“Plainly Put

Kemmerer, Wyoming, was a coal town in 1902, and most of its miners bought what they needed on credit at the company store. James Cash Penney opened a dry goods shop there that April, as a partner in a small chain called the Golden Rule, and sold only for cash. Prices were lower because there were no bad debts to cover.

Seth Godin’s The Dip says winners quit the right things at the right time, and Poland makes that moment easy to postpone: six months free of social contributions and two years of reduced ones leave almost nothing outside a founder to force a verdict, so the sum, the date and the number that has to move are best written down before the first loan, from a bank or from Avinto.

Jobs said this to The Wall Street Journal in May 1993, at a low point. NeXT, the company he started after being pushed out of Apple, had just stopped making the computers it was founded to build, and several senior people had left. The remark reads less like a rich man’s modesty than like a founder explaining why he was still at it.

A price is close to right when customers grumble about it and keep paying. The rule is widely attributed to Paul Graham, the essayist who co-founded Y Combinator, though no published essay of his contains it. Founders tend to set prices low out of fear, and the test only works where buyers are free to walk away; locked-in customers who complain are measuring their captivity.

Running out of money ends every argument inside a company, and David Heinemeier Hansson has long argued for skipping that lesson: 37signals has sold Basecamp to paying customers since 2004. The trouble with learning from an empty account is that it comes too late to act on. A monthly cash forecast with a zero date gives the same clarity while the choices are still open.

David Cohen co-founded TechStars in Boulder in 2006, a program that gives small teams a little money and three months of intensive mentoring. His advice here is aimed at founders who spend their early months chasing investors. The line is credited to him in startup collections; the conversation it came from has not been traced, but it fits the advice collected in Do More Faster, the book he and Brad Feld published late last year.