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Start-up Advice

Your Questions Answered With Alan Knott-Craig

Which comes first, customers or revenue? To make revenue, you need customers. Here’s how you build a business that people will care about.

Alan Knott-Craig

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How can I start a small Internet service provider ISP business? — Tonderai

This is similar to the hoary chestnut, “How can I take over the world?” The answer is the same. Sit at the knee of a master for two years (at least) and learn the game. When you have a sufficient network of contacts, and understanding of the business, head off on your own. How do you find a ‘master’? Identify an ISP that appeals to you. Get your foot in the door somehow, even if it’s just making coffee. Work your way to as close to the CEO’s door as possible by continuously over-delivering. Learn like a sponge.

The possible alternative to ‘find knee of master’ is to find a technical guy with zero sales inclination. Make him your partner. You become the front office (sales — find customers). He becomes your back office (tech — product delivery). If you can’t find a master or a tech partner, you can’t start an ISP.

Related: Want To Leave Customers Grinning And Vowing To Return? Do The Following

How do I find a co-founder? How do I find a development team? — Kirsten

For a technical co-founder, Tinder is best. Jokes. In fact, Tinder is the last place on earth to find a technical co-founder. Rather try family and friends. Conferences. University. Milk your networks by letting everyone know that you’re looking for a technical co-founder. Failing that, you must hire a development team.

The days of compensating software developers with equity in lieu of cash are long gone. Absent a technical co-founder, there is only one way to develop software: Pay for it. How do you find the right dev-house?

Word of mouth is best. The rules of thumb are:

  • Maximum project duration = three months.
  • Scope it once. Don’t change the scope.
  • Keep it simple.

For your first iteration, it usually makes sense to go with a young and relatively inexperienced crew (try www.avochoc.com). Yes, the product will not be future-proof, but your first version need not be future-proof. You just need something to start signing up customers and getting market feedback.

If you get traction, then you can start worrying about scalability and consider engaging with more experienced (and expensive) dev-houses.

I have invented a hamburger roll that ensures the patty and toppings cannot escape. Would you suggest I patent it?  — Albert

Interesting idea. From the photos, it seems your solution is a variation of a pita bread. It may be worthwhile reading Zero to One by Peter Thiel.

He argues that consumers will always resist change, even change that is very obviously good for them, ie: non-leaking hamburger rolls. The only way to introduce innovation into an established market is if it represents a minimum of 10x improvement over the status quo. Only such a quantum improvement will induce people to change behaviour.

Although undoubtedly a big improvement, I’m not sure the non-leaking hamburger roll qualifies as 10x innovation. And so it probably will not succeed in the market place.

Before patenting, I suggest you try sell some rolls to establish whether you can get traction and prove revenue potential.

Related: Direct Marketing: Go Where Your Customers Are

I’d like to launch an app with an advertising revenue model. What do you think? — Mvelo

I’m sorry to be the bearer of bad news, but advertising is an insufficient revenue model in South Africa. You need to figure out another way to make money. Most times, the paths to non-advertising revenue streams only reveal themselves once you have users.

You should work on the assumption that it will take you at least two years to get sufficient traction, therefore you need to have two years’ worth of runway before plunging into your entrepreneurial adventure. In those two years, you should be growing your users as much as possible.

The size of your user base will determine your negotiating power with potential investors and/or customers, and will determine the odds of success in finding a non-advertising revenue stream.

Okay, forget advertising. I’m going to charge my users a monthly subscription of R20. — Mvelo

I realise that it’s a chicken and egg situation, but it’s very hard to find backing until you have proof of your theory working in the real world. On other hand, it’s hard to get proof without first finding backing. That’s the entrepreneurial quandary.

Generally speaking, the egg comes before the chicken. The egg is users. The chicken is revenue. Before you can test your revenue theories, you need users. Refer to previous answer.


Read ‘Be A Hero’ today

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Alan Knott-Craig is a successful entrepreneur and best selling author. Founder of over 20 companies in the tech space, he was named as a Young Global Leader by the World Economic Forum in 2009. To find out more about Alan’s new book, The 13 Rules for Entrepreneurs, go to www.13rules.co.za.

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Start-up Advice

Put On Your Wellies: It’s Time To Wade Into Risk

Entrepreneurs aren’t all leaping into the unknown like lemmings off a cliff, but they do need to consider it…

Chris Ogden

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You’ve had a great idea. You’ve looked into its development. You’ve recognised that it has potential beyond just what Auntie Mabel and Mike From The Grocer think. And you’ve clearly nailed a pain point that can make money. Now it is time to take the risk of running with it.

Every big idea comes with risk. You can’t step out into the world of entrepreneurial thinking and business development without it. Your idea may fail. It will also be time consuming, demanding, hungry for money, and hard work. It is unrealistic to expect that your project will leap out into the world and be an unmitigated success.

It is also unrealistic to assume that it isn’t worth taking this risk.

There are steps that you can follow to ensure that your risk is managed so you aren’t blindly leaping off that cliff…

Step 01: Do your research

No, canvassing your neighbours, friends and family is not doing research. You need to know that your idea will appeal to a broad market and that it will have significant legs. This may sound like daft advice, but you would be surprised how many people think an idea will take off just because Susan in Accounting said so.

Step 02: Understand the costs

Projects are hungry for money and investment. Realistically work out your budgets and how much it will cost to take your project off the ground and then stick to it.

A calculated risk is a far better bet than one that shoots from the hip and hopes for the best. You can also use this as an opportunity to draw a clear line under where you will stop investing and end the project. If it keeps eating money and isn’t getting anywhere with results you need to be able to walk away.

Step 03: Know when to walk away

As mentioned before, this can be defined by a line you’ve drawn in the proverbial sand (and budget) but no matter where you draw this line, you have to stick to it. Often, when time, money and energy have been poured into a project it can be incredibly hard to walk away.

You think ‘but I have put so much into this, just one more’ and then it gets to a point where the ‘just one more’ has taken you so far down the line that walking away feels impossible. Leave. Learn the lessons. Apply them to your next project.

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Start-up Advice

Mind The Gap

The entrepreneur’s guide to finding the gaps and building the right solutions.

Chris Ogden

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Innovation may very well be the key to business success but finding the gap into which your innovative thinking can fit is often a lot harder than people realise. Some may be struck by inspiration in the shower, others by that moment of blinding insight in a meeting, however, for most people finding that big idea isn’t that simple. They want to be an entrepreneur and start their own high-growth business, but they need some ideas on how to find that big idea.

Here are five…

1. Network

It sounds trite but networking is actually an excellent way of picking up on patterns and trends in conversation and business problems. The trick is to note them down and pay attention. Soon, you will find patterns emerging and ideas forming.

2. Look for pain

Just as networking can reveal trends in the market, so can spending time reading. The latter will also help you find common business pain points. These are the touchpoints that frustrate people, annoy business owners, affect productivity, or impact employee engagement.

Be the Panado that fixes these pains.

3. Luck

luck

This is probably the most annoying of the ideas, but it is unfortunately (or fortunately) very true. Luck does play a role in helping you capture that big idea. However, luck isn’t just standing around and random people offering you opportunities. Luck is found at networking events, it is found in research and it is found in conversations with other entrepreneurs.

4. Luck needs courage

You may have found the big idea through your network, a pain point or pure blind luck, but if you don’t have the courage to take it and run with it, you will lose it to someone else.

Being bold in business is highly underrated because most people assume that everyone is bold and prepared to take big leaps into the unknown. However, not all brilliant entrepreneurs were ready to throw their family funds to the wind and leap into an idea – they were courageous enough to figure out a way of harnessing their ideas realistically.

5. Pay attention

This is probably one of the most vital ways of finding a gap in the market. Often, people are so busy that they don’t really pay attention to that niggling issue that always bothers them on a commute, or in a mall, or at a meeting. This niggling issue could very well be the next big business opportunity. Pay attention to it and find out if that issue can be solved with your innovative thinking.

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Start-up Advice

5 Things To Know About Your “Toddler” Business

As you navigate this new toddler phase of your business, here are five things to bear in mind.

Catherine Black

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Ah, toddlers. Those irresistible bundles of joy bring a huge amount of energy, curiosity and fun to any family – but there’s also frustration and worry that comes with their unpredictability, as they grow and start to become more independent. If you own a business and it’s successfully past its “infancy” of the first year or so, it’s likely it will also go through a toddler stage of its lifecycle.

Pete Hammond, founder of luxury safari company SafariScapes, agrees with this. “Our business is now three and a half years old, and we’ve found that we’re not yet big enough to justify employing a large team of people to handle the day-to-day admin tasks, yet we still need to grow the business as well,” he says. “As a result, our main challenge is finding the time to step back and see the bigger picture. Kind of like when you are raising a busy toddler and you spend most of your time running after them!”

As you navigate this new toddler phase of your business, here are five things to bear in mind:

1. This too shall pass

Everything in life is temporary – and that goes for both the good and the bad. It’s as helpful to remember this when you’re facing the might of a toddler temper tantrum, as it is when you’re facing throws of uncertainty in your business. If your new(ish) venture is going through a rough patch in its first few years, it can be easy to think about giving up – but don’t. As long as you have an overall big idea that you believe can add value to your customers, keep pushing through the rough parts until you come out the other side.

2. Appreciate what this phase brings

The toddler years mean that the initial newborn joy is officially behind you. But these small humans also bring their own kinds of joy, as you watch them learn new skills, say funny things, and give affection back to you. While your two-year-old business may not hold the same exhilaration for you as it did during those first few months, there are now different things to appreciate about it: Maybe you’re expanding your product range, or employing new people who can take the workload off you.

3. Establish boundaries

Toddlers thrive on boundary and routine – and your toddler business will too. As it grows into a new phase, try and establish limits in terms of the type of clients you want to work with and the type of work you’ll do. It’s also a good idea to make a decision about the hours you’ll work and when you’ll switch off, which will help you establish a good work-life balance.

4. Take a break

Every parent with a toddler needs a break every now and then, even if that means a walk around the block (on your own!), a dinner out with friends, or even a few days away. The same is true for a demanding small business: every so often, remember to take time out to rest properly, where you switch off your laptop and completely unplug. You’ll return much more inspired and resilient to deal with the everyday uncertainty that it brings.

5. Give it space to make mistakes

While the unpredictability of a young business can be stressful and tiring, it’s also a time for trying new things without the risk of huge consequences if they don’t quite work. After all, it’s much simpler to change your USP if you’re a small business employing a few people, rather than a big company where 50 people are relying on you for their salary, or where you’ve received a huge amount of investment capital. While you may fail in some of the things you try with your business (in fact, this is almost guaranteed), see it as a toddler that’s resilient enough to pick itself up, dust its knees and keep moving forward.

During this phase of business growth it’s also essential to have the right type of medical aid cover. There are medical schemes such as Fedhealth which has a number of medical aid options and value-added benefits to ensure that your health and wellness is taken care of too. After all, the healthier you and your staff are, the more productive your business will be – during the toddler (business) stage and beyond.

While this phase can be frustrating, it’s a sign that your business is growing and adapting, rather than remaining in its infancy, and that can only be a good thing! So embrace the difficulties, learn from them, and watch as your business strides forward confidently into the next exciting phase.

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