We go beyond the lean startup method pioneered by others. Our Zero-Based Approach to Entrepreneurship does not ignore this method, but rather incorporates lean startups into a larger framework for building that has worked especially well in producing durable businesses in a resource scarce environment. Through this framework we have come to realize the benefits of this deeper approach.
Zero-Based Entrepreneurship gets its inspiration from Zero-Based Budgeting, an accounting method whereby each and every line item in a budget is reset to zero on an annual basis. When this is done, each of the expenses added back from the zero point have to be fully justified, eliminating carry-over expenses from prior years that are not helpful to the overall business goals. Zero-based budgeting by its nature is detail oriented and can’t rely on blind assumptions and blanket increases. It is certainly done with the assumption that nothing is sacrosanct. It is time-consuming, but favors direct results nevertheless. The advantages are very flexible budgets, greater focus on operations and impact, lower costs, and more disciplined execution. There are downsides in that it takes more time and intensity to implement and it tends to bring the focus to the short and medium term.
Our founder, Eric Mathews says that “entrepreneurship is the art of subtraction and not addition” and this method is living proof, our philosophy at work. Here is how we go about Zero-Based Entrepreneurship at Start Co.
The Method:
- We focus holistically on the startup, taking into account all aspects of the foundations of business without making assumptions or taking assertions at face value. We look at operations, team, legal structure, disciplines, product, customer base, key technologies, unfair insights, and much, much more.
- We ask founders to begin from scratch, without preconceptions or existing models to guide. If we don’t understand, we continually ask more questions to ensure we understand. In practice for early and idea stage businesses, it means more customer and market discovery. For later stage companies, we ask them to detail out the business thoroughly through a series of dig in sessions.
- The process helps the startup uncover their core capabilities, systems, and processes — the zero point or foundation of their business. It also may uncover some challenges that need to be addressed.
- We then shift their trajectory to an ideal state using lean, iterative sprints of customer and market discovery, iterative delivery and testing, and finally, production of a growth engine for scaling with revenue and financing.
As Eric also likes to say, “Every design choice has a positive and a negative.” The Advantages of this method are that we build very flexible companies with a great amount of focus on operations and impact, lower costs of starting up, and more disciplined execution. The Disadvantages of this method are that it takes more time and intensity to work this way and it tends to bring more focus to the short and medium term rather than the long term of the business. We believe that the benefits of zero-based entrepreneurship justify the intensity up front in that in the long term, more durable businesses are built.