In The $100 Startup (published in 2012), Chris Guillebeau discusses the challenges of starting and growing a small business, and offers a guide to help overcome these challenges. The book aims to aid would-be entrepreneurs succeed and escape the rat race so they can live life on their own terms. *The $100 Startup *is the result of hundreds of interviews with and surveys from real startups. As such, the majority of the book’s points are illustrated through examples.
SUMMARY OF KEY POINTS
On the initial stages of starting a business:
- Advances in technology mean it is now possible to launch and grow a product cheaper and faster than ever.
- It is important to merge passion (and skill) with something that others will value and pay for. However, many follow-your-passion businesses are built on something indirectly related, not the passion or hobby itself.
- Success is highly linked to providing value. A product or service of “value” tends to help people get more of what they want (money, love, attention) or remove things they don’t want (stress, anxiety, debt). Notice that often the underlying reason for these desires is emotional.
- For many businesses (typically online businesses), location is no longer a prime concern. In some cases, becoming completely mobile can be an advantage.
On early strategic/marketing considerations:
- “A marketable idea doesn’t have to be a big, groundbreaking idea; it just has to provide a solution to a problem or be useful enough that other people are willing to pay for it. Don’t think innovation; think usefulness.” (p.95)
- “[Your product] doesn’t need to be cheaper – competing on price is usually a losing proposition […] Being different isn’t enough: differentiation that makes you *better *is what’s required.” (p.96)
- It may or may not be important to consider “traditional” customer demographics, such as: age, location, gender, ethnicity and income
- Or it may make more sense to consider other ways to group your customers such as:Interests, passions, skills, beliefs and values.
On getting underway:
- Keep costs low at the start – *$100 Startup *frequently stresses that acquiring startup capital is usually not necessary, and definitely not preferable: “You might expect that certain types of businesses are easier to start with limited funds, and that is correct. It’s also the whole point: Since it’s so much easier to start a microbusiness, why do something different unless or until you know what you’re doing?”(p.169)
- Get first sale asap (the book emphasises the need to eliminate procrastination).
- Be able to explain your mission statement in 140 characters
- “Advertising is like sex, only losers pay for it” (p. 147)
On getting sales:
- Connect your offer to customer benefits
- What people say they want and what they want are not always the same.
- Create urgency through time-restricted sales.
- Offer reassurance immediately after someone buys something from you.
There is an important section on how people place value on something not always being rational: “you must learn to think about value the way your customers do, not necessarily the way you would like them to” (p. 120). Here’s how:
- Create a FAQ page on your product website (the -main- purpose of which is to provide reassurance and overcome objections in advance)
- Offer a (non-complicated) guarantee (to answer the question “what if I don’t like it”). “Generally, you should offer an incredible guarantee or no guarantee at all. A weak guarantee, or one that is unclear, can work against your credibility instead of helping it.” (p.123)
- Overdelivering
On how to create a successful product launch:
- Create hype around a product launch – talk about it beforehand
- Create offers around the launch (discounted price for limited period of time – create a sense of urgency)
- Stick to your offer time frame (better in long run – people know you mean what you say)
- Admit flaws of your product – builds trust.
On maintaining your focus:
*$100 Startup *places notable emphasis on focusing on profit. Three key methods are suggested to help you maintain this focus:
- Price your product or service in relation to the benefit it provides, not the cost of producing it. N.b. on pricing psychology: “having a high-end version creates an ‘anchor price’. When we see a superhigh price, we tend to consider the lower price as much more reasonable” (p.174)
- Offer customers a limited range of prices
- Get paid more than once for the same thing,i.e. continuity program, membership, subscriptions.
An additional point that the book also often makes reference to is “tweaking” your pricing to see the impact on profit. You may be surprised at the inelasticity of demand for your product.
On running/growing your business:
- Select one or two metrics and be aware of them at any given time (e.g. sales, cash flow, incoming leads)
- Leave everything else for a biweekly or monthly review where you delve into the overall business more carefully.
- Make sure your social media strategy talks about you and your product enough.
- Options for further growth: self-franchising, joint venture/partnerships (can create leverage)
- Outsourcing is discussed, and it is apparent that many entrepreneurs have strong opinions about virtual assistants:
“But there was one topic that resulted in a wave of divergent opinions. That topic was employing contractors or ‘virtual assistants,’ also known as *outsourcing. *On this topic, input ranged from ‘love it’ to ‘hate it’ to ‘it’s complicated’ ” (p.213)
- Affiliate programs are typically poor deals, but if you find a good merchant, the relationship can be useful.
Make sure you work on your business, not just in it. To avoid this issue author recommends setting aside 45 minutes without internet access every morning to think about:
- Business Development
- Offer development
- Fixing long-standing problems
- Pricing review
- Customer communications
All of the above actions should initiate, not respond.
The book also contains an interesting discussion of what to do if your business is successful, highlighting that growth is not always right for the individual and can create unwanted stress. The point? Consider the implications of success and growth sooner rather than later.
EVALUATION
Unless you are a seasoned entrepreneur, I think it unlikely that you could read *The $100 Startup *and not find something interesting or useful. This is largely due to its case study approach, with most “theory” (the book is not technical at all, so I use the term lightly) reinforced with examples. This is a blessing and a curse, since it means that the book is very accessible, and offers specific instructions on what to do, but occasionally lacks technical explanations.
The incessant relating of all concepts to individual examples can be a little tedious (though I am ultra-sensitive to that kind of thing, and it only annoyed me a little), and one or two of the choices of useful businesses to piggyback on (Groupon) now appearquestionable in light of the recent stock price tumble. However, these complaints are minimal, the vast majority of the book is up-to-date.
The100startupwebsite contains a number of free resources given in the book which are useful. In particular:
- 39 step product launch checklist (I thought this was rather good).
- One-page business plan (useful when you’re just starting out).
There is a very brief discussion about how to grow a business in order to sell it for a profit late in the book, and it feels more like an afterthought. If you’re looking for a book that teaches you how to grow a business for the specific purpose of selling it on, this is not it.
If, however, you want some practical advice on how to get your act together and start making some money by setting up your own business, this is worth buying. It’s probably also worth mentioning that I had about 5 decent business ideas whilst reading the book – certainly gets the creative juices flowing.