David Cummings on Startups

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  • #1 Question for Startups Bootstrapping

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    Recently I was talking to an entrepreneur working on a mobile game app in the education vertical. She doesn’t have money to invest and is working hard to bootstrap the business while looking for a technical co-founder. Here’s what I told her was the number one question for startups bootstrapping:

    What’s the simplest product you can launch and sell while building customer rapport to help guide future functionality?

    Obviously, bootstrapping a startup is difficult, but for most businesses it is the best way to go. Too often entrepreneurs spend time adding new features to their product after it is already salable and before they’ve built quality relationships with early adopter customers. Embracing the constraint that the minimum viable product is the goal — not the perfect product built in a vacuum — results in better outcomes.

  • 50 Things Every Startup Should Know

    With so much noise out there relative to what’s important in startups, here are 50 things every startup should know, in no particular order.

    1. Just do it
    2. 99% of decisions aren’t permanent
    3. Be slow to hire and quick to fire
    4. Measure what you manage
    5. Competition isn’t as important as the customer
    6. 95% of startups shouldn’t raise money
    7. Join a startup peer group
    8. The biggest challenge with growth is keeping everyone aligned
    9. Price differentiation doesn’t last long but customer service does
    10. Market timing is the most important factor for homeruns
    11. Empower customers to help sell new customers
    12. Create the best environment you can for your team
    13. Asking good questions is more important than guessing the answer
    14. Build relationships before you need them
    15. Always consider the best alternative outcome before beginning a negotiation
    16. Consciously balance time working in the business vs working on the business
    17. You only get one first impression
    18. What you start out doing isn’t likely where you’ll find success
    19. Get the corporate culture right and everything will fall into place
    20. The best exit strategy is to not need one
    21. The biggest enemy of websites is the browser Back button
    22. Recurring revenue is the best form of revenue
    23. Don’t burn any bridges as it is a small world
    24. Build a niche brand and curate all aspects of it
    25. Pivoting and iterating is healthy in a startup
    26. Always ask for a discount
    27. Your idea isn’t unique
    28. Sharing your idea with others will lead to benefits you can’t predict
    29. Keep it as simple as possible
    30. People identify with companies more so than products
    31. It’s worth paying a professional (lawyer, accountant, etc) to do it right the first time
    32. Set goals and adapt to changing information
    33. Storytelling is more powerful than marketing
    34. Most startups initially price their product/service too low
    35. Make time to think
    36. Focus on rhythm, data, and priorities
    37. Develop offline analogies to describe your startup
    38. Companies aren’t just about profits
    39. Celebrate the small victories
    40. Play to your strengths
    41. Be opinionated about your product when considering customer suggestions
    42. Know why you’re different and clearly articulate it
    43. Don’t develop products in a vacuum
    44. Regularly communicate with employees, customers, investors, and the community
    45. Remove friction for all stakeholders
    46. Absent information people make up reasons
    47. It is difficult to concentrate on more than three things at any one time
    48. Employees are the most important stakeholder
    49. No plan is perfect
    50. Consume the startup but don’t let it consume you

    What else? What other items would you add to the list?

  • Good Work, Good People, Good Pay

    One of the more important questions to answer for a startup is the general “why” question: why are you in business? For us we make it simple. We’re in business to provide an environment for good work, good people, and good pay. I know this sounds generic but it drives everything we do. Here’s part of how we define the terms:

    • Good work – defined as work that is fun, interesting, and challenging
    • Good people – defined as people that are positive, self-starting, and supportive
    • Good pay – defined as compensation that is above average with great benefits and perks

    This approach isn’t for everyone but  it has worked well for us. I recommend coming up with a formal business purpose as well as an answer to the “why” question. The most important thing is to make the purpose meaningful and live it in the company.

  • Giving Out Awards as a Business Model

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    As part of being a business model aficionado I enjoy learning how companies make money (hint: it isn’t always obvious). One interesting model that I don’t think people pay too much attention to is that of giving out awards as a money making strategy. Here are a few examples:

    • The Who’s Who books where you “win” recognition for being outstanding at what you do only to be hit up for $50 for each book you want with your information (I almost fell for this in high school)
    • Best Places to Work awards (we’re always finalists but have yet to win) where the company giving out the awards makes money off the HR consulting firm that administers the survey and then has the applying company pay if they want to see the results
    • Fastest Growing Company awards (we’ve won a couple of these) where the award winners are invited to a fancy dinner or multi-day conference, and have to pay the standard event fees, becoming a significant money maker for the company that gives out the award

    I think giving out awards as part of a business model is interesting and should be considered for certain types of companies. For many web companies it doesn’t make sense but it is a successful avenue for many traditional companies.

    What else? What are some other examples of awards as business models?

  • The Post-10-Customers Startup Sales Strategy

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    Today I had the opportunity to spend 90 minutes with a startup in town and talk about their go to market strategy. They launched a couple months ago and have signed up 10 paying customers through a combination of referrals and general search marketing. The big problem: sales aren’t going as well as they would like, cash is running low, and they don’t have a sales strategy.

    The biggest challenge for technical co-founders is transitioning from being product builders to product sellers.

    Here’s the advice I gave:

    • Prepare to be the sales rep, sales engineer, and product manager
    • Charge significantly more than initially thought for the product and listen for people saying the product isn’t worth it (that happens more often than people saying you should charge more)
    • Manage the four main sales metrics: calls, demos, opportunities, and deals won
    • Understand they’ll be ratios like the following: to win one deal it takes three opportunities, to get one opportunity it takes three demos, and to get three demos it takes 150 calls
    • Pick the most promising vertical from the first 10 customers and use Jigsaw.com to generate a list of 500 applicable companies plus employees
    • Plan for four hours a day of calling on the companies, with the expectation that it’ll take 8-10 calls per company to get the right person on the phone

    Employing this strategy will quickly reveal if the right vertical has been selected, and if so, a path to success will be eminent.

    What else? What other recommendations do you have for startups working on their sales strategy?

  • Sales Reps Should be Pleasantly Persistent

    Earlier today I was having lunch with a successful entrepreneur in town and the topic of sales reps came up. He used a term to describe the most common attribute for productive inside sales reps that I really liked: pleasantly persistent. Continuing with yesterday’s post that customer service shouldn’t be hard, let’s look at why sales shouldn’t be hard with pleasantly persistent reps:

    • Make a plan of attack that involves multiple phone calls to the appropriate prospects/suspects until contact is made
    • When leaving voicemails, say when the next day/time call will take place
    • Follow-up at the previously announced time and reiterate that you said you were going to follow-up and did it
    • Do what you say you’re going to do and be pleasantly persistent

    Of course, all of this should sound like common sense, because it is so obvious. Sales is not easy but being pleasantly persistent increases the chances of success.

  • Customer Service Shouldn’t Be Hard

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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

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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

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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.