Ship It on the Side

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Don’t go looking for startup funding from VCs or banks. It’s time consuming and the guys “in the know” say that money is just too tight right now. Besides, why would you want to do that anyway? Your time is limited. You have a full time job and need to get your startup off the ground.

So here’s five super innovative funding ideas for getting your startup going if you are short on cash, and have a full time job to do as well:

1. Work For It – You already have a revenue source: your job. Get lean at home. Throw a couple of steaks on the barbee instead of going out for dinner. Carry a sack lunch to work. Use Netflix streaming video and Hulu instead of renting movies–then turn off the cable/satellite. Get your buddy to share some of his homebrew instead of drinking that Castle Rock you love. Get a VOIP phone and learn how to setup Asterisk*.
2. Save For It – Sell that old trumpet from high school band-you’ll never play it again-and besides, you can buy another one when the company takes off. Ask your parents; don’t be shy. If you write a quick startup business plan and present it to them, or your friends, you might be surprised how much capital you can raise. Divest assets like that Google stock you were holding onto. Get on eBay and sell those old Spidy comics. You can buy them again later.
3. Trade For It – Get involved in your local software community and ask around. You’d be surprised how many software developers are working on projects of their own and would help you in exchange for some help with theirs. Also, look for some bartering opportunities. Its not uncommon for startup business owners to barter for services.
4. Inspire For It – Do you want to change the world? Or do you want to help someone and make their life better? Tell your friends and family. Better yet, find someone with the skills, contacts, or equipment you need and ask them if they, too, would like to do something that has impact; something that leaves a mark on the world. I once needed help with a two-week summer teaching job that I’d volunteered for. The work was just too much for one person, but the job was unpaid and was during weekdays from 9am to noon. I asked a friend, “how would you like to change a few kids lives forever?” I just knew he would say “no”, but he jumped at it and Thanked Me for the opportunity. It was a hard two weeks, but the next year he was ready to go without my asking him. You can do it. Inspire someone the way you were inspired.
5. Sell For It – Look, you’re a programmer with the entrepreneurial spark. Use it! Find a small app that you can write quickly, throw up a website and learn a little SEO or SEM. Build something that you can charge $10 for and just see what happens. Don’t do anything big. You’d be surprised what people will pay for. I once wrote a little app that I called Credits. All it did was scroll text up or across the computer screen like the credits at the end of a movie. IT SOLD! I eventually sold the source code to a guy and took it off the market.

So there it is, five most-fabulous startup funding ideas to keep you out of the bank and keep your entire startup ownership to yourself.

* We use an old PC with an Asterisk Server and spend $10/month a multi-line telephone system.

Who you are will determine your competitive advantage. Your personality will be your greatest differentiator as more startups are created and workers choose to grow their side jobs into full blown businesses.

You will attract and repel some people just by being yourself. Use that to build your company.

Small Business Labs has yet another insightful take on niche markets.

Customer are increasingly looking for good and services that meet their specific needs.  The Internet is allowing niche producers and customers to find one another more easily.  And technology is lowering the costs of serving niche markets.

Combined, these trends are making more and more niche markets economically viable.

And as costs to enter niche markets decrease so profits increase and the need to serve a larger market decreases as well. In other words, a business can do well with fewer customers.

For instance, as costs decrease to produce and distribute, say, high quality music, so music producers need fewer and fewer customers to make a substantial income. A small music producer with, say, 25,000 yearly sales of a $10 CD is bringing in $250K per year. If yearly costs are $15 – 25K per year that is a substantial profit with a very small following. Marketing for the music industry is being outsourced for a fraction of what it costs the big boys.

Some are rightfully concerned about competitive advantage in this increasing niche market; we have to think of this a different way. Your competitive advantage is likely to be a personality trait moreso than a traditional fiscal or technology advantage. As more people become entrepreneurs (and that is happening in droves) the real differentiator is simply your attractiveness to a particular group.

Until there is a terrorist attack or the DOW recovers at least half of it’s 6,000 point losses there will be a deluge of two kinds of articles available online:

1. Articles that start with something like: “In a down economy…” or “During a recession…”, followed by something gloomy, and

2. Articles about “the best thing a business can do to survive/thrive in a resession/down economy.”

How many, “stay lean”, “talk to your customers”, “differentiate from your competition”, and “repurpose your marketing dollars” articles can one read? There are so many of these kinds of articles that it’s a challenge not to just say “oh brother” when I come across yet another one. But every now and then there is one that really says something different. I will try to point those out periodically either here or via Twitter.

Small Business Labs has a mixed bag. Most of their articles are insightful small business trends analysis. Sometimes, though, I wonder what sking was thinking (sorry sking).

Take this one that cites a list of “Top 10″-type posts from Small Business Trends. Most of those posts are rehashes or just old news. One of them, however, a post about franchise trends, was pretty good and seems to be on the money. Check it out.

What I like about the franchise trends article is that it is opportunitistic; something you’re going to need to be to “survive in this economy”.

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Today we’re doing things a little different. In past shows we have focused on the software and programming side of things. We’re talking about the Business aspects of building your startup on the side; particularly on Execution.

http://www.ideasonideas.com/2009/01/startup_fail/: Why your startup will Fail. Written by Eric Karjaluoto (car-ja-loh-toe) who runs a web design agency (that’s why they call web design shops when they get big) that must be doing ok. Eric talks about all the reasons you won’t execute. And why all those reasons will be the doom of your startup. One of the most interesting things he says is that, of all the reasons you’re startup will fail, it won’t be because of your competition. It is great reading if you’re determined to make it. But if you not, well, maybe you shouldn’t read this. Really… it can be discouraging if you’re not serious.

http://www.youtube.com/watch?v=EhqZ0RU95d4: Gary Vay-ner-chuk of Wine Library TV… if you’ve never heard of this guy, you’ll thank me for this one. If raw enthusiasm can make your company successful, he’s proof of it. I don’t think you can build a company on just raw enthusiasm, but he’s got it in spades. In this video Gary is supposed to talk about building a personal brand within the Social Media Landscape. But what’s really useful is the things he has to say about how to get your dream company off the ground “on the side”; you know, as a side job.

http://omnisio.com/startupschool08/david-heinemeier-hansson-at-startup-school-08: David Heinemeier Hansson at Startup School 08. I really like this guy, from afar. He’s probably kindof a jerk in real life, but most of my best friends are… and since I’m kind of that way too, I bet I’d like him in person too. David, the inventor/creator of Ruby on Rails (the VB6 programmers dream come true), gives some insights into creating a profitable software company. He really breaks the number down. The best part is how he essentially trumps all of the silly advice available about giving your product or service way. ‘Cause, if it’s worth anything, it’s worth paying for.

According to a recent study…

A.D.D. moment: don’t you just love it when an article starts out that way? When I see that, especially as the very first sentence in an article it’s hard not to roll my eyes. I like data. Some of my favorite books are written by data guys like Malcolm Gladwell, Marcus Buckingham, and Jim Collins. These guys based much of their findings on large data sets. My friend Martin likes to quote that, a single data point is of no value at all. So when an article (or even worse, a White Paper) starts off with “According to a recent study…” anywhere in the first couple of paragraphs, well, I just cross my arms, tilt my head, and say “mmmmhmmmm” like a sassy black woman from a booty-shaking comedy.

So, anyway, according to a recent study… ehem… small business growth increases during a recession. I won’t bore you with my conspiracy theories about “the media” chomping at the bit for the last SEVEN YEARS to say we’re in a recession… nor about their GLEE over the declaration of the current recession. Sorry, I bored you anyway…  But the data seems to correlate the conclusions of the study. It seems to say that during a recession big corporate jobs are lost and, rather than just dying or leaving the country, Americans tend to start small businesses.

And when businesses get started they need to really focus on marketing and sales to grow.

It’s easy to pontificate about a trend here. An increase in new small businesses plus the growth of the Internet equals more online marketing and sales software.

I really like this prediction because of Flowerpot, the marketing and sales software we’ve been designing. My business plan includes the description of Flowerpot as the “Quickbooks of sales and marketing.” It really is different from anything out there.

Hat tip to sking at Small Business Labs.

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Show Notes

As a software entrepreneur building a startup means lots of things. One thing you’ll get used to is talking to your potential customers to get a feel for what they want. You wouldn’t want to invest the time and money into your world-changing idea only to have your target customers reject your baby. So, in addition to being a business owner, startup entrepreneur, money raising guru (rainmaker), and tax expert (yes, you become a tax expert), you also have to be a psychologist.

One thing you can do is to gather a bunch of your potential customers together and ask them what they want. Kindof hard to do if you don’t have a clear idea of what your world-changing software application is supposed to do for your customer. So very early in the startup phase of your software startup you’ll want to make a complete list of the features your software will have. Describe them in as much detail as possible. We talk about this at length in previous podcasts.

Then take that list of features and “analyze” them to get a list of Business Rules. This is the subject of Episode 6.

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Ship It On the Side is a software podcast and blog about building a software startup as a side job.

We are growing a competitive and profitable software startup company by writing a web application called FlowerPot. During this journey we are sharing our experience and would like to invite you to participate.

So listen to the podcasts and share your thoughts! And thanks for dropping by!

Ship It on the Side will resume recording in January 2009. Until then, have a little nogg on our behalf, watch a good movie, and enjoy our previous shows.

And thank you for listening.

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Show Notes

Book: Professional Software Development by Steve McConnell
Book: Quality Is Free by Philip Crosby (out of print, but can find it)

The word of the day is – Priorities

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FlowerPot – Our sponsor