What I Wish I Knew About Starting A Business

A letter to myself 3.5 years ago.

Dear Jaysen,

Right now, you’re terrified. You don’t know if your idea is enough to become a ‘business’. People are nice when you tell them your idea, but you don’t know if they’re just being polite. You wonder if you are wasting your time building something that is going to fail. You worry that your savings are running out and that if something doesn’t happen soon, you will have to drop everything and start again.

But there is an easy way to test whether your idea can become a business: start charging people money. That’s it. That will tell you whether your idea can become a business.

The problem right now is you are scared to ask for money because you fear the outcome. You want to wait “until it’s ready” as if your business will magically launch itself in six months. You think that if you keep working on the business, producing more content, adding new features, tweaking the website, the money will somehow follow.  

In reality, you’ll be in exactly the same position in six months, except you’ll have run out of money and time. TCLA won’t ever become a business until you start making money because that is what a business is. Right now, it’s just an idea, a website with content. Websites with content won’t fund your living. 

What about investment? Yes, some businesses don’t need to charge people money yet, but your business isn’t one of those businesses. You aren’t pursuing a moonshot project that is going to change the world, and you need to be honest with yourself that you just want to run a business. So you don’t need to worry about investors, fundraising and seed rounds. All you have to worry about is profit.

There is a very simple formula for building a profitable business. You just need to make more money than you spend, over and over again.

My advice to you is to focus on making your first sale. Not tomorrow, not next month, not six months down the line - today. If you can do it once, you can do it again and again. That’s your income. Keep your costs lower than your income and you have your profitable business.

With a profitable business, you have options. As Paul Graham puts it, you are now default alive. The business can run on its own without outside capital. There is no longer a timer on your business. You can make long-term decisions for the good of your company without being in a constant fight for survival.

“Okay, but it’s not that simple!” Actually, it is. The theory is very simple, it’s just that the application is hard. This is an important difference - keep the theory in mind at every step of the way. When you find yourself getting excited by new ideas or getting lost by the number of routes to take, remember: the fundamental goal of running a profitable business is to make more money than you spend. That’s not something to be ashamed of.

Find your true fans

Read this article by Kevin Kelly, the founding editor of Wired Magazine. The takeaway is that you don’t need as many customers as you think you need to make a living from your work. You only need 1,000 true fans. Just 1,000 diehard fans out of the 7.6 billion people on this earth who are willing to pay for your products and services because they love what you do. 

How do you find true fans? You need to delight your customers. This is not obvious because many businesses don’t delight their customers.

To delight your customers, you should solve their problems. In your case, the problem your customers face is that securing a job in law is hard. Your sole focus should be to make that easier.

Right now, you have it easy. Because you pursued a career in law, you know the problems your customers are facing because you have been there yourself. Build something you would have been willing to pay for and your customers will be willing to pay for it too. 

The danger, as time passes, is that you will forget what it’s like to be your customer. You will start to assume that you know what your customers want. Avoid this trap. Take the steps you need to take to put yourself in your customers’ position. The solution is simple: spend a disproportionate amount of time talking to your customers.

Don’t kill your business by rushing

TCLA doesn’t need to become an online law school today. In fact, it doesn’t need to become an online law school in five years. For as long as it is profitable, you can keep working towards your big goal. If you pursue profitability, you can work at your own pace, pivot, make mistakes, iterate, learn how to build a team and manage so that when you do get to your goal, you are the right person to lead. 

So why are you rushing to do everything now? Competition? Competition won’t kill your business. You are not the only person in the world to have an idea for an educational platform for aspiring lawyers. Competitors will come and go. As long as you have your small group of customers - your 1,000 true fans - you will be in business. 

Leverage

To build your business, you will have to do things that won’t make sense when it gets bigger. As Paul Graham puts it, do things that don’t scale. As a sole founder, do everything you need to do to find your true fans.

If you have a particular level of expertise, providing consultancy services will get your business off the ground quickly. This means you will trade your time for money. The problem, however, is that consultancy services don’t scale. Your money is limited by the amount of time you have available, which puts a cap on the money you can earn unless you work for big clients.

If you want to scale your business, you need to find leverage. Transition into providing products that, as Naval puts it, “have no marginal cost of replication”. Put simply, for every new customer, you don’t want to have to trade more of your time. This will allow you to scale your business to thousands of customers. 

Media and technology offer leverage: you can write something once that can be distributed to thousands of customers with the click of a button. You can also build platforms that provide all of the products and services your customers need once they have paid.

As you grow the business, you will generate the capital to use other forms of leverage, such as hiring new members of the team. If you decide to hire, use this as an opportunity to unlock your time, so you end up working on the highest-leverage tasks - the tasks that only you can do as the leader of your business. This includes things like mapping out your vision, hiring, unlocking bottlenecks for your team, iterating to retain product-market fit, and opening up new sources of revenue. 

In the meantime, try to automate or delegate the rest of your tasks, unless there are tasks that you want to do because you enjoy them (it’s your business, after all). Tools like Zapier make it possible to automate tasks without a coding background.

To delegate tasks, you will need to go above and beyond to break down what’s in your head onto paper and into a series of repeatable steps. You need to break down far more than you think because running a business as a sole founder makes it very hard for everyone else to know what you are thinking.

Ultimately, the goal is to build a documented system so you can take anyone and train them into an exceptional addition to the team. Right now, three and a half years on, this is the stage I have reached. I have a long way to go.

Stress

I couldn’t end this letter without talking about the stress you will go through as a founder. The stress will never cease, you just get a bit better at dealing with the uncertainty.

Once you have some proof that you are onto something, your whole goal is not to quit. This is extremely tough at the beginning because you won’t know if you are just about to hit the tipping point. Many people quit without knowing whether their business would have become a success.  Naivety helps here; you can disrupt existing models by solving problems that others believe are unnecessary or foolish because you don’t share their biases.

Building a startup means perpetually learning on the job. You will get almost everything wrong the first time, so it’s your goal to be open-minded enough to find out your blind spots, double down on the few ideas that work and leave the ones that don’t. Most weeks I come to the realisation that I have been doing something obviously wrong, but this was never apparent at the time. This will happen to you too so try not to beat yourself up about it too much.

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I hope you enjoyed my first post. If you have any thoughts, please drop a comment on the article, I’d love to hear from you.

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