users, or more pages, offset by declining ad rates.

Both have upper limits and most companies with advertising models have fixed costs exceeding current revenues. When you try to compute how many page views a pure advertising model needs to generate just to cover fixed costs, it is usually baffling.“

That’s my emphasis added, but the article makes a great point.  The only way to scale an advertising based model is to increase the number of page views.  This naturally has an upper limit, and that upper limit is probably much more shocking than you realize.  I think we delude ourselves when we hear about someone making ‘millions’ off a blog, and think that’s really a business model.  It’s a hobby, possibly a lucrative one, but a business? Probably not.

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On June 15, 2009, I gave a presentation as part of the National Summit.  Here are my lecture notes, as well as the PowerPoint.  Both are a bit unpolished, but you get the general idea.

“I’d like to talk to you today about taking an idea and turning it into a business.

Ideas are like elbows, almost everyone has at least one.  There are a lot of personality traits and behaviors that can help a person with a business idea undergo a personal transformation or growth and become an entrepreneur – an actual executor of that idea.  I’m not here to talk about that today.  I’m assuming that if you made it this far into my spiel that you’re already the kind of person capable of starting an enterprise.  What I’d like to focus on in the next 15-30 minutes are the very specific and deliberate actions you can take to shepherd your idea and turn it into a business.

In a nutshell here’s the key: To turn an idea into a  business you need to refine the idea until it becomes a product or service that is so inherently attractive to users that they’ll change their behavior and use your product or service.  And you need to do this all in a way that brings in more money that it burns up.  Thanks for coming, enjoy the rest of the conference. But seriously, it is that simple, but in the simple lies the complex, so let’s break this down.

I very deliberately break this into two parts.  I do that because here’s the problem most people face.  They mix all this up together and try and eat the entire sub sandwich in one bite.  There are two components: what the business is, and how it makes money.  When you cross the streams, you lose focus.  And brilliance in one of these areas won’t cure utter stupidity in the other.  But when we let ourselves think of this as one undifferentiated mass, we can delude ourselves into thinking we’ve got a great business, when maybe all we have is a clever idea that’ll never make a profit, or a clever way of making a profit that’s attached to a product or service no reasonable person would ever want to use.

Refining the idea is what I want to talk about.  Figuring out revenue and costs is extremely important, and a vital area for innovation.  The business model end of things is a matter of marketing, sales, and being clever about costs.  I want to talk about Refining Ideas.

You need to research to refine your ideas and the first thing you should do is GET OFF THE COMPUTER.  Look, I’m no technophobe, but at some point the thinking became, if it’s not on Google, it doesn’t exist.  Computers are supposed to make us smarter, not us more stupider make.

The most important thing you can do is Talk to People, better yet, Listen to People. Get out of your office, get away from the desk and talk to people.  Have actual conversations with people.  Preferably face to face, so you can sense the whole conversation.

Talk about what? WOOD BEFORE SCREWS. You’ve got some sort of idea for something.  You saw some sort of problem, or opportunity.  Something you noticed or experienced triggered this idea of yours.  The person who invented the screw had wood that needed to be held together.  Put your idea aside and get back to the wood.  Talk to other people who might have this problem, and confirm that they’ve got the problem.  Go deep on the problem, before you even begin to talk about your solution.  People want SOLVING NOT SOLUTIONS.  Your initial idea can change wildly because what you may have discovered in that initial a-ha moment isn’t a solution, but a deep problem that needs solving.  And maybe your ‘a-ha’ solution isn’t a good solution.  Good solutions achieve the ends sought, they resolve the problem fully and directly Without identifying the problem on a deep level you can’t know if your solution fits, much less if its a good fit, or what you’re really hoping for, a fit that is so good it motivates changes in people’s behavior. So RESEARCH THE PROBLEM BEFORE THE SOLUTION

CONTEXT IS KING.  Talk to the people who have the problem about everything that surrounds the problem.  What’s their mental state before and after solving the problem.  What solutions do they employ now? You want to understand everything around the moment where the problem occurs and is resolved.

It’s inside that context that you’re solution needs to operate.  YOURE NOT TRAINING MONKEYS TO RIDE BICYCLES.  You take the customer as you find them.  Can try and change their purchasing behavior, but woe if you’re trying to change the context. CHANGE IS SCARY.  You’ve got to find out where the customer is at to move them to where you might want them to be.  TALK TO OTHER CONTEXT PROVIDERS.  See who else is solving the problem or providing context to the problem.  They will have insights you and the client both lack.

So, identify the PROBLEM, the CONTEXT and CHANGE their behavior.  How do you do that? REFINE THE IDEA SO THAT IT PROVOKES CHANGE.  How? Well the problem and context will help you understand the customer’s feelings and motivations, and you need to craft your idea to have the greatest appeal to their feelings and motivations.  You do that and you end up with a BETTER TARGETED CLIENT DRIVEN IDEA.  A better idea than the one that led you down this path.  Once you’ve got that PULL ‘EM, CLOSE ‘EM, KEEP COSTS DOWN and make a PROFIT.  Better yet, make VALUE.”

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Managing your burn rate without getting burned.

Managing your burn rate without getting burned.

In his immortal tome, Art of the Start, Guy Kawasaki said “Focus on cash flow.” And like with a lot of things, Guy’s dead on right with this one.  As a start up, cash is your most second most important asset (the first? your time!). Controlling your burn rate, the rate at which you are going through that cash, is therefore crucial.  Here are some ideas for managing that burn rate.

1.    Look at your income statement and/or cash flow statement.  Target the largest outflows or expenses and see what you can do with them.  If you can get these bonfires of cash under control, you can slow down that burn rate.

2.    Don’t obsess over the small ticket items.  Chances are they add up, but you’ll run yourself ragged trying to run those down.  You’re looking for meaningful and sustainable adjustments to cash flow, not short term gimmicks.

3.    The hardest cuts happen at home.  The easiest salary to control is your own.  If you’re not already eating Ramen noodles, start.  Your reward for running a successful business is not in the present salary, but in the fact that you’ll get to keep running it in the future.  Don’t sacrifice the future to satisfy the present.

One caution here: when you’re in the planning phase, make sure your plans reflect you taking a reasonable salary at some point.  If you don’t have that in your plan, then your business will look better than it really is.  You’re looking to stay cash flow positive, not create the illusion that your business is actually turning a profit, when the only reason you’re profitable is that none of the founding team is taking a salary. So set a salary that’s reasonable, reasonable for a startup being significantly below market.

So how do you simultaneously not take a salary, but reflect that you are?  That’s easy baby, and it all comes down to the difference between the income statement and the cash flow statement.  The income statement typically reflects obligations as they’re incurred not necessarily paid.  The cash flow statement does the opposite: it shows the cash flowing out only when the cash is in fact flowing out.  Confused? Here’s an easy way to think about it – at the start of the month when the rent is due, you feel broke (obligation incurred), when you actually write the rent check, you are broke (cash flows out).  Your income statement will reflect the salary you should be taking, the cash flow statement will reflect what you’re actually taking.  To most accurately reflect this, particularly in a way that helps underline for investors the sacrifice you’re willing to take, you can have a line item on the income statement for salaries and a line item for deferred salaries.

A final note on deferred salaries: even if you’re deferring salary, you shouldn’t start out at day one with your salary set at 100% of the reasonable salary you’re looking for.  In the early, early days, you’ll be waiving salary entirely, not simply deferring it.  So start at zero, scale up to full, but defer along the way.

4.    Keep other people’s salaries low.  It’s fair to expect that you, as a founder and at least part owner of the enterprise, will be living like a broke college student for a while.  This isn’t fair to ask of people who don’t have an ownership stake.  It is reasonable to pay them somewhat below market, since most of the people you want to join you in a startup should be smart enough to know that a startup needs to run lean, and that means lower starting salaries.  You can ease the pain of this in multiple ways:

• Offering deferred compensation
• Offering stock options or equity
• Offering workplace options that aren’t available at more established, better paying places (e.g. “I can’t pay you any more than $X, but if you need to bring your dog to the office, that’s fine with me.”)

5.    Defer any expenses you can.  Pay bills as late as you can without destroying your credit or damaging your relationships with suppliers.  The direct, honest, and right thing to do is to negotiate terms in advance.  The slimy thing is to evade bill collectors. Don’t do the slimy thing.  First, it’s not the right thing to do.  Second, how are you going to account for that in a proper business plan?

6.    Avoid anything too gimmicky.  Can you avoid rent by working out of your home office for a while?  Sure.  Can you expect a team of 20 people who are anticipated to make $900k in revenue to all work out of their homes?  That’s a bit odder.  Flying coach instead of first class? Sounds good.  Claiming that you have a car and can drive anywhere, even if it is 1000 miles away? That’s an unsustainable gimmick.  Your business plan should reflect that you’re a savvy manager of cash flow – not that you’re an idiot.

Good luck, and avoid the burn.

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