MS

Hello, I’m Michael Sliwinski, founder of Nozbe - to-do app for teams. I write essays, books, work on projects and I podcast for you using #iPadOnly in #NoOffice as I believe that work is not a place you go to, it’s a thing you do. More…

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It's All About Passion » Chapter 2 - Passion 1: Money

Chapter 2 - Passion 1: Money

You will develop a healthy passion for money!

Passion 1: Money

“It’s a bit of a myth that entrepreneurs and businesses are driven by money. Very few great businesses truly are: most great businesses are driven by a belief in a need and a belief in something that helps meet it. And getting paid and being profitable, whilst of course important in itself in the longer term, is more important as the vindication that what you believe has some truth in it: people agree with you.”

  • Graham Allcott, author of “How to be a Productivity Ninja”

Money makes the world go around… kind of.

Money rules the world we live in right now. No doubt about that. But it’s not what it’s all about. Money is just a means to an end - a happy, fulfilled life.

It sounds nice in definition but the media want us to believe otherwise. In the consumerist world we live in, it’s all about the money - it gives you power, cars, houses… the media wants us to believe we can buy ourselves a way into happiness.

The same applies to the startup world. Young, aspiring entrepreneurs are reading high-profile tech blogs where they learn about other young guys cashing it big time with huge company valuations, amazingly big venture capital rounds and fantastic financing opportunities where millions of dollars are just laying around there to be picked up.

These big sums of money only make young startup founders blind. They have very often never even seen more than a few thousand of dollars at a time, yet they seem to subconsciously redirect their motivation towards “getting rich quick… or die trying” (as the rap star 50cent would say).

I was like this when I graduated from college. I wanted to make it big for fame and fortune. And I failed several times to finally understand that to be passionate about money you need to approach it from a totally different angle.

Passion for money, not millions

Money is a tool. A means to an end. Really. That’s it.

When you’re running a startup you should be passionate about money in a sense of keeping a good eye on your finances, managing your cash-flow properly and making sure your costs don’t get out of proportion.

It’s your job to look at the money as a means to build a successful company and not be blinded by the millions of dollars you think you’re going to have. Probably you never will cash in these millions. Yet if you do, you will not care about it anyway at this point. This is how it works.

Several studies proved that if people had enough money to cover their basic needs, they stop caring about it altogether. I can testify it’s true… and that your passion will get you there.

These days I’m crazy about the revenue and I’m watching it very closely, comparing to the previous months, looking at the increase or decrease of sales, making sure my costs don’t sink our ship. I care about the “healthy revenue” and not the amount of cash in my bank account.

To me money is a benchmark and a health indicator of my startup. It helps me quickly determine if everything is going all right. This is the kind of passion for money I’d like to talk about here.

When I thought it was all about they money I failed…

This is my personal story of how I failed several times before finally making it with Nozbe. I’ve seen dozens of similar stories with my “startup friends” and I keep on seeing the same pattern repeating itself. Read it carefully and please learn from my example and don’t replicate this approach.

In my country it’s very common to think of a “copycat” business as a way to succeed. This is exactly what I did at first.

I come from a fairly big country in Europe and the biggest one in its central part - Poland with close to 40 million inhabitants. It really is quite a big market and there are many companies that succeed by only being present in our country.

The easiest way to “make it big” on the Internet in a country like mine is to simply get into a “copycat business”, meaning to copy something from a bigger market that is not available in Poland yet, but according to our assessment will eventually be.

That’s why there are so many “national” eBays, PayPals, Groupons, Facebooks, Twitters, Linkedins, etc. These folks decided to try to rule the market before the big player showed up. I was like this before. I read the American blogs and was observing what’s going on there and when I saw a lucrative business opportunity, I’d brainstorm the idea and when I saw nobody was doing this in Poland yet, I’d just go for it.

That was my reasoning. To build something quickly, get rich fast and be famous. To rule my local market with a copycat business. Do you see how ridiculous this sounds? Well, I didn’t find it so at that time.

The idea is to build the “copycat” fast and launch as soon as possible.

I was also quite confident I was the only one seeing the copycat opportunity. I was building the solution fast to make sure I could be the first to market and I was confident when it happened I’d succeed. I was twice wrong. Firstly, there were other guys building the very same thing at the very same time and secondly, I was about to receive a hard lesson in business that the first to show up doesn’t mean is the best.

I built my first copycat web-based product right after college in 2004 and showed it to the world. I was proud and was seeing some initial traction and some early success. I was pumped.

It's all about passion - chapt 2_2

When you’re only motivated by money - you will lose

Everything was going as I had planned. Then suddenly one competitor showed up. And another. And one more… and my unique “business opportunity” space started getting crowded.

And these other guys were building a better product than mine! And with more features! Better design, offer, whatever the bottom line was, I started to lose ground.

The thing is, if you’re only motivated by the money, you’re going to lose interest quickly. This is what happened to me. I started giving up. It was supposed to be an easy business! I was supposed to be rich and famous! What gives?

Finally I surrendered. It was too much effort with too little payoff. It just wasn’t worth it for me. I went back to doing e-commerce and Internet marketing consultancy gigs for my clients and decided to give it up for now with my own web-based business. Maybe it just wasn’t meant to be for me, or so I thought.

It’s so easy to give up if you don’t become rich and famous quickly which was all that motivated you in the first place. I don’t want to entirely discourage anyone from copying a proven solution to their local market - maybe you have a unique angle on this, maybe you’re truly passionate about the industry and feel you can contribute by making a better “copy” of the product. It’s hard to say. What I know is this - if you are motivated by money, your chances of failing increase exponentially.

Do you think I learned my lesson? Well, not quite. I built a second “copycat business” in 2005 and again, after some initial traction and first customers, I thought I was on to something. But the story did repeat itself. First problems arouse and I started giving up. Finally I surrendered. Again. This time around I was certain I’d never have a chance at building my own web based business. It wasn’t meant to be for me. Little did I know that a small task management tool I built “on the side” for my own purposes will become my main business and calling…

“Building startups is really in fashion now. Unfortunately very often it comes down to a “Startup Lifestyle” which means pretending that you’re doing a “cool project” sitting in a cafeteria with your Macbook. The truth is, a startup is simply a fast-growing company where there’s no time to lose. You just have to work a lot. Like crazy lot. And you can only do it with passion.”

  • Art Kurasinski, blogger, co-founder of Fokus

My startup idea found me…

When I failed with my two previous startups where I wanted to earn a quick buck with a copycat business launched in my home country, I stopped searching for a startup idea. It found me. When I was struggling with productivity and with the amount of work I was getting from my clients, I read the GTD book by David Allen (“Getting Things Done - the Art of Stress-free Productivity”).

Inspired by David’s method I built a tool that’d help me achieve my goals and implement the GTD system in real life. I spent a whole day researching the web to find a tool I needed for this (and back in 2005 there were not many) and finally when I found nothing, I dedicated one weekend to building a very simple, bare-bones web-based tool with some PHP and MySQL hacking. When two years later I finally took the plunge and showed my tool to the world, I realized there were more folks like me who needed something similar and it took off.

In the first three months I got 5000+ users and launched my premium service and started charging for Nozbe. It was a scary moment for me. What if nobody really likes it? What if nobody pays? Well, I risked it all, made a big launch and when the first orders came I knew I was on to something. In the first 2 weeks I got 100 orders! I know, 100 out of 5000 is not an ideal conversion rate, but these were 100 real people paying for my software! Yay!

Charging for software is great and your customers become your investors

Everything shouldn’t be free “as in beer” or “as in air” and many guys building software don’t get it. When you charge for stuff, apart from getting a revenue stream and being paid of your efforts, you can really verify if people really like what you’re doing. When they are paying for it, it means it’s worth something. Otherwise they wouldn’t be parting with their hard-earned cash for you. They’d actually go to a bar and buy a beer instead :-)

When people spend their money on the thing you’re selling, believe it or not, they are buying in on your passion and they are prepared to share it with you and align it with their passions and desires.

They become your investors. Even though they have a minority stake, it’s a big deal for them. They’ve shown their commitment and later they’ll show it even more by commenting on what you’re doing, by sending their feedback and letting you know what they think. They are in this together with you.

The commitment goes both ways - you just took their money and you can’t fail them now. Your job is to make sure they get their bang for their buck. It doesn’t mean to just do what the customers say, it means to listen carefully and do what you’re supposed to do to make your product better.

It's all about passion - chapt 2_3

Money drives passion in a healthy way

When you love your product and your customers share the love by sharing with you their hard-earned cash, it steams up passion from both sides. You’re even more passionate about doing what you do as you get this confirmation in something tangible also known as “money”.

I’ve found that to be very true in my case. The more I earn with what I do the more motivated I am to make my business even better, more reliable and strong. Money, when approached wisely is an enormous motivator that helps you drive your passion forward and you share it with your customers along the way.

Earning money is also a skill - learn it

Asking for money is not easy. Designing a product in a way it entices the people to pay you and learning the pricing the hard way (by overcharging or under-charging) is not as straightforward as it seems.

I’ve met many startup founders who gave up way to easily because they didn’t see the affirmation of their work in a form of healthy income coming in because it doesn’t “just come” easily.

Charging for what you do and actively selling it is not easy, but it’s a skill you must learn to pursue your passion and be reminded of the kind of great work you’re doing.

When the best-selling author of “Rich dad, poor dad” Robert Kiyosaki was asked during an interview by an aspiring author about what she should learn more of to have the kind of success he had with his books, he responded: “take some sales courses”. She was disappointed, she thought she should improve her “writing skills” and not her “selling skills” and then he replied: “Did you write about me as a “best-selling author” or as a “best-writing author”?” That’s exactly the case of a startup founder. Learning how to sell the result of your passion is a skill you must learn.

Money is not a target - it’s a benchmark

Approaching money as a target (i.e. “I want to earn a million dollars”) is stupid, short-sighted and guarantees failure. Money is a confirmation (as I mentioned before) that you’re doing something good and is a benchmark that shows how well you’re doing it. Money indicates what’s happening. It’s not a “tap on a shoulder” kind of thing when you have a bunch of free users who are just saying nice things to you because your product is free. Nope. These are facts. Like my product? Great! Are you willing to pay for it? No? Yes? When you charge for a product you really see if people mean what they say. They vote with their wallet. And when they do, you want to offer them your best. One look at my spreadsheet and I can see which months I’ve been slowing down, I’ve been taken it in a sloppy way, I’ve not been at my best. That’s why I carefully examine my cash-flow on a weekly basis and analyze it carefully. I don’t do it for greed, or to enjoy my success. I search for patterns, problems, templates, schemes… Money helps me see what’s going on.

Money also helps me think and seek new ways to improve my product. When I see lower conversion rates, I know what to work on. When I see more cancellations, I’m more motivated to convince my customers to stay than ever by just building a better product and service. It’s all very well related and money can be a great indicator of what’s really going on.

Surprised how money ignites my passion

When you look at the money as a target. When you just want to be rich, it’s not very inspiring and you make wrong decisions. Not based on your passion, the values you have… but based solely on the ROI (Return On Investment). Don’t get me wrong, watching ROI is critical for your success, just as we discussed earlier… But it’s just a part of the story.

Guy Kawasaki once said: “it’s all about making meaning, not money” and he said that the proper way to inspire anyone (including an investor) is to say this: “Here’s how I want to change the world. And while doing that, here’s how I want to earn money for it”.

The customers really feel like investors. They’re part of your team.

One of the things that surprised me along the way was something I mentioned already - people feel like investors when they pay you for what you’re offering. They feel like a part of your team. They share your other passions (for product, industry, etc). They feel they’re riding along with you. This lead me to many great conversations with my customers, unlikely partnerships, free dinners, you name it. By paying a small monthly fee for my service people feel like they just joined my team. I love it. They love it. It’s very rewarding!

Earning money gives you freedom you never expected to have

Healthy revenue gives you an opportunity to inspire others, assemble a great team of folks who work with you and share your passion not only because of the paycheck, but because they share your vision and are happy to be a part of it. Good level of revenue gives you more freedom to experiment and try different paths in your product or service. It’s important not to lose focus there, but I find the freedom to experiment very appealing and again, sometimes we built something surprisingly great just because we could.

It’s all about the money when the money is not what it’s really about.

You need the money to keep on keeping on and pursue your other passions. It’s a tool, a device, a means. And you need it. But you shouldn’t want it. Then it’ll come to you and help you make your dreams come true.

Now, that we’ve talked about the money (the essential thing), let’s focus on the really important stuff and the other, stronger passions.