mathiverse's journal

[mathiverse]

I'm reading E-Myth and realizing that my sincere desire to avoid doing the technical work I used to do might be a strength at this juncture. It'll prevent me from recreating my job, but as the owner. The distaste for the work also means it'll serve as an incentive to get employees to take over that part of the work ASAP.

@Crusader: Nice example!

[shaz]

Employees might not be such a good thing if you don't enjoy managing employees (I don't). Outsourcing can be a great option.

[mathiverse]

I have never managed an employee, so I'll see how it goes. Ultimately, I hope managing employees is just a stage before I hire a business manager to manage the business so I can step away for the most part.

[mathiverse]

Well, I'm a few pages from finishing "One Million in the Bank" and the main idea that I'm interested in is starting a tried and true company. If I start a tech company that either 1) builds something that already exists, but has market share available or 2) is a well known business model (eg consulting as DutchGirl suggested), do both of those ideas count as tried and true?

What are the traits of a business that can be called "tried and true"? I'd list:

* Many companies exist that already sell the product profitably.
* It isn't a winner take all business.
* It doesn't rely on timing.
* There is a well known (to insiders) playbook to profitability.
* It doesn't depend on innovation in the product or the business model.
* The value proposition of the product is already known and agreed upon among customers.

The author, Slavin, suggests that internet companies aren't a good idea, but his examples were basically drop shipping and content marketing like xmj mentioned earlier. Businesses where you sell on the internet, but that offer very little value proposition beyond better marketing than other people. Those both seem very different from (1) or (2) above.

[mathiverse]

See example the indiehackers podcast #16 with the sidekick.org founder.

Wow, I finished listening to this podcast and it gave me a bunch of ideas. Thanks for the suggestion!

[mathiverse]

So I finished E-Myth and it echoes Desyllas's advice to focus on creating documented systems for each role in the business, so that it becomes a system that can run even with unskilled people in each role.

Also the idea that each person has an entrepreneur, manager, and technician in themselves and that a small business requires many people to change the mix of their expressions of those roles was interesting. I definitely see the technician in myself and also the entrepreneur. I probably need more manager and less technician.

Well, time to let the idea of starting a business gestate some more. I have a lot to think about.

[simplex]

Here's a short read which is complementary to Desyllas book: https://blog.alexmaccaw.com/the-six-pri ... usinesses/

[xmj]

Yes, xmj, I've thought a lot about your post since I first read it! It went in my list of all time favorite posts on the ERE forums even back then. I've been considering more seriously now though since I have been feeling compelled to earn a significant amount of money again and I need to change my approach if I want it to last.

I think there are other business options besides the two you listed which result in a lifestyle business. A lifestyle business is really defined by the flexibility it provides its owner to live the lifestyle they prefer. The first idea that I had was creating a suite of SaaS products where the sales are due to the value proposition for the user rather than the reputation of the creator. Think building and selling tools.

That is, I'm talking about the difference between buying Tim Ferriss's online course because you like his blog (or book or podcast) and paying for a subscription to a marketing tool because you found it increased sales when you tried it out (or your colleague recommended it to you because of their increase in sales). Or paying for a consulting service because the owner has a reputation from going on the talk circuit, writing books, and having a podcast like Jason Turner and C++ consulting versus paying for a consulting service because the business has a reputation for doing good work like hiring BCG for management consulting (where the particular person doing the work isn't important).

Also, despite my last paragraph which may seem like evidence to the contrary, I recognize that every business requires sales and marketing. I am willing to go on sales calls, write advertisements, cold call and cold email customers, and so forth. I'm not willing to do marketing like Tim Ferriss or Dan Koe who put a lot of details of their life out in the open as a part of their personal brand building. That was more the point I was trying to make.

After reading more, it sounds like many successful small businesses get to the point that the owner can consider it a lifestyle business as long as they have a continuous focus on factoring themselves out from the operations, sales, management, and administration. So maybe what I'm interested in is starting a successful small business which has the potential to be run by someone else down the line rather than a lifestyle business and whatever that connotes.

EDIT: Also on further thought, maybe I do agree with you. I'm not going to build a business based on my persona, so, in your dichotomy, I'm stuck with building a business around selling something bland. It'll be bland software tools that sell themselves because they actually solve a problem for the user.

I mean, I was intentionally trying to point out the tail ends of lifestyle businesses: either one completely focused around your brand, or the very opposite bland and commoditized service for which there's already a massive existing demand.

The watch strap example came from . . . my watch strap recently breaking, thus creating demand, and me turning to an online service that I presume was dropshipped from somewhere else given their massive SKU number.

The 4HWW opposite of this is because when I was in my last year of university I came across his book, and later learned that his business is very much NOT him spending just 4 hours per week on it.

There's plenty of space in between those two tail ends. To my mind, the further you get from the commoditized service the more your business will benefit from putting a touch of you into it. Hope that makes sense.

[zbigi]

What are the traits of a business that can be called "tried and true"? I'd list:

* Many companies exist that already sell the product profitably.
* It isn't a winner take all business.
* It doesn't rely on timing.
* There is a well known (to insiders) playbook to profitability.
* It doesn't depend on innovation in the product or the business model.
* The value proposition of the product is already known and agreed upon among customers.

I agree with the above. Incidentally, it rules out most (all?) software business ideas, since they don't meet the "many companies exist" criteria. For most software products, there's probably less than 5 companies in the whole world which are serving that particular market.

[mathiverse]

Incidentally, it rules out most (all?) software business ideas, since they don't meet the "many companies exist" criteria. For most software products, there's probably less than 5 companies in the whole world which are serving that particular market.

It depends on what one defines as "many."

For software, less than five companies may be sufficient for the market to worth entering. The reason you want companies to already exist is that you want there to be proven demand from paying customers and a playbook in terms of what to build. It doesn't have to be as commoditized a market as restaurants or brick and mortar stores. Obviously, having only two or three companies in a market might be a sign it's not a good market to enter due to some underlying dynamics like a winner take all situation, so discernment is necessary.

@xmj: Ah makes sense! Thank you for the clarification!

[fiby41]

The software companies that are actually monopolies advertise themselves as having a lot of competition and inversely if a company says has to say it enjoys durable competitive advantage, it doesn't. This is the view of Peter Theil.

"It doesn't rely on timing" and "many companies exist" are opposite to each other. Not just for consumer cyclicals but also for companies manufacturing heavy engineering products and first-order commodities from raw materials.

It should be okay to have lumpy profits. We shouldn't beleive everything Buffett says but- "See's Candy is only profitable one month of the year and we are okay with lumpy profits."

[zbigi]

Small software companies usually have a moat of having worked on the software for years, so, if you'd like to copy their feature set, you'd have to work on it for years too. That plus open source hobbyists, who, in many areas, will do the copying for free.

[mathiverse]

It should be okay to have lumpy profits.

Sure. I agree.

Timing is supposed to refer to not relying on larger trends like getting in when interest rates were low or getting in when the housing market was booming. The fact that revenue isn't generated equally throughout the year is not a factor in the decision. Any software subscription probably has lumpy months that line up with common fiscal year start/end months as one example.

An example of a business where both criteria is met is software consulting. Consulting is the type of business that can be profitable most of the time even if profits are better in a growth environment. There are many software consulting companies and there is always room for more.

[mathiverse]

Yeah. I agree. If the whole of your business's idea is to copy a competitor feature for feature, then that probably won't work. There has to be something more. The same way you probably won't have a successful restaurant if your entire idea is to copy McDonald's feature by feature.

I'd also note that the fact that something is available in open source doesn't mean someone won't pay for a better version or that companies aren't paying a lot of money to use it anyway. See the podcast simplex posted for one example. Also note the many teams created to manage important open source software packages at companies that use them.

The fact of the matter is that many open source tools are poorly maintained or completely unmaintained, lack features that are needed for production, or just aren't as good as they could be to get all the value from the product. Many companies don't want to pay for an engineer's time productionizing a tool if it costs less to buy a software license for an enterprise version. Engineer's often have other priorities than the tool at issue anyway. At the business level, they aren't making decisions based on what is the cheapest option in terms of cash outlay at that moment, they are doing a cost benefit analysis. Saving engineering time by buying an enterprise version of a piece of software is a reasonable choice in many situations.

[mathiverse]

I sold an item on eBay for the first time. It was easier and more streamlined than I expected. I will try to sell more in the coming months.

Now to see how easy it is to sell books on Amazon...

[AxelHeyst]

I had good results selling a few books on eBay as well - have you looked at that? Particularly textbooks and hardbounds. I’d just find whatever the price was on Amazon for a used copy and then post it for a little less on ebay. eBay was so easy I never looked into Amazon - is there a benefit?

[mathiverse]

I haven't looked into selling books on eBay. I'll start there! Thanks for the tip, AxelHeyst. I don't have a strong reason to try Amazon. It's just the main site I associate with used books.

[jacob]

I used to sell on amazon (I've probably sold >100 books there) but after they jacked minimum shipping cost to the buyer to $4.99, sales dropped off a lot, so now I just dump my unwanted books off at LFLs. It should be said that I have gotten a lot lazier about recouping costs vis-a-vis just giving stuff away over the past few years though, so there's that.

Also, my standard rule bank then was that unless the amazon sales rank was under #50000 it wasn't worth bothering. It would basically never sell. You'll also be competing with obnoxious algos always underbidding you by $0.01. I would go in once a day and counterbid everything to maintain the lowest bid. If not, it would never sell.

I've only ever sold books on eBay once. Comparably speaking, it's a lot easier to list them on amazon. All you need is the ISBN and the condition. No need to take pictures or write a description.

There's also paperbackswap. See https://earlyretirementextreme.com/how- ... -them.html ... a lot of this info is likely dated.

[theanimal]

I used to sell on amazon (I've probably sold >100 books there) but after they jacked minimum shipping cost to the buyer to $4.99, sales dropped off a lot...

That may just be an Illinois thing? I've bought used books in the past year shipped to AK, WA and CA where shipping on used books was either free or $3.99 from third party sellers. I've also sold books in the past year with the same offerings. Though I think I remember it being $2.99 years ago, but I could be mistaken.

I've also sold more than a hundred books on Amazon and would recommend it over ebay. A fraction of people use ebay, especially when looking for books. Any book where the used price is greater than about $5, I'll go ahead and sell. Below that it's not really worth it after fees.

[mountainFrugal]

In addition to the advice above, I like this simple concept. Default dead or default alive. Achieve ramen noodle profitability then you can start to set your own course!

http://www.paulgraham.com/aord.html
Calculator of the same concept: https://growth.tlb.org/