I recently came across an article by James Altucher about a daily practice he does every day in order to stay on top of his game. He’s gone through many struggling phases in his life where he has lost everything: millions of dollars, his family, his friends but later came back stronger, in part due to his daily practice.

He talks about having four legs to his practice: Physical, Emotional, Mental, and Spiritual. It’s really all about not over exerting yourself in one area and staying balanced between all four. His theory, based on his life experience, is that if you are weak on one or more of these legs, you will have difficulty mastering the remaining ones. This imbalance leads to chaos and you’ll lose your luck, and quite possibly your success.

I found his particular daily practice to be the most interesting over other knowledge-centric practices because he incorporates other activities that are often neglected by entrepreneurs and people involved in early stage startups! For example, it’s very easy to skip workouts due to sitting at a desk coding all day, or avoiding spirituality because you’re stressed out. It is vital to make your life is balanced if you actually want to expand your network, attract some luck, and be successful. Otherwise, you’re just playing the lottery for success!

In honor of James’ daily practice, I created a chart that can be printed out and posted on a nearby wall in your home or office. After you have read the post about his daily practice, the chart can be used to remind you of your daily responsibilities. It doesn’t track your progress or nag you to do them (that might be a future article and adjoining iPhone/iPad app!), but it will keep you on track as it serves as a visual reminder and “cheat sheet.” Download the PDF below.

Download the Daily Practice Chart (.PDF)

You’re free to use it as you please, including posting it on a website or forum, but please do include some attribution.

If you believe that the worst has come to the US and world economies, then perhaps you believe the next 5 years is filled with a joyful rise in the stock market, endless consumer purchasing, extreme real estate speculation — you should stop reading this article right now. I’m not going to try to convince you otherwise!

Otherwise, if you believe that we’re in bad times, and headed for something nastier, I invite you to take this time to identify what things you need to change in your life to thrive during this time. Here are a few things you can do to help your business survive (or even start) during a period of duress:

• Spend less.
  This may sound obvious, but you need to stop spending so much. You may think you’re frugal now, but there are always things you don’t need that you keep buying. Was it necessary that you brought on all those extra consultants? Do you really believe that those fringe benefits are directly contributing to your profitability? Make some needed cuts, and start developing a “Do I really need this?” mentality.
• Start saving money.
  Cash is king in a world that is suffering. If you can manage to save up extra money now, you’ll be able to buy up assets and resources when things hit rock bottom. There won’t be much (if any) financing when everything is down! You’re going to need cash. Imagine when you have an opportunity to buy that $950,000 3-bedroom house that will eventually drop to $350,000. Or, when BMW and Mercedes starts to offer extremely steep discounts to clear their inventory because no one else is buying. If you don’t have cash when the deals come knocking, you’re missing out.
• Use lower cost alternatives to services.
  In many cases, we’ve standardized on using nothing but the best when it comes to services and products for our businesses. But there are a tremendous amount of alternatives to everything we use, many of which offer similar (if not superior) quality, but for a drastically lower cost. Seek them out, because you might just be surprised to find out that you can barter a little more with someone else.
• Bank with a reputable bank.
  Banks like Wells Fargo and Bank of America will not go under. Why? Because they take on a much lower quantity of high risk debt. Seek out banks that have a track record of taking on less risk, but provide higher interest rates. If you look carefully, you’ll find banks offering 3.5% and above for savings accounts (ING Direct), and considerably more for money market accounts. Why do you have tens of thousands of dollars sitting in a traditional savings account earning less than the historical average of inflation?
• Avoid rising above FDIC limits in your accounts.
  I don’t care who you are, but putting more than $100,000 in a checking, savings, or money market account is just asking for trouble. The FDIC insures accounts up to $100,000 per account type per bank. Anything over that, you risk losing (and at a minimum, at pennies on the dollar) when the bank fails and needs to be bailed out. There are billions of dollars in accounts that go uninsured because they’re over the limits. Take the time to setup additional accounts and split your capital up across them. Like the cliche says, “Don’t put all your eggs in one basket.”
• Always put 20% or more down when buying property.
  I know it seems appealing to buy that car for 0 down, or that piece of property for only 5% out of pocket. Unless your payments are considerably less than 20% of your monthly cash flow, you’re making a huge mistake. Should your cash flow come down, you’re going to be living in hell. Putting 20% or more down makes you truly think about what it is you are buying, and it increases your chances of financing. Some lenders are actually requiring 20% down now.
• Help others save money.
  If you build in the ability for people to save money into your products, they’ll buy your product, even during a recession or time of economic stress! Would you pay $5 for an iPhone application that helps you find the cheapest gas nearby? What if your services were all by phone and the Internet, instead of continually requiring your clients to come into your office? Perhaps you can even offer your product for 50% cheaper than your best competitor, and spin it as saving 50% to your clients.
• Telecommute more often, even with your clients.
  Work with your clients, vendors, employees, and consultants to telecommute more often. Everyone benefits. There are a few hurdles with it, but the benefits outweigh the problems. Your top performing staff will think twice about going to your competitors if you offer them perks that benefit them, but without costing you.
• Strengthen your network.
  Now is the best time to start revitalizing your network. Do it before the situation gets worse, because when times are rough, you’re going to want to lean on your network. I’d be willing to bet that most of the people in your network are not yet prepared for what is coming. This means, when that time comes, they’ll be asking you for favor, and returning them in exchange. Take the current moment to reach out to the people in your current network, and offer them a hand. Additionally, spend some time meeting new people at local business groups, on Twitter, and LinkedIn. Offer your new friends something to show your level of commitment.
• Increase your cash flow.
  Last but not least, find ways to increase your cash flow. You should be striving to grow your revenue every month. New streams of income are hiding all over the place. Put advertisements on that newsletter that you send out every month. Start a blog. Create simple side products that reuse some of what you’ve already built — a simplified version of it. Share a piece of what you’re good at in a PDF and sell it.

Many of these may seem incredibly obvious, but I’m willing to bet you don’t even try to do most of them. Give it a shot, focus on them, and see where you stand in 6 months. Come back and let us know how you did.

Sure, it starts with an idea (hopefully one that is based on solving a problem in the real world market and not just something that is ‘cool’). Very soon after, you need to start considering a million things:

Business plan, formation and legalization, tax plan, cash flow, capital investment, partnerships, financial projections, strategic partnerships, expansion of the idea, architecture, functional and technical briefs, functional and technical specs, wireframes, compositions, prototypes, implementations, marketing plan, system architecture, system and network implementation and administration, alpha and beta testing, marketing implementation, and eventually your launch!

Chances are that in the beginning it’s just you (and maybe another person) bootstrapping all of this. The reality is, most of these components are absolutely necessary, and it can seem incredibly overwhelming. The fact that many founders skip a lot of these steps is one of the main reasons startups go bust so early (take for example that many forgo the financial forecasting, and thus, have no true sense of their revenue and profitability potential). The contrary can be said as well, that because some entrepreneurs focus too much on these areas they never really get off the ground.

You need to have thought out your business well and you need to successfully launch and continue to deliver. But how can one or two people do all of this? The answer is that you need to stay balanced and not get too focused into any particular stage or topic, and you need to reach out and discover what other successful entrepreneurs have done.

• Is it really necessary that your pitch includes a 50-page business plan instead of a concise but meaningful 10-page one?
• Do you really need to understand every detail about how to erect a functional specification, or can a short set of mockup diagrams be sufficient?
• Do you really need to spend a lot of time meeting with marketing consultants, or should you just hire a firm to take it over?
• How can you fund your business, and once it’s funded, how do you manage your cash flow?
• What do I really need in my business plan? Isn’t that overkill?

These are questions that are difficult to answer, and there is no single answer that works for everyone. You could get caught up in years of researching each of these fields if you’re not careful (this is why eventually businesses hire people that specialize!). Thankfully, there are conferences and training programs that can be really helpful. There are conferences that help you network and hone in on your skills for a piece of technology that you may use (i.e. RailsConf, Oracle OpenWorld, WWDC) and then there are conferences that help you with starting a business or marketing it (i.e. START!, Seed, TechCrunch50, BlogWorld Expo).

For example, coming up on October 2nd, 2008, is a one-day conference called STARTonomics in San Francisco that could help you figure out what pieces are critical to your startup, and which ones really aren’t. The sessions are led by entrepreneurs for entrepreneurs. Here’s a little glimpse of some of the sessions that will be taking place during this intense day:

• Welcome to Startonomics & Startup Metrics for Pirates (AARRR!)
  Overview of conference agenda + Intro to Startonomics: how to create simple, actionable metrics to help startups make better decisions in product development & marketing.
• Product Development 101: Designing & Prototyping the DNA of a Killer App
  What does it take to plan, research, and develop a great web 2.0 application? Learn tips & best practices for setting the right process, goals, and metrics for your startup.
• Marrying Design & Development: a Match made in Heaven, not Hell
  Learn about the basic fundamentals of web design, and find out how developers and designers can work together to create great websites and applications.
• Creating & Implementing a Web 2.0 Marketing Plan
  How to design and implement an online marketing plan for acquiring users from multiple marketing channels, how to prioritize & mix channels based on stage of startup growth.
• Revenue: The Internet Wants to Be Free, but You Need to Get Paid
  Learn how to generate revenue using a variety of business models & strategies including advertising, digital goods, subscriptions, lead generation, & e-commerce.
• Funding Wisdom: What I Wish I Knew
  Forget the school of hard knocks – this is your chance to hear what 3 successful startup executives learned about the funding process, including timing considerations, types of funding, term sheets and working with investors.
• View the full list here.

This is a must-attend conference for startups working on Internet-based products! Beyond general session topics, you will be able to connect with other startups and successful entrepreneurs who can help you answer the really tough questions.

I’ll be there, soaking it all up. After the conference, I’ll write up a summary of some of the things I’ve learned from others that I think is most important for a successful startup!

A Story About A Colleague

A young entrepreneur colleague of mine has an incredible sense of drive and enthusiasm. He’s 22 years old. He’s even pretty smart, which lends to his success attributes. However, he absolutely fails at networking. He recently solicited my advice about his problem, and I wanted to share it with others in this article.

I pointed out to him that while he was good at meeting people, and great at letting people know (including me) what he was working on, he never sincerely asked his colleagues what they were working on, or how he could help. He shared with me the thought that he felt his work was more important and had a lot of excitement around it. I’m certain that many others share his position with their own projects. However, he clearly overlooked that others associate this behavior with being self-centered or uncaring. No one wants to help someone who doesn’t exhibit the ability to help in return (that’s questionably self-centered as well, but that’s beyond the purpose of this article).

While I know without a doubt that he’s not intending to be this way, a little bit of effort from now on, and he’ll experience a valuable return from his network one day.

Ways To Nurture Your Network

Many people find themselves with a large network, but no way to harness it. Here are a few ways you can nurture your network so that, eventually, it can become useful, meaningful, and profitable to you in the future.

1. Request status updates by touching base. Showing interest strengthens your relationship.

2. Share status updates with others upon their request and even when they don’t ask for it. Share it in a personal and meaningful way, and definitely not as an advertisement.

3. Be open to collaboration! You can use the help. And if you are helping a colleague, they are more likely to help you when you need it most. Working together only strengthens your initiatives and doesn’t mean you’re giving up control or ownership.

4. Find out how you can help, then do it. You’re busy and have very little time for yourself anyway, so giving a small piece can seem wasteful. Think of it like you would an investment. Chances are that you can discover small things that will help your colleague. This shows support and validation to your contact, both of which you’ll need later on.

5. As much as you think you do, you don’t know everything about everything, or even about your field, so don’t act like it. Solicit and value feedback and advice from your network. Be open to the opinions of others, even if it conflicts with your convictions.

6. Connect people in your network with each other. Once you have a strong network of people who trust and value you, one of the easiest but most important networking responsibilities is introductions and connecting other people together. For this to flourish, you will absolutely need up-to-date statuses on their needs and activities.

These steps take commitment and effort, but if you apply them, you will see fruitful returns from your networking investments.

The Lack of Conviction and Meaning

There are too many money grubbing vultures out there, some of which are destroying companies. While it is true that in a capitalistic society a business must be sure that its number one focus is to generate profit, there is a fine line with which how it can get there and still contain meaning. A company without a meaningful purpose (other than to generate revenue) is just opening itself up to being consumed by the tiresome, never-ending and cyclical road to having employee retention and customer satisfaction problems. It is almost always often the case that the management teams and investment principals of the company are the direct cause of the lack of defining and defending this meaning.

This meaning, motive, and purpose needs to be defined in the “DNA” of the business; the core root of its existence; from the very top. The business needs to be absolutely convicted of its purpose, or it will only appear as a charade that camouflages its true existence as an after thought or gimmick.

All too often, investors demand unrealistic time tables or visions, requiring drastic shifts in the priorities of the products the company builds. What begins to happen is the breakdown of the quality of the products, almost as if they’re cheating on the very nature of what their market wanted in the first place.

An Example of Conviction

Enter Mike Lee. A visionary, commonly self-referred to as “the world’s toughest programmer.” He comes from Delicious Monster fame, a company run by Wil Shipley, a no-bullshit developer. They’ve shipped one of the most well known cataloging softwares of recent day for the Mac (Delicious Library and finally, Delicious Library 2). It’s won awards. Wil was Mike’s mentor. Armed with knowledge and a dribble of fame, Mike set off to start the Silicon Valley’s next-best-company.

He stood for meaning. Design and functionality was to be merged in a harmony of utmost quality. He pitched and pleaded a team of engineers to join with him, touting his ideals and promising a company that stood for something; a paradise in the midst of the desert. They followed. Tapulous was born, and began to generate a lot of buzz for their iPhone-based business, that embraced Apple design values, and a clear message of honor that dictated no sacrifice in quality. Mike Lee began to lead his team to victory; and some victories were won by Tapulous: Tap Tap Revolution and Twinkle, two of the most popular applications on the App Store platform. The Silicon Valley gossips began to talk about this company, and the future looked good. Clients were ecstatic about the products, and employees embraced their lives at the startup.

One sad day arrived, when Mike Lee posted on his blog that he has been thrown out of the company due to irreconcilable differences with his investors. It seemed that investors wanted to churn out buggy software, software less than perfect. Mike knew that his business was built on perfection. His niche market wanted applications that were champions. After all, they’re the kind of users that are champions too. And he’d convinced his army to join him at the company based on these convictions in the first place. But his investors didn’t care about that. They wanted quick, dirty, filthy profits from the hot, hot, and hotter iPhone market.

Here’s what will happen. While the outcome of their mistake is yet to be proven true, it will backfire. Other employees will quickly defect (even though Mike publicly encouraged that they stay), and the investors and remaining management will not have the conviction and honor to attract top engineers and designers. Products will begin to suffer because cocky junior and mid-level engineers will write buggy architectures and applications, and uncommitted designers will skimp on the details needed to make the products top notch. And tight, unrealistic investor deadlines will only exacerbate this problem. Soon, they’ll be charged with sub-prime developer status, and they’ll be dropped by their niche market. They’ll join the ranks of ugly, meaningless companies who’s products will sell, but won’t win any awards.

What Mike has done is honorable. He built a company on conviction and meaning, and then stood by his declarations. In his case, he was made a martyr by his backers; sliced away for standing up for his beliefs. But he had the right idea! He built a company that everyone was talking about. A company that made amazing products. (By the way, Mike is obviously already up to something)

What You Can Do

There are a few things that you can do, that if you truly embrace will make your company absolutely remarkable. They’re very simple things too, but you have to be convicted.

1) Build a product that listens to what people want.

How can you possibly build something for someone if you don’t know what they want? Architects don’t force a design on you when you build your home!

2) Build a company that honors, appreciates, and nurtures its clients and employees.

Give your employees the equipment they need and are familiar with to be productive. If they’re designers, yes, they need 30″ cinema displays. You’ll get that extra $800 back in productivity faster than you think. Don’t over work your employees; just because they put in 80 hours doesn’t mean it’s 80 hours of productive and useful code; in fact, it’s probably junk. Respect their talents, after all, you hired them for a reason. Give them the authority they need to implement your visions, because real talent wants to be challenged and respected, they don’t just want to execute mundane and repeatable tasks all day.

Your clients are just as important. Give them the respect they deserve by listening to their gripes and complaints when they’re struggling to use your product. It’s easy to get frustrated with their negativity, but if you listen to what’s really bothering them and address their concerns, you’ll keep more of your customers. If your customers discover major bugs, acknowledge that you’re looking into the issue, and don’t wait until you’ve discovered a fix before you announce a solution like Apple does. It only serves to frustrate your customers more.

3) Build a product that stands for quality by avoiding shortcuts.

Stand for quality. Make the decision from Day 1 to never ship a product that has no intention of being remarkably perfect. Yes, ship it quickly and incrementally, but improve on it. If you’re breaking the bank to deliver a perfect product, chances are that you’ve made it too complicated! Strip it down, make it perfect, ship it. Then you can start adding additional, perfect features to make it the kind of product you’ve always wanted. But always have the intention to ship a meaningful and remarkable product. If you don’t intend to do something, it will never happen.

4) Build a company that lives and breathes moral and ethical values.

How about having a positive ecological benefit while having an economic one? What about protecting the soldiers on your staff from the vultures above? How about not over working your employees just because you think you’ll meet your deadlines faster, and instead empowering them to make great decisions?

5) Build a product that solves real problems but is also a pleasure to use.

Products can no longer survive to serve function alone. They need to be enjoyable and pleasurable to use. They should invoke emotion from their users; make people yearn to use it. They should look like pieces of visual art. They should be obvious on how to use them.

You Can Be Convicted Too!

What happened to the people who wanted to build a better product and not just make a significant number of dollars? What happened to the people who were willing to believe in a code of ethics, justice, and honor like the knights of the round table? People who want to build great products by building a great team, sustainably. What happened to the people with vision, innovative courage, and the desire to enhance people’s lives, and still make money?

These are the kinds of friends and business partners that I want. Ones with honor, compassion, conviction, and smarts. Ones that want to change the world. Ones that want to solve real problems, and add real value.

Are you building companies with conviction and meaning?

But, these folks got it right!

A small company in the UK called Carsonified recently set out to build a fully functional and fully marketed web application in 4 days for $10,000. They stopped all of their normal activities for nearly a week to get together and build something fun, productive, cohesive, and useful for what is a considerably small investment for most businesses these days. [For those of you who are still confused with what the UK is: the United Kingdom is that really big island off the coast of the mainland of Europe! And yes, it's part of Europe!] The end result of their effort is a free web application called ‘Matt‘ that allows you to send Twitter messages from multiple accounts without having to login to each one and post the message by hand each time. It’s fun, funky, fresh, and useful if you’re a twitterer.

I had the opportunity to talk to Elliott Kember, the lead developer for Carsonified, and ask him a few questions about their experience. Since I recently talked about dealing with discouragement in “Be Who You Are, You Silly Entrepreneur You!” and financial models in the last post, entitled “You won’t be bought by Google, so Quit Fooling Yourself; you need a sound financial model!“, I thought a few of the questions that I asked Elliott should address these areas. The following is an informal transcript of our conversation:

Kevin Elliott: So you put together a web application in 4 days. Why? What are your plans with this experiment? What did you hope to gain?

Elliott Kember: We put the site together to see if we could! Every now and then we have an “ideas week”, where we turn off all our phones and email, and everyone gets together and works on a common project. This time, we decided to use a framework and language that we hadn’t tried before, and use the Twitter API to make a useful, fun little app. Not only that, it was also an app that we had a use for, and we figured that there must be others out there who wanted to be able to post to several twitter accounts at the same time.

Kevin Elliott: How many people got together to do this in such a short period of time? How were you able to rope in a group of enthusiastic people to gel together on a common theme and goal for this project? Getting people excited about things, especially small projects, seems to be a difficult challenge. How did you overcome this?

Elliott Kember: All 9 of our staff were involved in building Matt – blogging, copywriting, designing and developing. There was a bit of confusion over why we had so many people working on the one application – we could have built the same app with just two developers and our designer, but without all the marketing, blogging, and PR we’d never have got nearly as much interest. Not only that, but everyone in the team was also able to contribute great ideas and feedback to the process. We managed to get everybody involved because we’re lucky enough to have a creative and innovative team, and a fantastic environment here at the Carsonified offices. We have a four-day week, great equipment and a beautiful office, and we all thoroughly enjoy working here – so any excuse to get involved in something exciting is always welcome.

Kevin Elliott: Did you have any major hurdles during this time? If so, how did you overcome them?

Elliott Kember: We didn’t have too many major hurdles – in fact, learning Python and Django was probably the only real hurdle! Any problems we had stemmed from the fact that we were still beginners with both. It can be quite frustrating when you know exactly what you’re trying to do, but not exactly how to do it. Twitter’s API went down a few times, which didn’t help – but it’s pretty famous for that and we managed to patiently work around it. I guess we expected it to be pretty hectic and tricky, so we were pleasantly surprised when things started falling together. A late night or two certainly helped

Kevin Elliott: At any point in this project, from conception to completion, did anyone doubt or discourage you and your attempts to engage and deliver? How did you deal with it?

Elliott Kember: Lots of people doubted us! Some doubted that we’d be able to produce a web application in four days, others said that it was just a bit of a publicity stunt. Many people missed the point and wondered why it took us so long to build. Quite a few people tried to copy what we’d done in less time and for less money, and others said that they didn’t understand the app, and thought it was all a big waste of time. Really, the only way to deal with this much negativity is to stay realistic about what you’re doing, and enjoy yourself. If people don’t like what you produce, then they’re welcome to their opinion – but at the end of the day, you’re not building it for them. The positive feedback makes it all worth it, and there were lots of positive message and compliments. Thanks to everyone who sent them!

Kevin Elliott: Your site mentions that your goal was to build a fully functional web application in 4 days in under $10,000. Considering that you included marketing, PR, copywriting, and other activities this sounds like an excellent accomplishment. What considerations did you take for planning a financial model around it? When you sat down at the beginning of this effort, did you determine how this would “break even” and eventually post some kind of profit? (NEW)

Elliott Kember: We didn’t actually plan against a budget – this figure just happens to be the amount we spent in salary during the time taken to build the app. Many readers took this to be the budget of the application, and it became one of the more talked-about parts of Matt week. So having said that, I think it’s fair to say that we didn’t have a financial model, and we didn’t expect it to “break even” at all. There’s no advertising on Matt, and it’s free to use.

Kevin Elliott: How did you measure and enforce the budget as you moved forward? (NEW)

Elliott Kember: Managing the budget was very easy. There wasn’t one! The only budget we did have was a time budget, and we basically just had to make sure we got everything done as efficiently as possible, even if that meant a couple of late nights.

Kevin Elliott: What were your intentions for building this application in the first place? In other words, what were you hoping to gain by taking on this challenge? (NEW)

Elliott Kember: We hoped to gain a better understanding of Python, and Django. As developers, we’d never used them before and were interested in the challenges of learning a new language and framework, as well as working with the Twitter API.

Kevin Elliott: What are your future plans?

Elliott Kember: As for future plans, we’ve got some fantastic events and workshops coming up, and we’d love to see you and your readers there. We’re not sure when the next Ideas Week will be, but we’ll be sure to let you know – It was so much fun that we hope to do it again soon!

Kevin Elliott: Lastly, what were the three most important things that you learned about the team, the project, or the technologies after everything was complete? (NEW)

Elliott Kember: Mostly what we learned was the structure and workings of Python and Django. It’s a very foreign thing, learning a new framework, and learning the syntax and structure took most of our time as developers. I could say we learned that Mike, our fantastic designer, can produce a fantastic design and template in about three days! We also learned that TechCrunch readers can be a very tough audience.

Thanks Elliott!

To read more about the Matt project, Carsonified co-founder Ryan Carson wrote a guest article for TechCrunch that details more about how everything went down.

For some, maybe that’s a realistic exit strategy. And for even a subset of those, perhaps that’s also a realistic revenue generator (i.e. the exit strategy IS the model). But for most entrepreneurs, this is unrealistic. You need a fallback plan, because, chances are, even if you plan your business like a perfect game of chess with the hopes of being purchased by a giant, it’s not going to work out. Even if it does, it’s likely to not be as lucrative as some of the deals that have already happened. What do we do then? We develop a financial model with realistic projections to create a cash flow that actually makes sense (uberly simplified: profit = revenue – expenses, not profit = 0 – expenses).

Before you get frightened by the idea of actually building a real business instead of one of these socially driven flukes, think about what we’re talking about here. We’re talking about building a business on a reasonably small number of investment/capital dollars, having one or more legitimate revenue streams, and eventually, a profit. As intimidating as some people think this is, it’s not rocket science (and it surprises me how many people “claim ignorance” by saying “I’m just a tech person, not a business guy” in order to avoid this basic concept). Having some idea of how you’re going to make money is a vital path to success.

Here’s how you start:

1. Find and review example financial models, including forecast and cash flow examples.
2. Think about your market and your products.
3. Gather details about what you think it will cost for your research, parts, labor, prototypes, and other expenses.
4. Gather details about what you think you will charge for your products and services, or how much you will be able to monetize from other forms of revenue.
5. Build your financial model!

Find and review example financial models.

Before you can even start to begin building your own models, you should probably look at what other people have done (or, actually consider enrolling in a business course at a university). Examples can give you a lot of great ideas, and are a quick way to get introduced to the concepts of what a financial model really is. Just keep one thing in mind: it’s your money-making recipe from a financial perspective.

Here are some examples (and a few other introductions):

• A real business model for Redfin, used for 2 years (supplied on Guy Kawasaki’s blog).
• A very, very simple financial model for a rehab business.
• Some ideas from a bulkier perspective from an enterprisey white paper on financial models for IT projects.
• Another blogger‘s perspective on the truth of financial models.
• A surprisingly useful Ning community for financial models.
• Learn some of the science and technical terminology.
• A beautiful excel example that, although quite lofty, cleanly identifies the elements in the Nouncer (a now defected Twitter clone) model.

Think about your market and your products.

How can you build something for the people you haven’t even yet identified? You need to figure out who you’re trying to target; who you’re trying to sell your product or service to. This can be a little difficult, but it’s best to start with what you actually know. As you grow, you may be able to use some unique strategies of discovering what your market wants (market research reports, surveys, email questionnaires, and contests come to mind quickly).

Once you know what your market wants, you can consider what is consumable. Blindly building products that you think your community is demanding might not be the best idea. Keep yourself in it, because a large piece of your product is actually you (you can really mean the spirit of your company, morals, or views). Stay true to your vision, but don’t ignore what the reality of the market is telling you. Selling out to the demand may actually destroy the foundation you spent so long to build. Think about how to make money while delivering a product that is able to drive your client base wild.

Gather details about what you think it will cost for your research, parts, labor, prototypes, and other expenses.

In the beginning, you’re going to wing this one. But, you need to be conservative, and as thorough as possible. Ask what consultants are charging for research or labor activities. Look on the job boards to get an idea of what a full time employee will cost. There are too many questions to ask and consider, and they will be unique to your particular business. How many different components do you need for your device? What are the price points for various tiers of bulk purchasing of one component? How much time and labor do you expect you’ll need for your first prototype? What will it cost to form the business legally? How many administrators will I need on launch day? How many will grow over 3, 6, and 12 months? How about 3 years?

Write these out in the form of a FAQ or research paper if you’d like. But at a minimum, write it out in written language. This will make it easy to translate to attributes/variables in a financial model, but will provide the train of thought you had when you first sat down to put it all together. Trust me, you’ll find it valuable when you’re trying to figure out what “%vol / num. visitors” really meant, and how it was related to your project.

Gather details about what you think you will charge for your products and services, or how much you will be able to monetize from other forms of revenue.

This is the meat and potatoes of your financial model. Think of it as the framework of how you’ll make money with your business, but not the blueprint or implementation of it. For some, this is really challenging. For a born-to-be-an-entrepreneur, this might come very naturally (after all, you had a lot of experience with that lemonade stand; don’t lie, I had one too).

Ethan Zuckerman posted recently with a really useful enumeration of some of the ways you can make money. He focuses on the news industry (specifically journalism), but I think a lot of it applies to other industries too. He goes beyond the traditional ‘advertising’ and ‘premium services’ models too. This is a valuable way to get a start right now.

Build your financial model!</h3

No better time than to start building it right now. This really should be one of the first things you think about when you start evaluating your genius ideas. But don’t worry, this thing needs to evolve. It will change over a conversation with a colleague, and most definitely change over a time period of 6-12 months. And that’s good, so don’t get too stressed out if you think it’ll be too time consuming to do it all in one sitting. Get the basics down. Try to quickly prove that your idea will actually make a positive balance!

And if you already have an established business, building a real financial model for the first time can be extremely revealing! It can quickly show you what your real future holds (perhaps not as aggressive as you thought), and give you some ideas on how to refine your business so that you can actually target making progress towards that goal of early retirement.

If you’re in the sharing mood and would like to help other entrepreneurs develop their models, please feel free to link us to your model (or perhaps a model-in-progress) in a comment on this article and tell us what has really worked for you.

]]> http://kevinelliott.net/blogs/entrepreneurial/2008/07/07/you-wont-be-bought-by-google-so-quit-fooling-yourself-you-need-a-sound-financial-model/feed/ 6 http://kevinelliott.net/blogs/entrepreneurial/2008/06/29/free-copy-of-the-book-six-disciplines-execution-revolution/ http://kevinelliott.net/blogs/entrepreneurial/2008/06/29/free-copy-of-the-book-six-disciplines-execution-revolution/#comments Sun, 29 Jun 2008 18:52:32 +0000 kevin http://www.kevinelliott.net/blog/?p=35 Small Business Trends reported yesterday that Six Disciplines is offering a free book (up until July 6th only) titled ‘Execution Revolution’ which discussing execution strategies… what we believe our problems are with our businesses are possibly not what we think they are. This is a great promotion that is hard to pass up. They are even covering shipping!

Get yours here by adding it to your shopping cart, creating a new account, and using the promotion code ‘START’ when checking out.

Once you’ve finished reading the book, I’d really appreciate a small review back here at this post as a comment so that the rest of my readers can benefit from your time. We all benefit when we share information about what works and what doesn’t with each other.

I’d also like to remind you that I’m giving away copies of Guy Kawasaki’s upcoming book ‘Reality Check’ to several winners that share their story about how they dealt with others who discouraged their entrepreneurial efforts. You can read about it in the original post, as well as see what others have said. The deadline is July 1st, 2008, so you only have two days left!

]]> http://kevinelliott.net/blogs/entrepreneurial/2008/06/29/free-copy-of-the-book-six-disciplines-execution-revolution/feed/ 0 http://kevinelliott.net/blogs/entrepreneurial/2008/06/24/be-who-you-are-you-silly-entrepreneur-you/ http://kevinelliott.net/blogs/entrepreneurial/2008/06/24/be-who-you-are-you-silly-entrepreneur-you/#comments Tue, 24 Jun 2008 22:28:33 +0000 kevin http://www.kevinelliott.net/blog/?p=34 I recently stumbled across a free e-Book written by Michael Simmons and Sheena Lindahl, of Extreme Entrepreneurship Education Corp fame. They’ve been acknowledged by ABC, NBC, CBS, and Business Week for their efforts to reach out and educate budding young entrepreneurs. While their e-Book is mostly written for a college audience, I thought there was quite a bit of value in their message for the rest of us. Here’s a piece of the introduction in their e-Book:

You know who you are. Ambitious, entrepreneurial, goal-oriented, values-driven, persistent, self-starter, etc. You can’t help it either. You can’t help but get excited by the opportunities around you. You can’t help but get excited by your own potential. You know your life will be about big things, although you may not know exactly what those will be yet.

Here’s the thing though. It’s not easy. It’s not easy being you, because sometimes you feel isolated from parents, teachers, and even peers. Sometimes you feel like something is wrong because you feel different than those around you. Furthermore, the people closest to you, the people with the best intentions, often end up being your main critics. They say, “What makes you different?”, “You’ll never make it”, “That’s impossible”, “You’re an idealist.”, “You sure you’re not overdoing it?” They cannot help it.

Many parents encourage a safe path because that’s what worked for their generation. Many teachers encourage the conventional path because that’s what they know. Many of your peers encourage you to relax and take it easy because that’s what they enjoy. But none of these ways of being feel right to you.

Download a free copy of Michael Simmons and Sheena Lindahl’s eBook.

I immediately identified with this message. Most people that surround a young entrepreneur feel like it is their civic duty to let you know that you may not be capable of accomplishing what you’re trying to do. Is this more because they are uncomfortable with the idea, and less that you can’t do it? Is there any truth in what they are saying? Are they just trying to save you face and protect you from failure? If so, they’re limiting your potential. Also, their commentary can often be discouraging. Realize that the only people who are going to be supportive of you are other real entrepreneurs that are willing to acknowledge your ability. Most people are not wired like you are, and this is why they aren’t successful entrepreneurs themselves. They’re not interested in taking controlled chances like you are. They want to play it safe.

The fact that they play it safe isn’t necessarily a bad thing though. You and I need people like them. They’re the fabric of your future company. Rest assured, when you finally do launch that business, and get the funding you were looking for, you’re going to need reliable people to count on, who do like to play it safe — eventually. They’re going to be the ones that keep your business alive, but they’re certainly not going to be the risk takers. They’re not going to be the ones that you recognize for bright ideas and that out-of-the-box thinking that helps to separate you from your competition. Chances are, they’re not going to be your future partners, lenders, or executive team either.

Regardless of what people say, do not let down your enthusiasm. Stop and think for a minute if their advice is useful, or driven by an alternative purpose, even if it wasn’t advice you asked or was looking for. You might find that even in a negative exchange, that they are offering you an opportunity to find an area that you could use some improvement. Take it on as a personal challenge to see if what they’re suggesting might be truthful; but don’t let it stop you or hold your focus for too long. Remember, failing fast has a lot of value, and if you spend too much time trying to perfect what you’re working on, you might miss your targets. You might even lose sight of what your customers want because a colleague of yours said that your idea stunk. What made him authoritative over your ideas, anyway? Who told him he was your client’s representative? You did!

Kelle Sparta recently wrote an article for Startup Spark that seems to resonate with this line of thinking. She acknowledges that employees and entrepreneurs think very differently. You just need to realize that most people are employees (and might very well always be). Her description of the Entrepreneur Mindset seems right on target. It is relieving to find out that others breathe just like you every day, isn’t it?

Tell me your story of ‘staying on track’ even when others brought you down and you could win a copy of Guy Kawasaki’s upcoming book titled Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition. It is set to be released on October 30th, 2008 and will be the latest hardcover from Guy Kawasaki, a man who needs no introduction in the entrepreneur space. Enter the contest by Tuesday, July 1st, 2008 by simply writing your story as a comment to this post. Avoid too much brevity, but don’t make it too long either! I will be choosing the winning entry by July 4th by email, so don’t forget to include your email address when adding the comment (don’t worry, I won’t give this out!).

UPDATE: Jamie has won the contest. As an added bonus, I decided to give him a copy of any other Guy Kawasaki book of his choosing. Congratulations Jamie!

]]> http://kevinelliott.net/blogs/entrepreneurial/2008/06/24/be-who-you-are-you-silly-entrepreneur-you/feed/ 6 http://kevinelliott.net/blogs/entrepreneurial/2008/02/14/wearing-multiple-hats-or-how-i-learned-to-do-it-all-by-myself/ http://kevinelliott.net/blogs/entrepreneurial/2008/02/14/wearing-multiple-hats-or-how-i-learned-to-do-it-all-by-myself/#comments Thu, 14 Feb 2008 10:32:15 +0000 kevin http://www.kevinelliott.net/blog/2008/02/14/wearing-multiple-hats-or-how-i-learned-to-do-it-all-by-myself/ Whether you’re running that top secret stealth-mode startup all by yourself, or have a few angel investors and a team of 12, all startups require their principals to wear multiple hats. It often makes us feel uncomfortable, because we’re always doing something we’re not really experts at! But that’s OK, because it’s our job to get the business profitable, a focusable future, and a home for invested employees… at all costs. We’re willing to jump into any role necessary to get things done. For most of us, we enjoy it, but often struggle with areas we’re not that familiar with.

For example, you might have a Software Engineering background and you are comfortable building a prototype, acquiring some initial funding, and building the first revision of your website. However, you may realize that you have absolutely no background in Design, Typography, and Page Layout, other than some lustful blog reading. This is a tough situation to be in, but you’re not the first.

Here are some more resources to help you figure out how to more effectively perform when wearing the blue, red, or purple hats.

1. 36 Startup Tips from ReadWriteWeb. This article points out some really excellent tips for Startups, including “software engineering, infrastructure, PR, conferences, legal and finance.” It’s a must-read for anyone considering the idea of starting their own business by themselves or with a partner.
2. Creating Web 2.0 Effects With Photoshop from sitepoint. If you have no clue on how to make your company’s logo get that Web 2.0 look, this is your starting point. When it comes down to it, you might not need to hire a graphics designer to set you up for your prototype or first release.
3. The 50 Most Popular Web Design Blog Posts, Resources & Cheat Sheets of 2007 from crestock. Perhaps a little dated (I mean come on, we’re in 2008 right?), this is one of the most consolidated resources that identifies the best website design concepts of 2007. If you’re not worried about looking “too 2007″ then there’s no other place to look. This is also a great way to get introduced into design, and very quickly learn what trends exist.
4. 8 Web Design Mistakes That Developers Make from wakeuplater. Read and catch these mistakes before you do them, because you know you’re really just an amateur designer waiting for the business to make enough money to hire a truly fantastic expert.
5. 100 Photoshop Tutorials for Creating Beautiful Art by 3dTotal. Well, this might not directly help you with your business, but you’ll learn a crap load more than you ever wanted about how to actually use Photoshop. Then, you’ll be able to apply what you’ve learned to your future projects.
6. Illustrator Tutorials by Designer Today. Photoshop is great for some things, but it’s not a great tool to create your logo in because it doesn’t scale well. If you need to ever make your logo larger it’ll be pixelated. You’ll want to use Photoshop’s sister, Illustrator. This is just one of the many reasons to use Illustrator.

While most of these resources focused on Web Design, it mostly serves as an example of resources that can help you solve the problem of wearing a hat you’re not familiar with!

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