Hello everybody. It’s Matt Mandell. And um, my mo is removing wastes, driving efficiency and optimizing time. I’ve been a mentor of many startups and as a result of the years, almost a decade of doing this, I’ve essentially built my issue servicing founder questionnaire. The goal is to essentially avoid problems and um, quite honestly have problems come up earlier. So what I built is a mad lib style form. Um, so my name is you put your name in here and I’m looking to serve. So a specific customer. Who are you looking to serve? Okay. And in the location of this area. So I’m looking to serve uh, medical offices, um, in the northeast United States or dermatologists, um, in the, in northern New Jersey. So again, get as specific as possible because the more specific and deeper you go earlier, the easier it is and location. Again, if you can start small and then grow larger, that has a fair amount of value.

Just defining that will give you a lot better idea as to what you’re looking for. Okay. Right now my customer is current state. And then we will create a transformation to the end state by then what you provide. So current state is essentially, if I’m hungry, I’m I currently state is hungry, we will create a transformation to full by providing food, by providing, um, you know, sustenance. And it could be anything from we are a pizza parlor. We essentially provide nutrient rich snacks or nutrient rich pods or whatever it is. But again, it’s what is it now, what is the change that you look to accomplish? And then essentially how are you going to accomplish that change? Okay. Um, so that again, is the, are you actually solving a real problem?

Then moving onto the next section? Currently my time is worth x dollars an hour. I’m willing and able to take a pay cut of x dollars for this amount of time or x dollars per something for this amount of time. So for example, if you make $100,000 a year, let’s go with a kind of medium to higher number. Um, your time is take the beginning or 100 divided by two. It’s about $50 an hour. Similarly, you can go backwards and essentially have the have something that essentially is um, $15 and times two. It’s about $30,000 a year. Okay. So take what you’re making right now from all of the money that comes in in a year and then figure out what your hourly rate is and then you’re willing to take a pay cut. Because quite honestly, usually there’s a pay cut that is taken when you start an entrepreneurial endeavor, whether you like it or not, it is almost always true.

So I’m willing to take, I’m currently making an as example, I just picked $100,000 as a random number, I’m willing to take a pay cut to $10,000 per year or per month or per week or per something for how long. The goal is to set a stop gap. So you know when you want to stop and if you can stop so you don’t end up burning through all your savings because it’s very, very easy. And I’ve seen a thousand times before that people will not stop because of incremental commitment. Cause you feel like, okay, I’m just one step away. And just one more, just one more. Just one more. Similar to a child looking to get one more piece of candy. Then I’m going to test my market by taking action. So that could be, I’m going to build a landing page, I’m going to buy advertising, I’m going to do whatever it is that you’re going to do to take an action and test it.

And then I’m going to do it by when. So before a date, a lot of people, myself included, sometimes end up getting in this. I’m not, I’m not ready yet. I’m not ready. I’m not ready yet. But if you say, I’m going to talk to 10 buildings or 10 property managers before the end of the week, which is very, very doable, um, then you can actually test your idea and see if there’s something out there. Because usually, um, ideas will not survive the light of day and interactions with the customer. So the other thing is I’m adding accountability by saying I will report my results to, and then add a person’s name within two days. Could be, could be your mother, could be someone you trust, could be a a friend, it could be someone who you work with, could be anyone. The key thing is tell someone you’re going to do it and hold yourself accountable to them.

Then if I don’t see these results, I will take an action. So if I don’t see the results of, you know, five of the 10 people say they love it, three to 10 people say they’re going to sign up the, you know, you know, six people end up giving me a credit card on the spot. Figure out the actions and figure out what you want to get out of it and what the results are that are going to get you closer to the end state that you’re looking to accomplish than I will. So it could be that if I don’t have six people of the 10 buildings sign up, I’m going to adjust the idea. I’m going to ask more people, I’m going to tweak the idea, I’m going to throw the idea away and stop. All of those are valid. And again, the key thing is you’re going to test it by taking an action.

By a time telling someone’s you’re accountable and responsible and expecting certain results. Then you also commit that you’re going to take an action if you don’t see those results. Okay, now we’re going into customer economics. So I expect each customer to pay me x dollars per certain amount of time, and the lifetime value of each customer should be this amount of dollars. The company profit from each customer should be. So I expect each customer to pay me. Uh, I, oh, let’s pick a flower shop is, we’re jumping around here. So I expect each customer to pay me $50 every week because we want to have new flowers in our office every week. The lifetime value of a customer should be $50 times, let’s say 50 weeks, you know, at a hair under a year. And that would be a, it’s a lifetime value would be $2,500 because I’m taking 50 weeks times $50 and the company profit from each customer should be, I dunno, let’s assume half. And let’s assume $1,250 in this example. So this way you understand what the customer lifetime value is and that essentially goes into what you can afford to pay for a customer. Because if I know I’m going to make $1,250, maybe for the first year I’m going to say, you know what, I really want to see if the idea is going to work and I don’t care about taking profit, but I don’t want to go above $1,250 per new customer because I don’t want it to be something where I’m going into the red for a long period of time.

Okay.

Then our organization will be sales or operations focus. Do you have to pick one? Not both. Um, and we will sell by what’s the customer acquisition method? And it could be through advertising, could be through content creation, could be through affiliate networks, could be through word of mouth, could be through referral networks. Um, you know, generally it could be going to trade shows, could be going and hitting the street cold calling. They’re an almost infinite number of ways to go out there and get your customers, but figured out what you’re going to try and figure out where you believe it’s going to come from. Because if you don’t focus on that, you likely won’t end up getting things built.

Sales can solve and hide a large number of problems. Okay.

Now we’re looking at actual numbers of customers. So to get this many customers, I need to reach out to this. Many people each than a time period are expected cost to acquire. Each customer will be in an estimate. So for example, to get 100 customers, I need to reach out to let’s assume a 10% conversion rate. So I need to get um, a hundred divided by 0.1, which would be a thousand people each period. So let’s say each month. So to get the hundred customers at a 10% conversion, I need to reach out to a thousand people each month. And then by doing that, that ends up allowing me to figure out am I ahead of my goal? Am I behind my goal? How am I doing to reach where we’re trying to reach the expected cost to acquire a customer? Let’s say the expected costs will be $50. Uh, you know, an order send you $200. Let’s assume that we don’t want to go more than a month or four orders into, into the red to acquire a customer.

If we don’t have, then this is a client’s revenue or impact. So essentially you could be, if I don’t have 20 clients or essentially, you know, by this date, but let’s say three months from now, or it could be clients and revenue or it could be whatever it is you want to figure out. If, for example, you’re in a nonprofit, it could be that you’re looking for impact. Could be that you’re looking for people to, you know, um, so you know, adopt a new form or adopt a new approach to saving water. Uh, that could be the impact, which doesn’t have a revenue or an actual number of clients per se goal. But again, you’re doing is you’re committing that you want to figure out how many clients revenue and impact by a certain date and time and then the action you’re going to take.

So it could be that if I don’t have a hundred clients or thousand dollars of revenue, um, by, you know, per by this date a month in the future, I’m going to try a new way to try new types of customer and I’m going to go back up to the top and essentially try new specific customer or essentially it could be that I’m going to, take different action, could be a whole bunch of different things. But again, the main thing is deciding what you’re going to do early on in the process, not later on.

Then the last is I expect to sell for a multiple of x dollars of gross seller discretionary earnings or earning earnings before interest taxes. Earnings before interest, tax depreciation and amortization. My business school professors would not be happy with me. Um, so again, I expect to sell for a multiple of, typically tech companies with recurring revenues can sell for a much higher multiple than let’s say a restaurant. But knowing what you want to sell for and knowing what your exit is early is the important part. And again, sign cause you want to sign it and, and essentially commit to yourself and then the date that you did it.

If you’ve got any questions? Feel free to reach out to me. I’d be happy to help you and talk through this and that we can go from there. But again, hope it says value. And if you’ve got any questions, look forward to hearing from you. Good luck.