Hi there -
Here is this week’s “1 principle, 2 strategies, and 3 actionable tactics” for running lean…
1 Universal Principle
“Hire to build a traction flywheel.”
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The risk-adjusted value of founder sweat equity in an early-stage startup is $1,000+/hr. I’ve linked a video explaining my rationale at the bottom of this issue.
Does this mean you should hire anyone (or anything) that costs less than $1,000/hr? Not quite. In today’s issue, I’ll share a practical approach I use to know what, when, and how to hire.
2 Underlying Strategies at Play
I. Ignition before acceleration.
While it’s tempting to want to hire out sales or marketing or <insert your weakest skill> from the start, this is suboptimal because
1) You probably don’t have the money to do so, and
2) Even if you do, hiring is an accelerant, and accelerants require an initial ignition step.
Getting to ignition is your job.
For example, a VP of sales will not help you figure out how to sell your product…but they can optimize a process once it starts to work.
II. Speed of learning is the fuel.
Speed of learning is how you light an idea on fire. This requires
- prioritizing what’s riskiest, not what’s easiest,
- focusing on the few key actions that stand to drive the biggest impact (right action, right time) and
- maximizing for “speed of learning” above all else.
To make this concrete, I view my job as a founder as building a repeatable and scalable customer factory:
The customer factory is a metaphor for a business that turns unaware visitors on the left into happy, passionate customers on the right.
Making happy customers is the universal job of every successful business.
3 Actionable Tactics
I. Move from left to right.
If you were building an actual factory, you would not invest in equipment or hire factory workers until you knew there was demand for your widget.
The same is true with a customer factory.
Why build a product until you know people will buy it? This is why I start all my new products by working on the acquisition step, and then I move from left to right following the numerical order below:
While moving from left to right, 80% of my focus and attention is on getting that step to work.
And no, contrary to popular belief, you don’t need to first build a working product to test demand for a product.
II. Hire from left to right.
Once I get a step working, I hire out that step to something or someone to buy back my time, which I reinvest into making the next step work.
At first, I might hire a tool (e.g., Calendly for scheduling) or invest in automation (e.g., Convertkit for email sequences). But over time, this scales up to consultants, coaches, part-time hires, and full-time hires.
As I start generating customer revenue, I use this formula to calculate my time buy-back rate:
Buy back rate = (Annual Revenue) / 8000 hours
Why 8,000 hours?
There are roughly 2,000 hours in a 40-hour work week and 8,000 hours in a year. The math above calculates your effective hourly rate over a day, which helps you gauge not just work activities but chores (like mowing the lawn) that you could/should also outsource to free up your time.
For example, once you reach $10k/mo or $120k ARR product, your buy-back rate is $15/hr. While you may not be able to bring on a full-time hire, you can hire
- a part-time virtual assistant to offload administrative tasks,
- a marketer, designer, or copywriter for lead-gen, landing pages, or sales copy,
- someone to mow the lawn or do the laundry, freeing up your time to invest in higher-value steps.
Even creating free time to do nothing unlocks creativity by freeing up the subconscious thinking loop in your brain.
III. Build flywheels that amplify your superpower.
As you crank up your customer factory for the first time, you need to have a generalist versus specialist mindset.
In other words, you should be prepared to learn from books or invest in training/coaches to become good enough to get a customer factory running. This means getting outside your comfort zone to prioritize “right action, right time.”
For instance, over the years, I’ve taught myself just enough coding, copywriting, design, marketing, sales, etc. But I’m not the best at all these things. More importantly, not all these things fire me up equally.
As you build out a customer factory, you’ll (re)discover your unique superpower, which is the one thing you don’t automate or outsource and instead keep for yourself.
This is how you build a personal flywheel that compounds your mission and purpose to keep you moving forward.
Mine, for instance, is synthesizing complex concepts into simple and practical models. I don’t always succeed at this, but that’s the work that gets me up each day…
That's all for today. See you next week.
Ash
Author of Running Lean and creator of Lean Canvas
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P.S.
How to value founder sweat equity: