David Cummings on Startups

Author: David Cummings

  • Entrepreneurs’ Organization

    I joined the Entrepreneurs’ Organization (EO) three months ago and I have nothing but great things to say about it. According to the EO website, EO is:

    The Entrepreneurs’ Organization (EO) is a global network of business owners, all of whom run companies that exceed US$1M in annual revenue. We engage leading entrepreneurs to learn and grow through executive education and other tools for business owners.

    One of the most important aspects of the organization is what’s known as Forum. Forum is a group of 8 – 10 entrepreneurs that meet on a regular basis (usually monthly) and it acts as your own personal advisory board. This is an invaluable way to learn from other entrepreneurs and (hopefully) minimize potential mistakes and maximize opportunities. If you’re an entrepreneur, I recommend you look into EO.

  • How consolidated are your systems?

    Do your CRM, CMS, ERP, etc systems “talk” to each other? If a customer calls up do you have one interface to see their entire history? Even with the profiliferation of affordable, high-quality systems like Salesforce.com, Pardot, and Parature, most companies don’t have a way to see the history of interactions with a client from one screen. Typically, companies also have custom spreadsheets or applications where related customer information is kept, in an even more siloed fashion.

    One major benefit typically found in true SaaS systems (not fake ones) is that of an open web services API (typically SOAP or REST). An open API, and a system that isn’t in your own private network (who wants to keep ports open in their Firewall?), is a good recipe for integration. More companies should invest in consolidated systems as part of a larger strategy to divest of non-core IT functions (like CRM and CMS).

  • Attitude + Effort = What Matters

    Attitude and effort is what really matters. Think about it: 99% of the business issues you run into relate to those two items. Pretty simple, isn’t it?

    • Attitude captures the emotion, passion, and genuineness of the interaction.
    • Effort captures the care, fastidiousness, and desire of the situation.

    What matters to you?

  • What’s your one liner?

    I was talking to two young entrepreneurs last Monday at Startup Riot (thanks Sanjay) about their stealth company. After asking tons of questions, I was finally able to distill it down and come up with a simple one liner. Fortunately, I read as many technology and entrepreneur blogs as I can (via Google Reader, of course) and had lots of example companies to choose from when coming up with the one liner.

    Why is it so difficult?

    Well, often times it is technology based, and sophisticated at that, so it is difficult to explain in layman’s terms. I recommend coming up with two one liners: one for technologists and one for your grandmother. Here are the one liners for one of my products:

    • Technologists: B2B Ning.com with CMS
    • Grandmother: Tools to allow people to communicate on a website and update webpages

    What are your one liners?

  • A New Product’s Brand

    Working on the brand for a new product is an interesting and rewording part of the development cycle. I like to wait until after the product is in an alpha state to start the branding process as it takes a while to understand the feel and personality of the application. The first and most important part of the brand is the logo. Nowadays, it is easy and cheap to get a logo done. I’d recommend looking at one of the following:

  • Adapting > Predicting

    Adapting is a more important skill than predicting when it comes to building companies. Too often entrepreneurs and leaders think they have to decide every little detail in advance and follow the plan. Wrong. It is much more important to adapt and be perceptive of the market around you than it is to stay the course.
    In a similar vein, you have to make decisions with imperfect information. Markets, products, and conditions change too quickly to spend months coming up with a plan. Getting something down on paper and communicating that things are going to change as the plan is executed is the best path to take. There’s a famous quote that summarizes it well:

    A good plan, violently executed now, is better than a perfect plan next week.
    — George S. Patton

  • Rapid Improvement with SaaS = Reference Customers

    Another SaaS benefit that isn’t readily apparent before going live is the relationship between quick product enhancements and reference customers. Because you can update and enhance the product so fast, customers that make small requests can see the changes within a matter of days or weeks (assuming you accept the tweak and it fits in your opinionated vision!). This goes a long way towards having them become a reference account that you can use for future prospects. With installed software, it is difficult and time consuming to keep making little patches so customers often have to wait several months for the release cycle to happen before they can actually appreciate that your team has been working hard on their request.

    Near instant gratification with product change requests is something many clients have never experienced. Please make sure and temper expectations that it won’t always happen but that you’ll always be there to hear them out and be understanding.

  • New Product Pricing

    Pricing for a new product is really just a shot in the dark. What features go into what editions? What are the up-sell hooks? In my experience it is much easier to lower prices than to raise them. I’d recommend starting out with a price that is twice what you feel is right. Why? It is very easy to give “preferred customer discounts” and come down on the pricing, making the new client feel special. Throw in membership to your “product advisory council” and you’re golden.

    Another huge consideration: credit card price range or CFO price range. This is a big deal. Having a buyer be able to put the product or monthly fee on their credit card is a much easier sale than one that requires a purchase order and needs sign-off from the CFO. Wait, aren’t there plenty of deals between the $1,000 (credit card) and $50,000 (CFO sign-off) range? Yes, those are available but you don’t want to play in that space. The amount of time to complete a $20,000 deal is the same effort as a $50,000 deal. If you have to do a full-service, long sales cycle process, make sure your package is at least $50,000.

    My final thoughts: don’t spend much time on pricing, go to market quickly, and listen to your prospects.

  • Atlanta CEO Council Breakfast with the CEO of Red Hat

    The Atlanta CEO Council put on a great event yesterday morning. As part of their guest speaker series, they brought in Jim Whitehurst, the CEO of Red Hat, to share his vision as well as lessons learned being the COO of Delta Airlines. After hanging out with Lance Weatherby of the ATDC and Andy Monin of VendorMate, the presentation began. Here were Jim’s key recommendations for CEOs:

    • Focus, focus, focus – he mentioned three things they focus on for a year and work hard to say no to suggestions that don’t fall in those categories
    • Build repoire in person with all lines of company employees – he talked about meeting with 12,000 flight attendents over a six week period (350 at a time) as a way to help with customer service at Delta

    It was a great event.

  • Use Your GPA to Know When to Expand

    As a software entrepreneur it can be difficult to know when to expand staff, marketing, etc. One simple method I developed over the years is called GPA (Growth Plan Assets). The method is really simple in that you add together cash in the bank and current accounts receivable and then divide by last month’s “normal” costs. This, in a rough fashion, gives you the number of months you can operate without any new sales.

    You know you’re ready to expand when your GPA is greater than a standard college GPA (scale 0 – 4). So, like a college GPA, most of the time you’re in the two or three month range. When you go above that, you have a sufficient GPA to expand. When you are below a two, you’ll have some tough decisions to make. What’s your GPA?

    Note: The higher the percentage of revenue that is recurring, the lower the desired GPA.