What Customer Did You Lose?

I was talking with a startup the other day, and I thought everything was going well right up until they started talking about the paint.  The startup has done some impressive things, has a genuinely good business idea, has an obvious market, and has been able to cobble together the resources to show what can be done.  For awhile I was in awe of what had been accomplished, I bought into the story line, and was to the point I was pondering whether taking money from my business account to invest in a startup would be categorized as a business purchase, or a family one as far as whether I’d have to have a tedious discussion with my wife.  I was there.  I saw it. I BELIEVED. Until… until… they started talking about the paint…

“Paint… wah…? So tell me again why you need investment and this can’t be bootstrapped”. This is an important question.  The startup has customers, revenue, and the resources to supply the product.  Some investment more along the lines of debt would be understandable, but why do you need so much equity investment? That was the point the person started to explain how they really wanted the startup to “pop” and be impressive so that when you dealt with them you knew you were dealing with a real company.  I smiled… nodded and pondered where the closest Starbucks was.  I was excited about changing the world.  I don’t give one iota of a crap about paint color.

This is a problem that a lot of entrepreneurs run into, and the reason it’s a pet peeve of mine is that I did it in the past too.  People mistake “looking real” for shipping product. To be clear I don’t care what a company does with its profit.  CBT Nuggets had a salt water fish tank, LITERALLY a knife throwing room, and every employee got an iMac with Thunderbolt screen situated on a standing desk.  The other thing they had was a ticker on the wall that showed their revenue for the past year.  Those $5,000 desk setups only seem expensive until you look up at that ticker and realize they were chump change for the company. CBT Nuggets is successful, profitable, and they choose to spend that profit to improve employee moral. Cool…  That’s NOT the same as a startup looking for someone else’s money to in order to pretend to be a company like CBT Nuggets.

What many entrepreneurs miss is that the customers do not see, and do not care about the same things the entrepreneur does.  The customer wants a product, at a price they find reasonable,with a level of service that doesn’t drive them insane. Most of the time the customer doesn’t even see the same things as the entrepreneur, and even if they do don’t put the same value on it.

An example of this was when I bought my building for when I had the consulting company.  One of the things I was massively excited about was having a conference area with big table, comfy chairs, white board, etc.  I knew when I built that out that it would prove to my higher end clients that we were a “real” company and that they should trust us.  Here’s the thing… CEO’s are busy people… In consulting they don’t come to you… you go to them… So I had a beautiful conference area all setup to do professional pitches that was never used because I was doing those pitches in business owners offices as I wove my pitch between the incessant ringing of phones and interruptions by subordinates. Long story short I invested a lot of money in something no customer cared about…

This is what I want you to think about as you build your “real” business. To be clear I could rent office space, pay for web advertising, do trade shows, and whole bunch of things that “real” businesses do right now. (Please let me dispel the rumor that I’m somehow broke after YouTube.  A 99% profit margin over a number of years is a beautiful thing) Instead I work out of a bedroom office, and sum total expenses for Failed Normal come to around $100 per month. The reason being is that offices, fancy chairs, a secretary, and whatever else won’t matter to you.  This is a completely web facing company.  Your interaction with me is through social media, and various administrative systems.  The color of my offices is irrelevant.

So I want you to think about this as you try to build a “real” business.  Are you building it for your customers, or for your ego.  Before you spend a dime on anything that could be categorized as “investment” ask yourself what customer you lost because you didn’t have whatever it is you’re about to buy.  NOT whether a customer has said you should do something.  Not whether your peers laugh at your setup.  Not if your teeny tiny ego feels that you somehow deserve to have something better.  But who walked out the door?  Who was on the phone ready to schedule an appointment, and then decided not to because they realized you didn’t have something? Who did you meet on the street that used you in the past, and then they said that they went with someone else because the competitor had better resources?

If you ask yourself these questions before you spend money I’ll make the bet you realize that you’re spending money just to appease your ego.  To be clear if you’re spending profit more power to you, but if you’re accruing debt, selling equity, or sneaking money out of the families vacation fund you should just stop.  Today it will be a new coat of paint, tomorrow it will be a server rack, and the day after it will be the startup failing due to lack of resources.

Too many people right now are trying to portray something that they are not.  This is stressful because it means they put their resource requirements at such a high level that it becomes nearly impossible to find success, and in the age of authenticity I would argue it actually damages their brand.

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