Time for Money (business 101)

I just read a post talking about the “Does your startup pass The Sleep Test“, in principal the idea is sound it’s a little simplistic.

Fifteen years ago I worked as a consultant, the money was good but the problem I quickly realized is that fundamentally I was just trading time for money.  We can all see how a construction worker trades time for money — $15/hour here I come I’ll hammer and pour concrete all day.  Being a ski instructor is the same way, just like any trade job you’re just on the work for X hours get Y dollars, but you have to wake up and do it all again…  What’s funny is there are a lot of white collar jobs that are the same way, Lawyer is being a great example — hence why many people are slaving away on the partner path — then at least they get the benefit of their co-workers time.

Fundamentally, you need to build a business that for every hour you put in yields a % gain in a core asset.  That asset can then be realized in a few different ways.

  • A blog — you post frequently — have a regular readership that grows and advertising to support it.  This passes the sleep test, people read while you’re asleep, but at some point to grow you need to be a publisher (e.g. TechCrunch) because if you don’t and go on vacation your asset will decrease in value.
  • A piece of software — you or a small team builds a piece of software and sell it, you potentially can sell the software for many times the cost of development.  If done right you can build service contracts and upgrades that yield long term revenue on your customers post sale.
  • Software as Service — similar to above, but now you can charge on a reoccurring basis, though fundamentally this is really just shrink wrapped software with the support side built into the monthly charges.  Variants on this are advertising supported web apps. etc. etc.
  • Secondary assets — you build a widget give it away for free, but fundamentally you’re building a secondary asset that you hope to either data mine or sell directly.   When you signup for that free car at the mall, the offer is the car, but the company is now getting access to your contact information to both sell you a timeshare but also now they’ve got Name/Address/Phone/Email all in a nice neat package..  Plus as a “Are you interested in a Timeshare” phone call you can verify all of the information.

Once a business has an asset, Readers/Customers/Core Asset it now has something to grow and foster.  This is asset is then what the business should be organized around the care of.