GO IT ALONE!

I. The New Go-It-Alone Business: Core Philosophy & Definition

Definition: A fundamentally new class of entrepreneurship.

Minimal initial investment, the founder retains full ownership and control.

Run by a small number of people (1-6).

Designed for unlimited revenue potential, not just a lifestyle business.

Provides more stability and personal rewards than freelancing or franchising.

Builds a substantial asset with a leveraged business system.

Challenging Conventional Wisdom:

You don't need a lot of money, many employees, or limitless financial resources.

High failure rates (40% in year 1, 80% in 5 years) can be dramatically limited.

Individual Power: Technology and business changes empower individuals to be "positively dangerous" in business.

Key Foundation Ideas:

Personal Leverage: Amplifying your unique skills, making you the "fulcrum" of a business system.

Extreme Outsourcing: Delegating everything except your core strengths to external services or contractors.

Relentless Repeatability: Creating processes and systems that allow the business to work consistently and scalably.

II. Principles for Success

Focus on Reducing Risk: Be prudent and courageous; take steps to limit damage if initiatives fail.

Test business ideas with paying customers before full commitment.

Maintain your day job initially to avoid financial pressure on the new business.

Never Get Too Far Ahead of Your Customers: Products sell when they meet unmet needs without requiring dramatic shifts in customer behavior.

Rigorous Commitment to Flexibility & Innovation:

Build infrastructure with low-cost, monthly outsourced services to adapt rapidly.

Expect to learn and modify; few things succeed in their first incarnation.

Continuously launch new products/services, testing quickly and cheaply.

Create the Ability to Scale: Design simple business systems that grow without adding many employees or complexity.

Maintain an Experimental Attitude: Constantly run live tests of improvements, dedicating time to new initiatives. Assume competitors will copy you. Learn by doing, not just extensive planning.

Take Yourself Off the Clock: Seek business ideas that decouple your time from your compensation, leveraging automated systems or product-based income streams.

Master New Technologies: Utilize Internet-based services and communications to leverage efforts, even if not an "Internet business".

Develop a Bias Toward Action, Starting with Small Steps: Overcome inertia by taking incremental actions to invent your business, learning as you go.

Affirm Your Determination—Find a Way: Determination and passion are essential to overcome obstacles. Choose a business that ignites your passion.

Only Use Off-the-Shelf Products & Services: Leverage inexpensive, sophisticated subscription services (ASPs) for infrastructure instead of custom development.

III. The Great Shift in What’s Possible

Rule of Decreasing Support Costs: Services expensive for large businesses become inexpensive, plug-and-play outsourced options for small companies in 12-18 months.

Rise of Application Service Providers (ASPs): Software as easy-to-use, on-demand services (e.g., Salesforce.com, QuickBooks Online).

Easy to use, shared-cost model, continuously upgraded.

Thousands available for every business activity.

Levels the playing field between small and large companies.

Focus on integration and customization.

Major Internet companies (Amazon, eBay, Google, Yahoo!) offer ASPs for entrepreneurs.

New Specialization & Unbundling: Global electronic networks reduce interaction costs, leading to specialized firms handling activities formerly bundled within one company. This creates many opportunities for go-it-alone businesses.

IV. Do What You Do Best: Finding & Aligning Your Business Idea

Sources of Ideas:

Solving your own real-life problems.

Applying successful models/technologies from one industry to another ("Where else would it work?").

Identifying unbundled specialized activities from larger firms or professional services.

Improving existing products/services ("I Can Do It Better").

Focusing on dysfunctional industries.

Finding unrecognized value in under-used assets.

Imagining pricing innovations (e.g., flat fees vs. hourly).

Opportunities deemed "too small" by large companies.

Transforming a product into a service.

Providing outsourced services yourself.

Core Competence: The central skill or expertise of the founder that makes the business successful.

Must provide disproportionate customer value, be competitively unique, and be extendable to new products/services.

Identify by monitoring spontaneous reactions, yearnings, rapid learning, and satisfactions.

Alternately, find your source of personal energy and passion.

Aligning Idea with Core Competence: You must leverage what you do best. Superb execution of a mediocre idea is more likely to succeed than mediocre execution of a superb idea. Your passions choose you. Expertise can be learned if it aligns with your core competence.

V. How to Create Your Business System

Leverage Core Competence through Relentless Repeatability: Systematize almost any activity into a repeatable formula (e.g., 1-800-MYLOGO's logo design process).

Identify Important Metrics: Determine the crucial "leverage points" that drive sales and profits (e.g., Speed Anywhere's 5 metrics). Use these as early warning signs and focus your energy.

Make Time Work For You: Aim for profitability quickly to turn time from a foe into an ally. Focus on building sustainably rather than constant concern for viability.

Take Advantage of Benefits of Scale: Choose a niche where you can achieve scale (become important to others in your business chain). Benefits include better access, higher earnings, supplier attention, decreased per-unit costs, positive publicity, and new revenue opportunities.

Follow the 60% Rule: Automate everything except your core focus using inexpensive plug-and-play services, even if they only provide 60% of ideal functionality. Prioritize high-impact activities over perfection.

Build for Flexibility: Design your business infrastructure with tremendous flexibility, using monthly subscriptions to ASPs to allow for rapid shifts.

Make Your Own Luck: Preparation connects with opportunity. Design your business to quickly test new offerings, develop new sites, and expand advertising to capitalize on unexpected opportunities.

VI. The Myths About Start-ups

Myth 1: It Can’t Exist, Because I Haven’t Seen It in the Newspapers: Successful solo entrepreneurs often deliberately avoid publicity to prevent unwanted competition.

Myth 2: Extraordinary Risk Is Essential to Success: While risk exists, it can be managed and limited through careful planning and testing. Often, the risks of self-employment are more manageable than those of traditional employment.

Myth 3: The Size of the Employee Parking Lot Matters: The number of employees is a misleading measure of success; go-it-alone entrepreneurs succeed without large workforces.

Myth 4: Real Businesses Are Funded by Venture Capital: It's entirely possible to build a substantial business without venture capital. VC funding aligns with specific, fast-growth, liquidity-driven models that often conflict with go-it-alone principles.

VII. Why You Don’t Want to Be a Free Agent or a Franchisee

Free Agent: Skilled individual working for others on short/long-term assignments.

Reality: Subject to employment market fluctuations, lack of job security, often feel fear, not freedom.

Vs. Go-It-Alone: Entrepreneur builds capital (an asset that can be sold), captures full value of ideas, and has a livelihood even in bad times.

Franchisee: Buys into a proven business model.

Limitations: Following someone else's rules, loss of unique talent leverage, little flexibility, often requires significant upfront capital and physical location, limited psychic rewards (can be boring).

Exceptions: Mitch York (Maui Wowi franchisee) found a simple business allowing creative freedom and focus on marketing, his core strength, with outsourced operations.

VIII. Managing Extreme Outsourcing

Delegation is Key: Must be willing to give up control of important business parts and delegate everything except what you do best. Avoid the "control trap".

Decision Criteria for Outsourcing: Trust the third-party business AND outsourcing makes overall coordination easier.

Define Outsourcing Broadly: Includes ASPs, part-time contractors, call centers, manufacturing, logistics, etc..

"Brains vs. Arms and Legs": Keep critical, value-creating activities ("brains") in-house; outsource repeatable, ongoing tasks ("arms and legs").

Build in Customer Feedback Loops: Design systems for rapid, undistorted customer feedback. Direct customer interaction is invaluable for ideas and early problem detection.

Plan for Evolution: Outsourcing is an evolving process. Initially, you may do tasks yourself, but plan to outsource them as volume grows and you gain understanding.

Simplicity Always Wins: Design simple business propositions to achieve speed and react faster than complex competitors. Fight the tendency toward "feature creep" and "drift".

Monitor Competitors: Regularly study competitors' offerings and outsourcing strategies.

Maintain Discipline: Running a successful go-it-alone business requires discipline to balance activities for extreme outsourcing.

IX. Lessons from Inventive Companies (Illustrative Case Studies)

TheraSense: Entered a mature medical device industry dominated by giants, outsourced all but sales force and proprietary strip manufacturing. Achieved speed, professional image, and flexibility. Used in-house experts to oversee outsourcing.

Synapse Group: Pioneered credit card billing statements for magazine sales. Started with no outside capital, focused on "getting going as fast as possible." Paid flat rates to partners to simplify "yes" decisions and own risk. Dominated distribution channel without exclusivity by being first and speedy.

eMachines: Engineered a turnaround in the PC market by focusing on high-leverage processes (distribution, demand forecasting, customer service), extreme outsourcing of manufacturing, and following critical metrics derived from retailer data to launch products.

X. Evaluating Your Proposed Business (11 Tests)

The "Elevator" Test: Can you explain how your business makes money in two short sentences? (Ensures clarity and focus).

The "Three Rules Maximum" Test: Can you identify 1-3 critical success factors where you have expertise or can acquire it? (Ensures focused execution).

The "You Are the Customer" Test: Would you buy your product/service? Why? Are you unique? How quickly would you buy? (Ensures market validation and realistic planning).

The "Differentiation and Market Hegemony" Test: Is your business distinctive, and can it dominate a specific niche, even if small? Avoid "huge market, just need 1%" thinking.

The "Can I Be Circumvented?" Test: Can a supplier or partner replicate your business and eliminate your service? Structure your business to prevent this.

The "Double Your Costs" Test: What if costs double and revenues are halved? Does it still make sense? (Tests for room for error and resilience).

The "Dependency" Test: Are you overly dependent on one supplier or customer (e.g., search engines)? Plan to reduce or mitigate this risk.

The "Can It Survive Without Me?" Test: Are you building an asset that could be sold later, by systematizing your knowledge? (Optional, but adds value).

The "Multiple Streams of Income" Test: Does the business have potential for diversified revenue sources to limit risk? (Adds value, not a prerequisite).

The "Vulnerability" Test: What could instantly kill the business? How likely is it? How will competitors react? Can they deliver a knockout blow?.

The "More Than a One-Trick Pony" Test: Can you cheaply and easily expand your product line or exploit your core skills in multiple directions? Avoid single-point-of-failure businesses.

XI. When to Quit Your Day Job

Einstein Model: Work on your business at night and on weekends while keeping your day job for security and to test viability without financial pressure. Many successful entrepreneurs follow this.

Employer Relations: Be aware of company disclosure policies. Your side venture can make you a more valuable employee by developing new skills.

Alternative Starting Methods: Use severance pay or rely on a spouse's income during the initial phase, but with strict timelines and discipline. Seniors can also leverage their time without needing immediate financial returns.

XII. The Race to Liquidity: Why Venture Capital Is Not for You

VC Priorities: Venture capital firms are money managers with a 10-year fund life, needing rapid liquidity events (IPO or sale) in 3-6 years to return high returns to institutional investors.

Conflict with Go-It-Alone: VC forces rapid growth, many employees, founders sharing control, and focus on liquidity. This clashes with the go-it-alone model of profitable cash flow, sustainable growth, retained control, and limited employees.

Avoid VC If: You don't want fast growth, to manage many people, or to share control, or if your business isn't in high-tech, media, or health care.

XIII. Mistakes Happen—Learn from Them

Importance of Learning: Focus is vital for learning as fast as possible. Mistakes are inevitable and a necessary part of learning what works, but limit their downside risk.

Warning Signs of Failure:

Complexity: Unnecessary complexity creates more problems than it solves.

Complacency from Success: Success can lead to a failure to understand true reasons for success, ignore needed adjustments, and invite competition. Continuously reinvent your business even when things are going well.

Not Recognizing/Correcting Mistakes: Distinguishes successful companies. Be open to new information, talk with customers, monitor competitors, and use metrics as early warning signals. Regularly ask "what if" scenarios to challenge assumptions.

Focus on Maintaining Focus: Avoid attempting to expand from highly focused to comprehensive services, which often leads to "drift" and increased complexity. Valuable diversification enhances the core business and requires little new infrastructure.

XIV. Suddenly, Just Me: Transition Guidelines

Self-Reliance: Nothing happens unless you make it happen. There is no "A for effort"; you must take full responsibility for all outcomes, good or bad.

Be Prepared to Sell: You will constantly need to persuade others (customers, providers, partners) of your initiative's merit and enlist their participation.

Demonstrate Credibility: Project confidence in your abilities to earn trust from potential partners and customers.

Focus on Getting Paid: Cash flow is critical; prioritize timely payment of bills.

Build a Support System: Connect with peers and mentors. Don't be afraid to ask for help; people generally like to assist, and it strengthens relationships.

XV. Conclusion: Fear Is the Enemy

Fear as a Roadblock: Fear prevents many from pursuing entrepreneurial dreams.

Overcoming Fear:

Recognize fear as a signal to address issues, then turn it into positive energy.

Pursue your passion and do what you do best; the resulting energy will overwhelm destructive fears.

Cultivate self-confidence and the belief that "I'll handle it," associate with confident people, and stay busy.

Action dispels fear.

Beware Unlimited Resources: A lack of resources forces creativity, innovation, and determination. Too many resources can hinder long-term growth by encouraging inefficiency. Launching with minimal resources demonstrates resilience and often leads to long-term success.