Blank Sheet of Paper: Dollar Dollar Bills

As an entrepreneur pursuing a software product idea or a software-enabled service business, how do you get from a blank sheet of paper to a company with customers and momentum? This biweekly column focuses on ideas that can help you on your path. 

You’re an entrepreneur with a revolutionary vision, creating something amazing and game-changing. So accept this truth of entrepreneurship.

You don’t know what you’re building, and you don’t have enough resources to build it.

Especially those dollar, dollar bills.

Isn’t This MY Vision?

If you’re creating something transformational, you have to accept that your incredible vision doesn’t translate into a detailed specification, an industrial recipe, a blueprint, or a complete, robust engineering diagram. You can’t just build it once, or order it from a vendor.

You are changing the way something works, doing something that hasn’t been done before. So your clear, compelling vision of an alternative future is light on details and loaded with ambiguity. It’s also a vision for someone else: your customer.  You may know with great precision and accuracy 95% of your eventual product and business model. But that 5% is the difference between success and failure, and you can’t define it by working on your own.

Here’s the good news. You don’t have to be the sole arbiter of your vision. The community of people you are creating with (cofounders, employees, and investors, for example) and for (customers and end users) can help shape a successful product or service. You might as well engage them in tackling the ambiguity with you, and co-creating this new future you’ve imagined.

What’s the Catch?

You have limited resources, and startup organizations devour resources like a hungry dog devours birthday cake.

Every entrepreneur starts with a different set of assets: mental, physical, emotional, and financial. But one thing is true overall: all entrepreneurs’ resources are constrained in some way, especially in the beginning. It’s also true that your financial resources affect all the other resources, and in many ways are the most important to manage wisely.

Transforming a product or service idea into a company that sustains itself through revenues will take longer than you expect. The ambiguity in the process guarantees that “end-to-end” planning and estimates will be wildly incorrect. Overplanning may lead you to waste your resources or become paralyzed by doubt.

If you don’t have the resources you need now, and you’re committed to realizing your vision with other stakeholders, what do you do?

Invest in Learning

Defer spending cash until you have hard evidence that your model will work and there’s real demand for your product or service.

And until you reach that point, invest your time and sweat in acquiring specific knowledge of your customer’s problems and in figuring out the best solutions to those problems.

Think of it in terms of maximizing this ratio: Learning / Investment.

 

SweatEquity

 

Entrepreneurs often leap to investing money in order to learn. But the financial resources other than revenue that you use in the process of learning are in effect a bridge loan—very easy to burn through, and very hard to come by.

Instead, build and spend as little as you can at each step and learn as much as possible about what you can produce profitably that your customers will buy.

If You Build it Alone, They Won’t Come

The question is, How?

Here are the top three hacks that will help you maximize learning for almost no money:

  1. Talk to your customer: Without pitching, learn about your customers and their problems first, and use that information to validate the assumptions behind your vision. Once you’ve learned enough, you can start talking with them about solutions.  Talking is cheap and keeps your ratio high.
  2. Prototype it: Use pen and paper, primitive prototyping tools like clay or tape and cardboard, a 3D printer at a makerspace, and tools like Balsamiq to turn your learning into something you can test and refine. The process of making your prototype will be another chance to cheaply learn.  You can’t tell anyone else how it works, or how to build it, if you haven’t tried to do it yourself.
  3. Pitch it: Pitching is another way entrepreneurs learn and test their ideas. It’s also important to practice pitching so that you can sell your product more effectively—and maybe raise additional funding if you aren’t quite there yet.

By listening, thinking, and talking, you can get further than you think, and you’ll learn things that can help you unlock new resources. And crucially, you’ll be better able to use the real, precious dollars when the time is right.

About derekkoch

Derek is CEO and Founder of Independent Software. Independent Software’s mission is to “help entrepreneurs win”; the company works with early-stage ventures to build new web and mobile software products, place talent through the A100 software apprenticeship program, and access the statewide startup community through the company's online magazine, The Whiteboard. Derek and the company also partner with such organizations as UP Global, Startup America, CTNext, the Grid, and the Connecticut Technology Council, Derek works to create and advance initiatives that help entrepreneurs manage and lead successful startup ventures rooted in Connecticut. Derek holds a master's degree in Management from Northwestern University's Kellogg School. He lives in Connecticut with his wife and their two sons.