If you take a look at Grasshopper Group they are actually spinning off new companies based on the concept of building tools for startups. They solved our phone problems by building grasshopper They launched chargify to solve our billing woes from a SAAS model.

I still think solving one problem lots of business face is such a great direction for a startup as they are revenue driven from day one and most likely eat their own dog food. They are taking frustrations or opportunities within the industry and building and selling a solution for a problem that exists in the market place. All while making money!

Think about all those little things you need as a business (Billing, Shipping, Time Tracking, etc.). In terms of a platform, one size almost never fits all. So targeting smaller niches or tools that are interchangeable with other platforms actually expand the pie and allows for a better approach.

An interesting spin on this concept would be AppSumo, offering deals for these types of startup products. Once you signup, you get to view some of the deals like the epic deal they offered to startup’s for sxsw. You can view past deals once you put in your email. Be sure to use the same email or you will signup multiple times.

Building a business is hard enough, but with the right tools you can build it faster, cheaper, and better then you originally thought. The more startups that leverage tools rather then building them can focus more on their OWN product and JFDI.

For example, say you want to be a blogger and write content in a specific niche. You could do that whole fail-vertise (great you made $2 today!) with adsense and buysellads and hope that you have enough to make it while you scale your income and traffic.

Another interesting caveat with business is the spend model. How you can leverage spending with confidence because you know your estimated Cost Per Acquisition (eCPA) and your Lifetime Value (LTV). So the more you spend the more you will make in both a short term and long term environment. With a negative capital business you could in theory scale without needing the initial upfront costs because you have locked in your eCPA.

I have spoken about the Monetization Wheel, but thinking outside the box it’s time to review some unique business models.

-Wearing Shirts
-Hosting a Monthly Event
-Crowdsourcing
-TechVideo Series
-YouTubeMillionaire

I Wear Your Shirt – Talk about an awesome Job! You wear t-shirts, talk about companies, and focus on promoting yourself and your clients brands online through social media. Iwearyourshirt started out as $1/day on Jan 1st and $365 on Dec 31st growing by $1/day during the year. Now there are 5 Iwearyourshirt people so it’s $5/day and grows to $1825/day. I got the chance to meet Jason Sadler at SXSW who is not only awesome but killing it with model and additional models like monthly sponsors, etc. uBlanket is actually going to be on Iwearyourshirt so keep a eye out on July 8th

Meetup Group – Paid Meetups are nothing new, but could you make a living with it? Depending on how you structure the content and sponsorships, you could. For example, say you hold a meeting once a month and get 200 people. You get a sponsorship for the venue, food, and some other clients (e.g. supports of your meetup like salesmen for a product all your attendees could use). So $20 x 200 = $4000 just for the cover at the door. If you lock in some exclusives you could get that up to $5k or $10k depending on other special events. Not a bad way to make a salary by hosting 1 event a month!

As for an example, although it’s not via Meetup, Graham Lawlor hosts ultralightstartups – It’s really inspiring and amazing to see someone help the NYC startup community as well as have an opportunity to build up a self sustaining business around the monthly event, which is now also being done simultaneously in Boston. He is killing it with video streaming and twitter voting! I am really excited to see whats next for Graham with UltraLightStartups.

Crowdsource a living – There are plenty of new websites to not only leverage a simple skillset (fiverr) but also leverage real talent such as ideas for products with Quirky. Design skills either spec work like 99designs or Brandstack or real design skills posted up on ThemeForest.Net. There are plenty of other crowdsource ways to make a living, but just wanted to mention it.

TechVideos Series- Take a look at Peepcode, they are creating niche videos and charging a flat rate per video or a yearly subscription. In addition to the subscriptions, Peepcode has company payment plans so if you have 3 developers, you can buy once and show to all 3. Finally a way for a company to make money even when it’s being passed around internally. Okay, so what are these videos. Just think of any technical topic relating to development and it’s either been created or in the works. Okay maybe not that granular, but all the hottest topics in development focused around Ruby on Rails such as using git or Rspec.

YouTubeMillionaire – Yes they exist and you would be surprised at WHO is making a killing. Some comedians do well with this model where you have a $0.10 CPM but the video gets over 4MM views so that’s $400.00 now do that 5 days/week for a year and that’s over $100k! The most interesting niches especially on YouTube to watch and see millions of views is Starcraft cometary (H 2 the usky) and even applying makeup. These two niches are a perfect example of someone who enjoys something as a hobby and then show’s how to do what they do in a free environment but now with paid advertisement they can make real money with their knowledge.

Any other unique business models that you have seen or like? Post them in the comments below

The 3 wheels of Startups are the following:
1) Recommendation Engine
2) Sentiment Engine
3) Gaming Mechanics

From my recent trip to SXSW, I saw a LOT of gaming mechanic based companies so with that let’s dive into a couple of billion dollar companies that are killing it and leveraging this 3 wheel approach to startups.

1. Recommendation Engine
Take a look at Amazon – People who buy also bought… Do I need to say more?
Take a look at Netflix – Others watched or we recommend
Take a look at LinkedIn – You may know this person – Sometimes a bit creepy (Just saying)

You could also say social or add friends component could also be part of this recommendation engine, but it could also be used for the other 2 parts of the wheel as well.

2. Sentiment Engine
Tracking Positive/Negative Feedback – Brand Monitoring – So Radian6 wasn’t a billion dollar exit, but still 10x revenue!
Customer Support – Zappos & Comcast – There have been so many stories relating to how customer support and social media has played a role. I know in my life I strive to fully understand and leverage it for my own personal life such as (wrong time’s posted on @thehartford) or speed issues with @twcable_nyc

3. Gaming Mechanics
How many sites do you vote on? Digg, Reddit, Facebook Likes, OMFG! SERIOUSLY!
Zynga + Facebook = $$$ – Seeing how Zynga was a Parasites to Facebook in the Gaming world is a post within its’ self, but there is a LOT of money to be made with 600 Million people!

P+P = Player + Player (Help Each other)
P-P = Battle (Target Leaderboards and wins/loses)
Thinking of players and games did you know that NGMoco sold for $400 Million

Hashable = P+P & P-P (leaderboard and connections) – If you network and DON’T use this, WTF! My hat is off to them and they are going to be the ones who solve or come close to a personal CRM system.

Okay, so games are HUGE and Seth Priebatsch from scvngr did a keynote at SXSW where Twitter and Foursquare got their initial break through.

The 3 wheels of Startups (Recommendation Engine, Sentiment Engine, and Gaming Mechanics) are very powerful and can lead to some nice exits as well as funding opportunities. If your business doesn’t have any of these 3, start thinking or contact me. As an entrepreneur or even a business owner you NEED to leverage these 3 wheels of Startups to explode your business.

The US Government requires small business to verify citizenship with all the employees they hire. I have not hired any full-time/part-time workers yet, but it’s something that is going to happen sooner rather than later. You would think that it’s the governments job to monitor and enforce this.

In addition, I find it amazing that the US people are not screaming and all up in arms. Seriously, being a small business owner (one man band) I get all these tax benefits that a w2 (a JOB) doesn’t get or even better. Imagine for a second you are Warren Buffet’s secretary. You are taxed MORE based on % than Mr. Warren as he is in the upper bracket. This is just like how small business owners can get tax savings and jump into these tax loopholes to get perks like a hummer for half the price (car that is).

You would think it would be in the Governments best interests to keep taxes as simple as possible, but from a # of jobs I guess it’s not. Just look at H&R Block, that whole business would not exist if it was for a flat tax.

Even better, income tax didn’t exist until 1913! Imagine a time when you DIDN’T have 1/3 of your income go toward government. How did the government make money? Since the US produced so many products we could tax them outgoing. Now the US seems to only build virtual products (Facebook, Google, Twitter) there are no physical products anymore, they must tax just to make money. UGH!

From my own experience having a product that is very niche can be tough, especially if it’s NOT yet a buzz word. When I worked on SEO Drop and built out various SEO tools, most people would say what’s SEO? That’s like a shotgun to the face. So then you explain SEO.. and then your product.. and you still get blank stares! It is amazing but, many people still have no idea what online marketing is. So although you have a product that almost everyone needs, if they don’t get it or have a need for it, you are wasting your time.

Now fast forward. Imagine a product that everyone understands. Let’s pick on paypal for a second. Paypal allows you to process and take money for your business (simple in theory and very very important). Okay, but how about setup/support/etc. Well…. This is where customers pitch you and ask for features, shopping cart, subscription billing service, invoicing, etc. Business have a need to bill people (need to make money, right twitter?). So Paypal can get all of these great ideas and execute a few of them, right? Well that’s how it SHOULD happen, but in most cases it doesn’t. Also keep in mind what people ask for and want are sometimes two different things.

So, ask your customers! The next time your at a networking event pitching your business, ask yourself- are your customers pitching you? What new features are they asking for?

The problem is in order to learn you need to push the envelope and failure comes with innovation, just ask Edison. You learn more by failures than by success because it sticks with you. You can also test things that could lead to a big break through.

You don’t want to fail in a job, right? But in order to compete, you have to take chances. Some times you win, sometimes you lose, but you at least took a leap.

Now let’s flip it around.

Say you never fail. Say all the projects you work on are on time, under budget, and just work. Are you a god-like person who could never fail? But then by not failing are you not trying to push that envelope.

The main difference between the two is planning and knowledge. You can plan and read all about riding a bike, but you won’t have experience unless you get on that bike and ride. Same with projects, you can read case studies and build out the project, but if you are working in a field that you have no understanding or technical understand you are up a creek without a paddle. Knowledge and planning can make the difference of having a project go off without a hitch or falling on your face. So although failure comes with almost anything you do in life, if you plan and learn from your mistakes you can go far.

The most interesting thing about this model is if you look at media budgets. For example, the Superbowl is coming up and companies like Pepsi, Coke, Budweiser, etc. will spend millions on seconds of television advertisement. These campaigns are more focused on branding or maybe even actionable like buying a domain on Godaddy to see more hot chicks. Rather than spending all that money on branding, you could spend it in terms of savings for a customer. You are basically saying here is $25, go buy something from our store. The goal is to get them to spend more then $25, hopefully $50 to make back that money or break even if you have a 50% mark up.

Now that we understand LTV, let’s take a look at a monitization wheel. You need at least 2 products, sometimes 3 to get started. The first product should either be free or dirt cheap (less than $30). If you are doing 3 products you give one for free as a $X value. This will be your giveaway product to incentives potential customers to give you their first name and an email address. Once you have that you can then try and upsell them or pitch your front-end product, something to get them to pull out a credit card and use it. This establishes a pricepoint with them. So if you have another front-end product you could sell it for the same amount as they have already confirmed they would be willing to buy something at that price.

Now the backend product, this is your cashcow. You set the price on this really high, like 100x or 1000x your front-end product price. The goal is sell a few of these a month.

In order to create the monetization wheel you need to get affiliates to pitch and sell your front-end product as much as possible. You should offer a high 80% or 90% of the price to the affiliates. It can even be a lost leader by offering 200% of the price where you are losing money. Why? You make it up with your backend product. This will accelerate the building of your customers and you can leverage that LTV by knowing and adjusting the front-end product affiliate payment. Keep in mind that your affiliate payout on your front-end can make or break you depending on the sales an the backend.

Math time:

Product A) Free -> Lead capture Name & Email
Product B) $20 -> Front-end to get a paying customer
Affiliate for Product B) $19 -> Pay them $19 for every $20 they make you, so $1 profit
Product C) $2,000 or $20,000 -> Backend-end Cash cow product.

How is this a wheel? You rinse, wash, and repeat.
You have to release new products all the time and get customers to continue through your “system” or wheel. Or better yet, expand your market and just try and find new customers over and over again who have NEVER heard of you or your product!

Product D) Free -> Lead capture Name & Email
Product E) $20 -> Front-end to get a paying customer
Affiliate for Product B) $19 -> Pay them $19 for every $20 they make you, so $1 profit
Product F) $2,000 or $20,000 -> Backend-end Cash cow product.

This process repeats ALL the time in Internet Marketing. People want to BUY themselves a solution or system to MAKE MONEY. This is bad, but when you think about a business that offers REAL value and something that people WANT, it works as well.

Now take this same philosophy and apply to SEO and how you could automate your lead generating using SEO.

Well there are many directions and most of them depend on the idea, but here are a few frameworks/sites that you should keep in mind when getting started.

Initial Idea
WordPress – Blogging/Website Software
Themeforest.net – Design/WordPress Themes
PayPal – Simple way to get paid

Legal
LegalZoom

Accounting
QuickBooks

Hosting
HostGator
DreamHost

Newsletter
MailChimp
aWeber

eCom:
BigCartel
Shopify – Online Shopping Cart/eCom platform
Magento – eCom/Shopping platform/Cart
ShipWire – Dropshipment
RocketShip.it – API for UPS and other shipping services

Google Apps
Google Apps
Google Analytics – Track your online visitors
Google Adwords – SEM/Online Marketing

Online Marketing
Facebook Ads
StumbleUpon

Others:
FreshBooks
ChartBeat – Realtime Data Analytic
GoToMeeting – Conference Calls
GrassHopper – Get 8XX numbers and auto forward to cell phones, great for acting like a fortune 500 company

BTW, I have a podcast and ebook in the works as another 2011 goal of mine. It will be focusing on going from idea to business. More to come soon

Thinking about the process of idea to billions; I am just amazed at how betaworks is doing this and killing it.

The idea of building an idea for billions or failure comes in the form of 100 days and $100,000 also known as the Accelerated Start up.

The focus is to build out an idea and private network to test concepts and lock in a few wales or paid customers and maybe even hit that ramen profitable. This takes y-combinator to the next level if you have a team internally with the process/system for doing something like this. Creating a business the first time around is always hard, the second, third, 100th is a LOT easier. So by building a business that has the initial overhead (legal, accounting, developers) it’s a LOT easier to go from idea to product. The other benefit with having a $100,000 Accelerated Startup is your willing to put everything on the line because you can fail. Failure is an option and might be one where you can pivot and build a billion dollar company on the next go around.

So I know what your thinking, how do you get $100,00 Accelerated Startup when you have a job paying the bills or are unemployed. Take the same approach but outsource the process. This would require a technical entrepreneur as there are parts that need reviewing (e.g. code). Basically you focus on a $10,000 startup and outsource the development. So you take your idea, create some wireframes, initial business model, and hire a developer on odesk or even something like sourcepad and get a base system up and running. This should at least generate $1,000 in revenue over the next 100 days or you need to accept it as a failure. This is something I REALLY want to do more of as I have a TON of ideas and not enough time.

The goal of any business is to be profitable. The more investment and money you put in the harder it is to turn a profit. So start with what is free and move towards improving it over time. Ask yourself along the way, do I really need this? Do you really need to spend $10,000/month or can you start with $1,000 and use the $9,000 to build a better website.

I have started to think about idea to business in the following terms:

Idea – $1k
Basically you need some initial capital to get things up and running, like hosting for a website. Focus on free or very cheap things to get up and running. For example, do you need credit card processing using authorize.net or can you just get started with paypal?

Ultralight – $10k
You have made a few sales and friends/family are using this product. Now it’s time to invest a bit more into the infrastructure. Use a real shopping cart and credit card system. Increase your marketing budget and process. Invest in things that will save time or lower costs.

Paycheck – $100k
Congrats, you now have created a job for yourself, but is that what you want? Although you could have taken on angel/VC money and reached this point too. Either way, you have gone from idea to business and it’s time to put your head down and create jobs and become Oprah rich

Small Business – $1MM
You have multiple employees and have carved out a niche for yourself. It’s now time to see how fast you can maintain your growth. The niche you may be in could be reaching a limit or you could be facing competition. Always focus on optimizing and innovating in your space. Even if it’s too ahead of the curve, you will have those cash cow products that will still cover the paychecks. You will want to repeat this process of Idea to Small Business to reach a Corporation. Build a culture/environment that will innovate and maintain steady growth without reaching a death or burnout when it comes to working.

Corporation – $100MM
You have built out yours or coworkers ideas multiple times and now have a business that is being featured everywhere. It’s time to focus on maintaining your core employees. Remember most corporations BIGGEST assets are PEOPLE. Everyday these people walk in and out of your office and every night you HOPE that they come back the next morning.