I love listening to the war stories from other entrepreneurs…
It’s a nice way for me to be reminded of all the tough lessons I’ve had to learn…
I recently spent a little time listening to five founders tell some of their stories. And it didn’t take long for me be reminded of some of the basics.
Richie Zeng – WearHaus
Richie has built a successful headphone company. The headphones WearHaus makes allow you and a friend to listen to the exact same song by wirelessly sharing the music from one headset to the other.
WearHaus got its start from a Kickstarter campaign. The real genius to a successful crowd funding campaingn is to have a sizable audience for your brand so that when your product launches you have plenty of people who are willing to help support you.
WearHaus wasn’t looking to leave anything to chance so they began many months in advance and did three things to drive traffic to their website and build brand recognition…
First, in the age of “content marketing” they remind us that it still takes some ad spend to drive meaningful and targeted traffic. WearHaus spent several months using ads to develop brand recognition.
Second, they invited several musicians to guest on their blog. This brought in tons of music fans from all over the place.
Third, taking a page from the retail clothing industry they set up brand ambassadors on college campuses.
The first idea is a standard fair when it comes to internet marketing.
The second idea is a fun twist to how many bloggers got their start such as Leo Widrich at Buffer.
What I really liked about their marketing campaign was the third idea. They took an idea from another industry and put it to work in their own. Because their product is a new technology they needed a crowd that is traditionally full of early adopters, and what better place to demonstrate the value of sharing music wirelessly than a university library!
This third leg of their marketing stool really drives the idea that when you’re looking to innovate inside your own business you don’t have to come up with truly new ideas. You can borrow and tweak ideas from other industries.
Continuing in the marketing vein with WearHaus Richie is quick to point out that the one marketing metric you’ve got to track continuously is your Client Acquisition Cost (CAC).
It’s super important in the early days of your business to track your client acquisition because it feeds directly into being able to forecast the day when you’ll make money.
It also tells you if your brand is gaining any traction. Do you know your Client Acquisition Cost?
Eric Santos – Co-Founder of Benchmark
Benchmark has developed a better method for brick and mortar businesses to gather customer feedback from text messages. In the last year if you’ve provided feedback to a restaurant through text because the business had a sign at the counter asking you to do so, there’s a good chance your message was evaluated by Benchmark’s software.
What Benchmark is doing is near and dear to my heart. Getting customer feedback – good and bad – is where money is made. It’s when and where customers tell you what they value and where they will and won’t spend money.
Harvard University recently conducted a study of Yelp reviews and they found that half-star decrease in business’ Yelp rating would decrease revenue by 4%.
I’ve often wished there was a way to improve the number of clients who would respond to customer surveys. Perhaps Benchmark has found it.
During the interview Eric was asked what his biggest mistake was in launching Benchmark. He replied that he and his partner overestimated how easy it would be to start their business. They didn’t have enough of a contingency for things to go wrong.
“You think you know where you’re going… Be ready to find out that you’re doing it wrong, or it’s not a good idea.”
Hearing Eric talk about this reminded of an experience I had after buying a business many years ago. For the first 8 months everything went straight up. We nearly doubled revenue in that period of time. And then our number one client, who was still about half of our revenue hit a rough patch and their business was cut in half.
We took a 25% revenue hit and we weren’t strong enough to absorb it.
Contingency plans are important. And by that I don’t mean which restaurant you’ll wait tables in if things don’t work out, but rather, how will you manage when your plans have to change?
I don’t mean that you should spend weeks trying to cover all the possibilities that could happen in your business but you should have plans for a three possibilities:
First: What if your best client shrank by 50%, or worse, what if they failed? It happens. What would you do?
Second: What if your number one sales person quit tomorrow. What would you do? And the answer isn’t “beg them to come back.”
Third: What would you do if a key supplier or strategic partner failed to deliver or was significantly delayed in their execution?
The reason you want to plan is because it makes you think about the various resources you would have available to your business or that you’d need to get your hands on. When you plan, it plants the seed that you will come out the other side of any problem whole. More importantly, it gives you the confidence that you’ll keep your head screwed on straight when everything is falling apart around you.
Write a half page response to each of the three questions above and file it away. You won’t regret it.
Joe Fernandez, Founder of JoyMode (and also of Klout)
Joymode curates experiences.
What does that mean?
Want to host an outdoor movie in your backyard complete with projector, screen, speakers, and popcorn machine? You need Joymode. They’ll deliver it, set it up, and tear it down for 10% of what it would cost you to buy all the stuff you’d need to throw a party like that.
And that’s just one of one-hundred different experiences you can rent from Joymode.
Joe’s advice to someone growing a business?
Be careful how you scale your business. Know what you need to get right and make sure you have a solid base under you.
This is great advice. There’s nothing like duplicating a bad product or a broken process. More of a bad thing is a mess, it won’t make it better, and it certainly won’t make you more money.
When I heard Joe mention this I immediately reflected on an episode of The Profit where Marcus discovers that the owner of the Bakery he’s investing in has opened up another location without the processes or even the funding to do it. It was a third location and the fellow didn’t even know how to run the first two locations – that’s why he’d called Marcus to begin with.
You only duplicate or franchise the things that are successful.
As a business owner you’re going to try a lot of things that won’t work. Kill the bad ideas early and build on the successful ones.
What’s the logic behind this?
Over a decade ago I was having lunch with a mentor and we were talking about the business I was running and he asked me how I planned to grow it.
I explained to him that we would have to have offices in multiple states because our work was always in the field and mobilizing from Arizona to Wyoming was more expensive than say Denver to Wyoming.
Thankfully he warned me then, and I listened, that growing that way would bring difficulties and that I needed to make sure that our main office ran very smooth with little to no effort on my part because I would be focusing quite a bit on the new location and the new location would be funded by the headquarters office.
Because you’re going to be spending so much time focusing on the new effort to get it rolling you’ll need to know that you have a solid team running the established business. You need to be able to trust the processes, the product, and the people.
If your main office, product line, or service line doesn’t run well you will run into problems and that could be twice as expensive.
Bobby Edwards, Founder of Squatty Potty
If you’re a fan of Shark Tank then you may recognize this company. They did a deal with Lori Greiner but they were enjoying some success before that deal.
Squatty Potty started out as a handmade product and has morphed into a product that can more easily be mass produced. They’ve enjoyed some incredible growth in recent years thanks to being able to sell through large scale retailers.
Bobby had a whole host of great advice for everything from manufacturing in China to dealing with big box and national retailers.
One great piece for those of you looking to do business with large scale retailers is that they all have custom requirements for packaging, delivery, and quantities. They all believe they’re special and you’ve got to cater to each of them.
This means your systems will have to be robust enough to handle the differences.
Speaking from experience as someone who’s shipped to the large DIY retailers, I completely agree with Bobby. You don’t want to add every big box retailer you can in 6 months and maybe not even in a year.
Add one and get all the kinks worked out, then add another after you’ve learned something and improved your processes and capacity. I’ve seen delivery penalties on product that shipped to a national retailer that amounted to giving the pallet away for free.
In this case, unless you’re backed by an equity investor with deep pockets, the tortoise wins the race.
Karthik Sridharan, Founder of Kinnek
Kinnek connects small and midsized businesses with the suppliers they need. Do you know how to find the suppliers who can actually sell to you?
Karthik had a pretty cool bit of insight when he said that one of the big value adds that Kinnek got out of working in an incubator was Social Pressure.
Exactly. Peer pressure from other companies in the incubator.
Having someone around who’s working on building their business, who knows what’s going on in your business, and they’re holding your feet to the fire, is incredibly valuable. There’s nothing like having someone around who understands what your business can achieve and who asks you often what you’re doing to make sure you deliver on that promise.
Years ago I got some great advice from a mentor and he told me that I would become the average of the five people that I spent the most time with.
Companies are no different.
CEO’s of successful companies don’t surround themselves with “yes” men. They surround themselves with other leaders who are trying to accomplish something and who hold them accountable for what they are and aren’t accomplishing in their businesses.
Successful CEO’s love to compete and they like spending time with other CEO’s who are competitive as well.
Is your business the average of the five businesses who’s CEOs you spend time with? Are you happy with that result?
If not, it might be a good time to find a group of CEOs who are accomplishing what you’d like to accomplish with your business.
Birds of a feather…