Always New Mistakes

September 22, 2008

Why well funded startups waste money?

Filed under: Business, entrepreneur — Tags: , , , , , , , — Alex Barrera @ 12:49 pm

Sometime ago I had a conversation with a friend who asked me how much money I though was needed to get my startup going. I told him I though it would take 100.000€ to bootstrap it in the US, but that  it might be less. I still remember his skeptical face. I though he was going to tell me it was way too much, but to my surprise he told me it was way too low. I realized then that there is a great gap between bootstrappers and corporate drones. Enterprise people need like 5x to 10x more cash than what a bootstrapper needs but the truth is that this is just an illusion. It’s not true you need 10x more cash, it’s just that you aren’t used to save money.

As always, nothing is black or white and there are exceptions to this, but most of the time it’s just people flushing money down the drain without any real results. I really feel it’s because the money isn’t theirs and so, they don’t feel the pain it is to earn that money. Nothing like having your own savings at stake to think twice about spending it in stupid things.

The problem isn’t that corporate guys think this way, the problem is that I’ve seen many startups behave the same and I must say, it really shocks me. Wasting money is a bad habit, specially if you
are starting up and I think most companies don’t make saving money and resources a critical part of their company’s culture. For me it’s something fundamental in an organizations culture. Everyone should think about this, even when there is plenty of money, wasting it should be avoided.

What really strikes me is that the same behavior can be observed on peoples lives. Plenty of people ask us how are we (me and my girlfriend) able to live the way we do. The answer is that we don’t pay for stupid things. When someone tells you that they’ve spent 600€ in a pair of shoes I just roll my eyes. And don’t get me wrong, if you can spare 600€ a buy some awesome handmade shoes, please be my guest. The problem is that 99% of the times, people just can’t afore to do that and they buy them either way, which I must say, it’s just stupid if you ask me.

Sadly the only times I see companies trying to save money is when they need to bump their profits for the next quarter. The problem with this is that it’s too late. Creating a culture takes time and you can’t just reverse crazy spending overnight. Employees should feel that if they waste resources it’s their own payroll money they are wasting. The more you save, the more you get back at the end of the month.

And yes, I know, some readers are thinking, hey but I do save and my payroll is the same, instead those greedy bosses of me are earning much more to my expenses. This is both, true and sad, that’s why new entrepreneurs should start thinking about this issues from day one. Transparency is key for this to work and the problem is that not everybody is willing to be transparent. I would love to think
that money doesn’t changes people, but it’s not true, but if you have some solid guidelines and stick
to the basics I’m sure we could do much better.

Have you seen crazy spending in your company, in your startup? Tell us about it!

Image credits: http://www.savingadvice.com

June 12, 2008

Knowing your audience

Filed under: entrepreneur — Tags: , , , , , , , , , , , , , — Alex Barrera @ 5:53 pm

Yesterday I went, as usual, to the monthly local entrepreneur meeting in Madrid called Iniciador. Rodolfo Carpintier, Spanish business angel and CEO of the only Spanish tech incubator named Digital Asset Deployment (DAD). His keynote was brilliant, some old school tips and some real pearls of wisdom.

First tip: Are you sure you need the money? I’ve personally heard this advice many times during my latest trip to Silicon Valley and I have to say I share it 100%. Sometime entrepreneurs think that it’s all about rising VC, but not all ideas need VC. Most of them don’t. Mine neither, or so I think (yet).

Second tip: Know who your audience is. This is an old one, but still worth remembering. Don’t go and pitch a VC when what you really need is seed capital. Vice versa, don’t go to ask for seed capital if what you need is $5M to start running. This is also true for entrepreneurs looking for developers, directors, etc. I had one guy come to me yesterday asking me if I wanted to be his marketing director. I respectfully decline and the incident got me thinking. Don’t go to an entrepreneur meeting looking for that profile, it’s a waste of time. Most of the people going to those meetings are looking for the same and already have their own ideas, startups, etc.

Third tip: Have a risk plan in place before going shopping. For me this was one of the best tips. It’s most often forgotten in most business plans. You need to show that even if you fail, if all hell breaks loose, you’ll still be able to return some money to investors.

There are many more tips, but I just wanted to highlight some. And excellent book for these type of tips is The Art of Start from Guy Kawasaki (still haven’t finished it yet, but I’m enjoying it very much).

Care to share some more tips?

March 13, 2008

6 rules to get customer support right

Filed under: Business — Tags: , , , , , — Alex Barrera @ 2:03 pm

ballmer.jpg

Every single person that works in a business has been taught that customers come first. Nevertheless this simple piece of advice is, in my opinion, the most neglected one in a wide range of enterprises. Why this happens escapes my understanding. I remember when I was studying Marketing (yes, I’m a marketing computer scientist) we got banged really hard with: users, users, users (alas “developers, developers, developers” from the Steve Ballmer’s speech) but it seems not many people were listening that day.

I talk about this because I continually see entrepreneurs neglect the “users come first” motto. Customer or users are the most important part of any business, including web applications. I’ve highlighted several key point I think are worth noting:

  • Never, ever, under NO circumstances be disrespectful with your customers. This first point seems fairly easy, but in my experience, it’s the most recurrent failure in many businesses. The lack of respect and education is really broad. Even if the customer is wrong, being disrespectful is a no-no. First of all, being wrong is a subjective notion, and we have to always try to understand the user’s perspective. But even if a customer is truly wrong, we have to treat them in an educated way and swallow the bad moment. You can reduce this notion to: “The customer is ALWAYS right“. This brings me to the next point.
respect.jpg
  • Do not confront a customer. That’s bad PR, bad Marketing, bad everything. In the end you won’t getinsolence.jpg nothing out of a confrontation as the customer is already angry and if he isn’t, a confrontation is probably going to piss him off. Under this point I want to share two stories. The first one happened to my blogger friend Tom Raftery. Blueface’s CEO confronted him in a really nasty way. This case is even worse, not only are you attacking a former customer, but a prominent blogger with media exposure and it’s the CEO the one that is attacking him. Please bear in mind that the CEO and founders of a company are an extension of the company’s brand. Their personal brand is as important or more than the company’s, so do not engage in a confrontation, but even if you do, don’t expose the CEO or founders. The second story happened very recently at one of the South by Southwest‘s panels. It was during the Mark Zuckerberg’s interview by Sarah Lacy. I won’t get into the gory details, you can read those around, but there was something that really made me jump. At one point of the interview she confronted the audience in a very cocky way and said: “Try and do what I do for a living, it isn’t as easy as it looks“. From all points of view, even if she had a reason to say that, confronting a bored audience of geeks and developers is a really stupid move. Not only she didn’t accomplish anything, she probably made things worse with that attitude. So remember, if you ever feel the urge to yell and attack a customer (we all have been in that situation), refrain yourself, tell yourself you wont get nothing positive out of it.
  • Be transparent with your users. This point is probably more of a strategy to build a great brand, but I wished more companies did it. Yesterday I went to an event where they talked about the importance of personal branding. For the speaker, a brand is all about relevance, reliability and notoriety. When you are transparent with your users you increase the reliability perception of your brand. People tend to mystify companies and as such they tend to think that they are evil and that they only do things to gain big money. Being transparent brakes that notion and sets a human face to the company. For example, if Sarah Lacy had disclose that the reason she did the interview with Mark Zuckerberg the way she did was because of restrictions imposed by the organizers, maybe the audience wouldn’t have had their expectations so high. Evidently, a company can’t disclose strategic plans, but most of the time the can and in my opinion, they should. I know a lot of people that would be really happy if Twitter explained what is going on every time they are down.geek.jpg
  • Know your users. When someone starts a business, one of the first things they do is to make some market study and see which market niches they are after. You normally get a profile of the kind of user you are targeting. Strikingly, when dealing with customers and users, a company forgets all about this and treats them in a way that doesn’t makes sense with their profile. Come one, lets try to be coherent. If your target niche are geeks and developers, please, bare that in mind when you talk with your users. Communications flow in a much nicer way when you are in synchrony with your users.
  • Treat your users as adults. One thing really gets on my nerves is when you call customer support and they treat you like if you were completely retarded. Why do I have to tolerate that? I can understand that most of the calls a company gets might be from people with no clue of what they are asking, but extending that notion to all your user base is very dangerous. Please, treat your customers as adults, give them the benefit of being well educated and respectful persons. If you treat them as dumb, they will react as such. If you treat them as adults, some of them will hopefully react as adults.
    adult.jpg
  • Ask your users in a regular manner. I just added this last point just to remindfeedback1.jpg everyone that user feedback is the best tool start-ups and even fully grown companies have to understand and measure their brand awareness and quality of their products. Always introduce feedback capabilities into all stages of your products. This is even true at an internal level. Introduce feedback systems into you internal procedures to review and understand what is happening inside your company. And of course, act consequently. There is no use in processing feedback if you don’t do anything with it. Listen, process, act and most importantly COMMUNICATE the changes the company made based on the feedback. Feedback is a two way tool. This last point relates to the one about being transparent.

Concluding, I think that most of the tips I wrote about are pretty straightforward. Nevertheless I can’t decide if companies choose to ignore them because they don’t think they are paramount or because they couldn’t care less. Anyway, if you are an entrepreneur and you are bootstrapping your start-up (as I am) include these best practices as soon as possible as it will pay off on the long run. As I love to eat my own dog food, I encourage everyone to leave a comment with their thoughts on the matter.

    Create a free website or blog at WordPress.com.