Customer Service Shouldn’t Be Hard

RDNS Customer Service Representative

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One of the simplest and best ways to differentiate your startup is through customer service. I know this sounds basic but it is amazing how low the bar is set when it comes to getting help. Lately, I’ve had to interact with sales reps from two different companies — yes, people who are making a commission off my business — only to have them take 48 hours to respond to my emails. 48 hours for a response!

Here are a few customer service tips:

  • Build high quality customer service into the core of your corporate culture
  • Work to have customer service and sales questions answered within 15 minutes and no longer than two hours, if possible
  • Set the tone that employees on the front line should use out of office autoresponders when they won’t be able to get back to the inquiry within a reasonable amount of time
  • Celebrate and store customer praise for great service, put customer testimonials on the wall, and recognize employees who go beyond the call of duty

My recommendation is to deliver great customer service and make it a core of the business.

What else? What other customer service practices should be employed?

The Kiss of Death – A Full Product Rewrite

There’s a prominent Atlanta technology company that launched a new, full rewrite of their product this year. It was a disaster. I’ve been there as well. In fact, I know of several other software company CEOs who have similar battle scars.

A simple piece of advice: never rewrite a product from the ground up if you have a considerable customer base.

Here’s what I learned when we did a full rewrite four years ago:

  • It literally will take twice as long as your worst case scenario
  • Morale will be significantly affected on the engineering team
  • Sales will suffer as reps continually think the new product is around the corner
  • There will be major bugs upon roll-out, even with significant product QA

Now, we’ve all heard these issues happen to normal large IT projects, but not to software companies that specialize in this, right? Trust me, it doesn’t matter. People are overly optimistic that things get done in a shorter amount of time. My recommendation is to plan the big rewrite but to implement changes incrementally, instead of with a single release.

Why Groupon will Continue to be a Success

Groupon logo.

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There have been so many discussions as of late about Groupon and clones, especially with regards to whether or not Groupon will continue to be a major success. Here are some of the common shots at it:

  • It’s only an email list
  • They only do one deal per day per city
  • Anyone can compete with them
  • Their 50% fee to businesses isn’t sustainable
  • People who use it aren’t repeat customers and therefore not profitable customers

Here are reasons why it will continue to be a major success:

  • Building a critical mass of opt-in email addresses is terribly difficult and expensive, combined with fatigue from people getting emails from too many different competitors
  • Groupon already announced that they are going to offer multiple deals per city per day targeted against user preferences as well as hyper local deals based on zip codes
  • Creating a massive sales force to sell to local businesses takes a small fortune, and the only other companies suited to that are existing yellow pages and coupon companies, not low-cost startups
  • Businesses will always be opening new locations, remodeling existing locations, as well as other types of constant change that will make running a Groupon campaign beneficial to bringing people in the door

What else? Do you think Groupon will continue to be a huge success?

Offline Analogy to Describe a Startup

Picture of the BMV building on Reforma Ave. Me...

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One of the most powerful ways to describe a startup’s business is to think of an offline analogy. The idea is to create a hook in the listener’s mind so that they understand and remember the startup’s purpose. By using an offline analogy, you connect to a more known quantity.

Here are a few examples:

  • We’re like the printing function of FedEx Kinko’s, but entirely web-based with next day delivery at 30% less
  • We’re like a manual financial audit by a CPA, but done automatically every night
  • We’re like the Manheim Wholesale Auto Auctions, but online for dealers only

It can also be useful to try out a few different offline analogies to find the one that is most memorable. My recommendation is to come up with an offline analogy for your business and use that when describing your startup. The most important goal is to have the person you’re talking to be able to recall it in the future for potential customers, partners, investors, and employees.

Launch Fast, with Minimum Viable Product

Watt's steam engine at the lobby of the Higher...

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As part of the lean startup movement and customer driven development, the concept of a minimum viable product is one of my favorite components. I’m a big proponent of launching fast: less than 90 days from starting, a web services company should go live with their product.

Now, 90 days isn’t much time, and it isn’t alway possible to launch that fast, but having a constraint in place where the engineering effort is time boxed really forces you to strip off functionality and deliver a minimum viable product. All too often I see engineers so wrapped up in their product that they keep thinking they need to add one more feature, when in reality they don’t have enough market feedback, haven’t achieved product/market fit, and are building a product without a market. I’ve been there.

My recommendation is to get the product out the door as quickly as possible, with the bare minimum functionality that still makes it useful. With that in place, work hard to acquire customers, preferably paying, and then learn what their needs are, and incorporate that into your opinionated software.

Cash Conversion Cycle for Startups

One area startups don’t usually think through is their cash conversion cycle. What I mean by cash conversion cycle is how much work it takes to make a sale, deliver the goods or services, and get paid. At first it doesn’t seem like a big deal. You sell something and you get paid, right? Wrong.

Here’s an example cash conversion cycle:

  • Start calling on companies to build a sales pipeline for three months.
  • Have an average of a two month sales cycle. Now you’re at five months before the first sale.
  • Collect 50% up-front and 50% upon completion, Net 30 days (you give them 30 days to pay you).
  • Take 60 days to implement, train, and make the client happy.
  • Invoice for the final 50%, Net 30 days.

So, three months of calling, two months of selling, and waiting 30 days to get paid results in six months for your first dollar to come in. Then, two months to implement, and another 30 days to get paid, and it’s three more months after the first payment to get the second. Nine months after you start you get full payment is this example cash conversion cycle.

My recommendation is to think through the cash conversion cycle when deciding on your business model.

The Boat Analogy for Startups

There’s a common line describing the lack of agility in big companies: they’re like a tanker ship that has immense force but little ability to change course. Well, let’s take the boat analogy a bit further and apply it to the many startup stages:

  • Concept stage – you’ve picked out the boat of your dreams, how you’ll operate it, and where you’ll take it, but it is still a dream.
  • Seed stage – you realize you can’t afford the boat of your dreams, but really want to get out on the water, so you start with a jet ski suitable for you and your co-founder. Wow, this thing goes fast and turns on a dime.
  • Early stage – OK, now you have a few people on board. It is time for a nice ski boat, like a MasterCraft with an in-board motor ready to go fast and turn hard.
  • Growth stage -Things are starting to get crowded, you need more room, people demand decent sleeping quarters: it is time for the used 40′ Hatteras yacht.
  • Late stage – With so much value now, the cruise ship has left the port and hit the open ocean. There’s ton of people and value on board, but little hope of changing course.

What do you think? How applicable are these boat analogies to the different startup stages?