David Cummings on Startups

Category: Entrepreneurship

  • Early Startup Customers and Scalable Lead Generation Strategies

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    Once the minimum viable product (or minimum respectable product if you don’t subscribe to the “you should be embarrassed with your first release” approach) is in place there’s typically a parallel strategy that takes place: acquire the first 10 paying customers through whatever means possible and search for a scalable lead generation strategy. After achieving the start of a scalable lead generation strategy the next step is to profitably acquire customers in a repeatable manner. Of course, the words “profitably” and “repeatable” are critically important and are the death knell for most startups.

    Some thoughts are taking this two pronged approach of earning 10 paying customers and finding a scalable lead generation strategy:

    • The first 10 paying customers are often found through friends, family, and other forms of brute force marketing. For these 10, the should pay some money so they have a vested interest but even more importantly they need to be a channel for feedback as well as references for future customers.
    • Set expectations with these first customers that the system won’t be perfect but that the goal is to continually improve it and to get their input while doing so.
    • The scalable lead generation strategy is often found through significant trial and error. Plan on trying dozens of tactics before finding it, if it even exists. Some items that have worked include targeted cold calling, niche community sponsorships, PPC ads, and long-tail ad networks (see yesterday’s post).
    • Different lead generation tactics can be experimented in a parallel or serial approach depending on time and budget constraints. The most important thing is to learn from each experiment and look for new clues.

    Herb Keller of Southwest Airlines has a great quote:

    We have a ‘strategic plan.’ It’s called doing things.

    Now, don’t equate actions with results but the more tests you run, and the more failures you have, the closer you’ll be to finding what works.

    What else? What other ideas do you have about getting early customers while looking for a scalable lead generation strategy at the same time?

  • Example Startup Sales Strategies that Resulted in Success

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    After talking with hundreds of entrepreneurs over the years I like to reflect on patterns and trends. One trend that has emerged, to no surprise, is that sales strategies resulting in serious success are all over the place. The interesting thing is that many startups that have achieved my definition of success can pin point one specific strategy that really catapulted them to the next level.

    Here are real world startup sales strategies that led to success:

    • Enterprise software company that won a couple RFPs in a vertical and then proceeded to cold call the 4,000 organizations in the vertical and share the success stories
    • Software-as-a-service company that developed an expertise in using Google AdWords for lead generation and now spends seven figures a year on PPC and generates eight figures a year in revenue
    • Software-as-a-service company that sponsored small, specialized communities with thought leadership for lead generation
    • Software-as-a-service company that used small ad networks in niche communities to generate free trials and grow significantly faster than the competition
    • Software-as-a-service company that provided a free site that scored a variety of things and then offered more data in exchange for an email address for lead generation

    Please send me an email or tweet if you’d like to know the companies behind each of these examples as well as more information. There’s no silver bullet for all companies but there are unexpected techniques that had profound results for many startups.

    What else? What are some other example sales strategies that resulted in serious success?

  • Most Entrepreneurs Have a Sales Challenge

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    Most entrepreneurs I talk to are focused on growth. They believe that if they grow the business to X things will be better and easier. Once I hear that I then like to ask what their goals are for growth, revenue, and number of employees. I then share with them what I view as a successful business for me personally (growing, profitable, enough scale that the business doesn’t require me, etc).

    As growing the business is a function of revenue, we then talk about sales. Most entrepreneurs have a sales challenge. That is, building the product or delivering the service comes naturally — it’s increasing sales that is the most challenging. Some of the most successful entrepreneurs I’ve met are also the most gifted at sales or they figured out a way to build a sales and marketing machine.

    Building a sales and marketing machine is incredibly difficult — almost always more difficult than building the product or delivering the service. The next time you go about improving your product or refining your service ask yourself if the time is better spent building a sales and marketing machine. It isn’t easy, and probably not as fun, but I find that entrepreneurs need to spend to spend more time building a sales and marketing machine than they think.

    What else? Do you think most entrepreneurs have a sales challenge?

  • Updated Quarterly Check-ins

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    We’re mixing things up this quarter and doing quarterly check-ins instead of quarterly performance reviews. OK, so they are pretty much the same thing but we tweaked the naming to reflect that this is a conversation with your manager/direct report, it isn’t tied to an immediate raise/promotion, and is important for aligning goals. I’ve talked about performance reviews several times before. Here are the questions we ask now:

    1. What did you accomplish this quarter? (List top 5-10 accomplishments)
    2. What 3-5 goals will you focus on next quarter?
    3. How can you improve?
    4. How are you embracing the company values? (Please provide specific examples.)

    The quarterly check-ins are frequent enough to remember what you accomplished and infrequent enough to not be burdensome. My recommendation is to do something similar to facilitate communication and feedback on a regular basis.

    What else? What other ideas do you have about check-ins/performance reviews?

  • Track Everything in Marketing

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    Today I had lunch with two co-founders that have built a nice business the brute force way: they started in 2000, tried to raise money unsuccessfully, and bootstrapped things to a multi-million dollar revenue business. All their leads come from Google PPC ads and existing client referrals. They were lamenting that they’ve tried other marketing avenues like SEO, direct mail, and more but could never justify the cost. Of course, I mentioned marketing automation and how it can help track many marketing activities and close the loop on ROI reporting.

    Here are things that can be tracked with marketing automation and other tools:

    • Phone calls by way of vanity 800 numbers that are campaign specific
    • Direct mail pieces with personalized links
    • Social media using referrers and tracked links
    • SEO through referrers and source analysis
    • Advertising campaigns through tracked links
    • Companies on your site through anonymous visitor lookup
    • Email marketing and landing pages/forms are typically already tracked

    As a marketer, the Internet is boon since everything everywhere can be tracked and correlated with outcomes. If someone tells you it can’t be tracked, it’s time to talk to a different person. Marketers should track everything.

    What else? What else can be tracked for marketing?

  • Technology-Enabled Business Services are Underappreciated

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    After talking to a number of entrepreneurs over the years, the vast majority are focused on a building a technology product (e.g. a SaaS product or web site). Of course, there’s a natural bias since that’s what I focus on but nonetheless I talk to very few entrepreneurs trying to build technology-enabled business services startups. A technology-enabled business service is a business services company that uses proprietary technology to deliver something better/faster/cheaper than if you do it yourself or hire a traditional firm.

    Here are a few examples:

    • SecureWorks – an Atlanta-based managed security services provider that offers outsourced solutions to monitor and test for different security issues (as was recently acquired by Dell for a rumored $650 million)
    • Liazon – a health care and benefits broker (e.g. you can buy your company health insurance through them) that differentiates itself with a proprietary portal that makes it easy for your startup employees to choose from a variety of plans and allocate a set budget (instead of having a single health insurance plan for all employees you can have several and let them pick and choose)
    • SoftLayer – data center and hosting services that differentiates itself through a proprietary portal, provisioning process, and APIs that allow it to offer dedicated boxes provisioned much faster than most providers
    • WebGreeter – an outsourced live chat service for web sites where the call center agents are provided a simple list of questions they can answer otherwise they collect the visitor’s information for follow-up by one of your own employees

    Each of these examples is a successful business with proprietary technology that give it an edge in their market. My recommendation is for entrepreneurs to consider technology-enabled business services in addition to technology products.

    What else? What are some other examples of successful technology-enabled business services?

  • Consider the Support Burden of New Features

    One aspect of product management that took me many years to appreciate is the potential support burden of new features. When developing a new product, even in the first 12 – 24 months, it’s so easy and quick to implement additional functionality there’s a tendency to add new features without regard to longer term implications. The most important aspect of product management is to be opinionated about what goes in, and doesn’t go in, the product.

    Here are a few tips when considering the support burden of new features:

    • Pay particular attention to anything that allows custom code like HTML, CSS, or scripting as these are challenging to support
    • Watch for difficult user experience interactions like multi-select conventions
    • If you find strong contention internally for how a feature should be implemented it could be equally challenging for users to use regardless of how it’s done
    • Consider if the feature should be part of a specific plan or offering (e.g. more expensive plan or add-on due to the complexity)

    Implementing new features should not be done in a vacuum even if you are opinionated about the product. In addition to curating the product’s functionality, the complexity and support burden should also be considered.

    What else? What other tips do you have when considering the support burden of new features?

  • LCD Scoreboard Sets the Tone

    Lenox Square.
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    When people come to our office their first comment is always about the great views from the 34th floor on the edge of North Buckhead. Their second comment is almost always about the large LCD scoreboard we have in the lobby. People aren’t used to seeing a company’s current results(including revenues) and goals for the quarter prominently displayed for everyone to see. The LCD scoreboard sets the tone: results matter and we’re transparent about our progress.

    Here are some benefits of the LCD scoreboard setting the tone:

    • Everyone knows exactly where we stand on a daily basis via the LCD scoreboard in the lobby and the same Google Spreadsheet on the homepage of our intranet
    • We believe in transparency and accountability the moment you walk in the door
    • When things are going well, or not well, peer congratulations or peer pressure reinforce that everyone’s in it together

    The LCD scoreboard seemed like overkill when we first did it because of the cost and effort but I can confidently say it was easily worth it.

    What else? What are your thoughts on using tools like an LCD scoreboard to set the tone?

  • Entrepreneurs Don’t Need Focus Groups

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    In the past two days I talked to three first-time entrepreneurs that wanted input on their ideas. Every single one cited the desire to use focus groups to help validate their project. Entrepreneurs don’t need focus groups. Henry Ford has a famous quote that exemplifies how I feel about focus groups: If I’d asked customers what they wanted, they would have said “a faster horse.”

    Now, talking to customers and potential prospects is the right idea. Doing focus groups in the traditional sense is overkill and too expensive. Entrepreneurs are much better off seeking out prospective customers and engaging in a customer driven process using the 4 Steps to the Epiphany (free PDF of book) or Lean Startup model.

    A few things to consider when attempting to validate a startup idea:

    • Talk to at least 10 potential customers about the idea and get their input
    • For the prospects that express interest, ask for a firm commitment for them to use it (e.g. timeframe, cost, etc)
    • Ask them how they go about solving the problem now as well as what other things they’ve looked into to solve the problem
    • Seek out entrepreneurs or potential advisers that have relevant domain expertise

    Validating an idea before jumping into it full-time is one of the harder things to do as an entrepreneur. My recommendation is to roll up your sleeves and talk one-on-one with as many people as makes sense and get direct feedback.

    What else? What other tactics do you have to validate a startup idea?

  • Provide a Concise Explanation of the Startup Idea

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    Late this afternoon I had a call with an entrepreneur that I’d helped in the past. He’s working on a new idea and wanted to get feedback. Yesterday he sent over some slides about the concept and I skimmed through them. After the usual first five minutes of a phone call I quickly asked for to hear the short pitch on the new venture. Unfortunately, he talked for five minutes straight and it still wasn’t clear. I then asked again for him to restate the idea in less than 20 words and he didn’t have any luck.

    Startup founders need to provide a concise explanation of their idea. Here are some questions to think through:

    • What’s the offline analogy?
    • Who has the pain?
    • How is it accomplished now?
    • How would you explain it in under 20 words?
    • What’s the explanation for someone who’s in the industry (e.g. include the jargon)?
    • What’s the explanation for someone random on the street (e.g. exclude the jargon)?

    A concise explanation of a startup idea is hard at first but becomes easy with practice and refinement. All entrepreneurs need to have it ready at short notice.

    What else? What are some other tips or questions for developing a concise explanation of the startup idea?