Dharmesh Shah


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Startup Conversations With Myself: What Should I Work On?

By Dharmesh Shah on March 23, 2009

Entrepreneurs (particularly bootstrapped ones) have a tough life.  In the early days, things can get lonely.  So many decisions, so many challenges, so much to do — and very little by way of clear answers.

This is a somewhat light-hearted episode in perhaps a series of articles that I’m calling “Conversations With Myself”.  I’d like to think that I’m not alone in my strangeness in that I actually have these kinds of debates going on inside my head (often after 3:00 a.m.).  My guess is that some of you have variations of these kinds of conversations yourself.  If not, then I guess I’m just weird.long list

Conversations With Myself:  What Should I Work On?

Me:  Self, I’ve been thinking a bit about things.

My Self:  Are you you sure you’re not just procrastinating?  Don’t you have bugs to fix in the product or some other real work to do?  Thinking is for smart people.  Get back to work.

Me:  That’s just it, there’s just way too much work, and the list of things to get done seems to get bigger every day — even though I’m staying up later and working harder.

My Self:  So, what’s your point?  It’s a startup, that’s the way it’s supposed to be.  If you don’t have 10X as many ideas as you have time to do them, you don’t have enough ideas.  Quit being a whiny-assed pansy.  Nobody said it would be easy.

Me:  Yes, yes, I get that.  I know startups are hard with the 80–hour weeks and all that.  What I’m saying is that there are several items in the backlog that must get done.  And, as the product gets bigger and more users come on board, more and more time is taken up keeping the system running, responding to user issues and a bunch of other stuff.  When will the new stuff ever get done?

My Self:  Ok, so define “MUST get done”.  What happens if you don’t do some of those things?  The planet stops spinning?  You lose some users?  Your ego gets bruised?  You watch one more episode of “The Office”?

Me:  Ok, fair point.  I guess not all of those things are technically “must-dos”.

My Self:  Well, it actually goes beyond that.  Not only are most of the things on your list not “must-dos”, a lot of them are probably “shouldn’t dos” .

Me:  So, how do I go about figuring out what I should get done? 

My Self:  That’s a great question.  Unfortunately, we share the same brain, so I don’t have a great answer.  But, here are some things to consider.

Simple Tips For Deciding What To Work On

1.  Are you tracking all of the bugs and enhancement ideas (however crazy) somewhere?  If not, that’s step 1.  You need a central list.  Not this list and that list, but THE list  The One True List.

2.  Decide on a simple and semi-objective approach to classifying each item on the list.  Scales of 1–10 work reasonably well.  Some high level dimensions could be: 

a) This will help make customers happy (0–10)

b) This will help me sell more customers (0–10)

c) This will reduce costs of keeping customers happy (0–10)

d) This will give me and my team joy and happiness (0–10)

e) How much effort will this take (0=Several lifetimes.  10=Hardly any work at all.)

Of course you don’t need to have those specific attributes, but you get the idea.  Here’s why this is more useful than simply trying to assign a “priority” to an item.  First off, many items in the backlog often have more or less the same priority.  It’s hard to decide between them.  Second, priorities change as things happen.  You might wake up one month and need to focus as much as possible on getting new customers.  Another month the priority might be to take your existing customers and make them happier (so they stay customers).  By assigning the above attributes to each backlog item, you can “sub-sort”.  The key is to remain flexible, while remaining mindful of the costs of task-switching  when you change your mind.  Maintain a steady velocity and keep cranking away at the items that are important.

Item (d) above is interesting.  Why should you care whether a given task on the backlog will create internal joy and happiness.  Shouldn’t we all be maniacally focused on customers and make money?  Sure.  But, startups are hard work and trying to continuously perfectly optimize is sub-optimal.  Every now and then, you need to do some things that might not make sense, but might delight users or delight yourself or just plain allow you to sleep better at night.  It’s worth the investment simply to keep spirits and energy up.

3.  Try to build a rhythm for getting stuff done.  It’s a great feeling when you can “feel” the forward progress (however small).  If you get stuck on some project, put it aside and crank some of the other ones out.  Don’t go too far down the rabbit hole for any particular project or task.

4.  You should try to balance the kinds of tasks and projects that you select.  Don’t work just on new features that will help sell the product.  Or just work on things that make the UI/UX better.  Or just work on system optimizations that make your costs lower.  It’s important to pick a variety of tasks (with emphasis on whatever seems to be the bottleneck in the business right now).

So, what are your clever little tips and tricks to make sure you’re working on the right things?  Do you struggle with trying to decide what to do?

Topics: strategy
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Startup Lessons From The Underpants Gnomes: PROFIT!

By Dharmesh Shah on February 27, 2009

Are you building a profitable business?  I’m not asking whether or not your business is profitable now, but whether it will ever be profitable?  More importantly, does future profitability enter into your current decision-making?  If not, you’re doing your business and yourself a disservice.  onstartups underpants gnomes

Leave the “no profits” model to the not-for-profits — they’re much better at it

For some reason, many startups treat profit as a 4 letter word.  The common argument goes something like this:  “We’re going to create something so fantastically wonderful that millions of people are going to flock to our site, and then we’re going to be fantastically successful.  Just like YouTube.  Or Facebook. Or Twitter”

This reminds me of one of my favorite Southpark episode about the Underpants Gnomes. 

Watch this clip if you haven’t seen it yet (or haven’t seen it recently). 

The business strategy for the Underpants Gnomes goes like this:

Phase 1:  Collect underpants

Phase 2:  ?

Phase 3:  Profit

Many startups have a business model that’s even sillier than the Underpants Gnomes.  Why?  Because the Underpants Gnomes are at least thinking about profits!

So, why do startups ignore profitability so often?  There are several reasons, some of them pretty good.  The most compelling one goes like this:

“We’re designing for high growth.  In the early days, we need to be focused completely on getting as wide an audience/reach/user-base as possible.  If we think about revenues/profits too early, it will undermine that growth.”

This is a reasonable argument.  There’s definitely a tradeoff that occurs between growth and profitability.  But, it’s short-sighted.  I don’t have an issue making strategic decisions that are solving for growth.  That can be fine (based on market opportunity, availability of capital, etc.) but I don’t think it’s wise to ignore profitability. 

I’d argue that there’s a big advantage to thinking about profitability from Day 1 of the business.  You can still decide to do things that are solving for growth, but you should at least be mindful of profitability.

Here’s what I would do:

Step 1:  When looking at ideas for a startup, make sure that you pick one that has a decent chance of being profitable some day.  Just because you’re not solving for profitability in the early stages, is no excuse for ignoring the future profitability potential of an idea.  It’s going to matter.  Trust me. 

Step 2:  When creating a product, make sure that you design and develop something that has hopes of being profitable some day.  This goes to functionality, pricing, positioning, etc.  Sure, you might give the product away for free and have zero revenues (like twitter) to start.  But, someday, you’re going to need to find a way to make money from the product. 

Step 3:  When building the business, try to lay the groundwork so that you have hopes of making the business profitable within your lifetime.  This often involves getting better at tracking the costs of delivering your offering.  Sure, in the early days, it’s common to lose money on each customer (and as the joke goes “we’ll make it up in volume!”).  But, your chances of survival/success go up considerably if you can get a better understanding of the economics of the business and what it will take to actually get to a point where you’re making money.

Here’s how we like to think about it at HubSpot.  As the business gets built, we keep a very watchful eye on the “time to profitability” number.  (This number is based on our level of capitalization and other factors).  Then, as we try to make decisions, like what features to add, how fast to hire, what new projects to pursue, etc. we see how that might impact our profitability timeline.  Often, we make a conscious choice to work on things that will not improve our profitability timeline — but we do that very deliberately.  We try not to take the Underpants Gnomes approach of “we’ll worry about that later”.  We invest in growth (vs. profitability all the time).  We also make wrong guesses as to what impact certain decisions are likely to have.  But it’s been very helpful to have a working hypothesis that can be iterated on.

I’d argue that profitability is important for all startups, all the time (unless you’re a not-for-profit).  You can choose to defer it, just don’t ignore it.  Particularly in these though times, being mindful of profitability is a good thing.

So, go forth and shoot for the stars in terms of pushing for spectacular growth — just stay mindful that you’ll likely have to get to profitability some day.  Not all of us can be a Facebook or a Twitter (and in fact, most of us won’t be).  And, there’s nothing wrong with making money.  We are, after all, building businesses, aren’t we?  AREN’T we?

What’s your take?  Do you think about profitability every day?  Every month?  Never?

 

Topics: strategy
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