David Cummings on Startups

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Revisit KPIs at Least Quarterly

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Key performance indicators (KPIs) have been discussed several times before (here, here, and here). In general, we do two KPIs per department and discuss them at our weekly tactical if a value is out of line. There’s always the tendency to try and complicate things by adding one, two, or three more per department but I’ve found that it is hard enough to concentrate on a couple things let alone five different items multiplied out by several departments (sales, marketing, services, support, operations, and engineering).

One thing to note is that KPIs should be revisited at least quarterly for both the goals for that quarter as well as the items being measured. I’ve found that we usually change one KPI completely each quarter to try a new metric to see if better represents one of the two most important numbers for a department. Most individual KPI goals change each quarter in an upward manner but some stay pretty steady (e.g. engineering average of 32 burn down hours per week per developer).

My recommendation is to keep KPIs simple and to revisit them at least quarterly. KPIs should be fluid metrics that are constantly improving, but not complicated.

What else? What other tips do you have about revisiting KPIs?

February 13, 2011
Startups Should Develop a Sales Playbook
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After a startup achieves product/market fit one of the most important next steps is to develop a sales and marketing machine. The sales team should be working towards a reproducible, and profitable, sales process. As part of that iteration, a sales playbook should be at the top of the sales manager or entrepreneurs list of items. A sales playbook is the how-to manual for a sales rep. The goal is to document and categorize as much sales related information as possible in a digestible format.

Here are some items for a sales playbook:
- Corporate information
- Sales pitch
- Elevator pitch
- Market space
- Recent trends
- Target customer
- Types of buyers
- Features and benefits
- List of references
- Sales process
- CRM process
- Competitors and differentiators
- Objection handling
- Glossary
As you can tell, the sales playbook is very detailed covering upwards of 50+ pages. A key aspect is that it should be a living, breathing document that is constantly updated (e.g. a shared Google Doc). Startups should develop a sales playbook.

What else? What other items do you include in your sales playbook?
February 12, 2011
Bottom-Up or Top-Down Financial Projections
Continuing the post from earlier in the week titled Startup Financial Models after Product/Market Fit, I wanted to talk a bit more about financial projections. Too often an entrepreneur asks for feedback on their executive summary, slide deck, and financial model only to have the financial model show a top-down projection. A bottom-up projection is a much better way to do it. Let’s look at a few details:
- A top-down projection is often something like “we’ll sell $500k the first year, $3 million the second year, and $10 million the third year” without detailing what it takes to actually achieve those results
- A bottom-up projection details the tactical items like number of sales reps, sales rep quota, hiring plan, percent of sales reps that won’t work out, ramp up times for sales reps, ad spend per rep or per new client, etc
- A bottom-up projection more accurately outlines the assumptions and thought process of the entrepreneur, which then allows advisors or investors to offer more valuable feedback
- A bottom-up projection helps the entrepreneur better budget for the startup and it often shows it’s more expensive than expected to reach the goals
My recommendation is to do bottom-up financial projections to better understand the business and what it takes to be successful.

What else? What other ideas do you have about financial projections?
February 11, 2011
Send Sales Proposals Within 48 Hours

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Lately I’ve been talking to a number of service providers as we continue to expand — everything from office space to marketing firms to recruiting agencies and I’m amazed at how long it takes to get proposals from people. Optimistically, I like to think it’s a good thing — their business is doing well and they’re busy. In reality, I’m guessing they aren’t being prioritized like they should.

Take note: proposals should be sent to the prospect within 48 hours.

Yes, some business proposals are more custom and complicated but the majority are boiler plate requiring less than 30 minutes of customization. For our own sales team — yes it is a product and not a service — we strive to get proposals over to prospects the same day they ask for them. Of the 10+ proposals I’ve received over the past 45 days, the majority took over 48 hours to get back to me and the content didn’t appear to be customized beyond 10-30 minutes of work. Service providers need to sign up customers when they are ready to buy.

What else? What have you seen with proposal response times?

February 10, 2011
Four Years on Average for Startup Success

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There’s a variety of opinions online about how long it takes to start a company from scratch and have it be successful (depends on your success definition but for me it is $1 million+ gross margin (not revenue), growing, profitable, and not dependent on a single key person). I’ve talked to entrepreneurs that were able to do it in 18 months and I’ve talked to entrepreneurs where it took 10 years (most fail).

After being in the technology startup community for 10 years I’ve come to believe it takes four years, on average to be successful, if the company is ever going to be successful. That’s four long, hard years to be successful. I’ve also found it takes two years, on average, to know if the business is viable and on the right track. It’s a marathon, not a sprint.

What else? What timelines have you seen to know if a startup is viable and if a business is a success?

February 9, 2011
Increase Site Lead Conversion Rate First
Image by Adrian Eden via Flickr

Earlier today I was talking with a SEO expert about online lead generation, marketing automation, and other topics. One of the points he made was that there are two major levers for website leads: traffic to your site and the conversion rate of visitors on your site into leads. Pretty simple, right? Now here’s the kicker – most people focus on driving more traffic to their site as opposed to increasing their conversion rate.

If you double your conversion rate that’s the equivalent of doubling your traffic with the previous conversion rate.

Most entrepreneurs should work on their conversion rate before working on increasing site traffic. Here are a few quick tips for increasing conversion rates:
- Don’t assume the homepage is the starting point for most visitors (search engines make it so that all pages are entry points)
- Incorporate a call to action on every page (e.g. a link to download a white paper, sign up for a free trial, or join a newsletter list)
- Think through site personas for your different types of visitors (e.g. technical buyer, executive decision maker, junior researcher, etc)
My recommendation is to look at your conversion rate and work to improve it first before other web marketing activities.

What else? What are some other tips to increase site lead conversion rates?
February 8, 2011
Startup “Help” to Avoid
When starting a company one of the best things you can do is to talk to as many people about the idea and get their feedback and introductions. A successful startup is 20% idea and 80% execution. With that said, there is some “help” that should be avoided whereby people take advantage of first-time entrepreneurs.

Here are some tactics to stay away from:
- Fees charged to get an introduction or to pitch angel investors or VCs
- Offers to write a business plan in exchange for thousands of dollars (I’m against writing business plans as testing business models is the way to go, and if you do need a business plan for something like a bank, you need to be able to do it yourself to understand your own business)
- People who pose as angel investors only to try and sell you consulting services requiring big fees and stock options to work with you first to see if they might invest later
- People who pose as angel investors that really want to do business development deals for you in exchange for a percentage of revenue with no desire to actually invest
My recommendation is to talk with people that genuinely want to help and have a clear motive of helping the community or offering a standard service (legal, accounting, commercial real estate, banking, etc).

Thanks to my friend Wayt King who inspired this post with his tweet:

http://twitter.com/#!/wayt/status/34781249474134016

What else? What are some other examples of startup “help” to avoid?
February 7, 2011
Startup Financial Models after Product/Market Fit
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The last thing many technology entrepreneurs want to do is to become spreadsheet jockeys but once product/market fit has been achieved one of the next things to do is to develop a comprehensive financial model. Yes, before product/market fit you need to have a good idea if the business is potentially viable, and some spreadsheet work is necessary to understand the business economics, but this should be a simple exercise. Post product/market fit the financial model should be much more detailed.

Here are some resources to help build and think through a financial model:
Ideally there would be example financial models online that could be easily customized but the nature of most startups is that there are company-specific nuances requiring heavy customization. My recommendation is to familiarize yourself with as much as you can related to financial modeling while enlisting help when possible.

What else? Do you have any tips or examples for startup financial models?
February 6, 2011
Startups Don’t Require Perfect Decisions
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When talking to people that want to be entrepreneurs but haven’t made the leap, the most common reason cited for not starting something is lack of a great idea. Yes, a great idea is nice but successful companies usually have a good idea, great timing, and great execution. Related to the idea for the business, startups don’t require perfect decisions. Making changeable decisions quickly and learning from them is critically important. There is no such thing as the perfect decision.

Here are some examples where a perfect decision isn’t required:
- Logo – make sure it is professional but don’t dwell on it in search of the perfect decision (once you’re successful you can invest more in it)
- Marketing strategies – there are so many mediums and venues to try that it is more important to develop a culture of analysis and testing that will naturally figure out what does and doesn’t work
- Product messaging – it takes a number of iterations to find the right tone, voice, and message for your target customer profiles (this is one of the tougher things startups must do)
The idea isn’t to start with bad decisions but rather to debate internally, take the best decision at the time, execute it, and learn as much as you can as quickly as you can. Startups don’t require perfect decisions.

What else? What are some other examples you see where people try to make the perfect decision?
February 5, 2011
Market Research for Inquiry Response Time
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Lately I’ve been using contact us forms on websites for companies that I would have normally called in order to test the effectiveness and response time for their follow-up emails and calls. The results aren’t pretty. Companies must not a) have a process for their online form inquiries, b) get very many leads online, or c) only have the form because the web design firm went ahead and included it.

Here’s my simple research:
- Local tire store – responded eight days later with the quote I requested
- Local dentist – no response at all
- Child swim coach – one hour response
- Marketing vendor – responded 24 hours later and never responded to my email response (has been eight days)
Now, I’m not saying small businesses should drop everything when an email comes in but they should prioritize these prospect inquiry requests, as with inbound marketing, these are usually the most serious leads. A couple ideas for the issue include having alerts for these sent to a special email address that multiple people receive as well as using software to have the phone ring when a form is completed.

What else? What’s your experience been like using contact us forms online?
February 4, 2011