David Cummings on Startups

Blog

  • SaaS Hidden Problem: On-Boarding Costs

    Software-as-a-Service (SaaS) really is an amazing delivery model for software in that it better aligns interests of vendors and customers compared with installed software that requires a large, up-front fee. In reality, the monthly or annual fees for SaaS make it so that the vendor is financing the customer due to the fact that the customer needs to hang around long enough to become profitable. If you sell a large enterprise installed product and the customer isn’t happy, it can still be profitable (though isn’t good business practice). With SaaS, if you have difficulty on-boarding the customer and making them successful, they can walk away.

    A hidden problem with SaaS is the on-boarding and switching costs relative to the cost of the solution don’t usually match up.

    Think about it: if you charge $1,000/month for a SaaS product, you need to be able to make customers successful with almost no effort, otherwise you need to have additional implementation fees for thousands of dollars, driving up the pain of switching, increasing the sales cycle, and increasing the non-scalable labor aspect of the business. Many SaaS companies don’t adequately account for the on-boarding costs to their business model as well as how it impacts the amount of time it takes for a customer to become profitable. SaaS is a more capital intensive model for entrepreneurs compared to installed software.

    My challenge for entrepreneurs is to incorporate the on-boarding costs into their model and really think about how they can remove the enormous friction that comes with switching over to their system.

  • Ideas for Sales Proposals

    At today’s EO Accelerator Monthly Accountability Group we had a good conversation about doing sales proposals. As an entrepreneur or sales person, proposals can be one of the least fun things to do due to being time consuming and not always producing revenue. Here are some tactics we discussed:

    • Deliver a pre-proposal which is essentially a bullet point list of what you believe the client needs and let them know you’d like their feedback before fleshing it out into the full proposal
    • Never send a proposal over without being on the phone or in person while it is being read for the first time so that you can address any issues or concerns in real time
    • If it is an RFP, submit two proposals with one being exactly what they asked for and one being what you think is best so that the procurement person has to take them back to the stakeholder for feedback and input, increasing your odds of winning the deal

    Proposals are an important part of business and these tactics should help you win more deals. Good luck!

  • How I Get Things Done

    People like to ask me how I get so many different things done. Of course, I’m flattered, and I need a better, more self-deprecating answer. The answer lies somewhere in being able to read something once, make a gut decision, and never look back. I move quickly.

    On a tactical level, I have a few simple guidelines I follow:

    • Every day the first thing I do when I get in the office is review what I accomplished yesterday and write down what I’m going to do that day
    • I only read emails once and handle them on the spot
    • I never go to bed with an email in my inbox (inbox zero was hard to get to but has been easy to maintain)
    • I love delegating to people smarter than me and watching what they produce
    • I read 100 blog posts a day and use that to generate ideas

    I don’t believe there is one right way for people to get things done, but this method works for me.

  • Financial Models – How much detail?

    We’ve been reworking our financial models in preparation for 2010 and beyond (three year planning). One of the questions that has come up is related to how much detail should we put into them. Detail, both in the number of assumptions and amount of variables, as well as projecting out out a certain time period. In terms of time periods, here are some common options:

    • The first six months on a month by month basis, followed by quarters for the remainder of the year, and then just a yearly columns
    • The 12 months on a month by month basis, followed by quarters for year two, and then just a yearly columns
    • The first 24 months a month by month basis, followed by yearly columns

    I’m leaning toward keeping them fairly simple and using the first option for the time period details.

  • Budget vs Actual

    We don’t use budgets in my company. There, I said it. Yes, many executive would view it as blasphemous to not set budgets and measure actual against it. What do we do in lieu of budgets? We do have quarterly sales bookings goals, recognized revenue goals, profit margin goals, etc. Yes, we look at our salary cap, trailing 12 months revenue and expenses, and a variety of other metrics. On a monthly basis we have a chunk of money to use for whatever comes up, and department managers submit requests and we make decisions to allocate money, or not, within a week.

    I’m guessing as we continue to grow, and work through the process of exiting No Man’s Land, we’ll have to do budgets. For now, we’re in no rush.

  • The Art of War

    I’ve seen several entrepreneurs and business leaders cite The Art of War as one of their most influential business books. While I haven’t read it yet, a colleague of mine just started a weekly practice of picking a section or quote from the book and writing about how it is relevant to our company. There are a few takeaways here:

    • Look to military books and other non-business books for inspiration
    • Find third-party ideas and adapt them to your business
    • Look for things you’re passionate about and use them to inspire your team
    • Never stop reading

    I’ve added The Art of War to the list of books I want to read.

  • Mapping the Sales Process

    Another big idea from yesterday’s EO Accelerator sales education day was to visually map the sales process. Jim Ryerson said that mapping the sales process was the first thing he does when he engages with a new client, and that it’s a simple process most companies never do. Here’s what he recommended:

    • Get a stack of post-it notes and a white board
    • Make a list of all the stakeholders involved in the process like prospect, prospect’s manager, sales rep., sales engineer, consultant, etc
    • List the stakeholders vertically on the white board
    • Write each step in the process on a post-it note and put the note on the same row as the stakeholder that’s responsible for it, putting each post-it on a new column from left to right
    • Draw a line from each post-it note to the possible outcomes and keep adding more post-it notes

    We haven’t tried this yet in my company but I’m looking forward to going through the process and learning the benefits.

  • EO Accelerator Sales Day

    Today we had our quarterly EO Accelerator education event on sales and marketing. It was an all-day session from 7:30am – 4:30pm held at my office in Buckhead. Our expert instructor was Jim Ryerson of salesOctane, and he did a fantastic job.

    One part of the class was about persuasion and communication techniques to aid in the selling process. Here are a few takeaways:

    • Don’t talk — spend more time listening
    • Use short questions
    • Start questions with who, what, why, where, when, and how
    • Don’t ask yes/no questions
    • Offer alternate choices (e.g. do you want to start sooner or later?)
    • Always set an agenda for the next meeting at the end of a call, make sure both sides have homework, and promptly follow-up with an email reiterating everything

    In my experience, sales is the number one area entrepreneurs fail to do as well as things that come more naturally like product development and team building. I highly recommend making sales a top priority for entrepreneurs and really understanding how to create a repeatable process.

  • Venture Atlanta 2009 Wrap Up

    The Venture Atlanta 2009 conference wrapped up today with two great keynote speakers and 22 companies presenting their six minute investor pitch. As conferences go, the event was extremely well done and the venue worked out great. Here are a few quick thoughts from the event:

    • The companies were mostly early stage with revenues under a million for this calendar year, and naturally, huge growth projections
    • Most companies were looking to raise an average of $2M – $3M in a Series A or Series B round
    • The tabletop area for presenting companies to talk to investors was separated from the main area and didn’t get as much traffic as you would expect
    • The event had a heavy number of service providers, all of whom were very nice

    TAG, Atlanta CEO Council, and the Metro Atlanta Chamber of Commerce did a great job putting on the event.

  • Venture Atlanta 2009

    One of the things I love about the Atlanta technology community is that there are large events, almost quarterly, that bring entrepreneurs, technologists, and executives from around the region. We have events like Startup Riot, TAG’s Georgia Technology Summit, and Venture Atlanta. Today and tomorrow are Venture Atlanta 2009.

    From the Venture Atlanta website:

    Event Highlights:
    – Venture Atlanta Showcase with 24 companies to open this year’s event
    – 22 Presenters to give their pitches on stage on October 14th
    – Two dynamic speakers: Pete Kight of Fiserv and Jeff Sprecher of IntercontinentalExchange (ICE)
    – Networking with the entire Atlanta technology community
    – Meet Venture Capitalists from Silicon Valley, Boston, Washington D.C, North Carolina, Texas, Florida and more

    I recommend that you get involved with your technology community if you haven’t done so already.