Category: Business

Define the Goals

I was meeting with an experienced small business owner and entrepreneur today who has grown a very successful business in a very short period of time.

During our discussion and in a previous discussion he asked me to think about what my goals are for the business, what is the point of it all — all the work we’re putting in day in and day out at our company.

He suggested I think about that and let that drive some of the decision making in regards to the future direction of the company.

It’s easy to get caught in the day to day work and let time go by without defining the goals of the organization and also that the goals can come in and out of focus, or change even, as the company grows and changes.

One thing that he noted that stuck out was something along the lines of “there isn’t a right goal and a wrong goal, people have different goals, but you should think about your goals and what makes sense for you.”

Building a Bootstrapped Small Business

Pretty neat to see where things have gone since writing this post back in March 2012. In fact it’s been almost exactly seven years since writing that post.

Since writing that post, I have been fairly busy growing what I (and others that I talk to) would consider a highly successful small business.

Here are some quick notes:

1) We carved out a great spot in the website design, hosting and support market.

2) We grew from zero customers to about 1,400 customers and are adding 30-40 customers/mo currently.

3) We grew from one employee (myself) to 26 full time employees (we just hired two more team members this week).

4) Our organization is launching around 300 new websites/year currently.

5) Our organization is handling about 4-5k support tickets/year currently.

6) Recently, our week-over-week and month-over-month growth rate has increased substantially.

7) We continue to be 100% bootstrapped and self-funded, no outside investment, ever.

I hope to use this space to share some useful learnings and insight as a semi-young (32 yrs old), fairly successful, small business owner.

I hope to add value for those who are on or interested in a similar path, growing a small business – from the ground up, without any debt or outside investment, fully bootstrapped.

Line2 vs Google Voice

I got an email a few days ago from a guy who was looking for some info on Line2 as he is trying to decide if he wants to use it for his business. He got in touch because of the article I put together on our company blog titled: The Unbiased Guide: Best Phone System for Entrepreneurs & StartUps. I figured instead of just responding via email I would post this to the blog so that others can see the feedback I have about Line2 as well.

Here are my initial thought to him:

Thanks for getting in touch. Yep, we use Line2 for our company, we have 2 people each with their own accounts but we are in the process of merging the accounts, adding a third line and a 1-800 number. So far we have had a great experience with using Line2. Did you have any specific questions?

And his follow up email:

I had some follow up questions:

  • Line Quality
  • Uptime
  • Is there a CS Number?
  • Do you have any issues with calling from a landline through Line2?
  • Do you use the Softphone?

So now I’ll go about answering each of these points:

  • Line Quality: We have tried many systems (see in our linked post above) and this is the best we could find in terms of quality. Google voice has great quality as well. We use Line2 in “cell” mode via our carriers. VOIP degrades the quality of the calls a bit, but of course, that also depends on your internet connection. Line2 in cell mode feels just like a normal phone call in terms of quality.
  • Uptime: We’ve been using it for about 2-3 months now and we haven’t had any issues with downtime. The service always seems to be up when we need it. They have scheduled maintenance periods but they let you know way in advance and only book them during “non-peak” business hours. This has not been an issue for us at all.
  • Is there a CS Number?: Assuming CS means Customer Service, yes. Once you sign up for a paid account you get access to the customer service number. We have had a bit of trouble trying to connect with them recently, so I wouldn’t say their business is centered heavily on customer service.
  • Do you have any issues with calling from a landline through Line2?: Nope. This is where Line2 beats up Google Voice. Google Voice is notorious for not letting some land line calls through to your mobile device. We have never had anyone get stuck or dropped or not connected.
  • Do you use the Softphone?: Nope. We both use Andriod devices, I’m on the HTC EVO (4g) and it works great.

Hope that helps!!

Low price and high service is the promised land

A story about a rug

About two weeks ago my wife and I bought a carpet from a local carpet store, we were going to use it in the baby’s room that we are now prepping for the baby’s arrival. It was the only room in our house where they original wood flooring had not been refinished so we decided to get the floors refinished as well and then put the carpet down over them. But once we got the floors refinished we realized we didn’t want to cover them up with a carpet any longer so I placed a call back to the carpet store to ask them if they would give us a refund even though they had cut this carpet specifically for us. The sales person was great, he was super nice and super helpful in a way which you usually only find in a small town business or store. He let us off the hook and gave a full refund (minus the cutting costs – around $10). We would have totally understood if he didn’t want to provide the refund, he had every right to make us eat the $160 we spend on the rug, but he didn’t, he went the extra few steps to make us happy.

So now we’re looking at a smaller rug to fill the space, so that we can still see the wood flooring. However, we aren’t looking at that store again. Turns out that while they offer amazing service and great sales people, they are SUPER expensive compared to big box stores or online retailers. It’s really not fun as the customer, because I want to give the business back to them so bad, but I cannot let myself pay 50-200% more in the name of “good service.” This really got me thinking.

Not all about service?

Service is truly the next big differentiator, I mean, in a way it always has been one of the biggest places to find differentiation for your business. But now, in the wake of many tech companies outsourcing technical and other support services, it seems to be coming very much back into the spot light.

That being said, it’s not all about service, it never has been. It’s still very much about price as well. I think these two things work together in a customers mind like this: “If I pay a lot, I should get good customer service, if I don’t pay a lot I should not expect good customer service.” This is how you explain why walmart customers don’t care when they have to step over cardboard boxes in the aisles, yet whole foods’ customers would get upset if the peppers are not fully stocked, or someone cannot answer your question about the sourcing of fish or meat. Walmart customers expect crappy service, whole foods customers pay extra expecting great service.

The promised land

So the true promised land then seems to be if you could somehow offer low prices and good (or even exceptional) customer service. No customers would expect such good service at such a price point, which in-turn makes most of them very happy with what they are getting for their money.

It seems like a really tough spot to try and find but I feel like the path to this promised land lies in the scale offered by the internet and technology. We can scale things so crazy well with the internet as our primary business channel and tools offered by tech advances. We can stop thinking in terms of tradeoffs between cost and service as there are so many new ways to provide service at reduced costs (and costs per additional customer). Things like support forums and 1-click installers were never available in non-tech markets. To not take advantage of these things seems crazy. I am striving for this promised land with our web design company and I think we can make it there!

Not everyone is your customer

Yesterday, my co-founder Vince was telling me a story of a scene he witnessed at a local coffee shop. The basic scene was a person being overly aggressive toward another person in the shop about the services they sell. Person ‘A’ was trying to push their product/service on person ‘B’ without any kind of knowledge of what person B’s needs or wants were. This is a scene that is very familiar to me, I see it played out all the time, sometimes in the past I have been person A, sometimes in the past I have been person B.

Getting sold to is just annoying

I think that pretty much covers it. Being person B is not a fun spot, no one wants to be sold to by someone who obviously doesn’t care. These days the buyers are so informed that they usually don’t need to be sold to, they know what they need and they know where to get it. Sales should be seen more as an educational process (in depth education vs quick research), not as a necessity to build revenue.

Qualify your customers

Don’t be person A. Don’t try selling your product or service to everyone, not everyone is your customer, dummy. This is one of the many lessons that I have learned over the past four years of being a business owner. The most important thing about deciding to qualify your customers and pin down your true target market is that everyone is happier. You magically start doing better work, your customers magically are more satisfied with the service or product they are getting. Take that extra time to make sure the fit is right between what you do best and what the potential customer’s needs or wants are.

This has a crazy snowball effect on your marketing and business growth as well. Like if you have a customer who is your perfect customer and you do an amazing job for them, not so much because you’re amazing, but more because your offering fits their need PERFECTLY, you usually get a rave review from them. Even more important other usually get a rave review from them about you and what you do. People don’t go around recommending services and products that were “okay” or “helped us get by.” However, they do go around recommending services and products that were “amazing” or “life changers.” In terms of overall marketing program and marketing strategy, word-of-mouth is still super high on the list of importance, maybe even number one on the list of marketing importance. By tightly qualifying your customers you can really push yourself towards super positive feedback and super powerful word-of-mouth.

Learn about Positive Cash Flow

Starting my own business in 2009 was a great step forward for me. It gave me something else to focus on besides my 9 to 5 and it gave me a chance to challenge myself and learn a ton of new things. No doubt a lot of the things I’ve learned have come in the way of “tough lessons” and some lessons have been tougher than others. I still for sure have tons to learn, something that is exciting as well but I wanted to share one of the best and “game changing” lessons I’ve learned to date – Building a business around the concept of positive cash flow.

What does positive cash flow mean?

I’m glad you asked. Wikipedia explains the concept of ‘Cash Flow’ as the movement of money into our out of a business over a specified period of time. Positive cash flow simply means that over this specified period of time more cash becomes available instead of less cash. In other words, as your business operates it is building it’s cash reserves instead of depleting them. It’s both a very simple and very profound idea at the same time and I think it’s best explained with a few examples.

Negative cash flow example

I’ll take this example right out of my own marketing and advertising business. Let’s say we win the bid on a new project, let’s say it’s a TV Commercial and the contract is worth $5,000. When we win the bid and sign on our new client it is standard in our industry to take a down payment for the work, usually between 25% and 50%. Let’s say for this particular job we agree to $2,500 down and the remaining $2,500 upon completion. We are setting ourselves up for a negative cash flow cycle. We are doing 100% of the work while only having 50% of the cash. We don’t get the other 50% of the cash until the work is completely delivered.

Let’s also say of the $5,000 contract, that $4,000 are our costs on the job, leaving a very realistic $1,000 in profit. Great right? I mean, 20% pure profit, after all costs? Yes, it is great, but the problem is that we have $4,000 in costs to take care of before we get our profit and we have only received $2,500 in cash from our new client. That means in order to do this job and make our profit we have to self-finance the additional $1,500 ($4,000 total costs minus $2,500 in cash, still $1,500 short). So we either need to have this cash built up in some kind of operational savings or we need to do what tons of other businesses do and take out a line of credit.

Positive cash flow example

Now an example in a positive cash flow business, we can take this one right from my other company. Let’s say this time we get a call from a new customer interested in a new website for their small business. Let’s say the job is priced at $500 for setup. However, this time let’s say that our company’s policy is to take all payment up front, that in order to get started we need to full $500. Let’s also say that the costs on the job are $400, so again, like the other example above we’re making 20% pure profit on the job.

This time around, we are setting ourselves up for a positive cash flow cycle. We are requiring the full $500 in cash to start the project before we do any of the work. Not only will our costs on the project already be covered when we start, but we will also have access to our profits as well, right up front. We don’t need to self-finance any part of the project, our customer is financing it by paying for it up front instead of upon completion. We are working in a positive cash flow cycle now, a surplus of cash over a specified period of time instead of a deficit.

Implications I’ve felt

Moving from running a company with a negative cash flow cycle to a positive cash flow cycle has seriously changed my entire outlook on the operations of a business. I don’t believe credit or outside financing at this stage of my business is correct. So then, this meant I was always juggling cash from one client to the next, keeping savings high in order to make it through the “cash poor” months while waiting for big checks to come in. I would sometimes have to lay out costs that would not be paid back for six or eight months, an absolutely brutal place to put yourself in as a small business owner, particularly one just getting started.

Since moving to a positive cash flow model the number one thing I’ve felt is… more relaxed. I know it might sound kind of silly but operating in a negative cash flow cycle is just super stressful. You have to hunt down customers that aren’t paying, always be playing catch up, finance your own costs, etc. With a positive cash flow all of these things disappear. Now, we can spend our time focused on more important things than hunting down delinquent accounts, like developing a strategic marketing plan. We can also invest some of that up-front profit into new advertising or an office, or anything we decide on. It’s been a total change from a “catch-up” mindset to a “in actual control” mindset.

The importance of your cash flow model is a lesson I wish someone had taught me when I first started my business 3-4 years ago, however, I am glad to have learned it and built my new business around it. I hope this helps some of you think about your cash flow and if it is hurting your growth (or personal health), I hope this sparks you to make some changes.

Quick side note

I know it’s tough sometimes to charge up-front for things that are typically paid upon completion, but that is kind of the whole thing, you have to be creative. We offer web design services, which historically have always been paid in full upon completion, but by “productizing” them into specific product offerings instead of an open ended service, we are able to charge as you would for any kind of product, which is in full and up front. Think of going to Best Buy or Staples or even Macy’s. You don’t put half down on a button down shirt or package of legal pads, you pay in full, before you get to use what you bought. This is our mindset with products, pay first, get use of second. With services we typically pay a little (or sometimes nothing at all) up front, then we get the service, then we pay the rest. You might have to be even more creative than we were, but I’m sure you can be and I’m sure you can use it to turn your cash flow into a positive cash flow.

Our Market Isn’t Online

My partner and I have been working hard on ways to grow our customer base at FreshySites. We have done very well and surpassed expectation for our first 4-5 months in business but of course, we are looking to grow even more. We had a heart-to-heart the other day when we were looking over our, to be completely honest, haphazard marketing program. For these first few months we have done the following:

  • Used our current “real life” networks to spread the message about our new company
  • Used social media to spread the message about our new company to current friends
  • Posted 3-5 articles per week to our web design blog
  • Did some solid on-page Search Engine Optimization work on our site

Really that’s pretty much all we have done and it has not been what I would call “systematic.” This is netting us around 8-10 new leads per month which is translating into about 4-5 new website projects per month. Like I said, not too bad, but also not a rate we are satisfied with.

Where is our market?

It seems almost silly for us to have to remember to do this, but we decided to talk about who are market is and where they hang out. Being very web-centric kind of dudes we spend most of our time online, doing work, reading articles, following “tweeps” (lol?).

But about 1-2 minutes into the conversation Vince and I realized that our target market does like… none, of these things. Our target market is 35+ yr old small business owners who are too busy to spend time trying to build their own website but also don’t want (or need) to pay a company thousands of dollars to do it for them. Our target market needs something simple and turn-key, something reliable and that won’t set them back in terms of time or money. Our target market reads paper books and might even read the real physical paper version of the newspaper. Our target market is for sure not on twitter and might have a facebook page but isn’t quite sure how to use it or why they should. Maybe the best realization we came to is that our target market is absolutely HUGE.

Turn this ship around captain

So once we we’re totally honest about who our target market is, where they hang out and what they look like it was very obvious to us that the majority of time we were spending on the above “marketing activities” was focused in the wrong direction. Our target market is certainly not reading our company’s blog, they are def not following us on twitter and they are most likely not seeing our updates on facebook.

Insert huge sigh here

Our problem is that these are the areas that we know how to market in. These are the exact types of marketing that we consult on. To remove the idea of blogging as a central piece of a marketing program completely blows my mind.

So what now?

Now we have to go back to learning. Learning how to execute a marketing program in the brick and mortar world that our potential customers live in. Learning what that kind of a marketing program even looks like. Here are some ideas we have come up with so far:

  • Networking our faces off. Meeting new people as much as we can, whenever we can
  • Brick and mortar advertising – newspapers, billboards, etc
  • Getting an office space in a high traffic area
  • Getting a company car and wrapping it with our brand and marketing message
  • Meeting with advisors and other professionals who have succeeded in this marketing space

It’s very exciting in it’s own (mad men kind of) way. I’m excited to think that one of the major pieces of the new marketing program will be networking and getting to know more people in the local community. This has always been a really fun part of the job for me, sure you run into some people who aren’t so nice and aren’t good customers, but there are also ones who are amazing and you become really good friends with. I will keep you updated as our marketing program unfolds and takes shape, hopefully there are some online-schooled marketers out there who can learn a thing or two about real-world marketing as I do the same.

Misdirection

I’m looking to re-ignite the ol personal blog as a place to talk about all things related to my business, wordpress, web development, etc. I was on a roll a while back but kinda took a bit of a hiatus. A lot has changed in that period of time including the launch of a new project called FreshySites. FreshySites is a web design company founded by Vincent Consumano and I with the goal of occupying the space in the market between super cheap and non-personal services like GoDaddy and 1&1 and high-end way-too-much services by agencies or other web design shops. We are aiming at the chunk of the market that is occupied mostly by small business owners.