The 3Cs of early entrepreneurial success

My years of working in a corporate venturing setting and then with start-ups and their investors have cemented my belief in the power of that very first customer that you sign up and to whom you deliver your goods and services satisfactorily. Most recently, in a conversation with a California-based social entrepreneur, the point came up again.

It is currently relevant too as we are seeing many around us losing their jobs and becoming ‘forced entrepreneurs’ (n.b. they are different from ‘visionary’ entrepreneurs and ‘lifestyle’ entrepreneurs both of whom choose to be entrepreneurs rather than are forced by circumstances). The importance of that first customer can not be overestimated by such free radicals, free agents, freelancers, or whatever label du jour they prefer.

Here are the three advantages – the 3Cs in the title of this post – that the first customer brings to an entrepreneur.

Confidence

For many technically competent people, selling themselves or their product or service does not come easy. If it did, so many marketing consultants to SME would not be doing such brisk business!

Successfully making a sale boosts one’s self-confidence. In addition, finding a customer willing to use one’s product or services and pay for it signals to the market that another party has confidence in the product or service and the entrepreneur.

In seeking to develop the business further, the entrepreneur benefits from both the surge in his own confidence and the signalling effect of the customer’s preference for his product or service.

Collateral

The first successful sale also creates a worthy tool for future sales – collateral. In marketing speak, collateral is a broad term applied to any and all sales aids that one has at one’s disposal.

A reference from a customer, who has paid for one’s product or service is amongst the best sales aids. It helps the next prospect feel more confident about giving the entrepreneur a shot at attempting to sell his product or service.

Cashflow

Last but not the least, a successful sale and delivery brings the means to pay bills and to invest in further development of the business.

After the customer, cashflow is king in most early stage businesses. Especially for those, who have been forced to become entrepreneurs, cashflow is a crucial tool to measure success.

In summary, getting that first customer is therefore important, no matter how much or how little marketing you may have undertaken. Early success also crystallises the fuzziness of plans and dreams. Focusing one’s mind – and resources – on the first success is therefore advisable.

What do you think? What is your experience? Have I missed something? Do share your views in ‘comments’ below.

Related reading:

Dharmesh Shah, serial entrepreneur, super-smart, all-round nice guy on Startup diaries: Getting your first customer

James Gardner on The cost of your first lost customer

USA Today article on The first customer is always the most difficult but don’t let that well-known truth distract you from working to get one!

Late addition on May 8th, 2009:

Dharmesh Shah on The Attention Economy v. The Wallet Economy

It's when you deliver that counts…

The title of this post is a snowclone of the title of a book on investing, published in the late 1990s. Writing before the dot-com crash, the author talked about the importance of, not buying, but selling stocks at the right time, at the right price, so as to realise profits. Amid the dot-com frenzy, he delivered a sanguine message that if you did not sell in time to appropriate the cash, it did not matter how high the stock price went.

Back to the post.

Communities and conversations are at the core of Web 2.0. Profitable businesses are harder to come by. When they do, they do so using principles, which can best be described as Web 1.0 or even pre-Web.

Pre-web, my first post-MBA job was in a cosmetics firm in India. In the summer when I began, the company launched a product, India’s first one to be sold as a ‘sunscreen’. Our competitor, Hindustan Lever, had a similar product, but it was sold as a ‘fairness’ cream. The ‘sunscreen’ position in the consumer’s mind was ours for the taking. The print and TV advertisements were aspirational and sophisticated. The demand sky-rocketed. I was a sales trainee with the unfortunate job of booking wholesale and retail orders week after week. Why unfortunate? Because we could not fulfil those orders! We didn’t have enough product, thanks to a production glitch, resulting from several factors including unanticipated demand and inadequate supplier management; yet the TV ads continued.

That was the most distressing summer of my life. Our wholesalers and retailers weren’t the only ones upset; my friends and family were upset too because they could not get the product. Meanwhile I continued using my supply of Oil of Olay, hoarded in the previous summer as a summer trainee at P&G.

The lesson?

If you want and indeed strive to create a demand, make sure you deliver. A consumer ‘primed’ to purchase a product is easy to lose, and difficult to regain.

But do these old-fashioned things still apply? Very much so.

Pat Phelan writes about how Bank of Ireland’s has failed to close the loop with their marketing partners O2 and CarphoneWarehouse. This has led to not just a lost customer for O2, but also a lost young savers account for Bank Of Ireland and lost commission for Carphone Warehouse. He describes them all as ‘muppets’, a description with which I find hard to disagree.

The lesson?

If you have a complicated product concept, make sure all the parties can deliver. A disappointed, irritated consumer is very difficult to woo back, especially in a competitive market where others are willing and eager to serve him.

Which brings me to Chris Brogan’s post, on promoting one’s book online. Chris writes about how Seth Godin just launched his new book ‘Tribes: We Need You to Lead Us’, using a whole slew of innovative marketing tricks. He gave free copies to some bloggers to give away; he made available a 0.99c audiobook on iTunes; and he built a social community, called Triiibes, ahead of the launch. Readers of his blog were invited to send him the electronic receipts of their advance orders and their snail-mail addresses. A certain number were then invited to register ahead of others on Triiibes. So far, so ideal.

The book was launched on October the 8th. As I write this post, on October the 20th, Amazon-UK tells me I won’t receive my ‘advance-ordered’ copy before November the 6th. I am not alone. Others who ordered with Amazon-UK are also waiting. So much for participating in the conversation about the book on Triiibes and for the advance-ordering hoopla.

Not just that – and I write this to complete the argument – our snail mail addresses were required as something special was to be sent to advance purchasers in October. May be, I am jumping the gun. May be, something will arrive in the next 10 days remaining in October. But when the book itself hasn’t arrived, I wouldn’t be holding my breath for anything else.

The lesson?

If your supplier screws up, it is unlikely you will benefit from the advance community building and promotion. A disappointed customer will not forget the experience.

Not very much unlike my first employer’s fiasco with the sunscreen, is this? Before ‘Tribes’, I had never bought any of Seth Godin’s books. The trend looks set to continue, unless a copy of Tribes somehow arrives, before I give up and cancel my pre-order.

It does not matter how many cycles of awareness-interest-desire-action you take your customer through or how many communities you create. The conversation just won’t start until the customer’s demand – whether of his own realisation of a ‘need’, or a latent need articulated through clever marketing – is fulfilled. Delivering the promises of marketing requires operational excellence. Whatever version of the Web we are at, and however creative our marketing, human expectations don’t change. They get more demanding, not less so.

In other words: it’s when you deliver the promised product/ service that counts.

What are your experiences of good service delivery and bad ones in the Web 2.0 world? Do use the comments link to share your stories.

Interesting reading:

Universal-McCann’s report ‘When did we start trusting strangers?

Trust in the Internet god, but…

The definition of “essential” is essentially transitory.

When I was growing up in a medium-sized city in India, ours was one of the few homes with a personal telephone connection. Neighbours used to come and receive urgent phone calls in our house. Sometimes we would receive messages to pass them on to people. Neither of this was always pleasant because invariably the phone did ring just as we sat down to dinner. But somehow not many thought of the phone as essential.

Now all of us have mobile phones. Telling somebody our minute by minute progress, as we stand in the vestibule on a crowded train, is now essential, I suppose, as is filling every moment of our time with activity and productivity. Ubiquitous access to the web and all our work files, photos and the like are also deemed essential now.

So what do we do? We back-up everything. Online. On a server owned by someone else, who gives us a login and a password to access our own stuff, but we believe it is to keep our stuff safe from prying eyes.

Besides the presumption of web access, the real “essential” here is trust. The kind of trust one places in a bank before one hands over all of one’s jewellery to them in a safe-box. This was a common practice in India, during my childhood, although I couldn’t say what happens nowadays even as Indians continue to have amongst them a few Fort Knoxes worth of gold.

What happens when that trust is broken? When the company goes bust overnight? When they suddenly ask you to sign up with changed terms and conditions, and a fee, holding your files and photos to ransom in the meanwhile, as Poonam found out? Or when their service is poor, their sense of responsibility abysmal and you find that despite paying up in the beta, you cannot retrieve your own files and photo, as Jason found out?

The essential truth here is that the web cannot be ubiquitous until trustworthiness of web service providers is ubiquitous.

And until such a miracle happens, please trust in the Internet god, but please also take backups on a portable, removable hard disk that you have in your possession.

Related reading:

Putting Things Off – the laid back productivity blog

How to procrastinate

Do you have a backup?

Learning from the woes of third world web workers