Options are power
Life is about having choices, or making it so you can have multiple choices to avoid getting blindly led.
Last week, I read Jason Fried's essay about business independence called "Achieving optionality". Jason defines "optionality" as "a hearty mix of profit margin, small size, independence, attitude, and freedom", so basically, everything that reduces your independence, reduces your optionality. If someone decides for you, you have fewer choices.
Essentially, most businesses can't have (much) optionality because they run on credit, or have taken investment, or have boards, or all of them. Jason doesn't mention dependency on clients but I assume that agencies can see their optionality compromised by depending too much on one client. Jason has tens of thousands of small clients because he runs SaaS-based businesses, so he would have to lose a truckload of them to see his optionality reduced.
In a couple of times in the life of MarsBased, 50% of our revenue or more depended on just one client. Once, it was as high as 73%. While that didn't directly limit our choices, it could have done it, so I guess that dependency on clients might limit your optionality if you can't compensate it with having enough cash in the bank, fat margins or other ways to increase your independence.
I have been advocating for bootstrapping as a way to run healthier businesses not only because you don't have to run like a headless chicken but also because not everyone can endure VC-backed businesses or, damn, regular businesses.
If I had to borrow 50 euro from a friend to pay for dinner because I had forgotten my wallet at home, I couldn't go to sleep without giving the money back. How could I raise millions of dollars to run a business knowing that I might have no way of returning them?
By leading MarsBased for ten years, I have found that bootstrapped businesses are better suited for some kinds of neurodivergent founders. I have written about Slow thinkers and how the culture of immediacy is the enemy of quality.
We have been able to do whatever the fuck we wanted to do because we've had optionality. We have been able to run all remote without an office because we've had optionality. We have been able to host 150 Startup Grind events and three international conferences because we've had optionality. We have been able to devote thousands of hours to creating content on our blog, podcast and newsletters because we've had optionality. We've also done our fair share of open source, visited international conferences, sponsored other events and given a lot of stuff for free - because we've had optionality.
I would argue that our optionality, some might say, is limited because we only have one business. If that goes down, so do we. We don't have eggs in other baskets.
Maybe we don't need other baskets. And that, too, is optionality.
Ultimately, this model is incompatible with most startups, but even if you have investors and all that jazz, you can try to create more optionality in the future. You can buy back the company, repay loans, let go of your board, focus on margin and profit before growth and, generally speaking, reducing risk.
Now, the real challenge is: how and when do you start building optionality as you grow a business? How do you measure it? What part of it is intentional and what isn't?
These questions aren't for me to answer right now, but I'll happily read your take on this subject if you reply to this email and let me know!
Interesting, useful & weird stuff
- Jason Fried's "Achieving optionality" in written form and also as a podcast episode.
- My blog post "Immediacy is the enemy of quality".
- Derek Sivers' "Here’s how to live: Be independent".
- Vercel's V0 is awesome. Haven't tested it much yet but check what it can do.
- Tutorial to build an AI assistant that takes meeting notes for you and sends them over Slack.
- Bohemian Rhapsody (rubber chicken version).
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Thanks a lot. Big announcement on the next one, so stay tuned.