When a friend forwarded this tweet from Paul Graham, it hit close to home:
Startups are subject to something like infant mortality: before they’re established, one thing going wrong can kill the company. Hardware companies seem to be subject to infant mortality their whole lives.
I think the reason is that the evolution of the product is so discontinuous. The company has to keep shipping, and customers to keep buying, new products. Which in practice is like relaunching the company each time.
I don’t know if there is an answer to this, but if there were a way for hardware companies to evolve more the way software companies do, they’d be a lot more resilient.
Looking back on our startup journey at Minut, I remember several moments when we could have died. However, surviving several near misses we learned to tackle these challenges and have become more resilient over time. While there will never be one fully exhaustive answer, here are some of the lessons we learned over the years:
Subscription revenue is the only revenue that counts
While you can sell hardware with a margin and make important early revenue, it’s not a sustainable business model for a company that requires both software and hardware. You can’t cover an indefinite commitment with a finite amount of money.
Many hardware companies don’t consider subscriptions early enough. While it can be hard to command a subscription from the start (if you can, you might have waited too long to launch), it needs to be in the plan from the beginning. Look for markets where paying subscriptions is the norm rather than markets that operate on a one-time sale model.
Set high margins and earn them over time
It’s tempting to set low prices for hardware to attract customers, but in the beginning you should do the opposite. Margins allow for mistakes to be rectified. A missed deadline might mean you have to opt for freight by air rather than boat. You might have to scrap components or buy them expensively in a supply crunch. Surprises are seldom positive, and you don’t want to use your venture capital to pay for them.
Healthy margins can also be used to cover marketing costs while you learn what kind of messaging works and what channels you can sell through. If that wasn’t enough reason, starting with relatively high prices will help you avoid another common mistake, selling too much at launch.
This might seem counterintuitive — why wouldn’t you want great success out of the gate? The reason is that you will inevitably make mistakes with your early launches, and the bigger the launch, the bigger the blow. There are plenty of companies who achieved amazing crowdfunding success and then failed to deliver even the first units. Startups tend to chase growth at all costs, but for hardware startups in the first few years there is such a thing as too much of a good thing.
The story of my company, White Spider, began when I rented out the guest bedroom of my San Francisco apartment. I initially did it to make some quick cash to buy a used bike, but that weekend turned into many, and the bedroom became a mainstay on Airbnb. Eventually, I quit my high-paying job as a salesperson, and my side hustle grew into a successful design and guest management firm for vacation rental properties.
We manage hundreds of properties across multiple destination cities in the country. Today, we have the best team in the business made up of 95 percent women (this company didn’t build itself!). We chose to keep our operations completely in the U.S., instead of outsourcing to call centers. This means we pay our team members better than any of our competitors (one of the perks of being self-funded). We create wealth and new income opportunities for our clients. And, yes, it all started as a side hustle.
Below, I’m sharing a few pieces of advice that contributed to our success in the early days, helping to grow our company into the business it is today, in the hopes that these tips will help you to do the same.
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Customer experience is everything
Even in the very beginning, and arguably especially in the very beginning, creating a memorable customer experience is truly everything when building a new business.
Even when I had just a single bedroom listed on Airbnb, customer experience was a top priority. For example, considering each and every item that a guest may want and need during their stay to be comfortable—like Q-tips, tampons or makeup remover wipes. This might seem insignificant to the big picture, but in actuality, they are the big picture. Going the extra mile with details that some might consider a “nice to have” can take the customer experience from mediocre to truly memorable.
Experience is what builds your reputation, creates word-of-mouth momentum, drives referrals and keeps customers coming back for more. Further, with excellent customer service as the north star of the business, it became what we’re known for in the industry today. In fact, the clients who hire us often do so because they have the same commitment to service and know we will truly take care of the guests who stay in their homes.
Capitalize on the skills you have and surround yourself with people who have the rest
Early on, many side hustlers get burnt out because they try to do everything inside of the business. Work in your zone of genius to get your spark of an idea off the ground, then surround yourself with people who are even better than you in the areas where you are not so strong.
For example, my background was in sales, so to get started, I leveraged the skills I’d developed in my career to help build the business, such as creating relationships, communicating the value of a service and the art of follow-up and follow through.
You too likely have a few key skills that can serve as the foundation for getting started. Use those skills to create your initial success, then when you’ve built a little momentum, surround yourself with great people and help them succeed in the areas where they excel.
I promise, no one gets to the top without an incredible team of people around them (no matter what they say), so don’t feel the need to try and do everything.
Use your early successes to leapfrog
Going from one bedroom on Airbnb to managing hundreds of homes across the country, of course, didn’t happen overnight. We got there by treating every win like valuable capital that could be reinvested into the business.
Now, the most obvious form of capital is cold hard cash. While, yes, cash is important for any business, it’s not the only form of currency that can help you turn a side hustle into a full-time business.
For example, spending the time to gather customer testimonials and turning them into case studies builds your credibility. Additionally, an investment in your customer relationships compounds into repeat clients and referrals. When you’re aiming to build momentum in the beginning, no win is too small to leverage for more success.
Dare to be different
One common mistake that budding entrepreneurs often make is focusing too much on their competitors. Many spend a lot of effort on how they’ll compete with others in their industry and not enough on how they’re going to be truly different.
As a company, this has been one of our winning strategies since day one. We never wanted to compete with design firms that were creating pretty, but cookie cutter, spaces. Our approach is being bold and unique, and it has paid off in spades. Airbnb even recreated one of our designs in their corporate headquarters. The space caught their attention because we dared to be different.
Get creative to uncover how you can be truly unique in your side hustle. Perhaps there’s something that your competitors are ignoring, or you have humor on your side in an industry that’s typically very buttoned up. Whatever it is, figuring out how to be in a category of one versus how to be three percent better than your competitors will help you carve out your place in the market more easily and quickly.
Last, but certainly not least, there is one bonus piece of advice I’d like to share for anyone who is working on a side hustle right now. This year could objectively be called a dumpster fire. When times are particularly difficult, it’s important to attach the “why” for your business to what’s truly important to you.
The big why for White Spider is using our business to have a meaningful impact in the world, giving back to underserved communities, fighting social justice issues and creating opportunities for those who deserve them but might be overlooked by mainstream society. I urge you to do the same in your business. When times are tough, it will inspire you to keep moving forward.
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The following is excerpted from “The Wealthy Franchisee: Game-Changing Steps to Becoming a Thriving Franchise Superstar” by Scott Greenberg, Entrepreneur Press, 2020, XVII-XXIII.
I’d just come offstage from keynoting the opening session of a quick-service restaurant franchise convention in New Orleans. The presentation had gone well and now, on break, a small group had gathered around to chat. But John, one of the franchisees in the audience, patiently waited until I was alone.
“Hi, Scott,” he said. “I really enjoyed your speech. Do you have a minute to talk?”
“Sure. Want to sit?”
The ballroom was now empty, so we grabbed a couple of chairs up front.
“How can I help you?” I asked.
John shared his story of quitting his banking job to buy into this franchise. It wasn’t going as well as he’d hoped. Things started OK, but sales had petered out over the past few years. Managing the restaurant himself had kept labor down, but it had also consumed all his time. He struggled to keep good employees; it didn’t help that he’d been late with payroll a few times. He’d been in survival mode for a while and no longer trusted corporate to help him. (He figured they’d probably just tell him to market more, like he could afford it.) He still had six years on his franchise agreement and his lease. There was no way he could sell the business for enough to pay his debts. He had been limping along by using the equity in his house, which had taken a toll on his marriage.
John blew out his breath in a long exhale once he had finished his story. His despondence was palpable. It was obvious his problems were as personal as they were professional.
I listened with much compassion and little judgment. After 10 years as a franchisee myself, I could certainly relate. I’ve had those moments. I shared them with John. Then I explained how I moved through them and how he could, too.
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That evening, I was invited to a reception for the “President’s Circle” franchisees, the brand’s top performers. I’d noticed many of these folks earlier in the convention. These were the franchisees with ribbons hanging from their name tags, displaying phrases such as “Presenter,” “Multi-Unit Owner,” and “Million Dollar Club.” They were a chummy bunch, perhaps a little tipsy. Their mood was festive.
Diane had just won “Franchisee of the Year” and was getting lots of attention. She fended off the praise with jokes: “The people they really wanted to award just couldn’t make it to the convention!” I asked her if she had time for an interview, and she had to check her schedule. She didn’t want to miss any of the breakout sessions. Meeting after the convention wasn’t an option—she and her husband were leaving directly for the airport for a 10-day vacation in the Bahamas. We agreed to have breakfast together the next morning.
Over breakfast, I learned Diane had been in the system for seven years. She’d built two restaurants before picking up two existing locations in the past 18 months. The recent acquisitions hadn’t yet matched the numbers of her original stores, but sales were definitely on the uptick. She was pleased.
“Seems like you know what you’re doing, Diane,” I said. “What’s your secret?”
“Honestly, your guess is as good as mine!” she said. “I just really love this business, and it seems to be working.”
John and Diane sell the same products in similar territories. They follow the same procedures under the same brand name. They pay the same royalties and buy from the same suppliers. They share the same opportunities and face the same threats. John and Diane are essentially running the same business. But their experiences of the business? Day and night.
Every franchise system I work with has franchisees like John, Diane, and the less extreme majority in between. Lots of people are running identical operations but getting different results. Through decades of professional business speaking and 10 years of running my own Edible Arrangements franchises, I’ve worked to understand this disparity. Why would so many people running the same business vary so much in their success?
There’s no denying that marketing, location and operational skill are critical factors. But when you look at top franchisees across many companies and compare them with their lower-performing counterparts, you start to see some other patterns, as well. It’s not just where they’re located. It’s not just how they work. What really stands out is how they think.
Top performers have mental grit, enabling them to navigate through the complicated, stressful, and often lonely endeavor that is running a franchise. They see opportunities others don’t. They respond well to adversity. They cultivate productive relationships with customers, employees, and their franchisor. Most of all, they control their thoughts.
This mental advantage translates to operational superiority. They engage in the same tasks and face the same problems as their peers. But they do it better because their mind is an asset to their business, not a liability.
Related: This $ 100 Million Biggby Coffee Empire Co-CEO Shares the Secret to Turning an Idea Into a Positive-Cash Flow Business
Why top franchisees can’t always help struggling franchisees
It’s common in franchising for someone like John to reach out to someone like Diane. She’s getting wealthy in this business. Why not ask her how she’s doing it?
The problem is that while high performers know what they’re doing, they don’t always know what they’re doing differently. They’re just running their business the only way they know how. They may not be able to articulate the real reasons for their success.
Outdoor Living Brands once brought me in to keynote a convention for their multiple franchise brands and asked me to emcee their awards banquet. I suggested we keep the award winners onstage and interview them as a panel to see if we could squeeze out a few great ideas to share with the company. I asked each to share one thing they’d done in the past year that enabled them to succeed.
The first winner said, “We do a lot of marketing.”
The second said, “We treat our employees really well.”
The third said, “We go out into the community and get involved.”
That’s their big secret? That’s their special sauce? Who isn’t doing that stuff?! The discussion was pretty underwhelming.
But there were some things the top franchisees onstage had in common. All of them seemed positive, confident, and in control of their business. They were curious and committed to learning. They were focused on their customers. They took responsibility for their circumstances. They stuck to the system. They were the kind of people you like to do business with. None of the award winners articulated their mindset, but all of them exuded it.
I always ask franchisees for the cause of their stress. What keeps them up at night? I then try to speak to these issues during my programs.
Most people have plenty to say. They worry about sales and the competition. Their employees aggravate them. Their corporate office neglects them. These complaints are very common among franchisees.
But then I met Abdul Karim. Abdul is a multi-unit franchisee with Precision Tune Auto Care. His two units consistently rank number one and two in Washington state for revenue, operations and customer service. His customers love him. His employees are loyal. His businesses are profitable. This guy is a high performer.
No matter how I asked the question, Abdul refused to complain about anything. He sleeps well. He solves problems. His employees consistently perform. I asked him what other franchisees complain about. In reply, he told me everything franchisees need to do to succeed. His optimism was unbreakable and clearly the foundation for his success.
Twenty-six hundred miles away, Danna Vach runs a Bruster’s Real Ice Cream franchise in Georgia, which she acquired from a previous owner. After she took over the business, annual sales doubled. How’d she do it?
“I don’t know!” she confessed with a laugh. She couldn’t identify any operational or marketing strategy that made a difference. Things just started working, and she had no idea why.
I do. Danna is just like Abdul from Precision Tune Auto Care. She’s like those award-winning franchisees from Outdoor Living Brands. She’s positive. She’s engaged. Danna has the qualities I consistently see among great business owners.
Some businesses won’t succeed. Their location, the competition, or other factors may render wealth-building impossible. The right person doing the right things in the wrong situation will not succeed.
We control more than we realize. Most of our obstacles are excuses. They’re real, but they don’t tell the whole story. Wealthy franchisees turn around low-performing locations all the time. They scoop up these gold mines at rock-bottom prices from desperate franchisees who don’t realize how much potential they’re sitting on.
My money says you’ve got a better business than you think you do. You can lead better than you are. You can serve better than you are. Unless you’re operating like a wealthy franchisee, you’re in no place to judge what you have. Your business performance is as much a reflection of how you think as what you have.
“The Wealthy Franchisee: Game-Changing Steps to Becoming a Thriving Franchise Superstar” is available now wherever books are sold and can be purchased via StartupNation.com.
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