David Goggins
Former Navy Seal
Career Development
Bryan Cranston
Critical Thinking
Liv Boeree
International Poker Champion
Emotional Intelligence
Amaryllis Fox
Former CIA Clandestine Operative
Chris Hadfield
Retired Canadian Astronaut & Author
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Case Study: 37signals

Big Think: What are the common mistakes new businesses make?

Jason Fried: When you borrow money from somebody else, you’re on their schedule, you’re renting time. When you have your own money, or when you’re generating money through customers, you own your own time, you own your own schedule, and so you can take your time. We can take 10 years to do something because we have revenue coming in and there’s not someone saying your loan's due in three years, you know. So I think a lot of people struggle because they start of by borrowing money and then they’re sort of on someone else's schedule and they don’t have time to sort of get in the groove. So there’s some of that. I think people just typically just try too hard, actually. That’s weird because you have to try hard to succeed, but I mean try hard on the wrong things. You focus on the wrong things too early. And those can range, depending on the business you’re in.  

I guess my point is, I don’t think it’s competition that puts these businesses out of business, I think it’s the business themselves putting themselves out of business by hiring the wrong people, being afraid of making money, spending too much money early on, maybe getting a storefront that's too big if you’re a physical store. You know. Doing all that stuff when you really got to focus on the product first and keep it as small as you can and if you’re going to open a bakery, open it out of your house first. Just make – I mean, that’s probably technically illegal in some place, but make some... if you want to open a cupcake bakery, make some cupcakes and sell them at the Farmer’s market for six months, for a year first, on the weekends. See if it works. If it works, okay, now you have some people who like your cupcakes, you’re selling out every weekend. Now maybe you can move into something else. Instead of saying, "I’m going to open a bakery" and go buy a storefront and some expensive machinery and stuff like that. So I think people kind of start a little bit too quickly sometimes too and they should just make their time and starts something on the side and see where it goes.

Big Think: How did 37signals transition between business models?

Jason Fried: The big thing for us was that, we started out as a web design firm. And we were doing client work for hire—web design work for hire. And it was great. We were doing really well and things were going all right. And then we hit on this idea to make project management software. Right? But we didn't stop our client work business to build software. We started building software on the side. So we treated the new product like Base Camp, which was our first product, as a client. So we still were doing client work. So there was an overlap. So we kind of treated Base Camp as a side project, as a side business and let’s see what happens. And it turned out in a year or a year and a half later, it was making more money for us than our consulting business. So then we could stop doing consulting—which was a great day—and sell software instead.

But we didn’t say, like we’re going to stop doing consulting and start doing software the next day because that’s very risky. And I’m not a big fan of risk. I know like the whole entrepreneurial myth is like you know, the risk, take on risk and the entrepreneur with the risk. I just don’t buy that. So I think side businesses, trying something on the side, spending a few hours a week, seeing where things go first is the right way to do it. And especially if you have a day job. People dream of starting their own business, I don’t recommend people quit their day job and start their business. I think you should start your business on the side a couple of hours a night, a couple of hours a week, see what happens. You know, use your day job salary to pay the bills, to fund your new idea, and then maybe a year later you’ll be all right and you can do that. So, the business model shift for us was a slow and gradual shift making sure we were able to sustain ourselves on the new model before we give up the old model

The co-founder of the web application firm discusses common pitfalls of starting a new business and the need to be flexible with your business model.

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