The advantage of no funding

2011-07-09

Having no funding was a huge advantage for me.

A year after I started CD Baby, the dot-com boom happened. Anyone with a little hot air and a vague plan was given millions of dollars by investors. It was ridiculous.

Most business owners I knew would tell you about their businesses by talking about their second round of funding, their fancy encrypted replicated load-balancing database server, their twenty-person development team, their nice midtown office with a pool table, and their weekly promotion parties. When you asked what the business actually did, they couldn’t explain it clearly.

Then they would talk about LOI, ROI, NDAs, IPOs, and all kinds of things that also had nothing to do with actually helping people.

I’m so glad I didn’t have investors. I didn’t have to please anybody but my customers and myself. No effort spent on anything but my customers.

I’d get weekly calls from investment firms, wanting to invest in CD Baby. My immediate answer was always “No thanks.”

They’d say, “Don’t you want to expand?”

I’d say, “No. I want my business to be smaller, not bigger.”

That always ended the conversation.

By not having any money to waste, you never waste money.

Since I couldn’t afford a programmer, I went to the bookstore and got a $25 book on PHP and MySQL programming. Then I sat down and learned it, with no programming experience. Necessity is a great teacher.

Even years later, the desks were just planks of wood on cinderblocks from the hardware store. I made the office computers myself from parts. My well-funded friends would spend $100,000 to buy something that I made myself for $1000. They did it saying “we need the very best,” but it didn’t improve anything for the customers.

Never forget that absolutely everything you do is for your customers. Make every decision — even decisions about whether to expand the business, raise money, or promote someone — according to what’s best for your customers.

If you’re ever unsure what to prioritize, just ask your customers the open-ended question, “How can I best help you now?” Then focus on satisfying those requests.

None of your customers will ask you to turn your attention to expanding. They want you to keep your attention focused on them.

It’s counterintuitive, but the way to grow your business is to focus entirely on your existing customers. Just thrill them, and they’ll tell everyone.

© 2011 Derek Sivers. ( « previous || next » )

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