Tag Archives: real life experiences

How to lose a customer, How to gain a customer

In today’s world people’s need for instant gratification is stronger than ever. We don’t have to go to the video store any more, we can just play movies instantly on Netflix. So Blockbuster loses customers after all the years of pissing people off by charging ridiculous late fees and having an inferior product. Why would I pay crazy rental fees at Blockbuster, when I can pay $9.99 a month to watch as much as I want? Now they are going out of business. Same thing with Borders books. Why would I go to the bookstore and spend $3.45 a gallon on gas, when I can just download the book to my iPad from wherever I am in the world with an Internet connection? Why would I pay $30 for a book when I could have it instantly for $9.99, or for $4 if I bought it used from Amazon? These are just two examples that immediately come to mind as I am watching what used to be two powerhouse companies shut their doors in Tampa and around the country.

This is not a trend that’s going away. It will only get worse as technology improves, and as the younger generations who are used to it get older, making up a greater part of our population. If you don’t think this affects your business, or the business that you work for you should stop being naive. It affects all businesses and organizations. How much software do you still get on CD? Heck how much software do you still install on your computer? It seems like a new SAAS (Software as a Service) provider pops up every two minutes, with great products most of the time.  Why would I want to install software on one computer, or many of them for that matter, when I can access my software through any device that has Internet access and a web browser?

Today Zephyrhills lost me as a customer to a smaller, cheaper, more agile competitor. After receiving my $71.00 water delivery bill from them, I gave them a call to see why I was being charged $7.00 a bottle for water. They informed me that it was because the price automatically goes up after a year. I’ve had service with them for 2 years, so I’m not sure I buy that. The person on the other end also had a very hard time speaking English. On a side note, if you really want to lose customers, hire workers lacking this most important skill set to answer your phones. You might as well stop offering phone support all together. You probably wouldn’t aggravate as many people.  After getting frustrated with the rep and the answers I was getting, I was transferred to speak to someone about changing my service. At my old office I had a water filtration system instead of the water bottles and it was considerably more cost effective. It was also nice not to lug and store 40lb water bottles that needed to be replaced every two days. I was interested in getting this installed again. The new rep, who could speak English, informed me that she needed to contact the installer to answer some of my questions and that he would be giving me a call back. After two days of not receiving a call back, I decided to call the a competitor, Arctic Spring. They were friendly, answered all of my questions competently, spoke English, had the product I wanted, and could install the next day. One more thing, they were $25 per month, with a $20 install fee! So I get similar water, my bill is cut into a third, they have good customer service, they are local, I have a person I can call instead of a company, and they came out to install the next day. Zephyrhills couldn’t even give me a call back the next day.

Folks this type of stuff is going on all around us. This is a real life example of how companies are changing the game to put a beat down on their competition. The old way, just doesn’t work anymore. The important question to ask is this; is your company Zephyrhills or Arctic Spring?

Don’t just say NO, scream it!

This is a topic that seems like a dead horse that just keeps receiving a beat-down, but for some reason budding small business owners rarely seem to listen. As a matter of fact, those in the service industry seem to listen the least. It’s one of those things that most need to try before they buy. But I will tell you right now, there is no reason to put yourself through this kind of pain.

Here’s the scenario. You are just starting out, or perhaps you’ve been around and business is a little bit slow. Then this deal comes around. It has an odor to it. Sometimes the stink is so unbearable that your eyes start to water and your stomach starts to turn. A good example of this would be someone who wants to pay a thousand or two for $10k worth of your services. It’s a bad idea to take this business, and you know it from the word go. Most of the time these types of deals will anger you enough that you will just walk away and spare yourself the pain.

The second smell is a little more subtle and a lot more dangerous. It’s the guy that wants what seem to be little compromises. Certain wording in a contract. A 10% price break. A smaller security deposit. Much like the carrot salesmen, these guys have more angles than I can think of. What will happen with them, is they will feel you out, and see where you will bend. Once they understand your vulnerabilities, they will capitalize on them every chance they get. Along the way, you get the feeling that you are probably not a good fit, but what can you do? You need the money. When all is said and done, you made the stupid decision to do business with them and you ended up losing money. In the meantime, the rest of your business suffers because these guys tend to be time vampires. They want to meet all the time, but they don’t want to pay for it. You can never keep them happy. They have designed it this way. If you feel like they are constantly unhappy with you, you will do more to try and get back in their good graces. They don’t value what you bring to the table, they proved that during negotiations. They are not concerned about the welfare of your company. If they put you out of business, they will just pick up the pieces and go somewhere else.

I have made this mistake on a number of occasions. I don’t want you to make it too. I implore you to be careful of these types of situations. Never, ever accept business out of desperation. As much as you may start to believe there is nothing else out there for you and you have to take the deal, I have rarely found that to be the case. Run away from bad deals and turn up your hustle meter. Get out and network some more. Call up a few of your current clients, see if there is anything you can help them with. Look at your expense sheet and see where you can cut some things. Just always keep this in mind. If you say yes to the bad deals, it makes it hard to say yes to the good ones.

Why your small business, your client, and their carrots are like Eve, the snake and the apple

A bad carrot

As a small business, at one point or another, you inevitably will be offered a carrot. Whether you are starting out or have been established for a little while, there are people out there who can smell you desire to go to the next level with your business, so they offer to “help” you get there. Here’s a quoted example from an email where one such carrot was offered to me just recently:

Basically, I am developing a social media website and have tons of people that are waiting for me to launch.

Are you willing to help create aspx pages for me calling webservices controlled by my data architecture team?

Due to the potential growth, most of the individuals that are working this deal are working for stock..  Are you up for that kind of arrangement?   You wont have to quit your day job, but this will definitely lead to WAY MORE WORK…

Who knows, when I replied to him this way I may have walked away from a chance to make millions. I will keep you posted.

Thank you for the offer. Unfortunately I have been a part of a number of arrangements like the one you are proposing (stock for services) and none of them have worked out too well for me. So after the last one I decided that if I am going to work without getting paid it would be  on something I have a controlling interest in, or for charity.

Carrots can come in all forms. The promise to send you “Way more work” or “buy more product” . Stock offerings in a startup. A promise to refer lots of business to you if you do a good job. I could go on all day. Some carrot salesmen are better than others, and they package them in all sorts of ways. What they have in common is they are all after the same thing. They want to take advantage of you. They want you to work for free, or for a lot less than what you would normally charge. They want you to take a loss on selling something to them. Sometimes they want you to finish in half the time it should take to do the job properly. They basically always want you to go outside of  your business model. You setup your schedule and pricing based upon the time you need to spend and the profit margins you need, to achieve in order to stay in business and be successful. The minute someone compromises this, they aren’t helping take you to build your business, they are planting the explosives that will help it to implode. If you want to spend extra hours working on something, build something for yourself, not someone else.

Carrots are poisonous. They aren’t good for you. If you see one, run faraway and do so as quickly as you can. Eve thought she needed to move away from the plan too. When the snake offered her the apple, she ate. I think it’s fair to say she regretted that decision.

Buying stuff for your business

When you start a business, if it is like most, you will need stuff to operate. Whether it be computers, desks, chairs, phones, coffee makers, you get the picture. If you want to increase your chances for success here are a few things you can do:

  1. Use what you already have – Chances are you already have a computer, you have a desk, you have a chair, you have a phone, and you have a coffee maker. Use what you can from what you already have to keep your expenses down. It might be inconvenient to share some of these items, but if you really believe in the business you are starting these sacrifices will be worth it.
  2. Buy used – This is a really a good rule for buying stuff in general personal or business. New loses its value, and often times is not any better than what you can find used. New becomes used the minute you start using it, so it’s really only New until you buy it. You can save a tremendous amount of money by being patient and finding the right deals. With that said you should always use discretion.  If it seems like the deal is too good to be true, and has a certain smell to it, trust your intuition and move on. In this economy, businesses and individuals alike are looking to dump their assets for pennies on the dollar so there are some unbelievable deals out there that are for real. This past weekend I purchased a 1 year old Steelcase Leap chair for $220. The guy I bought it from payed $650 for it new a year ago and he treated it very well. He needed to move it quickly so I paid about $200 less than I should have. I could put it on eBay today for $400. The other nice thing about buying used is that items have already lost most of their value, so if you want to upgrade something you have purchased used, you can get most of what you paid for it back out. Craigslist and eBay are two great places to look, but don’t stop there. You can get good discounts at major retailers by purchasing open box items. They won’t be the very best deals, but still good nonetheless.
  3. Stay simple – Many of the things you think you will need, you don’t. For instance, you may thing you need big expensive filing cabinets, but you might be able to get a good document scanner instead. That would limit the space you need and is more scalable. If you need to keep the paper, get cardboard storage boxes to keep old paperwork in. Sure they might not be as attractive, but attractive isn’t important in this case, conserving cash and not being wasteful should be your priority. You don’t need polished and fancy to start out. Truthfully you never will. Focus on addressing the problem you need to solve instead of looking at the solution for what you think the problem is. Focusing on the solution is a wasteful approach. I speak from experience. The more simplified you make things, the easier it will be to go in different directions as your business matures.
  4. Always negotiate – The asking price is never the price. This even applies to retail stores. If where you arrive in the deal isn’t a win for you, then walk away. When negotiating, always try to focus on creating a win for both sides. You can do this by collecting information and understanding what the other party is trying to accomplish.
  5. Pay Cash – You can get better deals when you have cash in hand, and you won’t go into debt buying this stuff.
  6. Keep your finances separate – You don’t necessarily have to have a “business checking account.” If you are trying to see if your concept will work, there is no reason to incorporate and spend all the money to become a business, but you do need to keep good records. The easiest way to do this is to keep your “business” money in a different bank account. Buy all your stuff from this account.

Want to live the dream? Drive a piece of crap car

Being in debt is the first step you can take towards living the life you don’t want to live rather than what you dream of. The first step you can take towards being successful in a business venture is being debt free. It won’t guaranty your success, nor do you have to be debt free to start a business, you are just stacking the deck in your favor if you are. One of the biggest challenges you will face when starting up a small business is cash flow. The less debt you have, or if you are fortunate enough to not have any, the less cash you need to keep your business going. It also means that you have to be profitable, to keep it running. If you have to borrow money to start your business, or for its upkeep, chances are you shouldn’t be playing the game.

I’m not saying this from a holier than thou perspective either. I have spent the last two quarters paying back creditors for mistakes I made last year. The biggest mistake perhaps was not driving the piece of crap car. In the first year of my company’s existence, things were going really well. Things were moving fast. So fast in fact I decided it would be prudent to go out and buy a sports car that could keep pace; with borrowed money. To go with that sports car, my ego decided the company needed to grow, so I hired two full time people making a combined $120k per year, one earning a healthy commission, and the other getting fully reimbursed for health insurance. Along with the personnel expenses, my personal expenses were high, the company needed a bigger office, and I signed up for the we will approve anyone Dell computer lease. After a few months of slow sales, money started getting tight, so we brought on a marketing person to try and drum up more business, after all we now had a massive expense sheet to support. Then we started getting the occasional customer who wouldn’t pay on time, or at all, so I started to borrow money just to cover payroll. Things were getting worse but I wasn’t willing to wake up from my dream turned nightmare yet. Sadly, I wasn’t having fun anymore, the 90 hour work weeks were piling up, and we were taking whatever business we could get our hands on. By the end of 2009, projects started to go south because we took on too much work for not enough money, and we were ticking off all of our clients. The quality of our work went down the tubes. Our environment had a feeling of desperation to it as well. We didn’t really discuss things directly; instead  we choose to have endless hours of wasteful conversation regarding how we needed to change things in order to be the best web design and development shop around. Had we not been wasting this time, we could have been getting our work done and wouldn’t have lost as many projects.

As 2010 started off, I knew that things weren’t going to get better. There was no evidence to support it. I was selling off personal and company assets to survive, as I hadn’t taken a paycheck in months. Sales had halted because I fired the sales guy, and didn’t have time to sell anything myself as I was too busy slaving away with project work. Clients were growing impatient. Rather than filling the hole up, I dug it deeper and hung on to my last two expensive employees for 3 months more than I should have. Finally by the middle of March, I informed them that their last paycheck would be in two weeks. From there I feverishly started eliminating unnecessary expenses. No more office space. Subscriptions that were going unused were cancelled. When money started rolling in again, I kept my personal expenses down and started paying the debt off.  I contracted with my ex-employees to get overflow work done, paying them when I got paid and only for the billable work, instead of having the constant stream of salaries flowing out the door. When our car lease expired in June, my wife and I decided to stick with one car. Once we could afford to do so, I dropped $2k on a piece of crap for running errands and getting around town. It has faithfully taken us everywhere we needed to go. Instead of being in the red every month, my business was finally profitable again with a decent surplus.

I attribute this mostly to the fact that I didn’t have to take bad projects anymore to survive. I cut my client base down significantly, and resolved to only do business with companies I like to do business with. Additionally, and maybe more importantly, this has allowed me to take a little time off of client work and focus on my true passion of software development. In the next few days I will be submitting my first app for the iPhone, QuickFire, to the App Store. Even though I’m not quite debt free yet, the goal is to be there by this time next year. Being profitable is the element that has allowed me to position things where they need to be. The amount of stress that lifts off your shoulders is incredible and your focus shifts dramatically.

To give further credibility to what I’m saying take a look at the list below. According to CNBC these companies have no debt:

  • Google
  • Apple
  • eBay
  • Electronic Arts, also known as EA or EA Sports
  • Bed Bath and Beyond
  • Gap
  • Texas Instruments

It’s amazing what you can do when you don’t have the debt monkey on your back. Sadly, most businesses offer the monkey a ride before they have made their first dollar. Many people think you need a business loan to get started. Consider this, you can’t go bankrupt if you haven’t borrowed money. Most businesses go through rough patches. By not having debt, it means you should have savings, which will help you during these times. It also means that you don’t have money going out the door that isn’t producing profit for your company. Anything that doesn’t produce profit in a business is unnecessary and it should be cut. This includes office space, 3rd party services, vehicles or even employees.  This last one is hard, and I have personally had to do it, but a business cannot survive if it is losing money. The one exception I would note is charitable activities. While I believe all financial contributions should be made personally, if you build a small company with employees I would encourage you to participate in charitable activities, on and off company time. Being in business for yourself includes making tough decisions, perhaps more than you ever had to deal with in your life. If you start and stay debt free, chances are you will never have to deal with layoffs, and as long as you understand your customer base (that’s another article), and you will never have to shut it down either.

37signals has been writing a series called “Bootstrapped, profitable and proud.” It highlights the stories from tech companies who have $1M in revenue, didn’t go into debt to get started, and are profitable. The first article in the series is about Campaign Monitor, a software company that has doubled their revenues and profits for the last six years. If you are someone who finds it easy to learn by example, be sure to check out the rest of the articles in that series.

Finally, this wouldn’t be a complete article about debt without mentioning Dave Ramsey. Whenever you are dealing with debt, the first thing Dave tells you to do is to sell the car, and buy a piece of crap that will take you where you need to go. I recently had the pleasure of attending an all day seminar put on by Dave. One of the things he mentioned, is that companies should shoot for having 50% of annual expenses socked away in savings. This is tough to do, especially if your company starts growing very quickly. Rapid growth can come with elevated expenses, and if you are not careful money can leave your bank account more quickly than it goes in. Of course with more employees, that 50% becomes a larger number exponentially. Dave’s company isn’t even there yet, although they are close. This goal is much more attainable though when you are shooting for it from day one, have zero debt, and low operating expenses. If you are currently in debt, I strongly suggest that you take his Financial Peace University class. This is a great class that is geared towards personal finance, however many of the principals apply to business as well. For more business specific material, you can check out EntreLeadership also by Dave Ramsey. The one day course I took would have had a tremendous impact on how I would have run my business had I taken it before I started my company.

The irony here is the piece of crap car won’t get you where you want to go in style. It won’t always get you there quickly. The point A to point B trip can be somewhat of a challenge at times. The car with a payment will help you to impress people you don’t know or even care about. For a short time, it will quickly take you back and forth to your destinations, in comfort, with lots of cool gadgets. However the newness wears off, the value depreciates and the payment sticks around. The piece of crap will will teach you a thing or two about humility and contentment. The piece of crap car will also allow you to do just what you need to do. It might be slow, but it will ultimately get you to the road less travelled, where dreams happen. The one with the payment might be shiny, and it might go fast, but it’s ultimate destination is rush hour traffic. If you’re not into cars, just think tortoise and the hare.

Old Faithful

1999 Hyundai Sonata