David Cummings on Startups

Author: David Cummings

  • Monthly Financials Review

    We have a monthly financials review on the first Thursday of each month. As part of our rhythm, data, and priorities, using the terminology from Mastering the Rockefeller Habits, we try to have consistent, repeatable processes for everything we do. The monthly financials review involves talking through the following items:

    • Balance sheet, cash flow statement, and income statement for the past month, quarter-to-date, and year-to-date
    • Reviewing the trailing 12 months expenses vs revenues and looking for trends
    • Looking at the cash flow forecast for the next 12 months

    Financials, especially cash flow, are critical for entrepreneurs to monitor, and I recommend doing it on a regular basis.

  • Quarterly Performance Review Time

    It’s that time of the quarter to do our performance reviews. We try to make them very simple and focused using a methodology from Patrick Lencioni. Everyone in my company has to answer the following four questions personally as well as for their direct reports:

    1. What did you accomplish?
    2. What will you accomplish next?
    3. How can you improve?
    4. How are you following the values?

    Employees then provide anonymous feedback about how their manager can improve to our HR manager. I feel that doing reviews quarterly, and not tying them to compensation discussions, makes for better communication that flows in a more timely manner.

  • Product Distribution Thoughts

    Whenever people ask about our sales and marketing strategy, I always tell them we focus on direct sales with a small percentage of revenue coming from indirect channels like value added resellers (VARs). Inevitably, I’ll get the question asking why we don’t do more with distribution partners. We’ve worked hard in the past at setting up reseller and OEM relationships only to never have them work out as well as both parties initially expected.

    I think distribution partnerships are a good idea but I wouldn’t bet the farm on them.

    Partnerships, like any other part of your business, take serious time and energy to cultivate well. My recommended approach is to take baby steps with distributors and build small wins over time. Once you have some simple wins under your belt, only then would I recommend taking the next step toward a deeper relationship.

  • Find your ZAG

    Yesterday I had the opportunity to spend a couple hours with three entrepreneurs as part of a special group devoted to continual business improvement. We meet once a month and talk about ways to improve our businesses, with a special emphasis on corporate culture. A topic for yesterday was for one of the entrepreneurs to take us through his new ZAG.

    ZAG comes from the Mary Neumeier book of the same name and is a way to express your company and brand in a succinct, no-nonsense manner by answering several simple questions. Once your ZAG is complete, you will have outlined several facets of your business, including:

    • What you stand for
    • Why you’re different
    • Who you want to be like
    • Where you’re headed
    • Several more…

    I recommend checking out the ZAG book to better clarify many aspects of your business.

  • Strategy Change for Small Ecommerce Business

    Two weeks ago I met with an entrepreneur that is in the midst of changing the strategy for his small ecommerce business. As ecommerce sites have become more prevalent, and big brands like Amazon.com have continued to expand product lines, it is more difficult for small vendors to compete. This entrepreneur’s enhanced strategy is as follows:

    • Eliminate 30% of the products offered as the secondary line extensions added over the past few years have not proved successful and diluted the brand
    • Invest much more heavily in custom content about the products, including unique information and rich media (e.g. 360 degree product views)
    • Spend more time training sales and customer service personnel on the products, and allocate time for them to actual use what they sell

    I don’t know much about ecommerce businesses but his enhanced strategy sounds strong to me.

  • Getting Involved in the Atlanta Tech Community

    Mike Blake has a great post from April of this year titled Joining the VC Scene in Atlanta. His insight and links are an invaluable resource for anyone looking to get involved in the Atlanta technology community. I would have tweaked Mike’s title to say “Technology Community” instead of “VC Scene” as his commentary is really applicable to anyone that is interested in getting involved, regardless of caring about the VC scene. In addition, I would add a few more links:

    Again, please read Mike’s post and get involved in the Atlanta technology community!

  • Startup Advice from Texas Startup Blog

    Alexander Muse, whom I don’t know, has a great blog over at Texas Startup Blog. One key section of his blog, labeled Startup Advice, has a great deal of content that every entrepreneur should read. Here are some of the topics:

    I recommend entrepreneurs read through all the topics.

  • Advice for Aspiring Web Entrepreneurs

    On Tuesday of this week I met with an aspiring web entrepreneur who sought input on what he should do to better his skills. In addition to the five habits of a successful entrepreneur advice, I offered up the following items to be a habit as well:

    • Pick 50 blogs related to technology, web development, web marketing, venture capital, and entrepreneurship and spend one hour per day skimming them
    • Learn HTML and CSS and spend two hours per week using them
    • Make a blog with your personal name as the domain name and write one post per day

    Doing these tasks on a regular basis isn’t the easiest thing to do, but making it a habit and sticking to it can make the difference between success and failure.

  • Software Roadmap Process

    In addition to watching the U.S. Open tennis tournament, I’ve been thinking about our product roadmap process. The previous roadmap process for our SaaS product hasn’t kept up with the pace of product demands due to success in the marketplace. Here are the general ideas for our new process:

    • Shared Google Spreadsheet with individual tabs for each department, a tab for the actual roadmap, and a tab for customer ideas from our idea exchange
    • Each department keeps a laundry list of what they’d like to see in the product in their respective tab
    • The sheets have the following columns:
      – Item
      – Description
      – Sponsor
      – Priority
      – Difficulty
      – Discussed
    • Department managers come together once a month to discuss items that haven’t been discussed yet and to lobby for their requests to be moved to the main roadmap
    • The product manager makes the final decision, based on input from the key stakeholders

    It’s a new process for us and I’m excited to see the results. The most important aspect of product management is to be opinionated about the product vision and fanatical about what does, and what does not make it into the application.

  • Software Pricing Proportionate to Sales Cycle

    Two days ago I had the opportunity to meet with a local entrepreneur who’s working on a SaaS product geared towards pharmaceutical sales reps. The gentleman and his co-founder are working on the business part-time while outsourcing the engineering to a contractor in NY. After the usual chit chat, he drilled into the area that he was struggling with the most: pricing.

    His product is currently priced at $99/month/user, and has one add-on with a per usage cost. Having a medical sales background, he’s enlisted several independent, commission-only reps to help sell the product, but with no luck. I asked him about the sales cycle and he said it usually takes a couple weeks for a rep to sell the product once the prospect is in the buying cycle. What’s the problem with this situation? A product that sells for $99/month, and requires a trained sales rep, isn’t going to work unless it can be done in a call center and is a mass market application (think cell phones or cable TV). Software needs to be priced in direct, proportionate relation to the sales cycle.

    My advice to him was to either make the web application more self-service with a price point that is in the $10 – $30/month range, or to go much more up-market and sell a $1,000/month product to departments. At $99/month, his product is too expensive to sell without an inside sales team, and not expensive enough to compensate trained sales reps. It requires selling, not order taking.

    Pricing is difficult and should not be under estimated. For more software pricing thoughts, please visit Joel Spolsky’s post from 2004.