danielstallworth asked: How are you man? A curious thought exercise in regards to Entrepreneurship: If you had $1000 to spend on staring up a business, what would you do with that $1000? (Assuming the business was already set up and incorporated, or not if that's easier) Would you seek out as many free services as possible while using it to raise more money? Or focus it on building up the product and idea first? Just interested in your thought process, the what is not as important as the order of events.
I have $1000 to start a business… how would I spend it?
Well, my answer would vary greatly depending on the kind of business I start. So rather than give a specific breakdown of the costs, here are some of the ways I would think about it:
1. Get customer feedback and make your business more valuable
Assuming that the business solves a real need for a particular market, I would focus initially on getting intensive customer/user feedback and iterating to improve. What differentiates my business from incumbents in this market, and why do my customers find my product valuable? Quite often when an entrepreneur starts a business, they have a misguided understanding of their customers and their needs. So the more you can learn about your customers and the market FOR FREE, and use this knowledge to make your business more valuable, the better off you will be. I would focus intensely on this learning phase first before doing any paid marketing. No Google Adwords or Facebook marketing campaigns yet! Total waste of money at this stage.
2. Will the business generate revenue right away?
If it does, small seed capital can really help get the business off the ground with minimal outside funding, assuming the business becomes profitable quickly. Then you can pour profits back into the business - and you have a recipe for a sustainable business. Otherwise, you will need the initial seed funding to get your business moving enough to raise more money.
3. Make a website to give your business “a place to live”
Rather than hire an expensive developer, I would use a 3rd party (like Squarespace or Tumblr) to build a simple website that showcased my business in a coherent way. High value for low cost.
The good thing about using 3rd parties that provide software as a service is that you have to worry less about bugs. The software is tried and true, and you don’t have to burn time and money trying to build it yourself. Later once your business has proven itself to be valuable, then it may be time to hire developers and build your own homegrown solution. The exception to this rule would be when you’re building a software business. But even then it is smart to leverage companies and open source software that gets you maximum gain with minimal work.
I would also use a free email marketing service like Mailchimp to build a signup form and do email capture. This will allow you to gauge interest in your product/service, while also gathering a list of people who are you giving you permission to contact them about your business. Use them!
4. Actually getting the business off the ground…
Starting a service business? I would start by doing the work myself initially, to save money on workers, and get a strong understanding of the skills and mindset your employees will need to excel at their job. You’d also gain invaluable feedback from customers about their needs and how my service meets their needs. When you focus on making your service excellent, your customers will be your biggest allies, and will tell others about your service - which is the strongest form of marketing anyway.
Digital Product? Assuming that you have the facilities to actually build the software, I would negotiate a flat rate fee with a good designer (preferably someone you know) to work on logo & website design. However before you get to this stage you should have a strong understanding of your company’s core values, value proposition, and mission. This will give the designer focus and help you to waste the least amount of time possible in design iterations.
Social products (for example) are often subject to network effects - meaning that the value of the service increases as users actively use the product. So once the product has been built and tweaked, I would use the money on marketing - focusing on driving relevant traffic to your website. It’s crucial to get the right kind users for your site or app, and if possible, ensure that viral/sharing functionality is built into the product.
Physical Product? If I were building a business around a physical product, I would use a portion of the funding to make a really nice video for a Kickstarter campaign - to both raise more money and secure my first paying customers. This is all after validating the concept, getting user feedback and really honing the product, of course.
5. Final thoughts on saving money
Resist paying for office space as much as possible… rent is expensive! Operate from your living room or basement for as long as you can - it will save lots of money.
Hiring employees is very costly. Not only are they expensive, but they introduce other levels of uncertainty and risk. (Managing them, paying them, distracting you from your vision, they may quit, etc.) If possible, reduce the amount of people you employ (if any!) initially, and get more done with less when you’re first starting out. This will save you money & heartache.
But don’t get me wrong… “people” are very valuable! It is very important to harness the energy and reach of other people to move your company along and spread business via word of mouth referrals. The feedback of your friends and supporters is invaluable at this stage - use your network as much as possible!