Most of the people I know who are money-making-machines got started really early. Lemonade stands, car washes, lawn mowing, baseball card trading. I think the reason they are money-making-machines today is because they started early. They learned the skills of negotiation, pricing, selling, and market-reading early. They have more practice selling than most people. That’s one of the reasons they’re better at it than most people.
Making money takes practice, just like playing the piano takes practice. No one expects anyone to be any good at the piano unless they’ve put in lots practice. Same with making money. The more you practice the better you get. Eventually making money is as easy for you as piano is for someone who’s been playing for 10 years.
This is one of the reasons I encourage entrepreneurs to bootstrap instead of taking outside money. On day one, a bootstrapped company sets out to make money. They have no choice, really. On day one a funded company sets out to spend money. They hire, they buy, they invest, they spend. Making money isn’t important yet. They practice spending, not making.
Bootstrapping puts you in the right mindset as an entrepreneur. You think of money more as something you make than something you spend. That’s the right lesson, that’s the right habit, the right imprint on your business brain. You’re better off as an entrepreneur if you have more practice making money than spending money. Bootstrapping gives you a head start.
So if you’re about to start a business, or if you already have a business and you’re thinking about taking funding, or if you’ve already taken funding and are considering going back for more, consider the alternative. Don’t raise money, raise prices. Sell sell sell. Get as much practice as you can. Force yourself to practice. Force yourself to learn how to make money as early as you can. You may hate it in the short-term, but it’ll make you a great businessperson in the long term.
John Topley
on 27 Oct 09What’s your story, Jason? Did you get started making money really early?
AJ Kandy
on 27 Oct 09This also helps entrepreneurs clarify their product or service’s value proposition. With funding, it’s too easy to fall into the trap of the fuzzy, ill-defined, over-thought, over-built.
That said, I’ve always suspected that a lot of successful web folks seem to already be rich or come from wealthy families, because that gives you a fallback (to try and fail), or the luxury of time to concentrate on your business if you aren’t doing a “day job.”
Question: when should you hire sales staff / marketing?
Hop
on 27 Oct 09In Buffett’s book Snowball, he made the observation that a lot of the richest people now had started selling and making money at a very young age.
Buffett himself had large newspaper routes he did before school and was making more than his teachers. He also leased pinball machines to local businesses, made a handicapping guide that he sold at the horse track, and bought a whole fucking farm – all before he graduated high school.
And he was insanely frugal – just rolled the capital from one thing to the next bigger thing. Then he read Ben Graham’s Security Analysis and the rest is history.
ML
on 27 Oct 09Def makes sense that the earlier you start at something, the better you’ll get at it. Similar to Gladwell’s 10,000 hours theory. That’s how much time you have to spend doing something before you really master it.
Joshua
on 27 Oct 09‘Rich Dad, Poor Dad’ was a good book.
Jamie Tibbetts
on 27 Oct 09Practice is always good, but I think some people are just born “money makers.” I grew up with a guy who sold stereo equipment in high school 20 years ago, and I knew then that he was going to be successful at whatever he ended up doing, because he clearly had a predilection for the business of making money. The same goes for playing the piano. No amount of practice is going to make you a good piano player if you don’t have the innate talent and desire to play.
S.
on 27 Oct 09Luck has a lot to do with it. i’ve made what some would call fortune (over 20 mills in 10 years) and our beginning was mostly due to luck (although we worked hard and bet the house in order to win). Afterwards, hard work helped, and lots of misses as well as few wins. Overall, I’m not sure yet how the whole thing works. Dedication is a must as the alternative makes no sense at all.
Good luck to all.
S.
Tim Boucher
on 27 Oct 09Hi Jason,
I enjoyed your talk at Startup School and was interested in this point exactly. You and other speakers at SuS (like Paul Buchheit for example) talked about how you were already building and selling things to your friends growing up.
I did none of that and I was wondering if you think that’s something that’s part of one’s character, or if that’s something that can come later.
Also, do you think your environment (parents in particular) influenced you or it was just the way you were?
I sometimes feel that I grew up in a well-enough family that I didn’t need to work for pocket money, but not entrepreneurial enough that I would be inspired. But it might just be my character…
Cheers,
Tim
Adam Neary
on 27 Oct 09Particularly with the current state of the economy, I think this thinking is spot on. I also think bootstrapping plays well with Agile, right?
Get something useful first thing out of the gates. Release it, see what people think, get as much feedback as you can, and push to your first 50 paying customers.
I think that funding, particularly if it is small, could bridge you to a strong team before revenue supports that team. But I think an even better reality is if you can find staff to bootstrap right along with you, and if they are the smartest people in the room, I imagine the rest of the problems will work themselves out.
Thanks for the post! -Adam Neary
Mark
on 27 Oct 09My parents funded my piano lessons (and other activities of my youth) in hopes that the skills and secondary knowledge gained would provide them with a return on investment down the road.
Seriously though, I agree with one of the previous comments regarding an already pre-existing knack for the undertaking. My wife is a music teacher and I can tell you from years of watching kids under her care, if they ain’t got it, no number of years of lessons is gonna make any difference.
Regarding business, I think that in addition to skills, there’s a certain bit of luck involved, as well.
JF
on 27 Oct 09Of course you need to be interested in something in order to pursue it. If you don’t care about piano you probably won’t be very good. If you don’t care about business you probably won’t be very good. Practice won’t make an uninterested mind much better.
Mark
on 27 Oct 09I understand what you’re getting at Jason, but in music, as in business, it has to go beyond interest into capability, capacity and true understanding. When you got all that, then the desire, drive and marked forward progress naturally follow. Interest alone is like an idea unexecuted.
Jorn Mineur
on 27 Oct 09ML, the gist of Malcolm Gladwell’s book is actually quite different. He demonstrates quite convincingly that people who are really successful not only have their 10,000 hours of training, but also happen to be in the right place at the right time. He writes that what distinguishes Bill Gates from other people with as much talent is an unimaginable amount of luck. The circumstances were right, and he was ready.
Kartik Agaram
on 27 Oct 09Who has 10 years without an income – or even 2! – to learn to make money?
Michael L
on 27 Oct 0910 year olds, that’s who! (That’s the point).
Brad
on 27 Oct 09Right on. I think most successful people would agree with your premise. Practice makes perfect.
JF
on 27 Oct 09Who has 10 years without an income – or even 2! – to learn to make money?
I didn’t say it would take 10 years to make money. I said you’ll be really good in 10 years.
You can get decent at something pretty quickly. Going from no practice to 3 months of practice on the piano results in a large leap of skills and understanding. Same with making money. Start early in your business and pretty soon you’ll get the basic knack of it. And then month after month and year after year you’ll get better and better. Soon enough it’ll be old hat.
condor
on 27 Oct 09Is the point about making money, or making something?
Money is an abstraction, its an accounting measure. Money tells you if the something you’ve made is being valued by others more than what it costs you to produce that something. Money is the measure and profit is the constraint that allows you to continue making that something.
I agree with the sentiment, but I think you’re only going half way.
Making something takes practice.
rwo
on 27 Oct 09“It takes money, to make money.”
Ok, maybe you don’t need a lot of money, but you need time, and it is really hard to find the time without money.
Every company has some ramp-up phase before any revenue comes in. During that ramp-up, significant amounts of time need to be invested. That time costs money. If you don’t got it, you will have to borrow it, or sell part of your company, or find a sponsor.
Opportunity, practice, interest, skill, and talent are only part of the picture. You need means as well.
kadavy
on 27 Oct 09I’m certainly not making a lot of money yet, but I still believe this to be true. You can be working on some tiny little blog that gets $20 a month in AdSense: tweaking ad placement for more click-throughs, pouring through analytics to figure out which keywords to optimize, analyzing CrazyEgg heatmaps to reduce your bounce rate, writing posts trying to see what goes viral.
Your friends may laugh at you for taking so much time to make $20 a month; but that means you need new friends. Those things you learn exponentiate and snowball when those writing skills help you write a book, and those marketing skills help you write it.
Whatever you choose to do next, the things that you love enough to do into the wee hours will feed your endeavors. I suppose it stands to reason that there’s much less pressure to learn these little resourceful hacks if you have money to burn.
MT Heart
on 27 Oct 09Nice post – not much new but good info all the same.
I couldn’t help but draw a parallel to the current U.S. administration and came to the conclusion that there must not be too many entrepreneur minded people working there. They must be very well funded, though.
Ali
on 28 Oct 09As someone about to go out on their own as an independent developer, this is quite encouraging. Sometimes when you’re trying to sell your skills/products and have no luck, its good to know that its going to get easier at some point!
Matt Blalock
on 28 Oct 09I find this totally true. I’m somewhat of a serial entrepenuer. I’m currently working on my 7th company. I began when I was 9 having yard sales at a local market with old junk picked up around the landfill.
I then, somehow, met a man who owned a liquidation company who sold me discount QVC merchandise. I then sold that at yard sales. Before long, I was making more than my parents and I was about 10 or 11.
I then started buying B-Grade clothing from top retailers and selling it locally. I then discovered eBay. I was selling clothes on eBay before eBay was a “business”. Somewhere in there, I learned to make money.
I now run a large e-commerce company with stores operating in 5 industries… and I have no idea how I do it. I just do. I went to business school, dropped out. Best thing I ever did.
The comments above about “It takes money to make money.” Not true – I made money with junk, then more money with that money. More money in junk than anything else.
@kadavy – “Your friends may laugh at you for taking so much time to make $20 a month; but that means you need new friends.” Totally. You’re making $20 to learn something, how many college kids make money by going to class?
Paul M.
on 28 Oct 09Jason, tell us YOUR story. When did you start?
Giles Bowkett
on 28 Oct 09I think the interesting question here is, what are the scales and finger exercises of making money, and how do you practice them? You can learn the piano by figuring out tunes by ear, or you can learn it by doing scales and finger exercises. The correct choice is obvious. The analogue is not.
Sachin
on 28 Oct 09it is the best way you have explained the point – Don’t raise money…..better we should make it a habit of not raising money every now and then.
Dan Kjaergaard
on 28 Oct 09risk=return
I think it depends on what you are building. If you set out to build electrical cars, you would need to build out capacity, headhunt engineers, buy licensed components, do marketing, lobbying etc. All requires big money and risk taking.
This quote from Henry Ford comes to mind:
“If I’d asked my customers what they wanted, they’d have said a faster horse”
Tom G
on 28 Oct 09I cannot agree more about bootstrapping an IT or internet enabled business where no large capital expenses are incurred. Once the business starts generating capital, the investors no longer serve a useful purpose and become a parasitic drain on advancement.
Practice is also important. While I’m sure there is a lucky few born with flawless instincts, my years of employment for somebody else taught me enough lessons to succeed on my own.
It would be difficult to start a manufacturing business without some kind of injection of capital though, Bootstrapping does not work for all business endeavors.
Our business was bootstrapped with 2.5 years of lean times on my wife’s salary alone. I’m proud to say we have never had long term debt. It can be done if one is willing to work very hard, stay focussed and make some sacrifices.
Dave Peele
on 28 Oct 09Great article! We have bootstrapped our business from the beginning. There have been pros and cons, ups and downs and we are still not over the hump yet… However, this article gives me another perspective that confirms to me that we have made an overall wise decision and of course, this does not apply to every business.
We may not be experts at making money quite yet, but we are definitely experts at not spending it!! :)
SingAlong
on 29 Oct 09@kadavy: you hit the nail on the head when you said “Your friends may laugh at you for taking so much time to make $20 a month; but that means you need new friends”. I haven’t made money with Adsense, but I spend a few hours every week doing small freelance jobs that helps me pay the hosting fee for my side projects and takees care of my necessities. I rarely depend on my parents’ money these days and they are happy to brag about it and defend me when moms of academic hotshots try to boast of their kid’s colg scores to us.
@blalock “You’re making $20 to learn something, how many college kids make money by going to class?” I belong to the second case :) Its been 5yrs since i started webdev and 2yrs working on the freelance stuff. And all this while I’ve been trying to turn one of my ideas as a successful business. And I’m still working on it. Guess I still haven’t hit 10000hrs :P
Matt Blalock
on 03 Nov 09@ Dave Peele: “We may not be experts at making money quite yet, but we are definitely experts at not spending it!! :)”
I love it!
@SingAlong: I wish I could count all the hours that I’ve spent… I don’t mean to make myself sound like some kind of whiz kid or “expert”. I just did it. Its what happened. I never “tried” to do it, sometimes I did try not to… but that’s another story.
PS loved the story in Inc this month about Jason, it was creepily similar to my life… in more ways than one it affirmed many personal philosophies for me.
This discussion is closed.