Investing resources is required to start and grow a startup. Luckily, money is not the only resource we own. Your time, skills and knowledge are invaluable resources that make an even stronger impact on the success of a business. After all, financial capital is created by investing human capital.
Make these three investment decisions for the highest return with the lowest risk.
- Invest In A Mentor
The common belief is, the answer to all of our questions can be found online with a little bit of research. Combined with the occasional support of online and in-person community members, this is all what an entrepreneur needs to move forward fast. While the reasoning makes sense, the reality is different.
At a high level, detailed guides, videos or books on how to accomplish X will not get you to X in the exact sequence of events or actions it was presented simply because the journey of the writer is different. More specifically, the proven system you are trying to replicate does not account for this expert’s failures, other lessons learned, connections, relationships built with key stakeholders, resources, timing, education, etc.
A mentor will learn about your background, goals and challenges to help you design a plan that works for you. Advice that will put their experience into your own context to steer you in a direction towards X with higher certainty and success predictability. Mentors will not eliminate mistakes or failures but will certainly significantly minimize their occurrence. Learning solely from your own mistakes may seem like a good way for you to figure things out but over time, those mistakes and small costs quickly add up and will certainty amount to more than what you would have invested in someone who has gone through a similar path and can help you overcome challenges and hurdles.
- Invest In Testing Ideas Quickly
Whether you are a programmer or focused on the business side of the venture, there are many tests that you can quickly run to evaluate the need and viability of an idea. Instead of spending months and tens of thousands of dollars building a product you are not sure people need and will pay for, use a fraction of your funds to test the riskiest assumptions. The strongest validation criterion is revenue, that is, if your ideal buyers are willing to pay or prepay for your upcoming solution, chances are you are onto something.
Creating a landing page with preorders and driving traffic to it through ads is a common and simple test that you can run within a week. Realistically, also depending on the product you are selling especially if it is a high ticket item or one that operates in a competitive industry, driving potential buyers to a page is not enough. In the meanwhile, personally meet with 100 of those users to better understand their needs and challenges. The landing page test combined with interviews will provide you with clear insights and a direction. If the problem is worth solving, move forward, otherwise, move on.
This approach works well for early as well as later stage startups looking to launch new features, upgrades, plans or initiatives. Always leave the biggest expenses for last until you run out of arguments why you shouldn’t move forward.
- Invest In Your Brand
Some things never fail. Sharing your journey, lessons learned and failures when done with authenticity and transparency will allow you to gather a tribe of like-minded people who will support you along the way. When Rand Fishkin, co-founder of Moz, decided to move on to another venture, SparkToro, he received numerous offers from followers and friends to support in ways like funding and feedback. Rand spent decades documenting his journey and helping founders through articles and tutorials. He shares some more insights in his Startup Circle mentorship session.
In sum, a business is a business whether you are bootstrapped or funded. When you’re funded, you ask, how can I allocate investors’ money wisely to increase startup performance? When you’re bootstrapped, you ask the exact same question although the funds are coming from your savings. Funded or bootstrapped, always start by clarifying your path by speaking with a mentor. Test ideas quickly and don’t fear to share your journey.