Rework, by the founders of 37signals, explains that it's easy to start your own company.

Innovation, the Internet, gadgets, and more.
March 25 2010 4:59 PM

It's Easy To Start Your Own Company

The new book Rework tells you how.

Illustration by Robert Neubecker. Click image to expand.

Jason Fried and David Heinemeier Hansson are two of my favorite guys in the tech industry. That's mainly because they have little in common with everyone else in the tech industry. Their 10-year-old company, 37signals, makes Web software for businesses. These products are universally hailed as simple, elegant, and useful—not to mention extremely popular and profitable. Yet 37signals' software often seems like a byproduct of a larger mission. On Signal vs. Noise, their entertaining company blog, and in lectures and classes all over the country, Fried and Hansson sell a particular capitalist philosophy: You, too, can start a successful business. Now they've distilled their wisdom into Rework, a small manifesto on the art of launching and running a company in the Web age. If you've ever thought of starting your own business, consider Rework your recipe book.

Fried and Hansson make an obvious point that's nevertheless worth emphasizing: The Internet has dramatically reduced start-up costs for new firms. This is particularly important for tech companies, but it applies in just about any industry. Say you want to start a wedding-photography business. In the old days, you might have rented an office or retail space to impress potential clients, bought newspaper ads to promote your company, signed up with a credit-card processor to accept payments, and spent a boatload on equipment and staff.

The Internet has reduced all these costs. Now you can impress clients with your Web site, you can attract them through free Craigslist ads and on review sites like Yelp, and you can accept payments through PayPal. Customers can pick out their favorite photos online, and you can subcontract with a company in China to make custom, professional albums that will be delivered by mail. In the past, you might have needed $10,000 to get your photo company up and running; now you can do it with a few hundred bucks.

Not only has the Web cut the financial costs of starting a business, it's also cut the lifestyle costs. Today "you don't need an MBA, a certificate, a fancy suit, a briefcase, or an above-average tolerance for risk" to make a successful go at a business, Fried and Hansson write. You don't even have to quit your day job or dedicate 60 hours a week to a new venture. If you can't afford all that, you can start a company on the side, from your house, in the time you'd otherwise spend watching TV.

Indeed, working only part-time on your new company might not be a bad idea. Among the many bits of received wisdom that Fried and Hansson smash in Rework is our culture's reverence for workaholism. "Workaholics miss the point," they write. "They try to fix problems by throwing sheer hours at them. They try to make up for intellectual laziness with brute force. This results in inelegant solutions." Instead of wasting time working harder, Rework suggests looking for smarter ways to get your business moving. For a software company like 37signals, this meant refusing to add too many advanced features to products—a decision that turned out to be enormously successful. Not only did this make it easier and faster to build software, but it generated exactly the kind of software that could attract paying customers. In fact, the main selling point for many of 37signals' products is that they do less than products from rival companies. Customers choose 37signals because they don't want bells and whistles.

Some of Fried and Hansson's ideas might seem too straightforward. When they tell you that failing in business isn't all it's cracked up to be, you might wonder why they needed to point that out—after all, who thinks failing is something to be proud of? Welcome to Silicon Valley. In many ways, Rework is meant as a rebuke to the ethos of the Web start-up scene. "Some people consider us an Internet company, but that makes us cringe," Fried and Hansson write. "Internet companies are known for hiring compulsively, spending wildly, and failing spectacularly. That's not us."

Fried and Hansson argue that traditional Internet entrepreneurs pay too little attention to what ought to be one of the main functions of business: making money. Too many Silicon Valley start-ups suck up millions from venture capitalists before giving their product away for free in an effort to attract a huge market share. Every once in a while one of these businesses wins the lottery—YouTube or Facebook will go public or get bought out by Google, and the founders will become billionaires. But more often these billion-dollar dreams don't pan out; for every YouTube, there are hundreds of VC-funded start-ups whose founders never make a buck.

Although it sounds like common sense, Rework's idea that businesses should seek out profits is thus kind of revolutionary in the world of Web software. 37signals doesn't care about market share. Getting a lot of customers is less important to them than getting a lot of loyal, paying customers. And taking money from investors is often more trouble than it's worth, Fried and Hansson say. When entrepreneurs take other people's money they begin to look to "cash out"—to look for a quick way to flip the company into a big-time payout—rather than try to build a sustainable business. And that, of course, leads to failure.

Sure, companies like 37signals that start small, eschew outside funds, and try to grow organically might never find a billion-dollar payout. But they're much more likely to reach another kind of success: making enough money for you to be comfortable without forcing you to give up control.

There's one other difficulty with looking for a lot of outside investment for your start-up—you might not get it, and then you might conclude that your idea isn't going to work. What I like best about Rework is its insistence that many of us build up mental roadblocks that limit us from starting something amazing. We think we need a lot of extra money or time or some kind of brilliant new idea before we can ever hope to start something great. But these days, for many people and many kinds of businesses, those constraints are easy to overcome. As Fried and Hansson write, "The most important thing is to begin."

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