The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future (24 page)

N
aomi Dunford was a teenage mother and a high-school dropout. By the time she was pregnant with her second child, she was living in a homeless shelter. After making it out of the shelter by working odd jobs, Naomi was determined to improve her circumstances however she could. Despite the obvious disadvantages—being a mom at age seventeen, leaving high school—she also had a few things going for her. Her dad had built several businesses from scratch, imparting knowledge and experience along the way. Her mom was a marketer. And back in the day, her grandfather was in advertising. In other words, marketing was in Naomi’s blood, so it wasn’t a huge stretch for her to imagine herself in a different life.

Without sharing her background with potential customers at first, Naomi opened a consulting company called IttyBiz. Tag line: “Marketing for businesses without marketing departments.” Later she would add products, courses, and referrals to other professionals, but Naomi started with a single consulting service: the service of brainstorming. Over the course of an hour and for an initial fee
of $250, she would evaluate marketing ideas and provide feedback on ways to improve them. Nothing more, nothing less.

You might wonder how many people pay for this service (answer: a lot), and whether it’s worth it (answer: keep reading). Naomi is originally from London, Ontario, but I met her in London, England, where she was living near her mother. While riding the tube around the city and wandering through an outdoor clothing market, I asked for her advice on a situation in my business. She listened for two minutes and asked a few clarifying questions. Then, without much of a pause, she said, “Here’s what you should do,” and gave me a list of specific actions and ideas while I frantically wrote them down. I took her advice and spent a few hours applying it in my next project. As a result, I made at least $15,000 more over the next year because of her action list. (I didn’t pay Naomi’s fee of $250, but I hope she appreciates this extended testimonial.)

As she sharpened her message and connected with more people, the business grew. At the end of her first full year, Naomi published a short video explaining how she had earned almost $200,000 so far. This came as a big surprise to the online world, because Naomi wasn’t known very well—she wasn’t an Internet celebrity, she didn’t have a million followers—and in fact, a lot of people who stumbled upon her website were immediately turned off by the coarse language and her distinct “call it like I see it” style. Article titles included “What to Do When You’re Scared Shitless” and “Moral of the Story: Topless Edition (with Photos).” But Naomi’s audience wasn’t put off at all.

One of the things Naomi does well is continuously remind her clients about the need for actually making money. This may sound simple, but busy entrepreneurs can easily become overwhelmed with all kinds of projects and tasks that have nothing to do with making money. Putting the focus on income and cash flow—measuring
everything else against those standards—ensures that a business remains healthy. Here’s how Naomi explains it:

Naomi is right: On any given day, there are all kinds of things you can do that have nothing to do with making money—but you should be careful about those distractions, because without the money, there is no business. Many aspiring business owners make two common, related mistakes: thinking too much about where to get money to start their project and thinking too little about where the business income will come from. Fixing these problems (or avoiding them in the first place) requires a simple solution: Spend as little money as possible and make as much money as you can.

Inspired by her second child, Heather Allard invented two wearable baby blankets that became a worldwide sensation. The blankets
were featured on
Access Hollywood
and sold in more than 200 stores, and it was all she could do to keep up. After the birth of her third child in 2006, Heather sold the products to a larger company in order to spend more time with the family. Success! She wasn’t done with entrepreneurship, though; the next step was to help other women, especially mothers, learn to do what she had accomplished. She started her next business, The Mogul Mom, with the goal of mentoring busy women who wanted to create more independence through a small business. The baby blanket business was highly successful, but it also became a high-spending operation as the product took off. On reflection, Heather realized that she would need to run her second act differently:

The distinction Heather points out at the end is important: She’s not reluctant to spend money on things that will (1) build her brand and (2) boost her sales. This kind of spending can grow a business. If you can spend $100 and create $200 in value from it, why wouldn’t you? It’s the other kind of spending—the unproven ad campaigns and unneeded custom websites—that Heather learned to stay away from. Lesson: Spend only on things that have a direct relationship to sales.

The stories from Naomi and Heather illustrate two important principles, both related to money. The first principle is that a business should always focus on profit. (Always remember, no money, no business.) The second principle is that borrowing money or investing a lot of money to start a business is completely optional.

This doesn’t mean that there are no examples of businesses that have done well through traditional methods; it just means that
borrowing is no longer essential
. Don’t think of it as a necessary evil; think of it as an undesirable option to be pursued only if you have a way to limit risk or are sure you know what you’re doing.

If you don’t know what you’re doing when you’re starting out, that’s OK, you’re in good company. Almost every entrepreneur pursues projects with a much-trial-and-much-error system. But since it’s easy to try things without losing your shirt, why seek investment and go into debt for something that may or may not work?

It’s completely possible to start on a very low budget without hindering the odds of success. Consider the reports of many in our study group: