Learning the Art of the Start – Part 3

11 04 2008

This is the third in a series of posts on The Art of the Start by Guy Kawasaki. Part one was on “why you’re starting”, and Part two covered “describing what you do.” Look for another installment this time next week.

Activation: Get cash, get people and get going

The third section of The Art of the Start is entitled activation, and is centered around getting cash and getting going. The most useful chapter of this section for me was on bootstrapping, which describes how to build a sales forecast.

To this point in my life, most of the sales projections I’ve seen (and the few that I’ve attempted to put together) basically used the same method for figuring out the potential market share.

  1. Calculate the size of the market
  2. Figure out how much money 1% of that market represents
  3. Adjust accordingly, up to 10% of the market
  4. Celebrate, because you’re going to strike it rich

Guy calls these types of forecasts “top-down forecasts”. While they may be compelling for some investors, they are definitely not practical for the bootstrapper.

Realistic sales projections

The real question that sales projections should answer is “Given our sales team and the product we have, how many sales could we make in our first year?” This exercise was immensely helpful for me, so let me walk you through my bottom-up projection for the first year…

  • First, I assume I’ll work about 10 hours per week on this project and spend 2-3 hours of that time on sales
  • That will allow me to make maybe 3 sales calls per week, or 144 per year (long conversations maybe, but these are real conversations with real people ;))
  • If I assume that 5% of the people I talk to will buy my software, I may get about 7 sales
  • Each sale brings in $x worth of business, so I can estimate the money I’ll get from sales in the first year

The number that I came up with will probably allow me to break even for the first year, which I would be ecstatic about. Furthermore, the estimate for sales conversions is pretty low at 5%, especially considering that about half of the climbing wall managers that I’ve talked to said they’d be interested in buying it. At the very least this gives me a lower-limit to what I can expect when I start selling ClimbPoint.

Just get it out the door

Which brings me to the other piece of advice that I gleaned from this section: Ship early, then test. Thus far in my distribution of ClimbPoint I’ve been careful about making sure it was bug-free before sending it off. Guy does admit that a tarnished reputation is a potential downside to shipping too early, but he makes a good case for getting the product out the door, regardless of how incomplete it may be. I still have a hard time with this one.

The rest of this section goes into how to position your product (preferably against a market leader, if there is one), how to recruit good people, and the art of raising capital. Even though I don’t plan to seek investors at this point, Guy’s advice and insight on raising capital seems spot-on, and I think it will be a great resource if I’m ever looking for some cash in the future.

The fourth section of The Art of the Start, proliferation, apparently covers partnering with others and branding your product. There is also a chapter in this section about rainmaking, but I guess I’ll just have to wait and see what that one is about.

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2 responses

11 04 2008
Learning the Art of the Start - Part 2 « Another Startup

[…] The Art of the Start by Guy Kawasaki. Part one was on “why you’re starting” and part three covers “getting cash and getting […]

27 08 2008
Finding a price point « Another Startup

[…] The above method is roughly a bottom-up sales forecast, as described by Guy Kawasaki in the first couple points of this post on the art of bootstrapping.  I first began experimenting with this method while learning the art of the start. […]

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