Brad Hargreaves | Building Things

Brad Hargreaves on entrepreneurship, community and life


with 4 comments

There’s a common misconception about why people become entrepreneurs. In my chats with founders, I’ve seen that the most common driver — ahead of earning fantastic returns, working flexible hours or learning new things — is simply getting away from a bad boss, or bosses at all.

To those on the outside looking in, the world of startups looks like a boss-free paradise. After all, you can name yourself the CEO, or at the very least have control of a menagerie of roles in your business. Unfortunately, it’s usually not. That’s because someone — perhaps an investor, a customer or a partner — is almost always playing the boss role.

Truly bossless businesses are tough to find; they have to follow a few major constraints. First, they need to hit cash flow positive almost immediately. Without that, you’ll either need to keep your day job (and your boss) or take investment (and investors, which are a different kind of boss). With cash flow, you’re only responsible to yourself and your business. Second, they need to have tons of customers, even at an early stage. That way, each customer isn’t important enough to justify appeasing them. Ideally, each customer is spending such a small amount that their process of dealing with you is automated (in B2B) or your business supports high churn (in B2C). Finally, executing the concept shouldn’t require more than perhaps one or two trusted partners.

There are a few broad categories of businesses that meet these constraints, and I’m fascinated by each of them:

Affiliate Marketing / Lead Gen: This is probably the easiest vertical to get into, as it doesn’t necessarily require any technical skills. Anyone with some marketing smarts and a WordPress install can start generating affiliate revenue, and it doesn’t really come with any obligation to anyone — affiliate program managers are often at least one level removed from the publisher (you), and it’s trivially easy to switch from one affiliate program to another.

One of the beautiful things about many affiliate businesses is that the entrepreneur is also building long-term value — typically, in a targeted email list or site that ranks high in search engines on certain keywords. In that way, affiliate and lead gen businesses are also fundamentally different from (say) consulting, in which it’s tough to argue that the consultant is building long-term value in their business.

Arbitrage: An extremely broad category, “Arb” is big umbrella that could include online advertising arbitrage, proprietary equity trading or perhaps even certain types of e-commerce. But it’s probably the most common of all bossless trades, with a huge number of independent prop traders making essentially bossless livelihoods. The downside of any arbitrage-based business, of course, is that the opportunity can (and will) disappear — of all the businesses discussed here, arbs are building the least long-term value in their enterprise.

Software Sales: To fit the criteria listed above, software business require some engineering skills. But if you’re a hacker, there are few better bossless businesses. This is especially true on the B2C side, with gaming as a prime example.

Note that in some of these businesses — especially B2B software sales — there’s a fine line that prevents customers from becoming bosses, and many entrepreneurs accidentally cross over that line by doing custom work, failing to automate sales processes or relying too much on a few large buyers.

This stuff isn’t for everyone, but I think there is some inherent (particularly American) desire for freedom from people looking over you shoulder, setting deadlines and making demands. And to many of us, that freedom is being a founder. Just be careful what you choose to found.

Written by Brad Hargreaves

December 13th, 2010 at 9:19 am

  • dherman76

    I’m late to the party (post is already 3 weeks old) but thought I’d comment anyway.nnIf the company is ultimately extremely successful, the “founder” who left her previous gig because of having a boss will probably eventually have another boss.nnI think the most important part here is not to leave a company because you do have a boss, but to find a company where your boss is someone you can learn from and trust. A boss is not there to babysit, which is a misconception. A boss is there to mentor and grow a team. If you do not want to be mentored and professionally grown, then that’s a whole other issue one has to deal with.

  • annmariastat

    I’m curious about your assertion that consultants aren’t building long-term value. I own a statistical consulting company, doing statistical programming, research design and analysis. As a brilliant statistician once said, anyone who thinks he (she) knows all of statistics is clinically insane. The more work we do for a client the more value we have for them because we know more of the details and needs of their business. The more work we do, the more value we build internally as the larger our area of expertise grows. nnThis isn’t always true, I’ve found that, especially in government work, there is really a push from clients to hire consultants to do the same thing over and over, but I think if you are looking at the long-term picture rather than just getting the work easiest to pick up today, you will, as a consulting company, build long-term value.

  • Brad Hargreaves

    That’s a fair point. I think it comes down to how you define “buildingrnvalue”. Anything I do that teaches me something is technically buildingrnlong-term value, including working for someone else.rnrnIt’s not really scalable, though. Any value you build is inherentlyrndependent on your own time and effort — unlike, say, an affiliate marketer,rnwho is building value that can accrue while they are sleeping. Eitherrnworks, but this post is talking about the latter kind of value.

  • Pingback: You Can't Get There from Here()