Entrepreneur Office Hours - Issue #90
Money isn't the only thing you're charging customers
I get lots of questions about pricing. And, as I’ve written (more than a few times), pricing was something I often struggled with when building my startups. But, as entrepreneurs, we have to be careful not to be too myopic about pricing. It’s not the only thing that matters, and, in this issue’s featured article, I explain why.
Of course, asking people for money is still an important part of entrepreneurship. It’s especially important during fundraising. However, lots of entrepreneurs don’t know how to ask for money particularly well (myself included), so I took a bit of time to explain the proper way to ask VCs for money based on some unintentional advice from my 5-year-old.
Finally, in this issue’s Q&A, I help an entrepreneur figure out how to set his hiring priorities. Hopefully it’ll help you, too!
Do You Know How Much You’re Really Charging Your Customers?
Hint: Whatever you’re charging them, I guarantee it’s more than you realize, and it’s a lot more than the price of your product.
My 5-Year-Old Taught Me the Best Way to Ask Investors for Money
As an entrepreneur, I often struggled asking people for money. That's obviously not a good thing to struggle with. Eventually, I figured out the best way. All it took was a little help from my 5-year-old.
Office Hours Q&A
I read your article about being good at too many things and how that can kill a company. I really enjoyed it and it made me think about how I run my own company. I am definitely responsible for lots of the important work, and your article made me realize why that could be a problem in the future.
So here is my question. Since I cannot afford to hire for all the things I do at once, how do I decide what job to hire for first? Do I choose the thing I don’t like? Or do I choose the thing I’m worst at? Or would you recommend something else entirely?
In my mind, this question has two answers: the ideal answer, and the realistic answer.
In an ideal world, you’re always trying to improve your company as much as possible. From that perspective, the best way to “fire yourself” from different jobs in your company is by identifying the jobs you’re worst at and prioritize hiring based on those jobs.
Let’s say, for example, you’re handling sales, marketing, and customer support. You hate doing customer support, but your biggest weakness is marketing. In that case, even though you don’t enjoy running customer support, it’ll theoretically help your company more for you to keep managing CS while hiring a better marketer.
But that’s an ideal world. The real world is more complex.
For example, when you hire to replace yourself, you always want to hire people better than you. What if your worst is better than the best of any currently available candidates? Conversely, what if there’s another job you’re doing that you’re pretty good at, but some combination of timing/luck/etc. has given you the access to hire someone even better? Do you skip hiring the amazing candidate just because it wasn’t the job you’d initially intended to hire for? Of course not!
Conversely, all jobs aren’t created equal in terms of time commitments. Going back to my earlier example, what if customer support takes you 30 hours per week and you’re only spending 10 hours per week on marketing? Plus, the cost of hiring someone to manage customer support is probably going to be less than hiring a marketing expert. In that case, even though you could probably find a better marketer than yourself, the amount of time and money you’d spend replacing your customer service efforts would offset the benefit you’d get from hiring a better marketer.
Hopefully you’re starting to see the issue with the question. The answer, as is so often the case in these kinds of scenarios, is “it depends.” Each startup is different, and what’s true for you is going to be different than what’s true for someone else.
The important thing here isn’t so much that you make the “perfect” hire. In your scenario, it sounds like you need to focus on making a valuable hire (or hires) as soon as you can. Don’t worry about perfection and focus, instead, on progress. As you make progress with hiring, over time you’ll increasingly move yourself out of day-to-day operational jobs, and that, more than anything, should be your main goal as a CEO/Founder. Ultimately, you want to be running the company, not doing all the work for the company. That transition is going to take time, so get started as soon as you can and be patient.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!