President Reagan has been quoted as saying “I’m from the government and I’m here to help” are the most terrifying words in the English language. One phrase I used to hear a lot that was just as terrifying to me was “we want to be your (fill in the blank) partner.” That could be a tech partner or a marketing partner or whatever. The thing was that most people have a tremendous amount of difficulty distinguishing between a partner and a vendor. The sad truth is that very few people or organizations that you’re in business with want to be the former and that’s a shame. Vendors are a dime a dozen while good partners are rare.
How do I distinguish between the two? Vendors send you bills while you usually end up sending a partner their share of your joint profits. Vendors come into your office and tell you how great their product or service is, even if you’re using it or them. They tell you their story and ignore yours. Instead of telling you what they are doing for you specifically, they tell you about the latest success story they’ve had, usually with some other “partner” of theirs.
It’s always easy to spot the vendors and the potential partners almost from the second they walk in the door. Partners will talk about you and your situation and tell you specifically how they can help. They’ll ask for reasonable compensation but also volunteer to share in the upside because they believe in their product and its ability to help you. Vendors come in with a canned, generic pitch. Their rates are fixed in stone and they don’t share the risk and so don’t have any interest in sharing the rewards.
I’ve always felt that my goals and those of my business partners were very much aligned. I can’t say the same of many of the vendors I’ve worked with over the years. I’ve also always tried to do business with my consulting clients and franchise candidates in that way – as a good partner and resource rather than as a vendor. Is that a difference without a distinction? Not in my book. How about in yours?
You can call shared interests believing your own BS or you can call them eating your own dog food. I like to think of it as having skin in the game, a phrase coined by Warren Buffet referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running. I use it in a much broader context and it’s something you should be looking for at every turn.
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I can’t tell you how many companies paraded into my office when I was in corporate life promising to solve issues we might be having with revenue generation, audience measurement, or dozens of other common problems. Many of the offerings were actually quite interesting although not yet deployed in the real world to any extent. If I was interested but skeptical, I’d usually make an offer somewhat akin to this:
I like your product but it’s awfully difficult for me to stroke out a check on something that is promising but unproven. So let’s do this. You provide the product and service as you say and I will pay you a much lower fee (or nothing!). However, if you deliver the results you say you will deliver, we’ll set up a success fee that will pay you more than you’re currently asking. In fact, if your numbers are right, you’ll earn double what you are charging.
In other words, I wanted them to have skin in the game. I wanted our interests to be perfectly aligned and I wanted there to be consequences for us both if we didn’t achieve what we set out to do. The reality is that you should always ask yourself who has what skin where because most businesses do their damnedest to avoid any sort of risk by putting in some skin. Sure, they pay lip-service to the notion of entrepreneurship but there are few who have put their money where their mouth is and invested into the tech ecosystem or directly into startups. Pay attention – much of the time the investment comes only after the product has proven itself or is a direct ripoff of something that’s already successful. I call this the second penguin strategy (you don’t want to be the first penguin that jumps in the water since there may be predators lurking).
If you’ve ever played cards, inevitably there is a kibitzer around. You know – the person who looks on and often offers unwanted advice or comment. They have no skin in the game. There are kibitzers in business too – you can find them writing for many trade publications – and you might even have some in your company as partners or clients or even employees. Not many companies took me up on my offer to make them more money. The few that did were fantastic partners and I still speak with some of the executives from those firms almost 20 years later. Having skin in the game made all the difference. What do you think?
One thing I’ve done over my decade in consulting is to go to tech events. Many of these attract dozens of budding entrepreneurs as well as we consultant types who are always on the lookout for a new client. Inevitably, as you’re making small talk and new connections, someone will tell you about their earth-shattering, world-changing brilliant idea. All they need is some seed money. Most of the time, their ideas…well…suck. Let me explain why.
First of all, they can’t explain the problem that they’re solving. They have a vague idea of who might have the problem but they can’t really explain what the problem is since they’re not the customer. Then they can’t exactly explain how they’ll scale – how they will attract a large enough customer base to get them to positive cash-flow and profitability. Lastly, they can’t explain the revenue model – how they will monetize the enterprise.
Major suckitude, in other words.
If you can’t explain how your idea takes in someone’s money – an investor’s or a customer’s – and spits profit out the other end, you’re in big trouble. An idea isn’t a business, you see.
One thing I’ve learned in consulting on franchises is that a lot of food franchises want you to have some food experience. While specific industry experience is less of a requirement in other categories, having relevant experience is a huge help everywhere, even if it’s just demonstrating skills that can help in your new business. If you don’t have the basic skills you need to germinate your idea – leadership skills, sales skills among them – or relevant industry experience, you are going to fail. Was that mean? OK, it was mean, but your idea still sucks because you are hanging it out there all on its own with nothing to support it. No money. No experience. No skills.
By the way. Most people who have been around for a while (your potential investors and others) can figure out very quickly if your buzzword-laden pitch is BS. Dressing up your sucky idea with a fancy presentation laden with jargon is lipstick on a pig.
What ideas don’t suck? The best businesses come from someone trying to solve their own problem and having the business acumen to grow that solution into something that can benefit others if the problem is a big enough one. There is a plan to make money, acquire customers, and generate a profit. Got an idea with those things? THAT doesn’t suck!
I like walking the golf course with a caddie. I really don’t get to do so much anymore since not a lot of places employ caddies. Even rarer are the places that employ professional caddies (as opposed to some kid who will carry your bag but knows less about the course and golf than you do).
I was thinking about the differences a professional caddie can make and it dawned on me that some of the things I appreciate most about good caddies are the same things that can help transform a good business into a great business. Ironically, those things don’t include what is often cited as the caddie’s three jobs: show up, keep up and shut up. There are, however, a number of other things I’d like to point out.
First, great caddies are available. What I mean by that is that they keep up with you and are by your side when you need them to be. They also leave you alone when you don’t need them, as you chat with your golfing companions. Great businesses are available as well. You can reach someone 24/7, even if it’s only to get told “we hear you and someone will get back to you by 9am” and their website information is up to date and complete. Great businesses let you know they are available and they hear you.
A caddie is an epitome of combining service and convenience. That’s what your business needs to do as well. The convenience of someone buying online and the service of going to pick up the order at a special desk at your local retail outlet does that (and saves shipping charges as well as time).
Caddies are proactive. They have the right yardage figured out when you get to the ball and they hand you the right club for the shot. By the way, great caddies give you the club you need, not necessarily the club you want. After a few shots, they’re pretty good at assessing your game and understanding the best way to help you have a great round. Great businesses are the same – they’re proactive. They know their customers and have what they want before they ask for it.
Finally, the best caddies are fun people. They’re great to talk with, generally have a decent joke or two to tell, and help you to focus on your task at hand. They make it easy to have the best experience possible. Isn’t that exactly what great businesses do as well?
One thing I deal with constantly these days is getting people on the telephone. I will often make 20 calls in an hour or two and only get a few people – all of whom have requested that someone call them – to answer the phone. Sometimes when I reach them they’re at work or driving and they ask if they can call me back. They hardly ever do, even when we set up a specific time. They don’t call me so I’ll call them at the appointed hour. They rarely answer.
It sounds awful, right? They claim to want information about new opportunities yet they won’t answer when opportunity comes knocking. My question to you concerns your business doing the same thing. No, not having customers hang up on you, but the opposite. Are you hanging up on them?
When was the last time you looked at your inbound customer service metrics? Do you even have such things? Research shows that consumers value efficient service and knowledgeable staff when they call a business. They find being kept on hold, rude service, and automated phone menus frustrating. You can measure on-hold time and you can test the customer service reps to be sure they’re knowledgeable and personable. You can check when call volume peaks and schedule more reps during that time.
One thing I’ve come to like quite a bit is the “let me call you back” option when there is going to be an on-hold time of more than a few minutes. You know what I mean – “press 5 to get a call back when there is an available representative or press 6 to schedule a time to be called back.” That’s customer-friendly and shows them that you respect their time and have empathy for their problem. When I hear “your call is important to us,” I always think “if it’s so damn important, why aren’t you answering?” Calling back shows it really is important.
It’s the little things we do in business that say a lot about how we run our firms. What messages are you sending? Are they the kind that will get customers to return?