How to build a business on sweat equity

I like to bust myths in business; one is which you *must* have funding to make your business idea happen. Here's a post I've just written for Virgin.com 'How To Build A Business On Sweat Equity':

Legend has it that the TV show 'Dragon's Den' is an accurate reflection of what business and enterprise is all about. A bunch of people parade their business ideas in front of the Dragons to raise funding and thereby lose control of their business.

Is that what business is really all about for most of us? Because for starters, it's a myth that you must have money to start a business. You don't. You just need a damn good idea - and a few other things, like paying customers - but not necessarily stacks of cash.

Okay, if you have a bunch of expert web developers to hire, prototypes to manufacture and warehouse space to lease then you may well need start-up funding. But for the rest of us - especially for the ‘I have an idea’ generation - you might find smarter ways to take your business to market without first raising money.

So lock away the company cheque book and embrace the spirit of ‘bootstrapping’. Bootstrapping is about building a business with little or no money. Many businesses, even Silicon Valley technology giants, started life this way in garages rather than plush office suites. You can start your business in the shed or spare room and then scale up once you have the revenues to support expansion. From the guy selling organic sausages to the woman making lingerie, the home-made model is how many successful entrepreneurs started out.

So here are six tips to launch a business without funding:

1.    DITCH THE OFFICE. Starting from co-working spaces, coffee shops, spare rooms and garages means you not only save on office costs but also those associated overheads from electricity to furniture. So ask yourself, do you *really* need an office?
2.    HAVE A LEAN TEAM. If you don't need hordes of people on the payroll, utilise freelancers, friends, and favours to keep those costs down.
3.    USE FREE TOOLS. Take advantage of free web-based tools like Google Docs to run your office systems without investing in pricey software licences.
4.    MULTI-TASK. You’ll need to be multi-dimensional. Whether it's writing copy for a brochure, learning how to code a website or making deliveries to customers, there's stacks of things you can do yourself. You’ll just have to work harder.
5.    EMBRACE NO-FRILLS. Do you need to attend that expensive conference, can you book cheap train tickets in advance to visit that customer, and do you really need that fancy letterhead? Be ruthless!
6.    ACT SMART. Do deals with suppliers, designers and manufacturers to have them share the risk with you. Cut great deals on the basis that you’ll reward their loyalty and service once you have customers in through the door.

If you create a business that doesn't require start-up costs, not only will your business be leaner but the skills you'll learn in financial prudence will stay with you as you scale up the operation.

But remember, no-one said starting a business was going to be easy: this is about investing huge amounts of 'sweat equity' to pull it off.

So building a business without funding will inevitably require more work; but on the upside, if you haven’t had to dilute your shareholding to secure investment, you’ll retain the freedom to be in control of your idea. And if your business is going to be a mega success, retaining control might be one of the best decisions you’ll ever make.

Business Stories #2: Alex, the user-designed computer

In the second of this week's profiles of companies behind new ideas, this is the story of  The Broadband Computer Company who have developed a new computer focused very much on the user.


Like many executives of his generation, Andy Hudson was a late adopter of computers, finally getting to grips with a laptop about ten years ago. His frustration struggling with an over--complex operating system led him to develop a computing package - ‘alex’ -  targeted at late adopters and the previously ‘digitally excluded’. Andy is now co-founder and Chief Operating Officer at the UK's Broadband Computer Company a tech start--up that raised £2.5 million to develop and launch ‘alex’.


Andy told me how he’d actually designed the front-end interface in PowerPoint before assembling a team of developers to take his idea to reality.‘alex' has been designed very much with the end user in mind, providing an easy to use bundled package of computer and operating system. The intuitive user interface was a direct response to Andy’s own experience and his frustrations. His eureka moment seemed so simple: “Why is it so hard? Users don’t want drop-down menus to make choices. If I want to do something, why can’t I just press one button?”


Andy told me the product had been designed from the ‘customer back’ unlike most tech products that are devised and pushed at the market. Before a nationwide launch, The Broadband Computer Company soft-launched the service to a group of 150 paying users in the North East Of England, close to the company’s base. Andy explained how critical this soft launch was in the development of the product. “We learnt a lot of lessons playing with that group of paying customers in the trial. They identified problems with the system that we just hadn’t spotted during development”. Instead of  a Mac or Windows operating system, ‘alex' has its own suite of programs each with a bright colored on-screen button. To the technologically literate it might look over simple but then it hasn't been designed for the early adopter iPad user. 


Identifying a clear market niche for the product by placing the user at the heart of the business idea, based on Andy’s own frustrations seems to have resonated with customers in the trial. The business is now seeking more funding to invest in marketing and a major nationwide launch. There’s a long way to go before ‘alex’ becomes a well known brand, in the meantime Andy says he continues to be motivated by customer feedback, "When you receive emails from users saying that you have changed their lives - it inspires you to carry on".

Business Stories : #1 Gibli.com, the knowledge trading website

This week I'm profiling three companies who have developed ideas and products to solve age-old business problems. The first is start-up Gibli.com, who've come up with an idea to help small businesses fill their knowledge gaps.



When pharmaceutical data company CEO Charles Joynson was struggling to find out information about doing business in the Netherlands, his dilemma gave him an idea. What if businesses who had questions could connect with others who had the answers? The result is Gibli.com, a ‘knowledge trading' website where experts can trade their know-how online in the same way people buy and sell on EBay.


The idea was born from Charles’ own struggle to find detailed information to launch a new product, “critically we failed to uncover the key facts that in the end were crucial”, he explained. That was the catalyst for the website which connects businesses with experts. Gibli only launched in April 2010 and the site now has around 150 signed up members with 100 site visits a day.


Talking to potential users prior to launch revealed that many felt there was a gap between sourcing free advice on the internet and paying for a consultant, giving Charles the confidence that there was a niche that Gibli could fill. “They suggested that the free advice on the internet was questionable, and you couldn’t always tell who the writer was. But if you paid a consultant to help you it could cost thousands. So we decided to let experts charge what they liked for slices of their knowledge”.


Charles quickly learnt the importance of assembling a talented team to fill his own knowledge vacuums. “Gibli was one of those projects which needed the input of other talented individuals to create something useful, rather than a single flash of inspiration on my part. In that way I was able to pull resources into the team to compensate for my own weaknesses.” Charles acknowledges the irony in the discovery that if he couldn't solve it on his own, he needed to get help “If only Gibli.com had existed then, I could have solved my own problem!"


The initial idea evolved as he sought contributions from others, experiencing what he describes as a ‘series of little eureka moments’ along the way. His business mentor played a really valuable role; one of her early recommendations was the importance of design to deliver the optimum user-experience. Charles had always been cynical about the value of design in a project but his mentor introduced him to designers who helped visualize the concept, adding a lot of value to the offering.


The expertise he’s brought in has strengthened Gibli's offering, making it stronger than his initial idea. He's now a firm advocate of the need to seek advice from experts. "I now know that if your trust the talented people around you, you will end up with something considerably better than you could have done on your own. And that’s what Gibli is all about".

Andy Hudson: Taking A New Idea To Market

Here’s a short video interview with Andy Hudson. I first met Andy in 1988 when I was doing work experience at a television production company. When I returned to the company in a full-time role in 1990 I worked with him on the music series ‘Friday At The Dome’ for Channel 4 and a number of other music and arts shows. We then worked together at his music events start-up Sol Entertainment and then at The Unique Broadcasting Company. Especially in the early part of my career Andy was a real mentor and encouraged me to think ‘plural’; that I could apply my skills to more than one area. It’s great to see how he’s reinvented himself from music and events to be founder of a technology business as he’s now COO of The Broadband Computer Company. The company has just launched ‘alex’, which offers safe, secure and easy computing especially for inexperienced users. I met Andy at the London launch last month and talked to him about how he’s developed the business from idea to market.

if the video does not display above, watch it on YouTube here

Getting Your Business Ideas To Market Rapidly

I’ve always been more stimulated by the ‘making things happen’ bit of business than all that inevitable long-term planning: I like to take ideas to reality, get them out in the marketplace. I have seen too many good business ideas stay in the womb for too long, and get launched too late, or worse, not at all.


Sure, you need to plan a business before you launch it but don’t get lost in five year plans and long term forecasting. In a fast moving market isn’t it often more important to actually get it out there? To DO, not plan? You can still test, prototype and tweak your proposition once it’s out there, getting valuable user feedback you could never get from focus groups and spreadsheets. And with digital tools, it’s easier than ever to rapidly and effectively launch an idea.

At SXSW Interactive in 2010 I’ll be hosting a session on this area - ‘Unplan Your Business Idea’ - along with David Sloly.

So with this in mind I was really excited to hear about 24hour-startup.com. Last month a team from Nonsense London gave themselves 24 hours to conceive, design and promote a new web business. the result is a brand called ‘Dr Hue’ which is now being sold on Ebay.

Okay, so it was a stunt (a good one at that), but proof that you *can* take an idea from blank sheet of paper to the market rapidly. There’s a 3 minute video below which summarises the stages in the 24 hour development.


24hour-startup.com - hour-by-hour from NonsenseLondon on Vimeo.

Jose and The Spicy Factor

I talk a lot in my business about the importance of having a point of difference in the marketplace. Whether you’re a freelancer, a corporate exec, a micro-business, an indie band or even a stand-up comedian, you have to work out how are you different from the competition?

Someone who shares that philosophy is Jose Castillo. Jose is based in Tennessee and I met him on his trip to London this week. Jose is a true juggler: he writes about new media, speaks to groups and conferences in the US and Europe, and consults with Fortune 500 companies and start-ups on the convergence of technology, marketing, and ideas. With his wife he also runs a co-working space http://sparkplaza.com/ in his native Johnson City.

What unites everything that Jose does? What he has billed the ‘spicy factor’. Through all his projects Jose strives to invest that wow factor clients are looking for: it’s about creating spicy projects. Recent spicy projects include pumping up 160,000 fans at the hottest race in NASCAR, leading panels on User Generated Content in Silicon Valley, starting up a company focused on generating new media business concepts, and launching a monthly Geek Dinner.

Here’s a 5 minute video I recorded with Jose on Floral Street, Covent Garden.



If the video doesn’t display properly above, you can see it on YouTube here