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Here are 10 quality posts from the Founder's Library:

Your idea is worthless in finding a cofounder  

Following up on the earlier article about why it's hard to find a technical cofounder, here's another one by Eric Hellman in the same vein with some specific advice for would-be "business guys", namely that they need to show that they can deliver results before looking for a partner:

  • If you really have sales chops, then you already have a customer ready to sign a check.
  • If you have fund-raising chops, then you've already raised a nice pot of money.
  • If you really have marketing chops, then you can make the idea sound irresistible, even though it's worth nothing and you'll change it completely six months into the company!
  • Product management chops are more complicated, and some nice posts by Vinicius Vacanti and Kate Ray are relevant there. Being a good product manager means you have hands-on understanding of many issues, including domain expertise and technology. If you really have product management chops, then you should be able to define a minimum viable product that's so simple even you can implement a demo version, or perhaps a first iteration of the product, if you're willing to put some skin into it. It's not that hard.

In practice, it all boils down to the fact that the person that anyone is most likely to want to join forces with is one who doesn't really need them in order to build a successful business.

Evolution of a dashboard: beware vanity metrics  

Des Traynor proposes 5 stages of a startup's dashboard's evolution. The right metrics can and should drive your decisions, so a dashboard can be essential to make your decision process quicker and smoother. The five stages are:

  1. One step above "select count(user_id)": when you just need some idea what's going on. Don't overdo it at this stage.
  2. Aggregation: when you want to spot patterns across groups of users. At this stage, it becomes interesting to calculate averages.
  3. Trends: display the averages over time on a graph so that you can more easily spot trends
  4. Insights and actions: mark up the graphs so that you can better attribute causes to changes in trends.
  5. Projections: when you have enough data that you can take guesses as to how changes in your activities will affect future changes.

It's an interesting post, but there is one problem: the focus is too much on vanity metrics. Not a single one of the metrics used in the examples are actionable metrics. Vanity metrics are dangerous for a couple of reasons:

  • They give you a sense of being in control even when you're not.
  • They can lead you to make the wrong decisions. Data is dangerous.

It can be useful to collect these types of metrics anyway, because gut feeling can sometimes uncover connections that data could not, but always be wary of wild guesses as to why something is trending one way or another. Metrics should be directly linked to hypotheses which you're testing, and directly lead to decisions which will increase your sales.

Go for the win-win situations  

One friend that I respect very much said to me: "The way to get people to do what you want is to get them to want what you want. You need to come up with a deal that is good for them and good for you, and convince them that it's in their best interest to do that deal."

It sounds obvious, on the face of it, but often, the deal involves multiple parties, multiple moving parts that need to each come together in a smooth mechanism. It's not a skill that I've perfected yet, not by a long shot (though this friend of mine has many times proven his mastery at this particular game).

In practice, a win-win deal can be fiendishly hard to put together. And sometimes, it's just not possible. But when you can achieve it, it is the ultimate way to get people to do what you want. As the king said to the little prince:

"Exactly. One must require from each one the duty which each one can perform," the king went on. "Accepted authority rests first of all on reason. If you ordered your people to go and throw themselves into the sea, they would rise up in revolution. I have the right to require obedience because my orders are reasonable."

Favo.rs makes a similar point:

At the outset of each of these negotiations, the mutually shared goal was positive value creation for both parties, and a foundation for a sustainable partnership that would cause minimal to no pain for each side. However, once negotiations began, these potential partners would inevitably take one of two paths. Path one: true shared value creation, a.k.a. collaboration. Path two: a one-shot game, where maximum value capture for only one party during the first set of negotiations was the desired result.

Entrepreneurs can easily get bullied or pressured into accepting path two.

Adam of Favo.rs advises entrepreneurs to walk away from "one-shot" deals, because they foretell a poor relationship in the future:

(...) would I like to deal with this partner in this manner on a monthly, weekly or even daily basis for the foreseeable future? If the answer is no…then don’t be afraid to simply walk away. Chances are you’ll look back someday and be happy that you did.

Silence  

From my father's blog on wisdom:

If you have a gift with words, learn to keep your mouth shut; when you speak, punctuate with pause; and when you have nothing to say, say nothing.

(...)

Your silence passes many messages; one is that you are somebody, not nobody, a person able to face a crowd and to wait. This is an almost biological power of the big secure animal looking at harmless ones. People understand or better said they feel. After this, you have a better chance to be listened to.

Silence has tremendous applications in the business world too, of course.

For me, the "aha" moment about silence came when I was working on my first startup, while still working full time as a consultant in Accenture. I was sleeping about 4 hours a night for 9 months, and so I was constantly tired. At the time I was managing a small team of people who often did not get along. So, every once in a while, I would have to set up meetings with me and two other people to resolve their conflict and keep the project moving forward.

Because I was so tired, I spent most of my time in the meetings quiet, minimising even physical movement. I would sit and listen and let the meeting go its way until I came to a moment where I felt that if I did not say something - the right thing - just at that moment, with just the right body language to support it, things would go wrong sooner or later and I would have to pay with even more tiresome activity.

I wasn't scared of being "found out" for doing the bare minimum in meetings. I was starting my first business and I believed I would be out of the corporate world soon (and I was). But I noticed something very strange. Because I talked so rarely, every time I spoke, people stopped talking and took the time to listen to me. By doing much, much less, I had somehow given the little that I did do a lot more weight.

Since then, I've used silence in many other contexts. It can be a very useful tool for sales, for example: when you're trying to close a sale, at one point you need to state your pitch, with the price, and then just shut up. If you keep talking, you will only distract the customer from evaluating the pitch and coming to a decision.

In person-to-person conversations, few people can stand a prolonged silence, particularly when it follows a certain kind of statement. "I don't know what I can do to solve X," followed by silence, will often pull suggestions for solving X out of someone who would not have volunteered them for "how should I solve X?"

Learn to use silence. It is a powerful tool in many contexts.

Online advertising for bootstrapped startups  

Rob Walling has posted this "5-minute" guide to advertising for startups. It doesn't go to a great depth, but it's a solid introduction. The article covers:

  • Strategies to make the most of advertising:
    • Converting advertising into emails (making it stick)
    • Using advertising to test hypotheses
  • The top five advertising options:
    • Niche advertising (InfluAds, BuySellAds, etc)
    • Google AdWords
    • Facebook Ads
    • StumbleUpon
    • Reddit

An interesting point is the view that advertising is not a viable way to scale a bootstrapped startup's customer acquisition:

unless you have deep pockets think of advertising not as a long-term traffic strategy, but as a testing tool to improve your website and find out more about your ideal visitor. Few bootstrapped startups can withstand the cash outlay required to turn advertising into a marketing activity with a positive ROI

Understanding your competitors  

In GrantTree, I've lost count of the number of times when, upon being asked about competitors, the client declares that "we don't have any competitors, what we do is unique".

Unfortunately, this mindset is wrong. Here's Des Traynor's take on it:

McDonalds and Weight Watchers are selling wildly different products, but they’re competing for the same customers. This is what we call indirect competition. Note that this is different to competing on outcomes. Video Conferencing & Business class flights compete on outcomes. In that case, they’re both hired for the same job (business meetings).

Spot on. The rest of the article explains how to make use of this insight in practice, with a real-life example. Read it now.

Principles for designing and deploying internet-scale services  

Excellent paper from 2007, by James Hamilton, who was formerly at Microsoft and has been at Amazon since 2008, on how to design and deploy web services at scale. The paper is fairly technical, but some of the key principles are worth knowing even for completely non-technical readers.

First, he outlines three simple tenets:

  • Expect failures. A component may crash or be stopped at any time. Dependent components might fail or be stopped at any time. There will be network failures. Disks will run out of space. Handle all failures gracefully.
  • Keep things simple. Complexity breeds problems. Simple things are easier to get right. Avoid unnecessary dependencies. Installation should be simple. Failures on one server should have no impact on the rest of the data center.
  • Automate everything. People make mistakes. People need sleep. People forget things. Automated processes are testable, fixable, and therefore ultimately much more reliable. Automate wherever possible.

Out of these key principles, some other design principles emerge, for example, for operations-friendly design:

  • Design for failure
  • Build in redundancy and fault recovery
  • Use commodity hardware
  • Have a single version of the software
  • Host everyone on the same version of the software (aka Multi-tenancy)

The paper is quite friendly to non-technical readers (at least at the beginning), and a breezy read for technical ones, and should probably be required reading for people building services which they intend to scale.

Even as a non-technical founder, you should be able to understand this paper, if only so that you can communicate with your CTO. It's probably a good idea to grab a print-out, and spend a couple of hours walking over it with your CTO and asking questions about the bits you don't understand. You'll come out of it knowing a lot more about the key technology concerns for a growing startup.

As a final note, it's worth adding that while early stage startups with few or no users should be aware of these principles, actually implementing them all from day one would be gross over-engineering. Get users first - scale once you have the users.

Sales comes out of who you genuinely are

Have you seen Glengarry Glen Ross?

It's a pretty awesome movie based on a play by David Mamet. There's a scene in there that has been posted ad nauseam, the Always Be Closing speech where Alec Baldwin puts some serious pressure on the small sales team at some kind of real estate company that's never fully described.

A less well-known feature of that film is the sales pitch and approach followed by that company's star salesperson, Ricky Roma, played by Al Pacino. Ricky is shown spouting ten shades of bullshit in a bar with his "mark", convincing him to buy a product that's clearly not good for him (and very expensive), and then actually lying to his face to try and maintain the sale when his customer realises (after being told by his wife that she'll divorce and ruin him if he doesn't cancel the sale) that he made a really, really bad deal that's about to literally destroy his life and put him in the gutter.

What does Ricky Roma do in this situation? He lies and pretends the contract can be cancelled later, so that he can lock in this "customer" into this sale that will destroy him.

Ricky Roma is a complete asshole and a stain on the reputation of salespeople. David Mamet must not have known a lot of salespeople, to have this view of what a good salesperson is, because that is definitely not how great salespeople work.

Which brings me to real salespeople, the ones who actually make sales in the real world, rather than in fantasy plays. The kind that you need to become yourself, to an extent, in order to be a successful founder.

Win-win-win

Successful salespeople don't pressure or bullshit the prospect into a sale. They are persistent, but they are always focused on achieving a deal where it will benefit all parties.

This means that a great salesperson will never be selling something that they don't believe actually helps the customer. And that has to be the starting point of every conversation with a potential customer. How can I help you? Is there something that I sell or someone that I know that can make your life better?

For the last few months, I immersed myself deeply in the sales process for GrantTree, but over the last few years, I've observed quite a few competent salespeople at work, and been part of many sales, both successful and not, and the conversation, particularly when selling high-value, high-price items, always starts with how to best help the person sitting in front of you (or on the other side of the phone call).

How you can help someone always starts with who you are. I'm a serial entrepreneur, with a blog full of advice for startups, with connections and experience that come from 5, 6 years of doing this, and with a business that sells a product that can help tech startups. So my conversations always start with understanding where the person on the other side is at the moment, and how I can help them. The best situations for me to help most tangibly is if there is a match between the services GrantTree offers and the state their business is in, but if those services won't help them, I would never push them into deals that won't provide a clearly positive outcome for them.

For example, some clients are too small for GrantTree to be able to add much value. It's the nature of government incentives, which are based on how much you spend, that the more you spend, the more you can get back. And the more you can get back, the bigger the difference it makes to use a specialist. I regularly speak to founders whose businesses are too small or early to make the most out of GrantTree's services. In those cases, I try to help them anyway - even without getting anything out of it for GrantTree.

This is how I start. My cofounder, Paulina, approaches clients differently. Her strength includes a very wide network of people who might be great connections for the person she's talking to, so naturally she leverages that, rather than tech startup experience, to help the potential client. But again - the focus is on helping the other person, never on trying to squeeze a deal out of circumstances where we can't make a positive impact on their business.

How will you approach your potential customers? That entirely depends on who you are, what you bring to the table. But it always has to be first focused on helping the other person. Otherwise, you are not a salesperson, you are a scammer looking for a quick buck, like Ricky Roma.

Getting over the money hurdle

With that in mind, as a geek, I used to find it hard to get past the fact that ultimately, I was doing this to make some money. This is probably the greatest hurdle for anyone (even people who eventually become master salespeople): realising that it's ok to make money from a deal.

It sounds trite, cute almost, but it's a real problem. Most people who have not spent a considerable amount of time selling will feel that the whole process is made unwholesome because they are, ultimately, doing it out of self-interest too. Yes, I'm trying to help the other person, but I'm also trying to make some money, so I must be selfish, right?

This comes back to believing in your product. If you don't believe that your product genuinely adds to your customers' lives, genuinely makes things better, genuinely helps, then don't sell it until you do, because then you are selling a scam and you should indeed be ashamed of doing so.

However, if you do believe in your product, then focus on that and the issue will go away. Here are some examples:

Patrick McKenzie wrote about how he started charging a lot more for his services after a conversation with Thomas Ptacek, who pointed out the vast amounts of value he was creating for the client business. Charging more enabled him to focus on providing top quality advice to people who could really make use of it. He's since helped many other companies to multiply their revenues. He wouldn't be able to do that unless he charged a lot for it (he wouldn't have the time to do it properly, with the right amount of focus). Patrick believes in his product (and should). If Patrick tries to sell to a business that would be a good fit, I'm sure he has no doubt in his mind that if the sale goes through, both himself and the client will benefit greatly. Is that a product you can believe in? Absolutely.

George, one of our recent hires at GrantTree used to work for Point-Two, who sell air jackets for horse riders that inflate upon impact. These jackets can save your life. He showed me a video recently of a woman whose horse hesitated before a jump. She went over the obstacle. The horse came tumbling after, on top of her. The 600-kg beast landed squarely on top of her. The air jacket meant that she walked away with a few bruised ribs. That jacket saved her life. Is that a product you can believe in? Absolutely.

GrantTree sells help with getting government funding. For the right clients, we increase the amount of funding obtained substantially, through our knowledge of the rules, as well as reducing the amount of time spent preparing the filings and the risk of doing so. Many of our clients would not file, or would file much smaller claims, if it wasn't for us. We regularly take on clients who have lost all belief in UK government funding, and are very surprised when the funding does go through. Or we take on clients who are already making use of the funding schemes and we substantially increase the amount that they get. Is that a product you can believe in? Absolutely.

Given that these are all products that add very tangible amounts of value to the clients, is it reasonable to make money for them? Absolutely. Making money from his consulting services means that Patrick has been able to go around the world helping well targeted businesses with his knowledge. Making money from the jackets means that Point-two have been able to save lives. Making money from government funding services means that GrantTree has been able to grow and help even more businesses. None of those things would have happened if those businesses did not make money.

So don't feel bad about the fact that you'll get money out of the deal too. If you believe your product genuinely helps your customers, then making money from it is absolutely deserved and reasonable.

Focus on the win-win nature of every deal you make and, over time, the self-accusation of selfishness will fade away.

In conclusion

Mythological salesmen like Ricky Roma, who are really highly skilled scammers, have given the sales profession a bad name. If you want to be a successful founder, sales is one of the many skills you need to learn.

Get over your fear of making good money from selling good services by realising that every sale you make will benefit your customers (if your product is worth selling) far more than it will cost them, and start every sale from the point of view that you are trying to help the other person.

Good luck with it! Sales is damn hard, even without misconceived notions about whether it's ok to make money when selling something.


Start charging right away  

Ilya Lichtenstein:

A lot of startups, especially SaaS startups, are extending their free beta for far too long. So many companies seem scared of pulling the trigger and asking their users to give them a dollar, and evolve from users to customers.

(...)

Their fear is justified, because the second you start charging for a product, all of the bubbly bullshit falls away. The market is cold, rational, and effective. It doesn’t care about your lean startup methods, your rockstar team, or your fawning tech press. All of your assumptions, vision, business plans and pitches are irrelevant.

Money line:

You’ve either built something worth paying money for, or you haven’t.

One of the basic mistakes I made on my previous business was that although we had real users right from the start (just a month and a half into the development), we didn't charge for a year and a half. And therefore we didn't really start learning until a year and a half had passed.

I covered some of the issues with that in my article on fitting your product to the right market.

One good way to get over this hurdle is to work with a natural and competent salesperson. Salespeople will not shirk away from asking customers for money, right now, today.

How to use Business Development in a startup  

Via this post, here's a great set of slides by Charles Hudson, about when to hire someone for Business Development, and how to use them properly.

Here's a summary/extract of some of the key slides:

The purpose of business development is:

  • Licence someone else's technology or content for use in your product or service
  • Distribute your product or service through someone else's network

Revenue growth, sales, "business guy" are not BD roles.

First, make sure you actually need BD. Maybe you want a business hire who is not a BD person, to work on relationships with key partners, do market research, or help you sell your company. BD is costly to staff, more so than even a talented engineer or designer, so make sure you really need it.

BD creates extra work for the product team. If you're not willing to do the extra work, don't hire a BD person. Be aware that internal projects will often get deferred to process deals signed by BD.

Make sure the relationship between BD and product is healthy: don't allow overly padded estimates of delivery time, but also don't allow BD to over-estimate their likelihood of closing deals. In addition, make sure that your BD people don't treat pre-deal engineering work as "free" - spec work and mockups cost, and bringing in your top engineers to a meeting is very expensive. But make sure your engineers respect the BD function too.

The presentation also includes information on how to evaluate Business Development deals, and how to make sure you're not caught out by typical BD problems. It's worth a read.

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