We all forget too easily: the best startup funding is sales. Sure, angel investment, friends and family, SBA loans, all of those options are necessary for most startups. But sales is better.

If you can, find the early customers. Give them a deal, make them important, work with them to optimize their needs; but make a sale.

Even if you need to go out and find investment — and I speak now as an actual angel investor — there’s almost nothing as convincing as actual sales. People are spending money. It makes a new business proposal far more credible.

True, not all businesses can do that. But a lot of them can. And, as we write about business plans and seeking investment and all, we forget the real sweet spot: finance growth by making the sales.

The sun was coming out, just peeking through from behind the tall pine trees on the hill above my house, as I drove into the office this morning.  I’d woken up before dawn and gotten back on the computer.

Does my title to this post seem paradoxical? A twist on the old “the harder I work, the luckier I get” saying? Yes, but it’s also true. At least, and Thank God for it, it’s been true for me.

I’ve been sleeping poorly the last few weeks because I have three projects converging. I like all three.  I wake up just before dawn and instead of turning over and going back to sleep, I’m up. Because I’m excited about making progress.

And this is a good thing. Okay: not getting enough sleep isn’t that good; I tend to drag in the afternoons. But being excited about projects, waking up early because the work intrigues me: that’s a good thing.

Which reminds me that a lot of my entrepreneurship has been escaping boredom. We needed the money so I couldn’t not work, but I could determine what work was. The first time I went out on my own I left a good job because it meant supervising other people doing the work I liked to do, instead of just doing the work I like to do. In the maker/manager scale I wanted to be maker, not manager.

I built Palo Alto Software around business planning because I came to love software and business planning. So there it was: creating the company to create the job I wanted.

So the luckier I get, the harder I work. And I love it.

(Photo credit: by Bushman.K via Flickr)

I read it last weekend on the New York Times website. It’s about a new gadget site to be called GDGT starting this week, developed by founders of other gadget site successes. Get this:

Their new site, called GDGT, will open to visitors on Wednesday. It differs from Engadget or Gizmodo by aspiring to be a gadget-oriented social network. Users of the site can create profiles and specify which consumer electronics devices they have, had or want to buy. Then they can talk about those devices with other owners, discuss new trends and tips, and decide how and when to replace them. (Emphasis mine)

Granted, Twitter changes everything, Facebook too, and Ning is sensational. But please (that’s a three-or-four-syllable p-l-e-a-s-e) — when does this end. Are there infinite successful new ventures out there from just taking any common interest (like gadgets) and making them into social media sites instead? Isn’t there a saturation point?

Take my case; and I’m getting older now, I’m hardly the advance guard. But I have username and password for three of the obvious mainstream social media sites, plus groups including Entrepreneur.com, Smartups.org, asbdc.net, the Business Week social site, and several others I can’t remember.

And that’s the active phrase there: “several others I can’t remember.”

I love gadgets. My son-in-law Noah and I exchange links and such about gadgets all the time. But the last thing I need is yet another new site, with another new password and username, that I’m supposed to be checking for messages. Not that username and password are a problem — plenty of tools for that — but that’s just not going to happen. It’s not just logging in, it’s finding the time and inclination to log into all of these special sites.

And maybe it’s an overdose from my business plan marathon last Spring. Every other new business is building a new social media site to bring people together.

And I just don’t think that’s going to work. Build a group in Facebook, or a chat group in Twitter, or something else that uses the ties and links we already have. Don’t give us another social media site.

I like serendipity. Not just because the word sounds like a refreshing drink in the shade on a hot day, but because when serendipity happens, it’s always good. Here’s the Wikipedia definition:

Serendipity is the effect by which one accidentally discovers something fortunate, especially while looking for something else entirely. …

So I had a great Friday: a nice drive from Eugene to Portland on a bright clear sunny early summer day, then lunch with Pamela Slim (@pamslim on twitter) and the second half of her Escape From Cubicle Nation workshop, with me included for a short guest spot on business planning. Then dinner with Pam and friends.

So what’s the serendipity here? It’s a reasonable question. It’s not like I didn’t already know Pam through telephone and email, and a lot of twitter; so I knew she does an excellent workshop. No surprise there — it was. And maybe you already take this for granted, but for me, at least, an old guy, the process of finding the real people through the blogs and tweets is a very special thrill. I’ve never been that good at cocktail parties or networking. But, through the magic of this new world, I’m meeting new people, and loving it.

So on Friday, I met Pam and several of her good friends, fellow bloggers and tweeters. We had a dinner hosted by @chrisguillebeau of The Art of Nonconformity and his wife Jolie; and I also got to know Matthew Scott of The Strategic Incubator (@MatthewRayScott on Twitter) better. Matthew is a wealth of really interesting stories, wisdom of both the real and folk variety, and business experience.

So I’m reminded that there really is a social in social media. Or at least there can be. It might start with blog posts, and tweets, but over time, as you follow people’s work and share (podcasts, phone calls, other posts), you get to know real people. And, when you meet them, they are real people.

Every startup has its own natural level of startup costs. It’s built into the circumstances, like strategy, location, and resources. Call it the natural startup level; or maybe the sweet spot.

1. The Plan

For example, Mabel’s Thai restaurant in San Francisco is going to need about $950,000, while Ralph’s new catering business needs only about $50,000. The level is determined by factors like strategy, scope, founders’ objectives, location, and so forth. Let’s call it its natural level. That natural startup level is built into the nature of the business, something like DNA.

Startup cost estimates have three parts: a list of expenses, a list of assets needed, and an initial cash number calculated to cover the company through the early months when most startups are still too young to generate sufficient revenue to cover their monthly costs.

It’s not just a matter of industry type or best practices; strategy, resources, and location make huge differences. The fact that it’s a Vietnamese restaurant or a graphic arts business or a retail shoe store doesn’t determine the natural startup level, by itself. A lot depends on where, by whom, with what strategy, and what resources.

While we don’t know it for sure ever — because even after we count the actual costs, we can always second-guess our actual spending — I do believe we can understand something like natural levels, somehow related to the nature of the specific startup.

Marketing strategy, just as an example, might make a huge difference. The company planning to buy Web traffic will naturally spend much more in its early months than the company planning to depend on viral word of mouth. It’s in the plan.

So too with location, product development strategy, management team and compensation, lots of different factors. They’re all in the plan. They result in our natural startup level.

2. Funding or Not Funding

There’s an obvious relationship between the amount of money needed and whether or not there’s funding, and where and how you seek that funding. It’s not random, it’s related to the plan itself. Here again is the idea of a natural level, of a fit between the nature of the business startup, and its funding strategy.

It seems that you start with your own resources, and if that’s enough, you stop there too. You look at what you can borrow. And you deal with realities of friends and family (limited for most people), angel investment (for more money, but also limited by realities of investor needs, payoffs, etc.), and venture capital (available for only a few very high-end plans, with good teams, defensible markets, scalability, etc.).

3. Launch or Revise

Somewhere in this process is a sense of scale and reality. If the natural startup cost is $2 million but you don’t have a proven team and a strong plan, then you don’t just raise less money, and you don’t just make do with less. No — and this is important — at that point, you have to revise your plan. You don’t just go blindly on spending money (and probably dumping it down the drain) if the money raised, or the money raisable, doesn’t match the amount the plan requires.

Revise the plan. Lower your sites. Narrow your market. Slow your projected growth rate.

Bring in a stronger team. New partners? More experienced people? Maybe a different ownership structure will help.

What’s really important is you have to jump out of a flawed assumption set and revise the plan. I’ve seen this too often: you do the plan, set the amounts, fail the funding, and then just keep going, but without the needed funding.

And that’s just not likely to work. And, more important, it is likely to cause you to fail, and lose money while you’re doing it.

Repetition for emphasis: you revise the plan to give it a different natural need level. You don’t just make do with less. You also do less.

Seems to me like the recession has hit bottom and the economy is starting back up.

It’s not just sales at our company which are picking up. It’s also people I know and talk to, like the other 24 investors in my angel investor group which met last week; most of them are business owners. And people at the local Chamber of Commerce and Small Business Development Center.

Yesterday I did the business plan section at a quarterly day-long SCORE workshop on starting or running a business. We had twice as many people yesterday as three months ago and six months ago.

I’m sure it’s going to be a long, hard, climb back up. We can’t get around the economic impact of so many people out of work, so many home loans in trouble, and so many people’s paper wealth worth a lot less now than a year ago.

Still, at least I think we’re starting to go up instead of down.

I like the title: "Just Start," as in start your business, shades of the now famous Nike "Just do it" campaign. Just start.

I’m pleased to be speaking along with John Jantsch of Duct Tape Marketing, Ken Yancey, CEO of SCORE, and Rich Sloan of StartupNation for this free webinar next wednesday. 

It’s a free webinar, but capacity is limited, so if you’re interested, please click here to register right now.

Adeo Ressi doesn’t like what he calls a slanted field on the deals entrepreneurs get from investors. He says (I’m quoting):

Honestly, I think that the entrepreneur gets a raw deal today, and that this has gotten a lot worse since I started in 1994. Entrepreneurs are victims of a lot of predatory and exploitative behavior.

This has been bad for a while, but it’s gotten much worse. And it hurts the country, and the economy. We need to fix the availability of capital for entrepreneurs.

That led to The Funded Founder Institute, a four-month, $450 program to run selected entrepreneurs (including, by the way, wanna-be entrepreneurs) through weekly sessions with mentors and experts, ending with a certification that should smooth the path to investment. Microsoft BizSpark scholarships are available too, to pay the $450.

Adeo is serious about smoothing the path for founders. He says:

If we could eliminate all the headaches that the modern bureaucratic layering adds to start a company, and allow these founders to focus on the core business challenge, the likelihood of success increases dramatically. We want them learning how to do it right.

A brief interruption before I go on: this looks like a really good program to me, even though it’s brand new, and not certified formally by anybody else. Adeo has a good reputation, knows a lot of the right people, and he’s done some important things before. I think the certification he’s offering is likely to be very valuable. So if you’re interested apply now. Applications close for the first session, which starts this month, May 9. The application costs $50.

Look at some of the mentors already on board. Several are major Web names, founders or CEOs of Scribd, Mahalo, Socialtext, and so on. And Adeo told me has many more, including other mentors as well known as some of these, in the wings.

Adeo himself gives this program a lot of credibility. He’s the founder and main force behind TheFunded.com, a site I’ve posted about before, entrepreneurs reviewing investors. He got his skeptical view of investors the hard way, building companies. Game Trusts, one of his more recent efforts, won $15 million in venture capital and exited with acquisition by Real Networks.

He’s serious about leveling the playing field. The institute has posted sample startup documents including suggested deal terms more favorable to entrepreneurs than most. And the institute is offering to arbitrate disputes.

It’s also taking a piece of the action, which it’s hoping to reinvest in the long-term health of the program. Adeo says there will be warrants, linked to equity, as a “vehicle of valuable attribution.” That’s for “value as a sign to the mentors and the founders. And 60% of the warrant value goes right back to the participants. The remaining 40% is held by the institute as a value play.”

You want this book: Escape from Cubicle Nation, by Pamela Slim. She’s been writing a great blog for several years, and now she’s put much of the soul of that blog into her new book, with the same name. You want it if you’re working for a company and thinking about going on your own. And you want it if you’re already on your own and thinking about working for a company. Or anywhere in between.

Pam starts with understanding how you got where you are, if you’re still in that company, and why it’s hard to jump. Her first section is “Opening Up to the Opportunities.” And she offers some seriously useful wisdom about that situation. These are just some selected quotes:

Employees who treat companies like old, loyal friends will die of heartbreak.

The larger organizations get, the greater their capacity for doing work that is not directly related to anything in the real world.

Next, “The Reality of Entrepreneurship.” Gulp. Covering how to actually do it, setting up your new business, which is also your new life. Specifically, practically, chapters on how to be self employed, marketing, business planning, your brand, and — here’s a great chapter title — “Test Often and Fail Fast: the Art of Prototypes and Samples.”

Which is great stuff, frankly, extremely valuable. And, to her credit, she leads you through all this without getting lost in it, or losing perspective on what really counts.

More quotes:

Life first, business second: If you don’t consider your life as a key part of your business model, you may find yourself outwardly successful and inwardly miserable.

I am convinced that the truly successful people, those who enjoy every part of their life and have financial stability, are very picky about where they spend their time and energy. So prune relentlessly.

Don’t trip if you don’t pick the perfect idea the first time. Really. Don’t.

Then a third section, “Make the Money Work,” faces the scary financial jump. “Look Your Finances in the Eye.” She talks about getting a clear picture of the current situation, tracking, clearing debt, reducing expenses, and — again the mix of practical tips with a broader view, suggestions like “let your fears guide you:”

Fears are not all bad! They can be a great way to ensure that your plan covers what it needs to. If you have a nagging fear about something that is not covered in your current plan, it is a good indication that you need to address it.

A fourth and final section called “Making the Leap” deals with the whole person, fears, family, what it takes to actually jump. Having been there myself, I can tell that Pam knows what she’s talking about. She offers sound real advice. For example, in this section:

Pay attention to your body. Tense muscles, stomach problems, anxiety, and trouble sleeping are all signs that you are trying too hard to control your creative impulses. Get back in touch with your body by exercising, meditating, and practicing deep breathing. This will reconnect you with your true voice that will tell you what you need to do to take care of yourself.

I don’t know if it is the same outside of the United States, but we schedule our kids like little executives. Parents frantically shuffle them between soccer, karate, and trombone lessons, play dates and extracurricular test preparation. The poor little tykes must carry electronic organizers and cell phones just to keep track of all the details of their overscheduled lives.

In short, this is a really good book about changing your life for the better. By going on your own. And making it.

Joanna Van Vleck has revamped her business plan at least half a dozen times, made a new take on an old idea work sensationally, and is riding triple-digit growth during this recession.

So, when she humbly offers 10 lessons for startups, it’s worth listening.

Joanna is founder and CEO of the Trunk Club, which is a network of fashion experts helping men buy clothes in a new-world model using Skype video to give clients the online convenience with personal service. She’s 25 years old.

She spoke to my start-your-business class at the University of Oregon the other day. I say “humbly” for real, because she started her talk apologizing for presuming to offer lessons. But she had her list ready. With slides.

1. Have a plan

Interesting, because Joanna has changed her plan several times, wholesale revamped her plan, but she always had one. She switches the world “vision” for “plan” sometimes; meaning that she goes in and out of granularity. Recognizing that plans change doesn’t mean not having them. Expect it to change.

2. Find out what’s important to you.

Plans may change but you want to keep your eye on what’s most important to you. Joanna wanted to do it fast, and well. She loves the style business but she doesn’t aim for a lifestyle forever business. She wants it to grow. She thinks about when and how to exit.

3. You have a lot of time, they have a little.

Joanna said:

In the beginning, you will want to connect with the “been there, done that” people. Remember this: you have a lot of time. They have a little. Respect that. If you tell them you will need 15 minutes of their time, make sure you only use 15 minutes. It will make them respect you more as a young entrepreneur.

4. You don’t always need experience in that industry.

This is interesting to me, because it contradicts my instinct, and a lot of generally accepted wisdom. But she did it, so she can talk about it. She wanted style and clothing, but she didn’t work first in clothing retail, and didn’t have a partner who did. She just dove into it, learned on the fly, and changed the model as she discovered what worked.

5. Start Young

She’s 25 years old. She came out of college and built this business. She could talk about the problems of dealing with people who didn’t take her seriously because of her age. Instead, she says:

Being young is very advantageous. List the benefits of being young and risking it all. If all else fails, I will get a real job at 28.

No family, no kids needing shoes, no mortgage; easier to get by. Less underlying risk. This is the time of life to take these chances.

6. Fail often, and fail fast.

Joanna started with one business model, found it didn’t work, revised it, then found that didn’t work, and revised that one. She knows what this familiar-sounding fail-fast idea means. But she adds:

Personally, I do not believe in failing. I believe in learning from things that don’t work, or don’t work the way you intended them to. The sooner you fail, the sooner you will succeed.

7. Ask for help, respectfully

I know from experience — she was a student in my start-your-business class four years ago — that Joanna does this right.

8. Replace “selling” with “promoting.”

It is never comfortable to think of ourselves as a sales person. In fact, I never had official sales training. What I have learned is that you become a lot more effective when you think of it as promoting.

9. Are they all green lights?

I love this:

A wise mentor of mine once told me that if you wait to leave your driveway until all the lights on your route are green, you will never leave. You must jump and build your wings on the way. You will hit red lights. They are momentary and are times to stop, adjust and get ready to go again. Learn to embrace the red lights.

What a great example!

10. Never stop learning or listening.

No argument there. Why do I think it’s ironic that she’s only 25 as she says this? But then, before I get too uppity with my gray hair and all, she’s the one who’s got the business growth of close to 300% during a recession.