If you are not frugal, don’t bother starting a company [founder qualities]

I like to read (auto) biographies of successful people. I think it is an excellent way to learn & be inspired. And I notice something common in many business persons who made it big  – Sam Walton, Warren Buffet and many more.

They lead a frugal, simple & happy life.

If you are the kind of person who takes inspiration from books, I suggest reading Made in America by Sam Walton. Sam Walton founded Wal-Mart, the largest retail organization in world and went on to became richest in America. But do you know how they lived? A simple, happy and meaningful life with out luxuries or lavish expenditures. I bought the book in 2nd hand market few weeks ago and have been reading it few chapters every day since. Lovely read.

In fact, one of my favorite books Millionaire next door is full of such examples of small business owners, successful professionals who live a simple & happy life.

Why frugality is important for successful business?

The basic equation of business is,

Profit = Revenues – Expenses.

It does not take a genius to figure out that if your business makes $100 in sales, then you got to spend less than that to turn a profit.

How do you spend less than what you earn? By being frugal of course. It is a surprise that most startups focus obsessively on acquiring funding (ie increasing expenses thru more interest, dividends etc.) than finding ways to cut expenses.

Not only being frugal helps you turn profitable quickly, but once you run a profitable business, you can easily get funding or investors.

By being frugal, you will be able to pass on the benefit to your customers, thus making your products valuable.

And by being frugal, you consume less, thus making earth a happy place.

How to be frugal

Observe frugality in all aspects

The first principle of frugality is you cannot be lavish in your personal life and frugal in business. It does not work like that. You have to believe it, observe it in all aspects of your life.

Hire people with frugal mindset

It is not enough if the founders practice thrift. If you hire people who are used to living lavish life, then you are back to square one. Make sure you hire people who are simple, who consume less and live happy life. It might take a while to know all these aspects when you are hiring someone, but you should invest time to know your team.

Keep things simple

You will end up spending a lot of money if you have a complex process behind everything in your business. By keeping things simple, you can cut expenses drastically and make more profits. Few examples of keeping things simple:

  • Give power to your employees and trust them. Let them make decisions to keep customers happy.
  • Trust your customers. When they ask for a refund or have a service request, just do it rather than subjecting them to extra verification steps.
  • Say sorry when you mess up. And learn from your mistakes. It is much simpler than finding someone to blame or defending your position.

Think of money as means, not goal

When you consider money as a tool to achieve something else, you will respect it more.Frugality does not mean amassing wealth or being cheap. It means being extremely wise with money and using it with utmost care. The moment someone thinks of money as end result, they are lost. For a smart business person, money means:

  • Ability to create products that their customers love
  • Ability to reward their employees & partners for all hard work
  • Ability to buy time (thru outsourcing, hiring etc.) for self
  • Ability to contribute to society (a la Bill Gates, Buffet)
  • Ability to say no to poor decisions & in-correct practices

De-link Happiness from Money

Most people when asked Why they spend so much, they simply say “to be happy of course”. Contrary to what we think, our happiness is not linked to how much we spend or what we buy.

While we can all agree that a starving person need to buy a meal to be happy, we can safely say that marginal returns of additional spending always diminish.

So how to de-link happiness from money?

Simple, develop a strong understanding of yourself and what makes you laugh, cry, content & sleep tight. Most often these things are not linked to how much money we spend.

For example, my happiness stems from,

  • Laughing many times everyday
  • Spending time (a lot of it) with my wife, kids
  • Talking & sharing opinions with my friends & relatives
  • Learning new things
  • Sharing new ideas & techniques with world (thru my blog, classes etc.)
  • Providing excellent value for money to my customers and hearing from them how they became awesome using what we sell.
  • Performing random acts of kindness
  • Doing occasional DIY fixing or creating something
  • Working out
  • Reading books, widening my mental vocabulary
  • Challenging my self with a difficult problem and solving it convincingly
  • Surprising near and dear ones
  • Taking a nap
  • Having a freshly brewed coffee or tea with my wife
  • Cooking (a variety of pizzas and pastas)
  • Eating ice cream
  • Visiting new places & exploring

As you can see a majority of what gives me happiness has no linkage to money

Are you & your company frugal?

Go ahead and share with me how you run your family & business? Are you able to turn profit every month? If not, time for you to rejig the expenses and discard the items that are pulling you down.

I wish you a frugal, simple & happy life.

Book Recommendation – $100 Startup by Chris Guillebeau

I am not sure how to pronounce Chris Guillebeau’s name. So when I make a reference to his work, I always say Chris 😛

But that is not going to stop me from recommending his recent book – $100 start-up.

There are 3 reasons why I love his book:

  1. It talks about creating a small, meaningful startup in a step-by-step fashion
  2. It features my story too!
  3. I like to have 3 reasons 😉

On a more serious note,

What is $100 Startup book?

In $100 startup, Chris shares the stories of more than 50 successful entrepreneurs who started with very low capital (often less than $100) and have been able to create a meaningful company. But he laces all these stories with lots of practical tips, ideas & puts them in a framework so that you can learn how to start your own business with low capital & grow it.

The book exposes to ideas that both Chris & several others featured in it practice to win markets & customers. Just after reading the first few pages, I got some excellent ideas for new products & ways to present them to my customers. It also inspired me to focus on right things.

Who should get this?

If you run a start-up or have plans to create your own destiny, this book is for you.

Also, if you are running on the corporate tread-mill & wondering if there is any way out, this book can inspire you.

Click here to purchase the book from Amazon.

Disclaimer

A few disclaimers.

  1. Chris interviewed me for his book & featured my story too (on page 32).
  2. Chris sent me a copy of the book so that I can share my comments with him.
  3. Amazon pays me a few cents if you purchase the book from the link above.

But,

I would have bought, read & recommended this book, even if none of the above 3 happened. Because I like Chris’ work, have been reading his blog for last 4 years & have his other book too – the art of non-conformity. So go ahead and enjoy the $100 start-up, because I want you to be inspired & educated.

My Experience of Outsourcing Work thru ODesk

As mentioned earlier, I needed an extra hand to help me with some of the customer support & website maintenance work. My first reaction was to take help from friends. But very few of my friends are familiar with the kind of systems I use, plus they were busy with married life, work etc.

The On Demand Global Workforce - oDeskSo naturally I started looking cheap ways to outsource some of the non-critical work. Once I started looking for freelance workers, odesk became an obvious choice.

How I went about finding a freelancer on oDesk:

In September last year, I started my hunt for a virtual assistant, by posting an Ad in oDesk.

Step 1: Post an Ad for my requirement in oDesk

This was simple. I briefly explained my needs and posted an advertisement in oDesk.

Since my company is not a big company, I received only a few applications.

Step 2: Interview the candidate(s)

Out of all the applications I received, I found one person quite eligible. He is also from a near by city where I live. So I scheduled a telephonic interview with him. The interview revolved around these themes,

  • I explained my company & my philosophy towards customers
  • I asked him about his previous experience
  • I asked how familiar he is with gmail & Excel, two tools that he would be using if hired
  • I tested his spoken and written English skills.

I found the answers satisfactory. So I went ahead and hired him for a pilot assignment.

Step 3: Review of the pilot work

I found out that despite a minor mistake, the person I hired (we will call him my VA – virtual assistant from now) was quite productive and efficient.

So I told him that I will be needing his help once in a while, when I have too much on my pate.

Step 4: Look for opportunities to outsource work

Like every entrepreneur, I too am protective about my work. So it was difficult outsourcing parts of it. But I rationalized that,

  • By outsourcing non-critical, repetitive parts of my business, I could focus more on product development, launches, marketing, content creation, idea generation, collaboration and other interesting stuff.

So I started to assign work for him (roughly 2-3 hours per week, often more).

What I quickly found out is that, he is quite responsive, helpful and learns very quickly.

After 4 months, What are my thoughts about oDesk

  • It took me a while to figure out how oDesk web site works. But after first 2 assignments, I could quickly find the right pages to assign work, review it etc.
  • The oDesk people are quite nice too. For eg. when you join oDesk as an employer, you will be asked to confirm your credit card number. First they will charge your card twice with 2 small random amounts. Then you must confirm the amounts by looking at your statement. Usually for Indian cards, this step takes a while. So I was waiting for my card statement. But I was pleasantly surprised when I got an email that said my card is confirmed by one of their employees manually. Great business move by oDesk (they dont want customers to wait…)
  • The payments are automatic. Every week oDesk would send me an email about the charges for work done in previous week. I could login and verify the timesheets if I want to. They will automatically charge my card on next Monday. So no hassle for me.
  • You need to be very clear: Whenever I assign some work to my VA, I found that I have to be very specific & clear about it. Otherwise, he would take more time than usual.

How much should you pay for a Virtual Assistant?

Based on my research, I think an hourly rate of $3-$10 is appropriate for a Virtual Assistant. For this kind of pay, you can expect to get the following types of work done,

  • Sending, processing, following up with emails
  • Doing simple text editing, HTML editing
  • Web search, Google based research work
  • Basic Photoshop work like resizing images, cropping etc.
  • Creation of word, excel or PDF files
  • Using a relatively simple website / software to add users / invoices etc.

Have you hired any Freelancer? What is your experience?

If you have ever worked with freelance workers, share your thoughts and ideas below. Also, feel free to share your views on oDesk. Please leave a comment.

Related: My thoughts on hiring and keeping expenses low.

Disclaimer: If you click on oDesk links in this post & join them as a employer or employee, I will receive a small commission. I recommend oDesk because they are an awesome way to hire help.

Its not Rocket Surgery, Make your First $ already!!!

Many people who dream of starting their own companies (including me) go thru the illusion,

My idea need to be unique, world changing and Google / Facebook / Apple big!!! Otherwise, it is worthless to start.

While, ambition is a good thing to have, I think we should mix it with ample doses of reality. I always remember an inspirational quotation I read somewhere,

Your head should be in the sky, but your feet should be on ground.

I made the same mistake of waiting for that one idea, one light bulb moment for good part of my college life and first job. Then, I realized that even to change the world with a big idea, I must start small.

And then, things moved rapidly and I could create my own business.

So, today I am inviting you to do the same. Go ahead and figure out a small business idea and generate your first dollar online (or offline). Come back and share your experience with us.

You feel awesome and uplifted when a stranger becomes your customer and pays you for your skill / product.

Here is an inspiration video by David Heinemeier of 37Signals fame encouraging start-up owners to make money.


Watch live video from HackerTV on Justin.tv

PS: the phrase “its not rocket surgery” is from David’s talk.

PPS: 37Signals blog is a good source of inspiration and knowledge if you want to start a business.

Lost Posts and a Start-up Book Link

Due to some problem with my hosting account, I have lost all the posts I wrote between August 13 and September 12, 2010. While I try to recover the posts, here is a recent book on start-ups that I have been reading.

Thanks to our reader Vinu, I recovered all the posts. He forwarded me newsletter archives so that I could re-publish them.

It is called start small and stay small. It is a book for developers and software folks trying to build their first company while still working on a full time job.

The book talks about how you can boot-strap your own micro-venture and grow it to a sustainable level. It deals with topics why you should identify and market to a niche, email marketing, sales page design, outsourcing and more. I really liked the way this book is structured and presented. It is clear, simple and tactical. Go read it today if you are in this for real.