Going for Great (vs. Big)

I've always admired GREAT companies. Not companies that have the most market share, but companies that do things REALLY well. My self-observation is that the bigger I TRY to be, the less I am focusing on doing things really well. Also probably why I am such a big fan of growing ORGANICALLY. The second I bring on investors or hire people beyond what my revenues support, the pressure is on to get BIGGER faster.

I met someone this past week who has built a nicely profitable SaaS company, just him and his wife. Growing it 10% a year, making it a little better every year for the past 10 years. LOVE it! Could they have grown more if they applied more of the profits to do more in marketing, yes. But it's really refreshing to see a tech company on this opposite end of the spectrum from the go-big-fast model that feels like an epidemic to me these days.

Jim Collins just released another great book How The Mighty Fall which talks about how companies don't fail because they do or don't innovate. They typically fail because they take their eyes off of the core of how they are most VALUABLE to the market. They bet the farm and neglect the core "flywheel" as he calls it.

This was an ongoing debate me and my partner had at RegOnline. Do we go for new products or services or focus on making our core product that much GREATER. You can guess which side of the argument I was on. Don't get me wrong, I WAS a proponent of quickly and cheaply testing new concepts to see if there was real demand. I just held a firm rudder on not sacrificing being "greater" in our core product to do it!

I'd rather be small and great than big and mediocre anyday!

Why I LOVE to Bootstrap

Seven Reason Why I LOVE to Bootstrap

1. Forces me to really LISTEN to what my prospects and customers WANT and will really PAY for

2. Eliminates all the NOISE of raising and then having to SERVE investor needs... especially considering that the business' real success DEPENDS on getting #1 right.

3. Forces me think about REAL ROI on every dollar I spend. Will this extra dollar spent on hiring this new person, spending this ad dollar, or investing in new technology... give me $2 back?

4. With limited marketing dollars, I think more about how I will take such great care of customers so that they WANT to do more business with me AND tell ALL their friends.

5. Creates a more REAL, grounded, and exciting environment for co-workers to work in.

6. Once profitable growth is in hand, creates a MUCH more stable environment to work in than a company that's dependent on the next round of funding.

7. Provides ultimate creative freedom to build the company, connect with customers, suppliers, and co-workers in as unique a way as I like.

PLUS
8. Forces me to test as quickly and cheaply as possible so as to get to real revenue and profitability.

Btw, this is my first post from my phone (while waiting for a bird to be caught in the cockpit of our plane)

Pricing Options - the power of relativity

I just read Predictably Irrational by Dan Airely and was BLOWN AWAY by what he discoverd on pricing options. Pricing options have AS GREAT of an influence on purchasing as does the value vs. price comparison I talked about in the last post.

Here are THREE Relative-Pricing-Option Strategies I pulled from the book...

THREE OPTIONS, MAKE TWO SIMILAR
A few years back The Economist made the following offer to prospective subscribers:
Internet-only subscription for $59
Print-only subscription for $125
Print-and-Internet subscription for $125 (yes the same price as option 2)

When Airely offered to 100 MIT students in his study, here's how they chose:
16 for Internet-only subscription for $59
0 for Print-only subscription for $125
84 for Print-and-Internet subscription for $125

When offered to 100 new students ONLY options #1 & #3 (eliminated the middle option):
68 for Internet-only subscription for $59
32 for Print-and-Internet subscription for $125

That's a 42% increase in revenue ($11,444 vs. $8,012) by offering a "throw-away" similar middle option!

Airely goes on to prove that whenever people are offered 3 options. 75% of the time they will choose between the better of the two that are MOST SIMILAR. He ran the same experiment in two other COMPLETELY different scenarios, and had the similar results (vacation packages and dating options).

Why is that? I think it's an unconscious clue that helps make the choice easier.


THREE OPTIONS - HIGH-PRICE ANCHOR OPTION
Menus that have a super-high priced option on the menu sell more higher priced entrees than those that don't. For example:
$50 lobster
$30 entree
$20 pasta
...will sell more $30 entrees than a menu with NO $50 option.

The theory is that people feel better about NOT buying the $50 option and buying the $30 option then buying the $30 option when it's the most expensive item on the menu.


FREE OPTIONS
Airely ran some studies to show that people will take something for free (like a Hersey's kiss) over something that's priced at a REALLY great value (a 5 cent high-end chocolate). People like free because it guarantees infinite value in comparison to price and also because it eliminates risk. I believe that FREE has many applications beyond "pay nothing" such as free bonuses for buying, free trials, and unconditional money-back guarantees.

ROLL ALL THREE TOGETHER
What would it look like if we rolled all three of these together? I haven't tested this, so at this point it's just me thinking out loud...
1. Provide three pricing options
2. Make two of the options similar (but one of the two clearly better)
3. Offer FREE bonuses in the better of the two options.
4. Price the third option considerably higher

As a buyer, I would see the options laid out and... feel smart for picking the BEST one of the two similar ones... feel good that it's NOT the highest priced option... and feel great that I get some FREE stuff as a result!

Most interesting line of the book: "We are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver's seat, with ultimate control over the decisions we make and the direction our life takes; but, alas, this perception has more to do with our desires - with how we want to view ourselves - than with reality."

TedTalk video of Airely

Pricing Strategy

Creating and changing pricing strategies is the hardest thing I've done and helped others to do with their businesses. It's complicated. It's intimidating. And its REALLY IMPORTANT in order to have a business that GROWS PROFITABLY.

So what do most of us do?
1. Look at competitors' prices
2. Charge the same, less, or free
3. Figure you can change pricing later once you get things off the ground.

And then we CHANGE pricing this way:
1. Look at competitors' prices
2. Add 5-20% to pre-existing prices
3. Figure we can change pricing later once we get a few more customers

Pricing is WAY too important to the success and sustainability of our businesses to take such a shortcut approach! DON'T do it.

The BEST thing we ever did at RegOnline was ASK our CORE prospects and customers what they thought, valued, and felt was FAIR for pricing. We found that people thought we were priced way below the value we provided (as much as half-priced). I've recently helped two other companies go through the same process and make surprisingly profitable discoveries.

Asking customers and prospects about pricing sounds something like this:
1. What value do you/could you get out of this service? Why? Can you go into more detail? Why is that? What is the implication of that to you or your business? How else does it help? What does that mean? How else does it help increase revenue or profits, decrease expenses, or make your life easier? (keep asking until there's no more left to be said)

2. How much is all that worth to you?

3. What PRICE is TOO MUCH for you to pay for this value? Meaning you would say "no thanks" to all that value in #2, stick with status quo, or find an alternative. (ask this to get a more reasonable answer to the next question)

4. At what price do you feel it would be fair to pay? Why?

5. What pricing structure would work the best for you or your business (one-time, per transaction, monthly, annual, etc.)? Why? What do you like and not like about the way others charge?

You'll be amazed at how honestly and happily customers and prospects will answer these questions for you. Why? Because it shows that you CARE about providing REAL VALUE to them and charging a REASONABLE price for it.

If you have a new business or product, make sure you can REALLY make a sustainable profit at what your prospects say is a reasonable price for your services. Better to find out up-front what is reasonable to them BEFORE building a business around an unprofitable model.

Changing an existing pricing structure looks very similar to the process above. But then when you change prices, give existing customers only half the increase from their existing prices to show them that you love them.

I believe REAL businesses generate REAL cash flow. And 99% of successful cash-generating businesses that I've been involved with established self-sustaining profit models early on (by their first half million in revenue). So stop guessing at pricing, and starting asking your prospects and customers the easier-than-you-think pricing questions.

P.S. - Thank you to those of you who have recently encouraged me to write more. It's PRICELESS to get the feedback/reminder from you that this stuff helps. Please keep the feedback coming and feel free to email me with topics you'd like to hear more about - billflagg at gmail.

Online Agreements Accelerate Sales

Don't let your deals get old with physcial contracts.

Online agreements accelerate sales. Requiring customers to physically sign contracts SLOWS sales.

Believe it or not, a couple internet-related B2B companies with pay-as-you-go services, still have physical contracts. A couple beliefs on why that is:
1. A physical signature has more teeth and is a safer level of commitment
2. Investors and potential acquirers value #1 more highly
3. Competitors are less likely to mess with clients when there's physical paperwork
4. It's what they did before and it's low on the priority list of things to change

At RegOnline we had physical agreements at first. I remember our salespeople waiting by the fax machine for their deals. When we went to an online "Terms of Service" check box, deals came in at a perceptively faster rate (I don't have the actual stats - too long ago).

Here's what happens in deals with physical signed agreements:
1. Buyer asks Boss for permission to go ahead with purchasing service, Boss says YES
2. Seller sends over physical agreement to be signed
3. Buyer puts agreement on Boss' desk and waits
4. Boss procrastinates reading through multi-page legalese
5. Seller "checks-in" with Buyer several times. Buyer "checks-in" with Boss several times
6. Boss decides maybe the attorney should look at this first
7. Attorney takes some time to review and proposes questions and changes
8. Boss asks Buyer to get answers
9. Buyer gets feedback and agreement sits on Boss' desk until they have time to talk to the attorney about the feedback
10. 3 months go buy and the Seller is still waiting by the fax for something that the Boss and Buyer said YES to months ago.

Here's what happens with simple online agreements:
1. Buyer asks Boss for permission to go ahead with purchasing service, Boss says YES
2. Buyer goes online, opens an account, and agrees to the "Terms of Service" check box.
3. Seller gets more sales faster, Buyer gets the benefit of the service MUCH sooner.

Is there more risk in online agreements? Of thousands of customers who have agreed to our terms of service, we had contractual issues with only a handful. Of those handful, we NEVER had an issue with the online agreement being unenforceable or less enforceable.

Periodically we had atypical deals or deals that were different from the published rates (due to volumes) and we also had some goverment, academic, or large corporate entities that required physical contracting. Most of the time we just did physical addendums to our online agreements that described those changes and differences. Still making it a lot easier for them to get started.

Not only do companies delay sales but they also can see terms deteriorate as a result of physical agreements. When I signed the deal to get 50 SalesForce licenses two years ago, they gave me a physical agreement to sign. I didn't sign the agreement for weeks. Everytime the salesperson called me back to "check-in", I asked if there was anymore they could do for us. Each time the salesperson came back with more (the terms kept getting better as we got closer to the end of the quarter). It was a little experiment on my end to see how they structured their sales process, which ended up getting us a much better deal in the end. I have to admit, I don't like to play games like this anymore. If we had just went online to agree to their terms of service, there would have been no more time to negotiate.

Don't let your deals get old with physcial contracts.

Better Converting Websites & Marketing

Direct marketers produce ugly, cheesy, long-winded stuff that CONVERT better.

Here's an example. At RegOnline we've had a really good converting homepage that looks really good, simple and easy www.RegOnline.com.

It just got CLOBBERED by an ugly, text intensive, landing page... http://www.regonline.com/marketing/products/event-planning-software-lf.aspx

55% MORE conversion when we sent half our Google Adwords traffic to the page!

The text for the page came straight out of a 16 page direct mailer piece that two brilliant folks on my team with direct marketing backgrounds created two years ago (thanks Lindsay & Eric). The mailer gives us a 3-5x return on investment.

Why do DM writing/mailers/landingpages work better?
1. More Believable - when a site or mailer looks nice and glossy we unconsciously feel like we are being marketed to. Our best-performing mailers looked the worst (no graphics, dull paper, courier font).
2. Focused - less navigational distractions to the real conversation, and one call-to-action
3. Conversational - the voice is always like a one-on-one conversation that sucks us in
4. Sensational - the headlines are dramatic to tease us into wanting more (ala The National Enquirer)
5. Overwhelming Evidence - makes a better/longer case that you'd have to be an idiot to not take action on

It is hard to believe and seems contrary to "building a brand" but people will buy more when it is ugly, focused, conversational, sensational, and most importantly, informative!

When I first started working with Lindsay she said, "The more you tell, the more you sell!" How right she is!

Please let me know your results if/when you've tried this yourself.

The BEST Secret of Selling

About a month ago I read the best sales book I've ever seen on the topic. It could ALSO be one of the best perspectives on what makes our economic and interpersonal world REALLY tick! It was a HUGE epiphany for me.

The Secret of Selling by Harry Browne
(an ebook, not avail on Amazon, but worth the effort. The juice starts on page 14)

Without giving away too much, Browne says we, as humans and organizations, all have our own unique sense of what will make us happy. And we are constantly trading our time and money for what we think will make us happier.

Will I be happier with this dollar in my pocket or with chocolate-covered cinnamon gummi bears in my mouth?

Will I be happier making more money going to work for another hour, or skiing another foot of powder?

We are ALL happiness decision engines, making trades all day long that we hope will increase our individual levels of happiness.

Great SALESPEOPLE help me to find what I WANT (or THINK will make me happier) and help me to get it. That is why Browne's secret of selling is: Listen to what people WANT, and help them get it. Salespeople/marketers/businesses who help their customers EASILY find what they want, are the most profitable.

Sounds SO simple, right? The execution is where everyone falls apart. Browne does a great job of outlining, in detail, the sales process for any sales situation.

As a salesperson, the better I understand what a person/organization really WANTS, the easy it is for me to give it to them. And IT'S DIFFERENT FOR EVERYONE. I was always surprised by how different the WANTS were for people looking at using RegOnline. It almost always fell under the umbrella of "Making it Easier" but it was always something slightly different in our system that made it easier for them.

No matter what, it's all about listening to what THEY feel would make them happier and then delivering it to them.

If you read the book, would love to hear your thoughts.

Anatomy of an Exit: Selling Your Company

For as long as I can remember, I've always wanted to be a serial entrepreneur who built and sold lots of companies. It wasn't until my mid twenties when I was in the throws of my third company that the "selling" part was amplified.

Here's what used to happen to me:

1. Start a company, find customers, hire employees, start making real money
2. Someone approaches about buying the company
3. Fall in love with the idea of having millions in the bank. Start thinking about traveling the world, buying private islands, and never working again
4. Become paranoid that if I don't sell soon, I may screw up the company, miss my chance at #3, and end up sleeping on my sister's couch instead.

I've come to find that this is a common experience with 80% of my entrepreneur friends AND is what drives them to ultimately sell GREAT companies to not so great companies who then run them into the ground (which is bad for customers, employees, and society as a whole). In fact, I'm surprised by how many of my friends (a good 30%+) have bought back the companies they've sold after they've been run down.

Plus, for companies that are profitable and growing, the economics almost never make sense to sell. Here's an example of a company that sells for 10x earnings (which is considered a GREAT multiple for most private companies under $10 million in revenue):

$1 million profits/EBIT
$600,000 after-tax profits

$10 million = sell company for 10x EBIT
$8 million after-tax (20% cap gain)
$640,000 = 8% return on the re-invested $8 million
$384,000 after-tax return each year

$384,000 spendable income after selling vs. $600,000 by continuing to operate. Unless, you are planning on eating into your assets, you'll be taking home almost half what you used to.

It's even worse is if the company is growing, for example:
20% growth/year over 5 years
$2.5 million profits
$1.5 million after-tax profits

$1.5 million take-home each year versus the $384,000 off the reinvested assets from the sale 5 years earlier. PLUS, the company as an asset is worth $15 million MORE now! AND your customers and employees are happier that a big parent company DIDN'T run things into the ground!

My intent with companies that I'm involved with now is to get them to profitable growth as quickly as possible, build GREAT companies that customers and employees want to shout from the rooftops about, and NEVER sell them!!... a little bit different from that kid who dreamed of building and SELLING companies.

On Monday I spoke at SXSW on the same topic to about 200 entrepreneurs and it hit me that we are in a world full of VC's, private equity, investment bankers, attorneys who love to promote "flipping" companies because that's how they make money. And there's not many voices out there promoting the idea of holding onto and growing companies for life. I was amazed by the energy that erupted from this room of entreprenuers to hear a different, maybe more fulfilling option.

So I've come to the conclusion that Richard Branson & Warren Buffet have it right... if a company is profitable and growing, the best holding period is FOREVER!

Selling the Authentic

I'm starting a new rule for blogging - if I have an epiphany that is supported by three independent unsolicited conversations, then I'll blog about it.

The epiphany in this case is about connecting/resonating with our prospects and customers on a level that goes WAY beyond just providing a product or service...

#1 A good friend of mine from college created www.Moosejaw.com and built it into a 200 employee company that REI fears. He did it by connecting with customers in a way that has LESS to do with the gear they sell, and EVERYTHING to do with interacting with some REALLY funny guys who have have pretty much the same products as everyone else. Go to the site and read as much of the text on the site as you can, and try not to laugh. We just met with them for two full days to figure out how to apply the same theory to www.StickerGiant.com (which I'm an investor/adviser).

#2 One of my all-time favorite copywritters, Gary Bencivenga, wrote this and I just stumbled across it:
" In your copy, especially your Welcome Letter, never be too timid to say with clarity and boldness what you believe and specialize in. Like the original IBM, have a company religion and evangelize it with zeal. Wear your colors proudly.

I call this the Credo Technique. Credo (pronounced CRAY-doe) is Latin for I believe. But it is much more than a technique. It is an expression of your most strongly held core values which serve as a clarion call to gather the like-minded faithful of your marketplace.

You will find that when you clearly stand for something, you will never stand alone. Indeed, standing for something special in your overcrowded marketplace sets you apart from armies of me-too competitors who strive to be everything to everybody, and wind up meaning nothing special to anyone.

Using the Credo Technique is the surest way I know to attract and bond with your kindred spirits, your true believers, your most loyal comrades in arms, your best clients and friends, as I hope I have found in you."

He's talking about going BEYOND our products to connect on a DEEPER level with our prospects and customers by being REAL. Let them FEEL who we are.

#3 I just came across this TED video last night. And it explains why both #1 and #2 makes MORE sense today than ever. It looks like a technical, boring video at first, but just stick with it, it's brilliant!... http://www.ted.com/index.php/talks/joseph_pine_on_what_consumers_want.html

AND, as I reflect back at RegOnline, a couple of the things that we got the BIGGEST response from our customers and had NOTHING to do with our software service.

1. Our company holiday cookbook
2. An email that I sent to all of our clients that said "We love you, we really do"
3. Building a support team environment that REALLY cared about the customers.

SO, the epiphany/paradigm-shift/new-information-has-come-to-light-MAN is THIS... show some fricken personality and let your prospects and customers FEEL why you care about being in the business that you are in. As consumers we WANT more than nice products and services WE WANT to feel and have more AUTHENTIC experiences in the process. So GIVE the REAL deal inside - it's more fun for everyone!

Focusing the Organization

Someone asked me recently “What are the three things you did with RegOnline internally that enabled it to be so successful?”
I said:
1. Keeping things simple
2. Focusing on constantly making it easier for prospects and customers (see my last post)
3. Setting goals for each department each quarter (which is the topic of this post)

The quarterly goals for each department usually met these requirements (in this order of priority):
1. Would have a significant impact for the company that didn’t exist before
2. Clearly achievable within the quarter (agile philosophy)
3. Directly impacted by that department’s actions
4. Limited to just ONE #1 priority (and no more than 3 priorities total)

Some examples:
Marketing: #1 on Google for 3 new keywords
Support: 100 unsolicited “WOW” remarks from clients about our level of service
Sales: increase our conversion rate off of live demos by 20%
Development: reduce the number of reported bugs by 30%
Accounting: reduce the number of billing-related support calls by 20%
HR: produce a recruitment video

Short, sweet, focused, achievable. Having just ONE thing to take it to the next level each quarter made it easier and more fun and rewarding for our team to achieve each quarter. We did tie a quarterly cash bonus to hitting team or individual goals. It ranged over time between $250-$500. Not a lot of money, but enough to make it interesting.

Interestingly enough, I don’t think we ever focused on any goals beyond a quarter, and it was NEVER tied to revenue or profit projections. Ok not totally true, the first year we took the entire company to Mexico, we tied it to doubling profit for the year. But, we subsequently decided to take everyone regardless of whether we hit our growth projections.

To be clear, I think it’s a HORRIBLE idea to set goals longer than a quarter or tie people to financial goals that really are not under their specific, direct control. I DO believe in having longer term INTENTS like:
“Support that is the best our customers have ever received from any company”
“Marketing that is so effective other marketers constantly copy us”
“A product that is so easy to use, you don’t need support”

Making it Easier

My first job out of college at Harris Bank in Chicago had nice wood signs all over the place that said "The Customer Voice Drives All Actions". I remember thinking isn't that obvious enough that people don't need signs to remind them of that? For me it was as funny as putting signs around the bank that said "Remember to Breath".

Fast forward about 15 years, and now I'm thinking about how each department in a company contributes to its success and profitability. Each department impacts profitability in different ways, but they ALL ultimately center around the same point to do so. Yep, you guessed it THE CUSTOMER and the question of:

What will make it easier for more customers to WANT to do business with us?

• What will make it easier for prospects to find us?
• What will make it easier to learn about our product?
• What will make it easier to choose us?
  
• What will make it easier to try out our product?
• What will make it easier to use our product?
• What new features will make their lives easier?
• What support will make their lives easier?
• What pricing structure will be easier?
• What billing process will be easier?
• Then, we get into what will make it easier for our employees to do all this
  

Each department in a company contributes to profitability differently. But they ALL ultimately center around the same point: how are they making it easier for people to do business with us.

• How is each person in marketing making it incrementally easier for people to find us?
• How is each salesperson making it easier to choose to do business with us?
• How is the development team adding functionality that clients REALLY want?
• How is QA eliminating bugs that would have frustrated customers?
• How is IT eliminating the potential for frustrating downtime?
• How is support making it easier for customers to get answers to their questions?
• How is billing making it easier to be billed and to pay?
• How is legal making policies that are fair and serve our customers as much as they serve us?

I was just going through a quarterly meeting presentation that I did about 2 years ago and one of the things that stood out on it was a couple slides that outlined how our billing department identified the most frequently asked questions and confusions in our billing and then outlined how to eliminate that confusion. Billing ALSO decided to add a line to the invoice that said "If you are not completely satisfied with your service, mark down this bill as you feel is appropriate and tell us where we can improve." We didn't want to accept anyone's money unless they felt they got fair value back from us AND we wanted their feedback.

As we do better in each department at taking care of our customers, it causes more prospects to become customers and more customers to become referrers... and a nice looping action takes place that organically accelerates the growth of the company. Anyone know where I can get some more of those "The Customer Voice Drives All Actions" signs?

10,000 Hours of Entrepreneur-ing

I recently read Outliers (thanks John Fischer!) while on vacation in Mexico. It BLEW my mind! It's about how focused people produce dramatically better results. The tipping point for being an "expert" is about 10,000 hours to be exact. The Beatles Sgt. Peppers album was at 10,000 hours. Bill Gates' MSDOS started programming endless hours in middle school. Tiger Woods... you get it.

While this should not be a surprise to anyone, it is a RARITY for people to be PASSIONATELY focused on one thing. When they are, especially in an area where few others are, they stand out and tend to excel, especially if the world wants what they have/know.

It got me thinking about where I have passionately focused the hours of my own life. I've been an "entrepreneur" my whole life starting at age 11 with selling candy out of my locker and a snow blowing business, then high school with a house painting business, then college with a loft reselling business and student advertising business, then out of college with a outdoor film festival business and lecture note-taking business and a national student advertising business, and five years ago till recently - RegOnline's online event registration business. A lot of them were happening concurrently. I've REALLY enjoyed building each of the businesses customer by customer, employee by employee, one brick at a time.

I also can remember having NO CLUE on how to do most things and driving myself crazy trying to figure them out: recruiting, hiring, firing, collecting debts, being in debt, sales calls, holiday parties, marketing materials, websites, AN employee who went postal, SEO, taxes, pricing, renting office space, taking care of unhappy customers, creating bonus plans, etc. Two interesting points on reflecting back:

1. It DID get easier each time I did each of these things AND I did get progressively better at each
2. Taking care of customers the way THEY want to be taken care of was ALWAYS easy for me - the challenge was keeping it at the top of my To Do list.

I can see why 10,000 hours is a tipping point. We need about 5,000 hours to stop stumbling through all the stuff we didn't really know from experience. Then the next 2,500 hours becomes about iterating experiences that start to give us real competency. And then the last 2,500 hours is what turns our practices into art forms where we have no more fear, we can fully and effortlessly engage our minds, hearts, and souls into creating things the world has never seen before.

Customer Kings

A RegOnline client just emailed us:
"Please communicate to others that I think Regonline is one of the most unique software/service companies I have ever experienced. I am a small start-up company, so I do not produce a ton of revenue for your company (yet J). But I still feel like I'm treated like a king ­that is a truly a rare occurrence in today's software world."

Three thoughts about this:
1. This is the reason I love to be a part of building great companies
2. Sales, marketing, and support costs go down when customers feel this way (and increase profits)
3. Profits are great because they provide sustainability and additional resources to do MORE of this for clients

Disclaimer: We are far from perfect and unintentionally piss off clients too. We just hope our ratio is less than others and constantly improving.

Moneymaking Tactics

Last week, someone I work with said to me and my partner, " You guys are better at tactics than strategy". After being a little stunned by the comment, we turned to each other and said "Yah I guess we are... isn't that where all the good money is to be made?"

It got me thinking about it though. I've found myself in several conversations lately where it feels like people are spending WAY too much time thinking about their "strategy" at the expense of executing well or profitably.

Strategies sound like this to me:

• "Let's merge these three divisions together (at the expense of product/market focus)."
• "Let's grab market share (at the expense of bottom-line profitability)."
• "Let's create industry marketing partnerships (rather than figure out how to market ourselves)."

Tactics sound like this to me:

• "Let's release new features that clients have been asking for and competitors don't have."
• "Let's eliminate start-up fees that clients keep complaining about and test increasing other 'more friendly' fees to increase profitability."
• "Let's make buying easier by eliminating confusing product lines and/or pricing."

My partner and I have been accused of not having enough "strategic vision" because we are too busy figuring out what will be easier, better, faster, more profitable for our clients. Maybe the difference between strategy and tactics is that "strategy" is nebulous market/business/industry stuff and "tactics" are more customer facing... which, isn't business about making it easier for customers to get more of what they want (at a profit)?

In reading Richard Branson's new book "Business Stripped Bare", he seems to agree, "If you're running an airline, a restaurant or any other kind of company, it's the attention to detail that really defines great business delivery."

Branson carries a notebook everywhere he goes. Most of his entries are like this one which Branson calls "the sort of dull, dreary, absolutely essential entries that everyone should be capable of writing, but so few do." This is one of Branson's recent entries while flying on Virgin Atlantic:
- dirty carpets, area around bow dirty, equipment: stainless steel, grotty
- choice of menu disappointing, prawns then lobster as a main course in Upper Class, chicken curry very bland, chicken should be cut in chunks, rice pretty dry, no Stilton available on cheeseboard

If BRANSON, as a multi-billionaire with tens of thousands of employees, makes a priority of looking at the fine details or tactics of how his customers are being served, then I have a feeling it had SOMETHING to do with why he has been so successful.

In making the iPod and iPhone, Steve Jobs didn't use strategy to win the hearts of consumers. He rolled up his sleeves and looked at how to make listening to music and using your cell phone easier... a very profitable tactic! Why do so few other companies follow suit and focus on the details that really make a difference to people? Maybe they are too busy focusing on the next big strategy instead?

Startup Valuations

I've had conversations recently with several early-stage founders about valuations for the purpose of raising money. It dawned on me that many early-stage companies are backing into their projections based on how much money they are trying to raise and how little equity they want to give up in terms of valuation.

Here's the process:

Step 1: Decide to raise $'s

Step 2: Talk to an investment banker who says minimum worthwhile raise is $3 million

Step 3: Set valuation at $6 million, so as not to give away more than half the company

Step 4: Build projections based on spending $3 million in the next 18 months and profitability that will eventually support a 10x return on a $6 million valuation

Step 5: Become unprofitable based on spending the $3 million raised

Step 6: Miss projections, run out of money, return to Step 1

This process seems to set up companies for a world of pain.

I do believe there is a better way, from my own experience:

Step 1: Create a profitable company by operating on a shoestring

Step 2: Use the profitability to hire more people

Step 3: Generate more profitability and repeat Step 2

Step 4: Enjoy the freedom from not having investors, not constantly raising money, and not feeling crappy about missing projections and being unprofitable.

I'm constantly surprised at how few business people think this way. I must be the crazy one.

Two Tips for Website Writing

I was having breakfast last week with the head of a successful printing company who wanted help with his website. I looked up his site on my phone as we were talking and noticed that it had a lot of marketing speak about being "THE premier, innovative, & cost-effective solution" without any real substance to back it up. I asked him what he says to prospective clients when he meets them in person. He said, "Once someone tries us they never leave us because we bend over backwards to make sure that everything goes right with their projects. For example, one client..."

THAT'S what I recommended he write on his website! Because it is:
1. human sounding
2. has substance

Very few sites talk like a real person or with real substance. But when they do, it's SO compelling. For some reason, marketers got the idea that speaking in a foreign language with marketing-speak generalities was a good idea. I see it in more than 90% of advertisements out there and it's horrible because there's no substance and nothing human about it to connect with... as a human.

David Ogilvy, the man behind the famous ad agency talked about this in Confessions of an Advertising Man that he wrote some 50 years ago. I just read it and it's a great reminder for people writing content for ANYTHING. Advertising that sells is advertising that tells, not advertising that entertains. He said "I do not view advertising as an art form, but as a medium of information."

Whenever I look at sites for the first time, I look for words that MEAN something to me. That give me VALUE. The more substance I read, the more I trust the site or company. I believe that most visitors do this unconsciously.

Examples:
Great Registration Forms
vs.
Better Registration Forms: We put our registration forms through hundreds of hours of user testing so your attendees can experience easier registration. (conversational and gives substance on WHY)

Electronic Payment Processing
vs.
Accept credit card payments online (eliminate technical sounding words)

My acid test for checking website copy is to ask "Would I say this to a prospect face-to-face?" If not, what WOULD I say? I write as if I am having a REAL conversation... because I am! When people go to sites they have conversations in their heads with the words on our sites.

Unfair Advantage

Five years ago RegOnline had lots of competition. Most weren't doing so hot and they all seemed to be doing very similar things like not putting their pricing or product online, requiring that you talk to a commissioned salesperson and sign multi-year contracts, etc.. Differentiating ourselves seemed relatively easy because the buyers wanted something different from what most of the industry was doing. We did it and gained a ton of market share.

I just finished Moneyball. It's another brilliant book by Michael Lewis about game-changing strategies. By looking at the game and player statistics differently from all the other teams in the MLB, Billy Beane's Oakland A's were able to win as many games a year as teams with 3-4 times their payroll. Billy Beane discovered statistics that REALLY made a difference in winning games like On-Base Averages instead of Batting Averages. He was able to pick up players that no one else was looking at for really cheap. Until Billy Beane, almost all teams in the MLB relied heavily on the subjective opinions of their scouts. AND the scouts from different teams tended to think the same and go after the same players - bidding up the cost of players.

It's another great example of how thinking beyond the pack can produce HUGE advantages in the marketplace. I'm constantly surprised by how many organizations just copy others in their industry. They listen to their competitors more than they listen to their markets. The good news is as long as the world continues its pack-mentality, there's great opportunity to discover what no one else is looking at and to have an unfair advantage to profit.

Profitable Pricing

I've had several conversations this past week about how to structure profitable pricing models. Thanks to the guys at Ignighter, Poll Everywhere, and Filtrbox for the great debates.

My philosophy on profitable pricing is simple:
1. Price high enough to make a great profit - I believe that a self-sustainable business model should be able to make a 20% profit at $1 million in revenues. To do this, I start with estimating what ALL my expenses will look like at a million in revenues to find out if I'm charging too little to make a 20% net profit. I'm continually surprised at how few "For-Profit" business people there are out there with a consciousness towards pricing to get to profitability quickly. It seems that most of these companies think that they will eventually make it up in volume.

2. Price low enough that 80% of core prospects will feel it's fair and reasonable. I've seen the smile on prospects faces at tradeshows when I told them our pricing. I've also seen that 20% of my prospects didn't like the price. Both of these are positive because it shows that the product was priced high enough to lose some but still capture 80% of my target market without having to sell too hard.

3. Price in a way that fits the way prospects want to buy. We constantly hear prospects and clients echo back to us that they LOVE our pay-as-you-go per-registrant pricing. Prospects also complained about how our competitors were asking for too much upfront. Would the prospect rather pay upfront, monthly, per unit, per user, per project, etc? Creating a structure that resonates with how people like to buy is HUGE. It's even better when it's a differentiator, like in our case.

4. FOCUS on your sweet spot in the market and forget about the rest. I knew our sweet spot was small to medium size events that needed more than just a rsvp form to signup and less than an integrated enterprise solution. I constantly see companies try to be everything to everyone - in markets they have no right being in, spreading themselves and their profit margins too thin - which takes away their competitive edge in their core market. I say OWN your core market. Price higher for it and make more profits in that core market, instead of trying to be too little to too many markets.

5. Freemium models (free to use unless you want more advanced functionality) make sense in consumer markets, but make no sense to me in business-to-business markets. They devalue the core businesses and pricing models and usually are a drain on resources. Providing a free 30-day trial makes more sense. I like the idea of customers that PAY because it helps make for a more profitable pricing model.

In short, what's profitably worked for me is to price high enough to still capture 80% of the core market. Structure the pricing so it resonates. Stay focused on pricing for one market. Use free trials instead of freemium models for B2B. I could go on forever on this topic. Feel free to agree, disagree, or add to the discussion...

Simplify Pricing

I've had three conversations in the past week with companies about simplifying their pricing structures and how they communicate them. Most companies think that more pricing options are better for the buyer because of the flexibility to tailor to different needs. I've found more options confuses buyers, delays their decisions, and requires expensive salespeople to make the translation.

With RegOnline we went from a confusing ala-carte pricing structure to a "get everything" for $3.00/reg. We then watched the simplicity of the pricing resonate deeply with prospects who were previously confused by the pricing in our industry. Did that work for all of our prospects? No, but it was perfect for 80% of our prospects.

Here's a great consumer example of making it easy. I just ate at this pizza place in Telluride that has an all-you-can-eat lunch special: $10/person for pizza and salad bar and a drink. There's something REALLY nice about the simplicity of one price for everything. AND they even included the tax in the $10 too! I asked the manager how this deal was doing for them. He said "GREAT, people LOVE it!! We've seen our business grow dramatically since we started it."

My recommendation is to reduce the number of line items in your pricing chart and watch your business grow.

Logos & Branding

I was just asked for input on a new logo design for Gold Lake Resort (Colorado's best kept getaway secret that I have a small investment in). One of the new design concepts looks like a hood ornament for a car. Which reminded me of a similar painful process that we went through to come up with RegOnline's logo.

For RegOnline we went through hundreds of logos and six months of frustration before we came to the conclusion that a font treatment was most powerful because of it's simplicity. Think about it, almost all major brands/logos are JUST font treatments: CocaCola, IBM, Microsoft, Sony.

Not only are font treatments dramatically easier to choose, but they tend to be a lot more powerful/memorable than designing a fancy logo. Simple is better because it's easier for people to remember... which is the point of most branding.

By the way, I like the font Gold Lake currently has on it's site. It feel representative of the organic, energetic, flowing nature of the resort.