9 ways a pie maker got her strategy right that any startup can apply.

Delicious to eat, educational to learn about.

In my attempt to learn from on failed startups I found that startups fail for some consistent reason. Themes like, “we spent too much time on technology that was overkill,” were easy to spot after 60+ postmortems.

But this doesn’t tell us everything. IF startups fail for certain reasons THEN other startups don’t fail for the inverse of those reasons. I’ve found an example in the most unexpected place: pies

On Slate’s Working podcast, host Rachel E. Gross interviews Teeny Lamothe, owner of Teeny Pies, a Washington D.C. pie company. Lamothe’s success making pies is the inversion of the startup postmortems. Here are 9 things she gets right.

  1. Do the work yourself. “I’m a one lady workhorse.” If you can do it yourself, do it yourself. The Startup graveyard is full of companies that thought they could pay for someone to write the code, create the ads, or make the sales. It almost never works because founders need to have the core skills for their space (#2). Not only that, but hiring employees can easily be a major financial and strategic mistake (#6).
  2. Have expertise. “I’ve gotten it (crust making) down to such a science there’s no waste.” “Getting the right ratio has always been fairly important when making savory pies…since I’ve made hundreds of chicken pot pies it’s gotten pretty easy to sub new elements in.” For Lamothe the core skill is pie making — and she has it. She knows she can pick up the other skills along the way, “It’s one thing to be very good at baking, it’s another to run a business.” Founders who don’t have expertise in a core area of their business consistently fail. Another core skill, sales (#4).
  3. Play by a bureaucracy’s rules. “In order to sell at farmers markets you have to have the proper licensing, so I rent a space with two other people in a tiny little kitchen.” “They (the kitchen owner) were very helpful getting a catering license.” If you want to enter an area where bureaucracy is a heavy hand, you can’t stray into grey areas. Put another way, you can’t set up a game of checkers but use the rules of chess. Lamothe got this right because she rented a space that helped with the bureaucratic requirements. Homejoy was a YC company that raised $40M but didn’t get this step right, shutting down amid a slew of lawsuits. Another common quagmire was companies entering the educations pace. Things don’t change quickly in those areas for a reason.
  4. Someone needs to sell. “My husband outsells me every weekend.” At the farmer's market it’s her husband that sells more pies. This is okay, so long as someone on the core team can sell. Selling means talking to customers, knowing the product, and having distribution are parts of the sales process and you have to have it. So many of the failed technology startups never asked for the sale. They made the pies, took them to market, arranged them beautifully on a stand, but then sat in their car.
  5. Differentiation. “I have sound a pretty solid spot against the other pie venders…I have pretty awesome savory pies which not everyone offers.” Lamothe’s savory pies are mouthwatering, and this is her point of differentiation. As Peter Thiel wrote, “failed companies failed to escape the competition.” Startup Flud launched their e-news reader when Flipboard and Pulse were already established on the iPad.
  6. Think of employees as fractions. “The people I hire won’t have the same drive and passion in the way that I do, but I have to still pay them. It’ll be a balancing act to finding the right people and encouraging them to work really hard.” Of the 4 financial mistakes failed founders make; hiring too quickly may be the most damaging (the others were: sunk cost bias, paying for marketing, and buying inventory). Each person a startup hires will be like a fraction. Most people will be 1/1, they give what they get. Some people will be 1/4 where they take more than they give. A few will be 3/1, superstars. The product of each startup is the multiple of each person.
  7. The X-MBA. “I knew that pasty school was going to be really expensive so I put together my own which was called the tour of pie.” “I’m working on my business plan right now and there’s a lot of Internet reading about how to write a business plan.” When you run a business you need to be in a constant mode of learning — but this needn’t be difficult. SOPHIA AMORUSO writes in #Girlboss that when she needed to figure something out she just googled it. Another technique is to keep a blog as Lamothe did. Michael Mauboussin, and Charlie Munger both suggest writing as a form of thinking. I really like the idea of an XMBA.
  8. Finding customers. “The biggest challenge at first was finding people to sell to.” “One week I just asked if they would start selling pie next to their vegetables.” Here’s a postmortem I didn’t read, we had too many customers and made too much money. The problem was the opposite, not enough customers. This came from confusing friends with customers, assuming ‘that’s nice’ meant ‘I’ll buy it,’ and solving for distribution. Lamothe avoided these common mistakes by going where the people are (#9).
  9. Be there. “The next step is a storefront but I don’t think it’s going to happen in D.C…it’s too expensive here.” Lamothe’s honesty about where to work is refreshing. Sarah Tavel said that tech companies should be in the valley while Fin-tech and content companies should be in NYC. Honda motorcycles succeeded because the American sales team was off-roading on the weekends. Daymond John said FUBU succeeded because he was the one outside the mall. Samuel Zemurray dominated banana imports because he was building the plantations. Being on the ground where it matters, (“I want to live in the neighborhood of my bakery”) matters.

Thanks for reading. If you liked this post, my survivor bias project may also be of interest.