Starting Up : Define Ramen Noodles : Ramen Profitable
Paul Graham coined the term Ramen Profitable, as in having enough profit to live on a Ramen Noodle diet/lifestyle. He gives many reasons why a startup may want to become Ramen Profitable as soon as possible, including: “The main significance of this type of profitability is that you’re no longer at the mercy of investors. … The most obvious advantage of not needing money is that you can get better terms.” Paul is a startup adviser (product) and I deal with services (consulting) -the business models he profess are slightly different from my area of expertise — yet, the advice holds true in either case: if you do not have a revenue that is higher than your expenses, you will have a harder time taking your business, company and/or practice to the next level: you will become vulnerable to the idea of full time employment. In a previous article I express that Cash is your most valuable tool, yet cash doesn’t last forever: at some point you need more. You should get Ramen Profitable as soon as possible.
As with many things in life, this seems easier said than done. You essentially have two ways of attacking the problem:
- Spend less. Seems obvious and futile at the same time, yet important. If you can’t find a way to reduce your monthly expenses to a couple thousand dollars (after taxes), you may not be very well prepared for the independent or startup life. Don’t think it is impossible, even if you are older and have kids. Prepare while you still have a job: pay off the car — those $500/month could become handy once you do not have a job -, rent the extra, empty room in your McMansion and be sure to pay off those credit cards that you should have paid off even if you wheren’t going independently. Yet, there is some futility to it: there is a point where it becomes way too uncomfortable to reduce the expenses (as in, when you can’t pay for your own medical insurance, for example). That is when earning money comes in.
- Earn more. You are the expert in your area: that is why you launched or will launch your business. You should know how to do this one, do you? In reality it is more complex. I can attribute success in this area to many things, but two jump out of my mind: Know how to sell (getting your hands dirty in purist terms), and to offer surprisingly good customer service. The later is more intuitive than the former. Good customer service is exactly what you would like to receive, and then more: adhering to the golden rule, even above profit is the way to go here. As for knowing how to sell: that is not as easy as it sounds. Most of us are taught to dislike salespeople. While there are hundreds of books out there that may help you sell, I find that selling is a natural skill that modern society has taught us to dislike. We are constantly selling ideas, trying to convince people to go to an event or to eat at a restaurant or to visit us. Yet, as soon as there is the mention of money, people try to distance themselves from the idea. Selling is just something that has to be done: repeatedly, until you get it right: maybe more often than you would like to.
Thanks a lot to Adventures in Open Source for the pointer to Paul’s website. There is a wealth of information to be learn on Paul’s website, some of which I have only started to read just now.