The Value of Experience in Entrepreneurship Ep 541

Summary Notes


In a comprehensive guide to entrepreneurship, the speaker outlines a strategic approach to choosing and scaling a product or service. They categorize all sellable items into seven groups, each with physical and digital versions, such as products, services, access, attention, risk, money, and endorsements. The speaker emphasizes the importance of leveraging personal experience and industry knowledge when selecting a product to sell, considering the entrepreneur's resources and ability to provide value. They introduce the "delivery cube," a six-faceted framework to enhance a product's value and profitability, which includes delivery methods, support levels, consumption modes, speed and convenience, and pricing strategies. This model helps entrepreneurs identify their optimal product offering, balancing ease of sale with fulfillment challenges to drive business growth.

Summary Notes

Personal Experience with the Problem

  • Direct personal experience with the problem is highly recommended for those new to entrepreneurship.
  • Having been that person, you have a clear understanding of what is desired in the market.

"You either have direct personal experience with the problem that you're trying to solve, which is if you're new to this would be one of my strongest recommendations because you probably aren't going to be able to guess what people want."

This quote emphasizes the advantage of solving a problem you have personally experienced, as it gives you insight into the customer's needs and wants, which is particularly valuable for new entrepreneurs.

Building Successful Businesses

  • The goal is to build businesses worth owning and potentially scale them to a billion-dollar valuation.
  • The speaker shares their journey openly, wishing to provide insights similar to those of renowned entrepreneurs like Bezos, Musk, and Buffett.

"I'm trying to build a billion dollar thing with I always wish Bezos, Musk and Buffett had into their journey, so I'm doing it for the rest of us."

The speaker is sharing their entrepreneurial journey in an effort to offer guidance and inspiration to others, aiming to emulate the success of famous entrepreneurs by building a significant business.

Entrepreneurship Lecture Insights

  • Speaker A recently gave a guest lecture at the University of Texas on entrepreneurship.
  • A common question from students was about selecting profitable products to sell.
  • The speaker plans to explain their approach to picking products and scaling a business profitably.

"Last week, I gave a guest lecture at University of Texas on a class in entrepreneurship, and the common question that I got in this aspiring group was, what do I sell and how do I make it profitable?"

This quote sets the stage for the speaker's expertise in entrepreneurship and indicates the primary concerns of aspiring entrepreneurs, focusing on product selection and profitability.

The Seven Categories of Saleable Items

  • There are seven fundamental categories of items that can be sold, with both physical and digital versions, totaling 14 types.
  • The speaker categorizes all saleable items into these categories for mental organization.

"The first thing that I want to start with is the only seven things that you can sell. And there's digital and physical formats of each of these things, which actually give you 14 different things you can possibly sell as an entrepreneur in general."

This quote introduces a framework for understanding the range of products an entrepreneur can sell, divided into seven core categories, each with a physical and digital version.

Detailed Breakdown of the Seven Categories

  1. Products

    • Physical products like water bottles.
    • Digital products like PDFs.
  2. Services

    • Physical services include massages, lawn mowing, or car repairs.
    • Digital services include ad creation, media buying, and software development.
  3. Access

    • Physical access like leasing a building.
    • Digital access like a subscription to Netflix.
  4. Attention

    • Physical attention through mediums like billboards.
    • Digital attention sold by platforms like Facebook and Google.
  5. Risk

    • Physical risk such as insurance for tangible assets.
    • Digital risk like cyber threat insurance.
  6. Money

    • Physical money involves banking and interest rates.
    • Digital money includes cryptocurrencies.
  7. Endorsement/Brand

    • Physical endorsements like logo usage on merchandise.
    • Digital endorsements like selling verified checkmarks on social media.

"So there are unlimited things to sell. These are just how I bucket them mentally, personally."

This quote explains the speaker's personal method for categorizing saleable items, suggesting that while there are countless items to sell, they can all fit within these seven categories.

Application of Categories to Real-World Examples

  • The speaker encourages thinking about how various items or services fit into the seven categories.
  • Using the example of a rock concert, which fits into the category of access to an experience.

"So I had somebody the other day be like, what about a rock concert? That is access to an experience, right?"

This quote demonstrates the practical application of the seven categories to real-world examples, illustrating how even specific events like rock concerts can be categorized within this framework.

Starting a Business with Limited Capital

  • Starting a business with only $100 is likely to preclude physical and digital products, leading to service-based business models.
  • Selling time through services is a common starting point for those with limited capital.
  • Established businesses with capital can venture into selling money (finance) or insuring risks.
  • Selling risk can be equated to providing insurance or paid guarantees for products or services.

"Now, that would probably preclude you from most physical products, probably most kind of digital, like, software type stuff. And so most of the time, you're going to start, likely with some sort of selling your time, which is often services if you're starting out."

This quote explains that with a limited budget, one is often restricted to offering services rather than products due to the high costs associated with product-based businesses.

"You can't sell money unless you have money, right? You can't insure risk unless you have enough capital to show that you can cover the cost of the thing that you're insuring."

This quote highlights that certain business activities, such as finance and insurance, require substantial capital to begin and are not suitable for those with limited funds.

Choosing What to Sell

  • The decision of what to sell should be based on available resources, skills, value, and experience.
  • The goal is to find the person or market segment to whom one can provide the most value.
  • A combination of product categories can be offered, such as physical products and experiences at an event.
  • The 'sweet spot' is providing maximum value for the least cost relative to the entrepreneur's current financial resources.

"Figure out the person you could provide the absolute most value to."

This quote emphasizes the importance of identifying the target customer who would benefit most from the entrepreneur's offerings.

"Now, you might record it and then also sell the digital versions of that."

This quote suggests diversifying offerings by combining different categories, such as selling both physical experiences and digital products.

Leveraging Past Experience

  • Y Combinator emphasizes the importance of founders having past experience in their chosen industry.
  • Even first-time entrepreneurs have indirect experience through family, upbringing, or odd jobs.
  • This experience can be directly related or adjacent to the industry of interest, providing a competitive edge.
  • Understanding personal experience helps in addressing problems with more insight and effectiveness.

"One of the things they look for is past experience in the industry."

This quote indicates that having industry experience is a valuable asset for entrepreneurs and is something that incubators like Y Combinator look for.

"So I know a lot of stuff about eyes. So if I wanted to get into a space, that would be a category of stuff that I actually know a lot more about than you might expect."

This quote exemplifies how personal or familial experience can provide unexpected knowledge and advantages in a specific business domain.

"I've also been in the kitchen there, so I saw some of the inefficiencies there that I could probably solve."

This quote illustrates how hands-on experience in a job can reveal insights and opportunities for improvement that could be the foundation for a business idea.

Business Growth Strategies

  • Discusses the potential for business owners with established businesses to scale up to substantial revenue figures.
  • Emphasizes the importance of prior experience or proximity to an industry when considering entering a new market.
  • Highlights the significance of leveraging existing knowledge to reduce the learning curve in a new industry.
  • Suggests evaluating problems that one is best equipped to solve, considering personal experience and available resources.

"Are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we would love to talk to you"

This quote is an invitation to business owners aiming to significantly scale their businesses, indicating the speaker's interest in assisting with such growth.

"And then you can transfer the experience that you had there to the new thing because there's a lot of ignorance, debt of stuff that you don't know about."

The speaker emphasizes the value of transferring existing experience to a new industry to mitigate the lack of knowledge and steep learning curve associated with entering a completely new field.

"Is there any one of these that I already have a little bit more experience with? And then of those things, which problem is the biggest that I think I can solve given the resources that I have access to?"

This quote suggests a strategic approach to business growth by focusing on industries where the entrepreneur has some experience and identifying the most significant problems they are equipped to solve.

The Easy to Sell, Hard to Fulfill Continuum

  • Introduces a conceptual continuum to evaluate products or services based on their ease of sale versus difficulty of fulfillment.
  • Encourages thinking about where a product or service fits on this continuum to find a balance between sales ability and delivery capability.
  • Suggests that finding the sweet spot on this continuum is crucial for driving profitability and scalability.

"What I want you to think with is what I call the easy to sell, hard to fulfill continuum."

The speaker introduces a framework to assess products or services based on the ease of selling them versus the difficulty of fulfilling them, which is critical for strategic business planning.

"On the flip side, man, that's not delivering very much, which makes it significantly harder to sell."

This quote underscores that products or services that are easy to fulfill but offer little value are challenging to sell, highlighting the need for balance in the continuum.

The Delivery Cube Framework

  • Introduces the 'delivery cube' as a framework with six aspects to consider when creating a product or service.
  • Discusses different delivery methods: one-to-one, small group, and one-to-many, each with varying value propositions.
  • Covers the spectrum of product delivery from do-it-yourself (DIY) to done-with-you (DWY) to done-for-you (DFY), with implications for scale and value.
  • Explores the level of support and medium of support (chat, email, phone call, Zoom call) as factors influencing scalability and customer service.

"The delivery cube has six pieces to it, and they work like this."

The speaker introduces the 'delivery cube' as a mental model to evaluate different aspects of product or service delivery, which impacts scalability and profitability.

"Each of these have different value propositions that are associated with them."

This quote highlights that different delivery methods offer unique value propositions, which should be considered when determining pricing and scale.

"Do it yourself diy dwy, which is done with you, as in you're holding their hand through the process of whatever it is you're doing or done for you, where you do all of the work yourself and you sell them a final product or final outcome."

The speaker delineates the spectrum of product service delivery, from DIY to DWY to DFY, each with different levels of involvement, value, and scalability.

"What level of support am I going to do and specifically on what medium?"

This quote prompts the consideration of the type and medium of support provided with a product or service, which affects scalability and customer satisfaction.

Availability and Perceived Value

  • The value of a product or service can vary based on the availability of the person providing it.
  • Real-time availability often increases perceived value.
  • There is a contrast between high availability and the value it brings versus limited availability and potential decrease in value.

"ly less valuable than somebody who's real time available to hop on a zoom call whenever they want."

This quote emphasizes that a person who is available in real-time, such as for a Zoom call, is perceived as more valuable compared to someone who isn't readily available.

Consumption Methods

  • Different modes of consumption include visual, audio, live, recorded, and text.
  • Live and in-person experiences are generally seen as more valuable but less scalable.
  • Recorded and digital formats offer the most scalability but are perceived as less valuable.
  • The balance between scalability and perceived value affects pricing.

"Anything that's live is typically going to be perceived as more valuable. And if it's in person and live, probably the most valuable and probably the least scalable."

This quote suggests that live and in-person services are seen as the most valuable form of consumption, highlighting the trade-off between value and scalability.

Speed and Convenience of Delivery

  • Delivery speed and convenience impact value.
  • Considerations include hours of operation, days of service, and response times.
  • The extremes of service levels range from overstaffing for customer convenience to maximum staff utilization.
  • Companies have found success at both ends of the spectrum.

"The fifth lens of the delivery cube is the speed and convenience of whatever we're delivering."

This quote introduces the importance of how quickly and conveniently a service or product is delivered, which is a key factor in determining its value.

The Ten X to One-Tenth Test

  • This test challenges one to think about how to increase the value of a product or service tenfold or maintain value at one-tenth the price.
  • It encourages innovative thinking for enhancing value or reducing costs.
  • The exercise helps identify new solutions and strategies for product or service improvement.

"If I charge ten times more for my current thing, what would I have to change about my thing that I sell in order for it to be worth ten times more?"

The quote illustrates the concept of the Ten X test, which is about reimagining the value proposition of a product or service to justify a significantly higher price point.

Scalability vs. Value in Business Models

  • The "easy to sell, hard to deliver" continuum is a concept that helps in deciding business models based on scalability and value.
  • Most scalable options may not fetch a high price due to perceived lower value.
  • Labor-intensive, personalized services are easier to sell at a higher price due to perceived higher value.
  • The balance between the number of employees, scalability, and value is crucial for business strategy.

"That is the easy to sell, hard to deliver continuum, where if you choose the most scalable version of this, you could have no employees and sell tons of units, but it would be very difficult for you to get a good price tag because the value might not be there."

This quote discusses the continuum of scalability versus value, indicating that highly scalable models may struggle with pricing due to lower perceived value.

Applying the Delivery Cube to Business Strategy

  • The Delivery Cube is a conceptual tool used to strategize product or service offerings.
  • It involves considering various aspects of delivery, including consumption methods, availability, speed, and value enhancement.
  • The cube helps entrepreneurs and business owners make informed decisions about what to sell and how to scale their offerings.
  • It also aids in determining the internal resources needed to support different levels of value.

"And so when I'm thinking through each of these things, I'm ticking off how I want to support each level of value within the thing that I'm selling."

The quote conveys the process of using the Delivery Cube to evaluate and plan the support for different levels of value in a product or service, which is an essential part of business planning.

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