The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future (33 page)

A
mong the people we’ve met in our story thus far, a few are active risk takers, charging ahead to storm the castle, career or finances be damned if they fail. But far more common are those who carefully take the time to build a business step by step. It’s a myth that all those who choose to go it alone are Type A motorcycle riders, betting it all on the success or failure of one project. Entrepreneurs are not necessarily risk takers; it’s just that they define risk and security differently from the way other people do.

Tsilli Pines, an Israeli-American designer who now lives in my hometown of Portland, Oregon, exemplifies the group of cautious entrepreneurs. Over the course of eight years, she crafted a business making
ketubot
, custom-designed Jewish wedding contracts. During most of that time, the business was a night-and-weekend project she worked on after coming home from the design studio where she was employed. With a regular paycheck from the day job, Tsilli felt safe experimenting with the business and learning as she went along. She also noticed an important side benefit to working this way: With limited hours to spend on the business, she had to make them count.

Thanks to referrals from happy couples, the business grew slowly but steadily, with more orders each year. Each
ketubah
was a labor of love, priced at $495. As 2009 drew to a close, Tsilli felt prepared to make the leap. She gave notice to her boss and colleagues and prepared to go full-time. This was it! She had jumped!

Except … the view on the other side wasn’t all she had expected. The first week of freedom felt great; the second week she began to wonder,
What do I do all day?
“I underestimated the value of having some work that was collaborative and not self-directed,” she said. Over the next few months, the business earned less than expected. Orders were still coming in and the situation was far from desperate, but Tsilli felt trapped, drained of the creativity she had thrived on while starting up.

“The all-or-nothing paradigm was too much pressure,” she continued. “I’m running a creative business, but it’s a creativity killer for me to define my whole income on the need to continuously deploy my creativity.” It was a hard decision to make, but six months after leaving the design firm, she approached the owners with a proposal: How about coming back part-time? They said yes and were happy to have her.

Moving back to the studio three days a week was the right fit. When she had left six months earlier, she had a lot of responsibility as the lead designer; there was no way she could stick around in a lesser role without first leaving for a while. Coming back in under the radar gave her the security of having a certain amount of fixed income while retaining the freedom of working half-time on her other projects. Also, Tsilli now worked as a contractor instead of an employee, and that gave her an unexpected but important sense of still earning all her income “on her own,” with roughly half coming from the studio and half from her business.

It was right for her to leave, and it was right to go back. The
business is still profitable, but without the pressure of needing to rely on it exclusively. Tsilli summarizes it like this: “The feeling I have is that I’m still laying brick after brick. The different pieces interlock, and over time they may build to critical mass. But right now I’m in a good place.”

Tsilli’s story illustrates the real challenge that befalls almost everyone with the opportunity to make a major career change and go it alone: finding a way to build systemization into the business, and deciding what role the business will play in the rest of their lives. Sooner or later, every successful business owner—accidental or otherwise—faces a choice: Where are we going with this thing? As described throughout the book, many of the members of our group made a deliberate decision to stay small, creating a “freedom business” for the purpose of having the freedom. Others chose to grow by carefully recruiting employees and going all in.

Here’s how three people faced this critical choice, resolving it in different ways.

Option 1: Stay Small

No one is truly a born entrepreneur, but Cherie Ve Ard probably comes close. Working on her own since she was twenty, she’s now thirty-eight and has never looked back. Her father was also an entrepreneur, starting the family software business that Cherie eventually took over. The company develops custom software solutions for health-care providers. In 2007 she hit the road with Chris Dunphy, her partner, and they traveled by RV across America. Being on the road while running a software company led to an obvious expansion: Cherie and Chris started a side business making mobile apps.

Business is good, but Cherie has purposely declined to pursue a number of expansion ideas. Here’s how she puts it: “Without a doubt, the smartest decision I made was to set a specific intention to
not
grow the business. Growing up as the daughter of an entrepreneur, I watched my father’s creativity and inventor mind-set get sapped as the business grew from just him to over fifty employees. The stress wore him down and diminished his quality of life.”

When I last spoke to Cherie, she was on the island of Saint John, where she and Chris had settled in for a stay of a few months (“maybe longer, or as long as we feel like it”). Cherie earns a good income of at least $50,000 a year but is insistent that the money isn’t the point. “My feeling of being a successful business owner is based on the quality of life I lead, not the amount of money I earn,” she says. “I own my business. The business doesn’t own me.”

Option 2: Go Medium

In the SoDo area of downtown Seattle, a factory hums with the sound of sewing machines. Chinese-American women, many of whom have worked at the factory for years, diligently apply patches to backpacks and laptop bags. I tour the factory with Tom Bihn, the owner, and his business partner, Darcy Gray.

With more than twenty employees and his own factory, Tom isn’t afraid of growth. But he turned his back on the biggest growth opportunity of all: distributing his popular bags through big-name retailers, many of which have asked repeatedly for partnerships. I was curious about this decision, so I sent Tom and Darcy an email later to ask for more input. Here’s what they said:

Marching to your own drummer is certainly interesting, and as Tom pointed out in another conversation, it may be a better business model as well. Cash flow for their business comes from many individual customers, so they never have to worry about one big store dropping their inventory (or defaulting on their debt). Because there’s only one source, Tom Bihn bags are well positioned against being perceived as a commodity. Tom and Darcy are able to charge a good price for the bags and ensure that they can continue to support all the employees.

When asked about any bad days or negative experiences in the business, Tom said something I’ve been thinking about ever since: “All the bad days have two things in common: You know the right thing to do, but you let somebody talk you out of doing it.”

At least in this case, Tom never let himself get talked out of what was clearly the right thing for him.

Option 3: Split the Difference

Sometimes the choice between small and big has more than two answers. A creative individual can learn her lessons about the wrong kind of growth and then apply them to the right kind. Meet Jessica Reagan Salzman, owner of a one-person bookkeeping shop in Attleboro, Massachusetts. I knew Jessica was a numbers person when she
provided estimated income for the next year of exactly $110,899. Many entrepreneurs are lost in the bigger picture and aren’t certain about their finances. They tended to answer my questions about income projections with statements like “Uh, about one hundred, maybe one-fifty or so.” With Jessica, there was no need for follow-up.

Ironically, Jessica started the business after an unsettling experience at a new job she had just taken for a CPA. As she was settling into the job, she kept tallying figures and wondering why something wasn’t balancing properly. She finally figured it out: Not only was the firm in trouble, it wouldn’t have enough to pay her when the very first bookkeeping cycle came around. Oops. Jessica quit and decided to go it alone.

Right from the beginning, the business was profitable at a decent part-time level, and Jessica was focused on raising a family without worrying about making a ton of money. But one day, her husband, Michael, called and said he was coming home early. “That’s nice,” she said. “Any special occasion?” There was a pause before he told her the rest of the news: He had been laid off, effective immediately.

Jessica’s business had been successful as a side project, but it didn’t make nearly enough money to support a family, with their second child just three weeks old at that point. After the shock wore off, they talked about options, and Jessica decided to take the business to a higher level. Her husband became the primary caregiver at home, and Jessica went to work. The business quickly grew and all was well under the new arrangement, but then it started growing too fast. “We had made major progress in the direction of growing revenues,” she said, “but we had also experienced soaring costs, and our bottom line clearly reflected the necessity for a major change.

“I just assumed that’s what you were supposed to do,” she continued. “As the business improves, you hire people. Right?” Unfortunately, although hiring people can sometimes help a business
grow, it always creates much higher costs and fixed obligations. Jessica made more changes, switching her business to a sole proprietorship and returning to a one-woman shop.
^*

Regardless of which path you take, as your project grows in scope, you can find yourself spending all your time responding to things and little time actually creating anything. The solution to this common problem is to focus on working
on
your business as opposed to
in
it. When you’re operating the business, you spend time putting out fires and keeping everything running as it should. Working on the business requires a higher-level approach.

Every morning, set aside forty-five minutes without Internet access. Devote this time exclusively to activities that improve your business—nothing that merely maintains the business. Think
forward motion …
What can you do to keep things moving ahead? Consider these areas:

BUSINESS DEVELOPMENT
.
This is work that grows the business. What new products or services are in the works? Are there any partnerships or joint ventures you’re pursuing?

OFFER DEVELOPMENT
.
This kind of work involves using existing resources in a new way. Can you create a sale, launch event, or new offer to generate attention and income?

FIXING LONG-STANDING PROBLEMS
.
In every business, there are problems that creep up that you learn to work around instead of
addressing directly. Instead of perpetually ignoring these issues, use your non-firefighting time to deal with the root of the problem.