Starting a Business The Right Way: Key Lessons for Busy Entrepreneurs | Chris Bolman | Skillshare

Starting a Business The Right Way: Key Lessons for Busy Entrepreneurs

Chris Bolman, Founder & CEO, Brightest.io

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13 Lessons (1h 3m)
    • 1. How to Launch a Startup or Small Business the Right Way (Intro)

      1:29
    • 2. What Makes a Great Business?

      1:53
    • 3. The Right Type of Business for You

      3:22
    • 4. Planning Essentials for Entrepreneurs

      4:23
    • 5. Helpful Class Resources

      0:48
    • 6. Business Structures for Non-Legal Founders

      4:34
    • 7. Minimum Viable Sales and Accounting

      4:30
    • 8. Contract Essentials for Non-Legal Founders

      4:27
    • 9. A Framework for Not Running Out of Money

      8:11
    • 10. Talent, Hiring, and People Essentials

      6:19
    • 11. A Formula for Getting to Product-Market Fit

      10:23
    • 12. Applying this Class to My Own Startup

      10:14
    • 13. Final Class Assignment and Conclusion

      2:15
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About This Class

Having led, started, and advised startups and small businesses for the past 10 years, this course is my effort to fit many of my most important lessons, frameworks, principles, and potential mistakes/problems that I think entrepreneurs, founders, and small business owners should know and understand into a single, hour-long course. This course is intended for beginner to intermediate-stage stage founders who either (a) are thinking about launching a business or turning a side project into a startup or (b) who are in the early phase of their business and looking to develop product-market fit, employ best practices, and avoid common founder problems and mistakes.

Transcripts

1. How to Launch a Startup or Small Business the Right Way (Intro): Hi. My name is Chris, and I am the Founder and CEO of Brightest, an app that makes it easy to do acts of good, track and measure your social impact, and helps plant trees to fight climate change. I'm not just a tech startup founder. Over the course of my career, I've actually seen small business entrepreneurship from a lot of different angles. I started my own agency. I angel-invested in a neighborhood coffee shop. I've created classes like the one you're taking right now. I advise and consult other startups, and I even at one point helped co-launch and create and open an art museum. One of the things that I want to do with this class, because entrepreneurship and creativity are so important to me, is pass along what I've learned to you here, in this class. One of my criticisms or observations about a lot of existing start your own startup tutorials is they're very focused on venture-backed technology companies. If you're trying to just make some extra money with your side project, open a small business in your neighborhood, start your own agency or consultancy, or do something else, that's not always that relevant or helpful. What I wanted to do in this class here is pass along and teach you some of my best tricks, foundational tools, best practices, and other learnings that I've learned along the way to help you build your own business from the ground up that you can be really excited about and launch a successful career with. With that, let's dive into the next lesson. 2. What Makes a Great Business?: Let's first start with a couple of important foundational basics and then we'll dive into some more actionable details. Question one, really the main question that matters is, what makes a great business? To me, a great business has the following definition. It's the right, profitable and sustainable balance between your brand, your identity, who you are, what your mission is, how people experience your brand and your products and your services. The products and services that you sell. What are you actually creating and selling to make money with. Your channels, which are how you interact and how you go out into the world to reach your target customers and then finally the customers themselves. This is your community, these are the people who have a problem or have a need that you're supplying and solving for. Successful business or the right business is about getting the right balance between those four pillars and doing it in a way that's profitable, where you're making more money than your costs, and it's sustainable, it sustainable for you personally. A huge problem in entrepreneurship is that entrepreneurs burnout, they overwork themselves. It's really important that you can achieve the right healthy work-life balance in your work in small business. Then secondly, that it's also sustainable for everyone else. You don't want to create a business that is really successful and profitable for you personally, but It's creating a bunch of pollution or bad externalities. It's incredibly important to think about not only what your business does for yourself, but what it does for your community, what it does for your city or world, and what's its overall environmental footprint. So again, getting the right business and creating a great business is about achieving a profitable mix and sustainable mix and balance between brand, product and services, channels and customers. 3. The Right Type of Business for You: Now that you understand the foundations of what makes a good or great business, it's important to talk about the catalyst or inspiration. When is the right time to start a business and what type of business should you create? To me, there's really three archetypes for a good small business or startup. There's the monetize your own gifts or talents business. In other words, you have a talent or ability or skill that other people will pay money for. For example, you're a great public speaker or a great presentation designer, and people will pay you to do that. Maybe you're a great graphic designer or illustrator and you can create art that people will buy. If you have an existing talent that you know there's market demand for and you know you can sell your work, this is usually a great foundation to start a business from. The second business archetype or model is the solve your own problem business. Again, this is another very common pattern for successful entrepreneurs, so the solve your own problem business is find something that you yourself see as a problem, something that frustrates you, a need you have that you can't find a solution for and create your own business to try to solve it. A great example of this is the founder of Patagonia. He originally was an outdoorsman and a mountain climber. He's started actually making his own mountain climbing gear and his friends had demand for it. He saw other people also needed it and so he started selling it, and that was the genesis for Patagonia. There's a lot of great examples of entrepreneurs who have domain expertise. They know a certain area, they have certain skills, and they see and feel and unmet need personally that they feel like they have to go out and solve. They do it for themselves and then that ends up becoming their business, and then finally the third, and I think the most challenging but also probably highest growth potential business is the solvent unmet market opportunity business. This is more of the visionary insight type business, where you're not necessarily solving a problem for yourself. You're not necessarily monetizing and existing skill. You're looking out at the market out at a customer profile or out at demographics, and you're saying, I see the world changing in a meaningful way. I think people are going to have high demand for this product or this service or have this need, and I'm going to create the company and the small business that's going to fulfill it. This could be looking at something as simple as demographic patterns in your neighborhood, who's moving in, what types of businesses do you think would be successful locally? Does your specific neighborhood need a pizzeria or a dry cleaner or a coffee shop or something else like that? Or it can be looking at a much broader, more aspirational market need. A great example of that being, for example, the smartphone and the iPhone, and the way that Apple saw and anticipated a need for an iPhone and something that could move beyond simple phones or the early prototype smart phones like the BlackBerry or the Palm Treo. Those are the three important archetypes for a business. I think one of the most important fundamental thing is understanding, which is your archetype, which is going to be the foundation for you to start a business from. Once you can answer that question for yourself or know the direction that you want to go in, there are a lot of good ways to adapt what you're doing and tailor your strategy, your needs, your budgets, and your plans to that type of business that you're starting from. 4. Planning Essentials for Entrepreneurs: Once you've thought about the type of business that you're going to create and you've really got that entrepreneurial bug or desire or drive to create something for yourself, it's time to come up with a plan. Having a plan is really important. When I say plan, I don't mean writing a super long case study like business plan. But it's important to have a couple of foundational elements of a plan. One of the reasons why is just pure human psychology. There's actually a principle called the Yerkes-Dodson law that was created by two Harvard professors. That says, "As a problem becomes more complex and more big, it tends to overwhelm us." We get stressed out, we get scared, we feel overwhelmed and our ability to work and solve problems or creativity actually can decrease. One of the best ways to solve and mitigate this is to come up with a plan, create an actionable to-do list of items that you're going to do. Start to check them off, start to make progress, and you will automatically feel better and work better. For me, when I'm thinking about a business plan, there's a couple of foundational elements that I want to include. The first is a brand outline. Now again, this doesn't need to be a full comprehensive brand book, but it's really important to have a basic sense of your brand identity. Are you going to use a logo? Do you have a logo? What's your brand going to be like? What's your mission, vision, and purpose? Are there any other style guide elements such as signage and other elements, maybe social media banners are profiles that you're going to need to create in order to bring this brand to life. I highly recommend documenting this or at least creating a folder on your computer, getting all these assets together, hire a freelancer or hire some support if you're not a brand oriented person, bring this all together and get this in a good place before you get started. If you want to learn more about branding and how to think about brand management, I highly recommend taking my other skill share a course on brand management and creating what sets you apart. Which is a really in-depth course that goes into all the different elements that go into a brand. After you think about branding your identity, you're going to want to think about your strategy a little bit. Again, I have an entire course dedicated to strategy. But I think the overall course and point here is, what's your key insight? How are you going to bring together all of your resources? How are you going to Marshall and assemble a plan to go from step A and your starting point to your ultimate desired end goal of building a successful business. After that, I think you need an operating plan, a basic financial forecast or spreadsheet which you could create using a free Google doc. You're going to want to have a hiring plan if you're planning to hire other employees and you're going to want a product plan or a product road-map depending on what you're creating. Now, obviously the complexity of your business, potentially the complexity of your supply chain, your organizational structure, the markets and customers you serve are going to dictate a lot of these different things. But I think it's really important to get this foundational stuff together so that you can orient yourself, so that you can communicate it with other stakeholders or co-founders and you can go out and get started. I think in particular you want to develop a baseline forecast and your baseline forecast is going to include a couple of things. How many units are you going to create or how many units of things are you going to sell, or how many customers do you need to win? How much revenue are you going to generate? What are your associated costs? How are you going to forecast that forward. And creating pragmatic, safe, measurable outcomes and objectives and estimates for this, is going to be really, really, really helpful for getting you set up and getting you going in the right way and helping you make the correct decisions about your business. As much as you can make these unit based costs so understand what's the cost of you ordering a T-shirt or creating a specific widget? What's the cost of a salary for someone on your team? The more you can kind of break it down into units, you can start to use those units as building blocks and even if you're not very financially competent or you're not a trained accountant, you can really understand the different levers for your business and what you're going to need to do or the levels of performance or sales you're going to need to reach to become successful and become profitable. 5. Helpful Class Resources: Quick tip before I go any further, throughout this course, I'm going to refer to different tools and third party resources that you can use throughout your business to do your job easier and manage it more efficiently and effectively. Obviously, I don't want you to have to stop every couple of minutes and pause the lesson or the class and write things down, so I'm taking all of my favorite resources that I'm going to refer to throughout the class and I'm going to put them in one place. Everything you need to get your business started and all of the resources that you should be referring to are going to be available at my website, chrisbolman.com/startup. Just head there. I'm going to link everything out, and you can find everything you need in that one place that you can refer back to after you've taking the class and even after the class is over. 6. Business Structures for Non-Legal Founders: I already alluded to it a little bit in the last lesson. But one of the important things that you're going to want to start to think about now as you launch your business is incorporation and some legal considerations. Now, again, strongly going to disclaim, I am not an attorney, this is not legal advice. I'm only speaking from my own personal experience, but it's very important for entrepreneurs and small businesses to think about incorporation and think about their legal needs early on so that you can make the right decisions and really that you can mitigate, manage, and minimize a lot of the potential risks to doing or launching a business. The first thing you wanna think about is the actual incorporation structure of the business. There's really three options here. Option 1 is you can retain a lawyer and have them advise you and walk you through this. If you're doing anything complicated or really feel you're out of your comfort zone, I highly recommend this. You can use a managed incorporation service or use online tutorials such as LegalZoom or other tools like that. UpCounsel is another one that's really great that I highly recommend for legal advice and services. The third one is you can just do it yourself. If you are experienced, if you have a legal background and you've done this before and you really know what you're doing and are highly confident about that. There's a couple different core business structures that you should be aware of and think about. If you're operating a small business out of your bedroom, you probably don't need to incorporate, if you're doing anything more complex than that, particularly if you're again, spending and receiving large amounts of money, if you need to, again, separate your own personal risk and liability from your businesses liability. You're probably going to want to start to think about this. I think there's really two general structures that are important to know. The first is an LLC. It's a limited liability company. LLCs are great for project-based work or for small entrepreneurial endeavors and partnerships. For example, me personally, I have an LLC for Bollman industries, and that is the LLC that manages a lot of my educational work, a lot of my personal consulting and my speaking engagements. If you're doing real estate based businesses, if you're operating a store or a restaurant, if you're working as a personal consultant or as a small agency, an LLC can be a great business model. It has simpler tax considerations, although you obviously still need to make sure that you're filing your taxes and you understand what those are. But it's the simplest, most accessible, and finite project-based way to create an organization where the liability is separate from you personally. Now if you're building a bigger business or you really expect to need to raise venture investment or need to raise capital from other sources, you're probably going to want to consider creating a corporation such as a Delaware C Corp. Delaware happens to be a state where a lot of companies get incorporated. They have very favorable and accessible incorporation laws. For example, with Brightest my startup, we're incorporated in Delaware. We are a Delaware C Corp with the Delaware registered agent. Again, I think I would recommend going on LegalZoom using a tool like UpCounsel or LawTrades and going online and figuring out what the right solution is for you and what your business needs. One great resource that was actually created by the co-founder of Airtable and is available as an Airtable, so great use of your own product, is the startup legal guide. This is a great resource that I've consulted. It walks you through a lot of the legal considerations and gives you advice on what are the different legal steps for your business. It gives you recommendations on potential lawyers to reach out to, but really step-by-step walks through a lot of the legal needs and considerations that you're going to need to think through pre- incorporation, during incorporation, and after you've incorporated depending on the steps that you choose and the way you can access it, I've made that easy is through our Brightest short link. So britst.com, the short version slash legal help. Go visit that Airtable, give it a read through. It's an awesome, super comprehensive and detailed legal primer. As soon as you feel like you're out of your comfort zone or you have other legal questions or needs, again, don't listen to me, go contact an actual lawyer and they'll be able to advise you from there. 7. Minimum Viable Sales and Accounting: So now that you've thought about and outlined your business plan, I want you to create two documents. Document 1, create an itemized budget of all of your startup costs. This is going to be incorporation, any legal costs if you need, let's say office space, or store, or retail space, this would include your lease, any employee related expenses, and anything around developing products, buying samples, doing QA, anything that it's going to take to get you from where you are now to your doors being open, and your business being open for business and selling products. Get that all down in an itemized document and spreadsheet, and understand what resources, how much money, and what your cash-flow situation is going to be between you, starting where you are now and getting to that point where you've gone through all of those startup costs. So build a budget, take really good care of it, track it, add additional expenses. It's really, really important. One of the things that I highly, highly, highly encourage you to do, is create a separate corporate bank account and create a separate corporate card linked to a separate corporate entity. Now, I'm not a lawyer, I'm not a tax advisor. If you are in a situation where you need one or both of those things, I highly recommend you do so, so this is not legal or tax advice, but it's incredibly important that you establish the business as something separate from yourself, and create a separate bank account, and a separate way to spend business expenses or buy things for your business. It's important for tax purposes, it's important for accounting, and it can really really simplify things. Once you do all that stuff, you can set up an easy subscription to a tool like QuickBooks Online, you can import your business credit card expenses, and it creates a really really simple way for you to track and manage expenses, and potentially other costs like payroll, without needing to do a lot of accounting work, which is going to tie you up as an entrepreneur or a founder. So as much as you can do to simplify your finances and also split your finances away from you personally, don't put business expenses on personal credit cards, the better off you'll be as an entrepreneur. The second thing is if you're in a business or you're doing anything that requires selling, so any business that doesn't entail, say, people buying food or basic necessities, or going to the pharmacy and buying day-to-day needs, anything that requires selling, I strongly recommend creating a simple sales presentation or sales material. What I would encourage you to include in the structure of that, is a baseline understanding or story narrative around what's changing in the world. What are the trends and what are the needs that are requiring people to seek out something that ties to what you're selling? Why is there a need, why will there be demand for your product or services? Once you do that, then start to probe and get into the specific pain, problem, or need, around why, what you're doing specifically with your business is needed. After that, you introduce your solution. Why are you uniquely qualified or special to meet that market need? Then add in any additional validation around your own business, your expertise, your credibility, your licenses, and certifications like, why are people going to buy from you? Why are they going to become customers of your business as opposed to a competitor? Or maybe you just revert to the existing status quo. So once you get your baseline business plan together and think about the outline and architecture of your business, create a budget, get everything squared away financially, so that you have independence between yourself and your company, and then go through this process of creating this initial sales narrative. Because I guarantee whether you're selling individual services, you're selling consulting, you're selling other products, if you have to sell the businesses, you're going to need this really tight sales narrative. Chances are, when you start a business, you're going to be or your co-founder is going to be one of the first sales people for the company. So it's very very important to establish this early sales narrative. Understand how you're going to go about this, and how your business is going to sell and fulfill customer orders through your channels, and come up with a really tight plan there, that you can present to other people, and that you can present yourself and feel really confident about. 8. Contract Essentials for Non-Legal Founders: Once you've thought through your basic incorporation strategy and you have a plan there, the next important thing I think to do from a legal standpoint or that I would advise companies to do again from my own personal experience, is assemble a document hub or repository of all the key documents that your business is going to need. This is going to include your incorporation documents and anything related to, for example, your corporate bylaws, anything related to your own founder steaks, anything if you have, for example, like a cap table. But also the actual what I would consider operational business documents that you're going to need. For that, really it's contracts, employment agreements, and employment related documents, and any other documents that you're going to need in your regular course or business to keep your business safe and conducted efficiently. One great resource here that you can start out with, and again, I would highly encourage you to consult with your lawyer on any steps beyond this, is the open resource document repository at COOLEYGO. A couple of very important business documents that you're going to want to make sure that you have and have a version that's adapted to your business and particularly the state that you're operating in or the jurisdiction where your business is located, is making sure you have a great employment agreement. If you're hiring full-time employees, or if you're hiring independent contractors, or consultants, you're going to want to make sure that you have a non-disclosure or intellectual property agreement. For example, if you are in partnership conversations with someone, you might need them to sign an NDA or a non-disclosure agreement saying that they won't photo-share your business secrets. If you're hiring someone to do work for you as a work for hire arrangement if you're hiring employees, you're going to want to make sure that all of the work that they create for you, all of the intellectual property that they generate, is something that you have right title and ownership to. You might need them to sign a personally identifiable information or a proprietary innovation and inventions assignment agreement so that you make sure that they're assigning their work to you and your business, and you don't end up in a dispute about intellectual property, or ownership, or work received, or anything like that. It's also very, very important to establish a basic contract for your product or services if that's applicable to your business. If you're doing anything where your entity, or your corporation, or your business is selling to other businesses, you're going to need a baseline contract template that's going to lay out who you are, what the scope of the agreement is, any important terms, for example, mutual indemnification, limitations of liability, outlining the scope of the arrangement, things like payment terms, and any other important matters related to this contract so that you can make sure you have good business agreements. Again, I'm not a lawyer. This is not legal advice, but I've definitely been in business and run businesses long enough to know that there's a couple important legal principles that you want to abide by. The first, is never, ever, ever, ever sign a contract that you haven't read or you don't feel like you fully understand. So many bad things have happened to small business entrepreneurs and even larger businesses from signing contracts where the terms aren't properly understood and haven't been reviewed by a lawyer. That's super, super important. Never sign a contract that you don't understand. Secondly, whenever there's a meaningful exchange of money, whenever you're hiring for services, whenever someone's paying you, make sure there's a framework or a contract or some agreement that's in writing between the two parties. Handshakes can work fine for small arrangements if you're selling something to your friends or if it's somebody that you know and personally trust. But as soon as money gets involved, make sure there's a contract because it's a super important way to protect you and make sure that you have the necessary leverage and recourse to get the money that's owed when you start to sell products and services. Those are just two basic legal guidance, advice that from my own personal experiences, I found very, very important. The more you can develop a baseline legal framework for how to operate your business safely, the better you'll be as an entrepreneur and the more safe your business will be as you start to grow and it starts to bring on more complexity and customers. 9. A Framework for Not Running Out of Money: Okay, so let's get to money because obviously that's, I think why most of us go into business or at least an important part of it, and just generally make or break a critical aspect of running a successful business. Hopefully obviously at step 1, you've already separated your personal finances from your company or your businesses finance. Super important, do that before anything else. Again, after that, none of this legal or tax advice, just want to tell you some helpful learnings that I've observed and learned along my career in business that hopefully will help you and save you some trouble or some pain or some issues down the road. First things first, once you set up your corporate entity and your bank account, make sure if you're in the United States to register for an EIN. An EIN is your federal tax number, it's like a business or a corporate entity version of a social security number, and it's really important to have for 1099, for paying contractors, for filing your taxes. It'll also help keep your social security number private if you're working with other businesses. So EIN really important to have, you can get it online at irs.gov. It's free, it's easy, it just takes a couple minutes to apply. Next, I think what you want to do is set up a cloud accounting system. Again, I think QuickBooks is great, but there's a variety of different options there, and make sure you're doing bookkeeping on a monthly basis. Again, sync your other finances, connect your corporate credit card, make sure that money is flowing in correctly. That really brings me to this idea of cash flow. Obviously, we understand the basics of cash flow, we deal with it in our own personal bank accounts. You want more money coming in than money going out. But I think the important thing to understand is there are some key principles with cash flow when you're running a business that are really helpful to think about. The first is managing your receivables versus your expenses. So receivables would be money coming in. For example, if you're a B2B business and you sell to other corporations, receivable would be money that other businesses owe to you. If, for example, you're operating a retail business, you might have more expenses on the inventory side where you need to order products ahead of time, and in that case, like that's really where your expenses lie, but most of your actual receivables are coming in at point of sale. Like somebody might be showing up in your store and swiping their card and you're getting paid through square and that's hitting your bank account and you're getting paid that way. It's important to understand like the receivable payment terms that you're getting. If you're dealing with contracts, if you're dealing with situations where other companies or other entities are paying you for services, it's really important and you want to try to get your payments as close to the date of service or as much as upfront as possible. If you're writing contracts that have long durations, try to get paid upfront or try to get paid based on milestones. If the other company or the other business is bigger than you and they have payment terms, try to get those payment terms as short as possible. A lot of businesses I've seen have run into trouble because they're, let's say selling to like a big corporation and that corporation has 90 day payment terms. Well, you could do all this work, you can absorb all these costs and not get paid until 90 days, three months later, and that can be really problematic. So think a lot about your cash flow and about how your business is going to be sending money out, where money is going to be coming in and trying to match up the timing around that. That's another thing that's really important and another reason why I think some basic financial modeling and financial forecasting can be really important. Another thing around just basic operational startup cash flow, is thinking about how you're going to fund your business in general. Now if you already have paying customers, great, you can bootstrap and use existing revenue and money coming in to fund your business. If you have investors, also great, you can use that as startup capital. But a lot of entrepreneurs start out and we don't have a lot of money. Maybe we don't have investors, maybe we don't have revenue yet, and we have to build up the business and build the product. In that case, one thing that I recommend doing is if you're a founder or the founding team in general is going to put their own money into the company, do it as a promissory note. A promissory note is basically a form of a loan between yourself and your founding team as co-founders and the business itself can set up a loan arrangement. That way it keeps the accounting more simple where you as a person have loaned the business money and with expectation that the business will return and repay the loan to you at a future date. That again, can be a way to really simplify your finances and remove some complexity in the accounting between the founders and the actual startup company itself. For example, with brightest, I wrote brightest a promissory loan and that was the initial start-up capital that got the business off the ground. So another really important thing. Another thing that's really helpful and important to understand, and I think obviously it goes without saying is pay your taxes and also understand the regulatory environment that your businesses operating in. For example, you obviously have to pay federal taxes, but if you're a Delaware C Corp, you also have to pay a franchise tax. If you have a business in California, there are California state level reporting and filing and fee requirements that different businesses have. It's important to know a federally where do you operate, but also in what state? What are the state-level laws? Do you have to register with the state? Do you have to file specific things with the state? Do you have to pay state-level taxes for your business? Because again, not paying your taxes can be a huge problem for businesses on the back end, and if you are a Delaware C Corp, if you are issuing shares, I highly recommend looking into the par value accounting method that can save you a lot of money on your franchise tax. One other financial tip that I recommend to all founders and entrepreneurs and small business owners is the idea of a pre-sale. I think pre-sales are incredibly important and can really help you bootstrap a business and get your cash flow in a good place right off the bad. I think a pre-sale is pretty straightforward, which is just the idea of pre-selling and trying to get money in before you deliver or actually have the product, and there's a lot of different ways and strategies that you can try to go about this. If you're doing certain types of projects, or launching certain types of businesses, if they're in the creative space, you can approach a crowdfunding platform like Kickstarter Indiegogo that's a classic way of doing what effectively is a pre-sale where you're trying to raise money so that you can go off and create and deliver and get the product. Another great way to do it is the idea of an opening or launch party. Let's say you are starting a neighborhood business and you want to have a really awesome fun, great launch party when your business opens. You could potentially think about selling tickets to that event. Have some great special guest, maybe some music, maybe some entertainment, something that'll get people to want to come and then circulate through your channels, through your friends, through your network, get people to come buy tickets and then you can use those proceeds and that money and put it into your business. So events and ticket presales can be another great way to think about preselling a product. The third is really the customer development idea of a pre-sale. This is more common in B2B businesses, but I also see this a lot and I think it's another great strategy to pursue. If for example, let's say you're an advertising agency or you're a software startup and you're making a tech product. If you have a great offering or something that's really exciting, take it to your client and try to get money up front to go off and develop it. In a lot of cases if customers are really excited about your vision, if they have a really challenging pain and you're uniquely qualified to solve it, in a lot of cases, you can have customers pre-fund or prepay on delivery, or maybe set up a system where you get a milestone payment up front, and you can use that, go off and use that as working capital to start your business. Again, I highly recommend whatever type of business you're creating, however you're starting, think about ways to prepay, whether that's crowdfunding, potentially selling shares or getting donations from your community, using a tool like patriarchal, thinking about getting customers to pre-pay for you, throwing events and pre-selling tickets. There's lots of different great ways that you can strategically bring money in that you can then use in your business to help launch it and grow it faster. 10. Talent, Hiring, and People Essentials: You've started hiring, your business is growing, you're successful, and now you're starting to scale out a team. You're bringing more and more employees on board. I think this is a really pivotal point and one other important area to make that I just want to make really, really clear. I would assume from the get-go that things will go wrong. I know as entrepreneurs, we're usually optimistic people. We usually like to see the best in people. We challenge ourselves, we believe in positive change. But I think when you're dealing with employees particularly and other people, it's important to think about culture, to think about the different politics in the workplace, different relations, to think about diversity, but also just to fundamentally understand that different people will come into an organizational environment or as employees with different motivations. There are different personality types and it's very likely that as an entrepreneur, as a business person, you'll hire someone who just isn't going to work out. They're not a good culture fit or their mentality isn't right for what you're trying to do. I think it's really, really important to think about the worst-case scenarios with the downside risks when you're hiring as early as possible. A couple of things that I like to recommend is best practices one, create a list of criteria for employees that you think is really, really important. Obviously, for different types of roles or different functions or different jobs. You can create different criteria. But I think it's super helpful to create a spreadsheet where, let's say, you have three criteria. Persistence, intellectual, curiosity and willingness to learn. Empathy and kindness and communication skills maybe that's four. But you like put those down. Now, every time you interview an employee try to as fairly and equally and as balanced as possible, rate them along those four attributes. Try to be honest with yourself as you give them a score. By keeping that record keeping and tracking over time, not only do you start to understand what are the profiles of a good employee who ends up being a great hire and what are the profile or what are potentially the attributes of an employee who ends up being a not-so-great hire. But you can learn and you can better optimize your system. Another thing that I also really, really like to do is apply an 80 or 85 percent on decision-making quality or delegation quality rule. What I mean by this is if you can hire someone else, obviously assuming you have the money and it makes sense from a financial perspective. But if you have work to be done, you're bringing on more employees. If you can hire someone who can do a specific job, at least 80 to 85 percent as well as you, if you were going to do it yourself, then that's awesome. You should have that person in that role. Ideally, you're hiring someone who can do something way better than you. But I think the bare minimum to really like be satisfied with is about 80 to 85 percent, or another way to say it is about ten to 15, maybe 20 percent of the time, one in five times they'll make the wrong decision and you'll have to correct it or you'll have to review their work. But four out of five times are better. They should be making the right decision with minimal supervision from you. If you can have somebody like that in a role and you can hire them, great. Awesome. Keep him in that role. You should focus on the other more important things that you're doing to grow the business. Be an evangelist, raise money, sell to customers, Inspire the employees. Be a great communicator. Get everybody else in the company executing. Do the core stuff as a figure head or a leader that you need to do to make the business successful. If you can't find someone or you do hire someone who doesn't abide by the 80 percent rule, which means they're consistently making bad decisions, there consistently making mistakes. You're trying to coach and advise them and they're just not learning. This is one of the worst parts and probably one of the hardest parts of business. I hate this myself, but I think the simple reality that you have to absorb it as an entrepreneur and this is really important, if it's just not working out, try to part ways with someone as quickly as possible. Help them understand why they're not being successful and move on. I think one of the worst things and one of the most toxic things that I've seen for companies and for organizations, is keeping an employee who just can't perform, who isn't the right fit, who's super negative or really really unhappy. Keeping in them in that role for longer than necessary, or not paying attention or not addressing that issue. It starts to have a negative effect on morale overall. It starts to seep into other people. It ends up being more of a burden like the more you can cut ties as diplomatically, as respectfully and as politely as possible with that person move on. I know it's sacks, but it's just super important. You can't have really negative on or poor performing people in your organization for a long time. They're going to drag you down, and as an entrepreneur, it's really, really important to make quick decisions and know when to move on. Again, I recommend. I know humans in dealing with people is very much about empathy. It's very qualitative, It's very important to be a good listener, be emotional, try to be inspirational. Try to get to value alignment with individual people and really motivate and inspire them. But at the same time, as much as you can be systematic, operational, and quantitative with the people that you are hiring through frameworks, through applying this 80 percent decision-making rule, the better you'll be able to manage people within your organization. Understand who makes a good hire, understand or be able to better like, estimate the qualities of a bad hire or a high-risk hire, then you'll be able to make better decisions for your organization. Build a better team and grow and hire more successfully. Obviously, I think overall, apply the basic principles of would you want to be friends with this person, would you want to hang out with this person outside of the workplace? Two, do they have kind of values and positive, moral character that you really respect, admire? Those types of people are usually great hire, and then, are they persistent are they driven? Are they good learners?Are they just going to get stuff done? That's a great mix in an employee. Particularly if they have good empathy, good technical skills, and their strong communicator. That's the general profile. Agnostic of the role that you're trying to look for, and then, obviously you're trying to hire for the right experience, balance or the right technical experience necessary for that specific job. Again, those are a couple important rules. But I think very good principles to abide by when you're hiring, when your team building and when you're thinking and how you're thinking about managing your people to get the best results for your business. 11. A Formula for Getting to Product-Market Fit: Now that you've got some frameworks, background and expertise in terms of thinking about managing money and managing people, it's time to talk about the last core area of running a business, which is really about managing product market fit and managing your channels. Obviously, it's hard to give one size fits all answers here because your business model and what you're doing and where you're working is going to be very different potentially. But there are some really good principles and best practices and ideas here that I'd like to share. As I said early on in the lesson, when we first started, getting a right business, creating a successful businesses is about finding the right sustainable, profitable balance between your product, your brand, your customers, and your channels. I think fundamentally, the business that you start is going to fall into one of two categories. It's either going to be a market pull business or a market push. What I mean by that is where does demand come from, and what's your businesses relationship with consumer or customer demand? Market pull businesses are easier and you know them when you experience them or when you see them. There's demand for your product. If you have a website up, customers are coming to it, they're buying what you're doing. If you have a store or a retail location, people are showing up they are shopping, people are interacting, there's clear customer understanding of what you sell and there's clear demand for it. Again, sometimes market pull is just an emotional thing. But if you're starting a business, if you're having a hard time selling it, if people aren't coming to your website, if they're not coming into your store, you don't have it. On the other hand, market push is more of the demand or category creation model. Now market push businesses can be great businesses, but they have a much higher burden in terms of making sure that you get enough brand recognition, awareness, and publicity that people ages know you exist. But be also really understand what you're selling, why it's important and why it's valuable. More innovation and new products tends to fall into the market push model. Whereas like having great existing market fit for something that customers already want to buy, is more of a market pull thing. Once you understand which one of those two categories you fall into, you can understand your prioritization. If you have a market pull opportunity, that's awesome, they're rare. They're obviously much easier to manage. What you're really trying to do at that point is thinking about how can you more sustainably, systematically and operationally grow the business? How can you put paid acquisition into existing channels to bring more people? How can you grow the business higher? Think about scaling it out. It becomes much more about operational plans and making what you're doing consistent and systematic. I would imagine most of you are probably starting more of the market push, which is you're getting started as an entrepreneur. You may have an early product and MVP or a prototype or an idea, but you have to really take it to market and you have to get it out there. I think there are some important ways to think about the steps that this takes. Obviously, the first is just thinking about how do you build a critical mass for what you're doing and how do you get that initial customer attraction? Here I think a lot of it just comes down to hustle, to persistence and using what you've got. If you're talking about getting the first 100 people to your website or the first five people to buy what you're selling or getting people into your store, you've got to go through your network. You've got to throw events, you've got to get out in network. You've got to be creative, you've got to hustle you just have to do these things like whatever it takes, to get that initial foundation. But once you get the initial foundation, once you've got a little bit of a critical mass, it's really more about seeding, building a community and getting product market fit. Don't try to scale and immediately grow the business without fit? Trying to grow a market push dynamic when you don't have fit, it's really hard and it's really expensive. When we were at percolate, we found ourselves in a market push dynamic. One of the things that we created was this concept of a bullseye. Obviously, I think we're all familiar with a bullseye, for example, from archery or from targeting, you're trying to aim for the center of the bullseye. What we did is, we basically took the circular bullseye and then we divided it into four quadrants and we did exactly what I'm talking about. We said one quadrant is customer persona type. One quadrant is pain or solution need or the problem that we're trying to solve, and we basically tried to map who was the exact ideal customer across the four quadrants right at the center of the bull's eye, so that we could focus sales prioritization, marketing resources, educational materials focused at that one customer archetype or persona, and then we could build out from there because the reality is, you can't always necessarily focus on every customer demographic. When you are a large mass market, CPG, or consumer business, you do have to focus on the demographics. You have to sell to moms and families and individuals. But for example, when you're just getting started, it's much more helpful to figure out who is the exact demographic archetype, who needs your product, who has the problem or the solution that you can satisfy, and how you can market to them. Specifically, once you can build enough traction and critical mass there, then you can scale it out. Again, using this type of bullseye framework to segment your market and think about ideal customer profile is really helpful. Another great related framework for thinking about product market fit and really knowing when you have it is surveying and specifically surveying your customers. You can do that via a Google form. You could do that via a customer feedback thing. You can use Typekit. You can send out NPS e-mails. There's lots of different ways you could literally just ask your friends or survey people, is asking the question, if your business didn't exist, if your product went away, if your service went away, what would they do and how unhappy would they be? Of the sweet spot that some marketers for example, Sean Ellis at Dropbox have established, is if 40 percent or more of your customers say that if you went away, they'd be really unhappy, they'd be really sad. They wouldn't know what to do, then you have a great business. Anything over 40 percent, is that magic number where you have product market fit. If you're lower than that, if you're 10-20 percent, where if your business close down, if you went away, customers could easily find a replacement. No one would be sad, no one would really miss you, I know that's tough reality and that's a tough truth to stomach. But that's not a business where you necessarily have product market fit. Go through this process of understanding who is your core customer archetype, find five or 10 or 50 of them, figure out ways to get them to engage with you on this survey. Some people may not be entirely truthful, but try to offer gift cards or discounts or special perks or insider access, but do what you can to get enough people to answer, enough prospective customers to answer this. Then not only will you have this sense of what's your current state of product market fit. You'll also be able to hone it a little more on. Well, what are the profiles and the attributes of the people who really do need your product? Who has the exact pain or the exact motivations or the exact need that you can solve? Really try to hone in and use that to further segment your marketing, your channel strategy, and how you're trying to reach people in order to make sure that you're building that critical mass of that specific customer profile type so that you can build out from there. Whatever mix of deep relationship building, low scale physical community building you can do, throwing events, hosting store events, on getting people together, doing focus groups, taking people out to dinner, do very manual relationship driven stuff, even if it doesn't scale, because that's going to help you build the initial customer community that you can build from, and then try to marry that with the digital broad reach, mass market stuff, social media, your website, e-mail marketing, etc. You have to do both to be successful as an entrepreneur and business. You have to build those relationships on the ground and you have to go for broad reach. I think it's also important to think though at the same time about prioritization. Because again, you're an entrepreneur, you have to deal with people, you have to deal with product, you have to deal with selling, you have to deal with operational things and payroll and facilities, it's more important to pick and choose one, two or three really good channels that you know were working, and disregard the rest. You don't have to spread yourself really broad to get channel access. For example, let's say you're starting a clothing business. You sell, maybe you have pop-up stores, you have a physical pop-up location, you have an e-commerce website, a Shopify site, and that's it. That's how people buy and interact with your bread. In that case, I would spend a ton of time on Instagram because it's a great channel for broad reach, for reaching people. It targets that exact demographic that you're trying to sell to. I would focus on a SEO and e-mail marketing and trying to drive people to your website. Then I would do as much as possible with physical community building, taking people out to dinner, trying to spend time with your physical customers, understanding where they are, where they live, what their media preferences, what they buy, and really try to focus your time there. You don't necessarily need to be on Twitter. You don't necessarily need to be doing like other Facebook things. You don't necessarily need to be on other channels like LinkedIn, like don't spread yourself too thin. Really try to segment your ideal customer. Understand who they are, what they care about, what their problems are, and how you're meeting those needs, and then figure out how you can deliver them the best experience possible, make them really happy and get them to instant gratification, joy, or pay off in their shopping or consumer experience as quickly as possible. It's really important at the end of the day, figure out what makes you unique. Figure out what makes you special. Figure out what your customers need and will make them happy, and if you can deliver that better than your competitors, you're going to be really successful. Then once you get to that point, once you start to feel that fit, once you've quantified it, then you can start to focus and take the next steps to really think about, how do I scale this? How do I invest more in this business? Bootstrap this initial customer development phase, as long as you can, get to that critical mass and then you'll know it and you'll feel it when the businesses at the right steps to take it to that next level. 12. Applying this Class to My Own Startup: I want to leave you with a little bit of a story or rather case study around brightest my latest startup, because I started it earlier this year around February. We've been working on it almost a year, maybe 9-10 months. We're still fairly early stage. We're still growing the business. Along the way I had to work through, apply a lot of these principles and think about these same frameworks, this same challenges, this same trade offs, and try to come up with my own answers. I want to just quickly walk you through some of the steps that we took, how I thought about it in a way that can hopefully orient and be helpful to you. Obviously let's start with the need and the why. When I was looking at the broader world, obviously one of the things that I think I may have taken for granted was this idea of social progress. That social progress and positive change was just going to happen in the world. I didn't have to be involved in it, I didn't have to necessarily know the people doing it. It was just going to happen. I think over the course of the last several years, whether it's with climate change or the political developments, I think one of the things that I realized was that if I'm not part of the solution, if I'm not organizing and helping other people be part of the solution and create and build the right future that we want to see it may not necessarily happen or the world or a country, for example, may go in a different direction. What I said is I fundamentally optimistically believe a lot of people are good, that they want to do acts of good, that they want to create positive change and make that a part of their life. But one of the main frictions are really like behavioral and time-based. Sometimes it's hard to get involved. It's hard to necessarily know what to do. It's hard to build those habits world busy, we have busy lives. The idea for brightest was to create one simple place where you could find ways to volunteer, to make positive change, to get involved in local civic or political events and activities. You can take action, you can track your results, and you can get involved and make that change easier. We started with a website and I said, great I'm going to make this available across the United States. I'll get different people involved. The fact that we're a one-stop shop, the design is good, we try to eliminate frictions and make it as clean as possible. That'll encourage people to sign up and to use it. I think that initial hypothesis was correct. I had people coming to the site, we sent people to town halls around March for our lives. We got people involved in the families belong together protest. We got people involved in we were an organizing partner for 350.org and the rise for climate movement. We've contributed to a lot of these different movements and organizations. We were very active in terms of placing volunteers with political campaigns and progressive campaigns in the 2018 midterm elections. But one of the problems and challenges that I noticed with accompany was that people would show up to the website, they would find something to do and then they'd go off and do it and they wouldn't come back. I think for me I'm great and I'm happy that we made something that people were using, but we were using something or we really developed a product that really functioned more like a search engine. It didn't really have retention. It wasn't like a true product in the sense that we could build a sustainable business model around it. I use that initial insight to start to go back to the drawing board and say, "how are we going to approach this, how are we going to build the right thing, and how is this going to work?" I incorporated brightest, so I made it a Delaware C-corporation. I issued shares to myself and the other early employees. Then I tried to bootstrapped the company as long as I could to really go through this process of customer development and product market fit. I filed my 83B, which again, if you create a corporation, if you're a shareholder, if you issue shares to yourself as a founder, I highly recommend looking into that, consult a lawyer and accountant it's very, very important. But I got the business off the ground by going through this promissory note thing, I lent some money to brightest, and then I built and designed the initial website myself and hired some external development help or developer help with additional engineers where I needed the help and I didn't have the technical competency to do it. Then from there I really started going through this very surgical thoughtful approach to customer development. I started a New York City meet up to get volunteers together, get people involved in activities. So I could meet people, talk to them face to face and hear what did they like about our product, what did they not like, what volunteer opportunities did they like, what helped them get involved, and really already meet the people that I knew were passionate about this that wanted to volunteer, that were going out in the world and doing these things and really trying to meet them. I also acted and worked as an organizer in New York and the New York City area for Swing Left. I worked on some different congressional and progressive campaigns, New York 11, New York 19. I spent a lot of time working with volunteers, seeing the technology and the organizing infrastructure and tactics that Swing Left was using, I help them build their New York City volunteer e-mail list. Again, went through this process of spending time with the people that I wanted to be in my community, wanted to be customers, to really try to understand what are their problems, what are their challenges to build relationships, and establish not only my credibility in that community, but really to understand as a brand and as a product, what did we need to be and what problems did we need to solve for our customers. For example, we ended up realizing that a lot of people were doing things on their phone. We made a brightest mobile apps so that people could interact with us. We made a text messaging service so that you can text the system and get answers back. Again, trying to reduce the friction and help people who are more phone first get involved in the product. That led us to the initial core user base of people getting involved and now we have an initial grass roots community of people who are engaging with us online that were meeting in some of our core cities like New York City and other places, and that's the initial foundation. Now I said, once we have this initial understanding, how do we turn this into a business? I looked at individual consumers, volunteers and I was like, well, it doesn't make sense to charge people to do good, that doesn't really make sense as a product. I want people to do acts of good. I want that to be free. I want as many people to get involved in that be as low friction as possible. I'm going to make the core product free. I think what I now need to think through is what are the products that we can layer on top and who's our ideal customer persona for those specific products. That helped me ID a couple specific opportunities. The first was organizers, political organizers or people inside companies who work on HR or corporate volunteering or corporate social responsibility initiatives. The people who need to build these communities, get them to do things, track the results, track the social impact, and coordinate involvement. That was a specific customer subset that I identified where there's strong mentality to do good. They're aligned with our mission and vision, and they have a need and a problem that we can help them solve, as well as willingness to pay. That led us to take a lot of the core consumer technology that we built for brightest and apply it to a software product that we could then take and go to market and talk to these corporations. From there it's really been about going through my network, building, landing pages online, doing things on social media, having conversations in some cases even doing cold outreach. There have been a few cases where I've connected with people on LinkedIn or just sent e-mails. I try to be as empathetic and observation or perceptive as possible and really identifying with their pain. For example, with one progressive organization that I've actually been involved in helping, we list them on brightest. I noticed they were doing a ton of stuff in Google documents and that they're organizing practices and how they were managing data was super, super scattered. They put some stuff in spreadsheets that have people fill out forms. They kept asking volunteers to do the same thing over and over and over again. I was like, well, the reason a common application exists for college is so that you don't have to keep filling out the same form and doing the same application over and over again, like how about brightest serves as your version of the common applications and the volunteers only have to do something once, sign-up for things once or that if they sign up for multiple things, it's a very easy narrative and then you can help track what they do along time and overtime and help them build their narrative and their involvement. That was another example of going from this very high-level aspirational goal for the product to really working with individual customers, identifying their problems and needs, reaching out in a diplomatic way, getting an initial conversation going and figuring out how I can solve their problem. In some cases, somebody may have or an organization may already have a solution or the status quo may be good enough for them and understanding what people don't want to buy or when they say no is just as easy so that you can save your time and going on and on. That's a general high-level view of how I went from this internal need and desire and feeling that I felt, which is we have all this great technology, people want to do good, we need more good in the world. Why isn't it easier to perform acts of good going through this process of establishing my initial community, doing some user feedback and testing, figuring out how to get people involved in the product. Then from there further segmenting my customers, talking to people, building relationships, understanding what people really wanted to by using that as the catalyst and the inspiration, the data to build my first product, and then going through the process of building out that product. Once we have enough traction and that product's development and we're selling enough, then we'll focus on things like referral programs, upsells, how can we expand the product to bring more organizations on board going into that operational scaling process. Again, just a general story of how I've been approaching it recently and what I've been spending my time on over the past year. Hopefully you can take some lessons or inspiration away from that as you go out and do this for yourself. 13. Final Class Assignment and Conclusion: To wrap things up, I just want to say first off, thank you so much for taking this class. I hope it was helpful. Obviously, I think you, yourself, should be really proud in taking these first steps in wanting to actively build something for yourself, or even diving in and already getting started. Entrepreneurship is one of the most challenging things you can do, look at me, I haven't even shaved this week. But it's also tremendously rewarding, being able to go from an idea or a concept or a mission or a vision and being able to bring it to life and really build it into something that other people can interact with, experience, appreciate, and hopefully enjoy. With that, I want you to go out. I want you to go be successful, build the next business that you want to see in the world, and go make it happen. If you need help, again, as I mentioned, I'm going to be compiling all of the resources, a bunch of links from this class, and I may be hosting them at chrisbolman.com/startup, my website. You can go there, get some links, I'll have that resource center populated. The other thing that I'd love to see you do, because again I know everyone's business is unique, obviously what you do is going to be very tailored to where you live, your experience set, your background, the resources at your disposal, is go through this possible mapping out, either visually or diagram or just in a doc or putting together a quick presentation of how you're going to go through these different steps and align these different pillars of brand and experience, product and service, the customer persona and profile that you're going to sell to and develop early on, and then the channels that you're going to go reach them. Walk through each of these step - by - step, fill it out, draw documents or images, put together supporting materials, drop it into the class, put together your business model Canvas outline, and I'll try to give you my feedback, my thoughts, give you any advice I have to hopefully help you out, and help you take it to the next level. Thanks again so much, and have a great rest of your week, and good luck building.