How we did over $1K in profit during Startup Weekend(blog.awesomeinc.org) |
How we did over $1K in profit during Startup Weekend(blog.awesomeinc.org) |
The amount made in the time period should not be viewed as a victory in this situation. There may have been an educational or other victory for team members, but the author seems to be celebrating a monetary milestone which would of been greatly exceeded by working minimum wage jobs doing telemarketing for an existing business.
But you didn't do better than minimum wage. You could have just done a bunch of TaskRabbit or Odesk or Elance gigs and for the same 26 hours ended up much farther ahead.
What does that mean? Perhaps not much because it's comparing apples and oranges (contract / service work vs. product sales). Or perhaps it does mean that you need to understand the value of income (not just revenue) with relation to time cost. That might actually be the biggest lesson here: yes, you can build something you can sell. And perhaps you learned how hard sales is, but how possible making a profit is. But most importantly, you learned that not all businesses are worth it. And this one most certainly is not worth it.
That's how most monthly services work. It takes a lot of work up front to make a product successful. You will almost always in fact be working for almost nothing when you start a company like this. That's why people raise money. But that initial work returns exponential value in the long term.
So yes, if you want to attack something you can attack the $1K in profit, go for it. But you're missing the point. The point is that making money takes work, and if you put in the work, you can make money doing anything. Like selling Jerky. Imagine if you actually have a good idea.
Second: But..... You produced something that you all don't seem to really care about. I don't think that you have to be an evangelist to work on a project, but I guess I just don't care as much because this is just an exercise for it's own sake.
Third: and.... I'm reminded of how, in grade school (Primary school...Brits?), we would have contests to sell cheap crap. Either wrapping paper, or knives, or whatever. The entire point of these exercises is to have small children hit up their family and neighbors to sell a bunch of crap so that the kid can win a Huffy. This mainly relies on people feeling bad saying no to a cute (not in my case, but generally) kid. Or like multi-level marketing. Basically you hit up your personal network and then peter out.
There is only profit if you always have volunteer workers.
I think that it would be false to say you were cash flow positive.
Since the revenue split between the team would not make minimum wage I can't even give you a "pass" on you all taking Minimum wage and the company being ahead the difference.
This is a nice proof of merchantability, but it doesn't equal profit.
There are lots of cool wins here. Putting together a "rockstar team", as the OP says (i.e. building relationships), hustling, and just plain going out on a limb and trying something halfway crazy. Those are all good ways to spend a weekend, young or old.
But making $1000 for 26 hours of work, with most of that money coming from the seller's personal network? That's not a headline-worthy achievement, nor is it a real measure of success. 44 hours between 8 people is a lot of work-hours, nevermind the opportunity cost of the recovery period the next day. The main problem, of course, is that the sales came primarily from the personal network, which is not a real indicator of anything when the time period is just a few days of sprinting.
So while I again commend the OP for taking the time to write down thoughts and reflections...I think there should've been more reflection on how reliable these conclusions are. "Acquiring customers is ALL that matters"? Matters for what? Making a nominal amount that matches a number (1,000) that looks good in a headline? I agree that people can obsess with things like website domain and styles too much...but that's different than concluding that customers don't really care. I've seen unremarkable Kickstarters become huge because of well-written pitches and a lot of time invested into the pitch video. You can't really say that user/customer experience doesn't really matter...especially if your sample size is your personal network in a period of days.
Another thing to consider...what about the ongoing costs? It's one thing to ramp up to get customers...it's another to service these customers who, presumably, have to be managed during the lifetime of their subscription...That's another potential opportunity cost.
OK, one more complaint. I think this bullet point is really specious:
> Determine what works and focus on it… this takes discipline. We started off with low hanging fruit — close friends and family.
The OP describes a telemarketing type situation...which, I have to say, is something I regret not doing enough of because my friends who've spent summers/years doing telemarketing as a temp job are some of the most easy-going, well-balanced people I know, due to their ability to take rejection. However, they've been doing it long periods of time...doing a weekend of cold calls is not quite the same thing for building that tough skin. And you don't get discipline in a sprint, but continuing to do the work after the euphoria is over.
OK that was more complainy than necessary...Again, great writeup by the OP (putting yourself out there is never trivial) and hope to see a follow up in 2-4 weeks
Who's to say that Startup Weekend is only for the "next Facebook"?
- First off, yes, if you add up the hours we spent on this business over the 2 days at Startup Weekend, we probably made less than minimum wage (although you may be discounting the fact that we played some wicked sick ping pong matches during our breaks, which were often longer than they should have been :). As someone with a MS in Economics, I completely understand opportunity cost and fully realize that we could have all worked at McDonald's for 2 days straight and made more money (ie. profits). However, as @dpearce acknowledged, driving up profits wasn't the point of the exercise. The point was to try to start a recurring revenue business as quickly as possible and hit a goal of generating over $5K in revenue and over $1K in profits (not a goal that we set, but one that Noah Kagan set for us here: http://www.appsumo.com/sumo-jerky).
- A secondary point was for everyone on the team to get comfortable with what I believe is the most difficult part of starting a business - sales. I've mentored dozens of startups and watched many of the struggle through the customer development stage because they don't want to ask customers for money. They would rather tweak the product, build a logo, add features, etc, etc...all things that might add marginal value, but shouldn't happen until you've validated that you have paying customers. These things also don't involve rejection...so they are easier in most people's mind. In just 2 days, everyone on our team was responsible for dozens of sales and I watched confidence rise from each team member as they made a sale (confidence that cannot be acquired by doing anything else BESIDES ACTUALLY closing a sale yourself...it feels good and then you want more of that feeling). Yes, this exercise was an extreme - as we didn't even really have a product before we sold it - just a simple landing page and a paypal account...but nonetheless it accomplished the goal of improving our team's confidence and abilities when it comes to sales.
- This wasn't mentioned in the original article and my bad for not publishing it. But, out of 267 total subscriptions, about 150 of them are unique (some bought 3 or 6 months subscriptions and we counted those orders as 3 or 6 total subscriptions)...This means that if we can retain those 150 unique customers each paying $20 / mo, we'll do $3,000 in revenue each month...this equates to about $600 - $800 in profits each month for doing about a half days worth of work to fulfill the orders (now we're talking close to $200 / hr... which is > than minimum wage (even if the recent strikes result in increasing min wage to $15 / hr...geez, could that really happen?? :)). Granted, $800 in profits per month is not a ton of money, but it's not a bad side gig for my younger brother (and fellow team member for this project) who is currently in college.
- Lastly, this project was a ton of fun...Our team was awesome and we learned a lot about what it takes to sell, move fast, and work together. This is really the point of a Startup Weekend event - learning something and meeting new people.
Thanks again for the feedback and comments guys! If you have other questions, hit me up.
Since you plan to keep the subscriptions going, I'm curious about how you plan to follow up with this project:
* do you plan on returning profits to the team?
* if so, is it evenly divided, or are individual sales tracked to the person that closed them? The latter could be the beginning of an affiliate system.
* also, would each team member get the full profit of each sale, or would you take a cut of their sales? The margins might be thin but could be interesting for the work-at-home types.
* have you learned more about sales or products during this time? i.e. did this fire you up to do sales for other existing products, or did it give you ideas for different subscription-based businesses? I can see product ideas for this - e.g. a "healthy pack" kind of offering, where you choose from jerky, nuts, dried fruit, and other Paleo-friendly road trip food, which you upsell to existing customers and hopefully make the offering more enticing to new ones - but don't see how the sales lessons scale if you tap out your friend network within a single weekend, unless you do the Amway kind of thing and just keep finding new sales people that sell to their friends.
* what's your long term plan? Do you plan on putting in more work into this?
I can think of several scenarios for the last point: to do no work and just let it ride as free money while you work on other projects; to do occasional weekend sprints of work with a team; to do little bits of work by yourself every day, like 30 minutes each morning.
I'd personally be interested in trying to learn other aspects of business that could make it grow, especially content marketing. I.e. would a blog about jerky be worth it in terms of sales? What kind of writing could you come up with that felt authentic? What kind of a time sink is it? Would it build a returning audience or be linkbait for Google? Would random people from adwords convert at all? Could you convert office managers that stock the office kitchen, or do they all use other services like Amazon? Etc.
I'm not denying that it was a great exercise, but not a great exercise in building a business. It's not a hackathon, you're supposed to be learning how to build the framework for a sustainable business.
As per your point of recurring income. No, I am not taking into account recurring income, because the author does not make it clear what the '267 subscriptions sold' constitute.
For instance he says: And when I say “what Noah did” I mean exactly what Noah did. Beef Jerky Subscription Service. Period. I “iterated” on the idea exactly zero. Just ‘stole it’ and executed like crazy for two days, along with the seven other people on my team.
However Noah http://www.appsumo.com/sumo-jerky/ required a 3 month minimum subscription with that 3 month period paid up front.
Now in the author's post they mention they sold 3 month subscriptions however the $5340 divides by 20 as exactly the number of subscriptions sold.
So did the author count the 3 month subscription as 3 subscriptions?
Did the author count it as 1 and not count $40 of the revenue?
Did the author do something else, there is not enough information for me at least to determine how the recurring income would be handled next month. So while you can estimate it would double, I do not feel safe making that estimate.