http://www.marktaw.com/Work_and_Business/Why-Businesses-Fail.html

What a FUCKING MASTERPIECE of wisdom and insight. It will help me save $250/hr in therapy (the bit about finding communities of like minded people). I'm almost (not quite) kidding with that last statement.

Seriously, this is great stuff that balances the fanboy hooha  of certain small business discussion communities.

Uh... Thanks. :)

I wonder if anyone realizes my graphics are copyright next year...

wow, thats really good.

I miss markTAWs posts, he often had some insightful stuff.

anyone seen him around?

ah! there you are :)

for some reason I thought youd stoped reading CoT.

::admires his speling of stoped.

every day I become a litle more eficient.

Mark, with fans like me you don't need enemies. I'm like the drunk Griswold cousin with the steel plate in his head. :)

Your article was misinterpreted over at Daddy's House as being anti-startup.

I think it's hella-insightful and is basic & primary, uh, wisdom.

It is anti-startup. Whoever said it wasn't?

the anti-startup part is interpretative though, its not the actual intention of the article.

the article itself just kind of lays out some facts.

Now that I think of it, the article is sort of:

Step 1. Steal underwear.
Step 2....
Step 3. Profit

I like the guy in ?biz who says "In the article X is $1 - but redraw his graph if X starting is $500.  You get to break even a lot quicker."

As if it was perfectly normal for a startup to make $500 in it's first month.

odd, Im not seeing the topic on JoS.

do you have a link?

It's in ?biz

http://discuss.joelonsoftware.com/default.asp?biz.5.318556.30

sure.  *now* I find it.

LOL. You most have posted that 1/1000 of a second after me because it appeared below mine after I clicked SUBMIT.

He also said he found the link in another post. I have no clue where that is.

Oops, I quit my day job.  Maybe I should have read that first.

is it jsut me or did lots of people *completely* miss the point?

the way I read it was that the graph was jsut a mind game (duh!)...the interesting bit wasn't the idea that if you started with a dollar a month income you would fail, the interesting bit was that expenses weren't the problem..income was.....there is no point even talking about cutting your expenses, that doesn't make much difference...you need to increase your income to be a success.
if you can do that immediately by selling more than $1/month, then great, but assuming you cannot you are way better to hold on to your day job and kill yourself with work.

its a good article and its *not* anti startup, or negative, or anything else.  its just common sense, and that means its worth saying.

nice article mark.

FNR, I agree completely with you. And the thread link quoted above is where I found the article. I haven't seen it anyplace else.

I found the other link, it's at the bottom of some thread and there's no discussion about it.

There are a few other places on the web that have linked to the article, and there's some round robin business discussion thingy that's linking to it next week. No idea how much traffic it'll generate.

who did that post about a groups worst enemies?

remember it talked about how every group had its 'religious text' that no one was allowed to critique?


thats what mark is doing here.  he is somehow attacking the religious text of a certain type of entrepreneur.

maybe of all of us americans :)  the idea we can just quit our day job and become a success by starting our own company is kind of inbred...

Shirkey. "A group is it's own worst enemy"

And are you calling me inbred? I swear, I didn't know she was related to me!

I was reading bits and pieces from it after spotting the link on JOS this morning.  A high-quality read, very intelligent, like a WSJ article or something like that.

"As if it was perfectly normal for a startup to make $500 in it's first month."

I'm stating the obvious, but that completely depends upon the business and product. e.g. Beginning a startup doing consultant work to support development, when you have a network of associates and peers begging to use your services, can have you -starting- with more than you were making employed, scaling up from there.

I would say outside of the "quit my job and work on software for 5 years to then be able to sell it" industry, most startups expect significant income right out of the gate, though thye also usually expect significant expenses as well.

Speaking of startups, I keep hearing about Y Combinator -- if I heard right, the guy provides "up to" $25,000 in funding for startups. That much attention and publicity for a largely laughable $25,000?

yeah, I agree.  what kind of bastard offers money to people like that?
its just outrageous the kinds of things some assholes think they can get away with.

They aren't giving -- they're investing. Investing a very small amount for what amounts to an enormous amount of publicity and attention, and I presume equity ownership.

I just find it odd that so many people are talking about them (Joel just mentioned them) when the amount they offer is less than most people can get on their credit card. They fit in the ecosystem of funding, I just don't think they're the great new hope of the internet revolution.

Sure, I'll agree that consultants can do that, and there are people who are smart enough & savvy enough to actually start their business with significant revenue.

These are mostly service oriented businesses. I'm primarily talking about product oriented businesses.

Good article, Mark - well done.

The thread over on ?biz seems to consist mainly of "I don't like his conclusions, so let me change the numbers to come out the way *I* want them to"

"These are mostly service oriented businesses. I'm primarily talking about product oriented businesses."

The line between service and product can become blurred (for instance is a coffee shop a service or a product business), however even with products if you turn your product flow right, nothing in the world is saying that Joel's "start with $300 a month in sales" model is even remotely close to true. In a traditional product model you blow your load of marketing funds at the outset and overcome that slow-growth curve. Nothing is stopping product companies from doing that either.

I'm not disagreeing with your assertion at all, however I think it's simplistic to say that "all businesses start with $1 in sales and very, very slow grow from there". Of course you aren't saying that, but some of the arguments disagreeing with those who say otherwise are implying that -- as if it's a given. It isn't. I wouldn't even say that it's the dominant business model, apart from perhaps software developers with no business sense who foolishly spin off on their own.

that ?biz thread is classic JoS these days.

a couple of intelligent posts and an army of dingbats with their eyes tight shut and their hands over their ears singing 'la la la la'

Are they putting their hands over their ears, or are they proposing an alternate scenario? (I haven't looked at that thread at all, btw. The number of times I've visited ?biz in its history could be counted on one hand).

Saying "one could have better up-front growth" isn't denial, anymore than than saying "you're going to have <$10 in sales for the first 5 years" is pessimistic denial that others might do better. Both are just scenarios, and neither is validated by either party as empirically more likely. Personally I think the ultra low revenue model is just as atypical as immediate ultra high revenue.

"Saying "one could have better up-front growth" isn't denial, "

of course not.  the premise of marks article makes ones upfront growth entirely irrelevant anyway.

maybe they're not in denial, it would probably have been more accurate to say that they had just missed the point entirely.

as far as I understood it, pretty much all marks article was saying was "you will need an income, and cutting expenses wont help much"
he then suggested that since they prolly cannot depend on getting an income immediately, continuing to work the day job might be a smart idea.

so saying "I could easily earn $500/month upfront" isn't just missing the point entirely, its actually agreeing with the article that the income was important.

so I guess you are right and I misspoke myself.  they're not in denial.  they are morons.

I appreciate Mark's root message, and it is a sober bit of reality for a lot of dreamers, however ultimately it's advice that is only support by manufactured numbers -- it's simply a scenario. One could just as easily manufacture some randomized charts proclaiming that if you quit your day job, a magical idea will hit you in your sleep and you'll get bought out by Google the next day.

Similarly, in some scenarios staying in your day job can completely undermine your energy, passion and MOTIVATION to pursue your business. It's the classic story of the guy with a great idea or a great book that he wants to write, but he never challenges his boundaries and thus is always too slow, or too unmotivated at the end of the work day, to bother. Countless dreams have been squashed, and business ventures have been completely undermined,  because people haven't taken the necessary risks.

Mark's article has one theme, and he wrote the article to point out a classic error a lot of entrepreneurs make - mounting expenses will kill your business.

FWIW, I lived what he posted, and the worst part is that it really does sneak up on you psychologically - it's not like you get a bill each month: "You owe $5k"; "You owe $10k"; "You owe $15k"

No, your credit card balances creep up, and your bills get paid a little bit later, and your mortgage payments move towards (and past) the "pay by" date. All of this is real value, but the accrual sneaks under the radar.

He's just shining a flashlight on it so prospective business owners have it in the forefront of their minds.

" however ultimately it's advice that is only support by manufactured numbers"

of course.  I haven't read many articles about starting your own business that *didn't* use manufactured numbers and then generalise from them.

its marks root message that is important. its not about instantly agreeing with him.
 
Its about reading it as a side of the discussion that is all too often entirely ignored.

anyone who reads it and decides not to bother is misreading the article anyway.  its intended to be cautionary, not biblical truth.

" Countless dreams have been squashed, and business ventures have been completely undermined,  because people haven't taken the necessary risks."

and equally countless dreams have been squashed and fortunes squandered because of people taking unnecessary risks.

What is needed when going into business on your own is a sound grasp of *reality*. 
Reality is a multi-faceted thingie that needs to be viewed from many angles to be soundly grasped.

Marks article presents one perfectly formed side of reality.
It is not a fully formed reality on its own, but it is a side of reality that needs to be understood, and that these days is increasingly ignored by the modern tech entrepreneur wannabe.

My curve was around ten years, that the top of the curve became a sudden cliff when Customs & Excise slapped a ten grand bill on me just terminated things a little faster.

But then I began with high income and low expenses, it was employing people that dragged me down.  I just didn't appreciate beforehand that I was unlikely to generate enough work to pay them all without having someone continually doing sales. 

Now I have far lower expectations and far fewer expenses.  However, it would be nice if people actually returned the calls they said they would when talking about opportunities for work.

"Speaking of startups, I keep hearing about Y Combinator -- if I heard right, the guy provides "up to" $25,000 in funding for startups. That much attention and publicity for a largely laughable $25,000?"

I have a theory which may be a little far fetched.

The attention and publicity garnered looks silly if it was done for a largely laughable $25,000. But may be what was aimed was the attention and publicity which will be used to sell something else. If that's the main aim, it is being achieved. There are a lot of people who like to start their own software firms. They read a lot of business books. If it is something that deals with both technology and business, people are excited. No way would these people get their hands dirty but they like to imagine themselves being entrepreneurs. Marquis summarized this populace when he said "If you make people think they're thinking, they'll love you; but if you really make them think they'll hate you". Such people with disposable incomes may be the target crowd here. They get entertainment, though it isn't obvious as when you go to a movie, as it is guised as information.

If a book is authored or a show/event/workshop is conducted by this person this attention garnered now would bring in a lot of eyeballs. If the book is priced $50, 500 copies would get the investment back and there would be a lot of other ways of making money with image built.

So, what Mark's saying is that Income starts at zero, while Expenses can start at Infinity?

marks saying you need an income to run a business :)


ok dennis, I guess that my main point is that marks article isn't one anyone *can* disagree with, its just a little piece of reality.
That doesn't mean anyone should read it and decide not to go ahead, it just means they had better bloody well try to understand it because it *is* biblical truth and people who ignore truths tend to embrace falsehoods.

if they read it, understand it and then decide to go ahead then great! they've increased the sum of their knowledge about the problems they will face and they've made their decision based on that knowledge.
which is all any of us can strive to do.

FNR,

"It is not a fully formed reality on its own, but it is a side of reality that needs to be understood, and that these days is increasingly ignored by the modern tech entrepreneur wannabe."

I dunno. If I had to make a blanket statement, I'd say that skepticism and fear dominate, and are by far the prevalent take on things (perhaps rightly so). Sure you find enclaves of people trying to build up each other's confidence, but on the whole I don't think the market is really in need of a reality check. Every dreamer who openly contemplates starting his own business immediately gets shot down by the hundreds of fear-of-change chairwarmers that desperately worry that someone will succeed where they fear to tread.

heh. either way its a good article :)

Yup interesting read for sure

The last paragraph is weak (too many 'probablies' - either state that's it's your opinion or quote a source) as are those graphs (the cyan line is meanigless as it appears to be 0) but the overall message is strong.

The observation that if one's isn't spending their free time on their business, one shouldn't quit their day job either, is classic.

I'd be curious if someone would do a little more research into the 'self-specialness' fallacy inherent in enterpreneurship/gambling. Of course, extraordinary businesses require extraordinary egos.