First customers are critical. Greatly exceed expectations at all costs.
There is so much history behind this insight, and so many stories that illustrate this point. Your first customers for any product or service form your reference base, the important group of allies that your marketing and salespeople rely upon when attempting to create buzz and make a mass market for a new product.
Panic! A new product launch…
If you’ve been involved in the launch stage of any product in the past, you should recognize the overwhelming feeling of panic when initial customers make first contact with complaints about quality, functionality, speed of service or other critical part of the new release.
Be ready to over-allocate resources to a launch.
The best advice I can give is to allocate all your resources to supporting the roll-out of a new product, at least for a short period. Respond immediately to every question and complaint. Capture every compliment and ask if you can use it for marketing purposes. If the product or service is especially complex or expensive, send someone from sales or marketing or even R&D to the customer location at the moment of first use.
What if my resources are limited?
[Email readers, continue here…] Of course, most of us have limited resources for such overwhelming support of a new offering. So, make the first release a limited one, sized so you can support it with existing resources, even if that means releasing it to only three carefully chosen customers at first.
And I am serious about the “…at all costs” admonition.
If you must provide a free backup unit, personal on-site service for a month, your personal cell phone number for the customer CEO, or any number of unexpected offers of superior service and accountability to those first customers, do just that. Make your customer a partner in the process. Send flowers to the staff in the department using the product for the first time if appropriate. Call the customer CEO and thank him for helping launch a product so very important to your success.
The result of your efforts?
The result of doing this right will be to blunt criticism, reinforce compliments and provide a solid user base to build upon. And the alternative is a lost opportunity to shine, perhaps a first wave of negative public reviews that post and report across the Internet, and a loss of reputation and goodwill that will take years to overcome.
So, empower your staff.
I don’t know about you, but I would much prefer to spend dollars reinforcing a great first customer’s experience than fighting fires in the marketplace after seeing negative reviews. Make sure your entire staff buys into this mantra. “These first customers are critical. You are personally empowered to do everything possible to exceed their expectations.”
the notion of the “teacher-customer” years ago. I internalized this phrase, recalling the many times I had partnered with customers to design new feature-functionality into my hotel computer system back when such systems were brand new to the industry. It was an ideal partnership for my growing company, as it approached one hundred employees on the way to almost two hundred fifty and selected special customers anxious and willing to spend time telling us of their pain points.
stated by German Field Marshall von Moltke in the 19th century.
My excitement in having developed so many new and “somewhat tested” features over a sleepless weekend was exceeded only by the enthusiasm of the entire hotel staff for the new and wonderful capabilities left behind after the magic weekend of non-stop programming. These trips were so common and their aftermath so predictable (a late-night emergency repair call waiting for me at home upon return Sunday evening) that the hotel owner created a mantra that stuck with me and caused quite a laugh at my expense for years. He would be sure to remind his staff, shaking my hand goodbye as I left in a hurry to catch that Sunday evening flight: “Wheels up, system down.” And that’s the result of “cowboy coding.” Ouch!
you developed a prototype, alternate pricing schemes, even a PowerPoint mockup to show to potential buyers? I would be very, very nervous without testing the product in the market as early as possible, ready to make changes and enhancements before committing to production and release.
Four- and five-star hotels loved the concept, which included redirecting outgoing calls from the cell phone by the guest to be sent through the hotel’s land line switch, making the hotel a miniature phone company with its attendant profits.
partners in firms that made subsequent investments in companies where I either made early investments or led a group of fellow investors in early rounds of finance. Each of these companies needed more cash than professional angel investors were willing or able to provide, and we turned to the venture community for larger investments.
In one such case, the angels were tapped out at $6 million invested, an amount far above their usual taste, but for a company we thought had a billion-dollar potential. The VCs subsequently invested $18 million, well beyond what angel investors usually can project from their own resources. Without the VC guidance there would have been little opportunity to even dream of a billion-dollar valuation goal. There is no question that the company took smart money and leveraged it for maximum growth, using the money, guidance, contacts and more from these large VC investors.
professional investors negotiate tough terms, from provisions of control over asset acquisition, eventual sale of the company, future investments, forced co-sale when others attempt to sell their shares and more. And yet, in an earlier post, we spoke of the problems that come when taking unstructured investments from friends and family.
Remember the admonition that investment from such close sources carries an additional burden for you – to protect your investors and their investment as if they were your alter egos, offering money as if from your own pocket. Such money should never be taken without clear understanding of the terms, whether a loan with a reasonable interest rate and strict repayment terms, or an investment valuing the company at an amount considered reasonable by a third-party professional, even if as a sanity check as opposed to an appraisal. This money is personal, an investment in you as much or more than in your company. The degree of care you take increases with the reduced distance between you and your investor.
very well-known potential acquirer of the business who offered an attractive price for the still young but successful enterprise.
thing as a lifestyle business with outside investors. To protect against such an event, almost every professional investor includes a clause in the investment documents which allow the investor to “put” the stock back to the company after five years, requiring the company to pay back the investment plus dividends accrued during the term of the investment. This sword hanging over the company is not often used but is a constant reminder that an outside investor is serious about getting out, hopefully in less than five years, at a profit, usually from the sale of the company. Many companies find themselves at the five-year point completely unprepared for a sale and without the cash resources to carry out such a repurchase of investor stock, making the clause moot.
The last money has the first say – in valuation and in sometimes forcing draconian terms that require prior investors to contribute a proportional new investment to retain a semblance of their original rights and avoid dilution or worse yet, involuntary conversion to a lower class of stock. As the years progress with typical VC firms seeing lower returns than expected by their limited partner investors, such terms are more common in secondary rounds of financing, causing a real riff between angel investors and their former close allies, the VCs, with whom they had once coexisted as suppliers of deals at expectedly higher valuations at each stage of investment.
I’ve arrived at a significant number of companies that were looking for additional growth capital after a “friends and family” round and had to “clean up” the cap table more than a few times over the years. Taking this kind of money has several pitfalls you should be aware of. It is most common to greatly overprice such a round of financing, valuing the enterprise well above what it may be worth at the moment for friends or related investors who do not have the sophistication or willingness to challenge the valuation.
VC’s do not even engage in discussion with most of those entrepreneurs seeking capital. By some estimates, 95% of contacts are ignored unless they come as referrals from trusted sources such as known lawyers, accountants, or fellow VC’s. And just for measure, VC’s fund less than 2% of all deals they do investigate. Typical VC investments begin at $2 million and quickly rise to $5 million and above, depending upon the size of the fund and stage of investment. Terms are much more restrictive than from strategic or angel investors, often requiring the entrepreneur to escrow his or her founder stock for a number of years to prevent the founder leaving, and restricting the sale of prior stock without the VC also being allowed to offer a share of its holdings in the same sale.
that I could neither compensate for lags behind the leader nor test my comfort zone at various points that matched the expectation of my instructor and my own increasing capabilities as a driver. Upon conclusion of eight laps of this, after pulling into the alley and climbing through the window on the driver side (there are no doors in these cars), I was handed a sheet with my timings for each of the eight laps. Only then, after when the information might have been useful, could I see how well I did.
You can think of numerous critical measures for your business that must not be ignored, but often are neglected by senior management. It is not bad to manage by walking around, a term that came from another of the many business advice books of the ‘90’s. But that method, although good for employee morale, is imprecise as a tool of measurement and should be relegated to a supporting role for you. Financial information from last month compared to plan and same month last year is certainly relevant, but not part of a dashboard, since there is nothing you can do to fix a problem when numbers are as old as a week, let alone the typical several weeks required to prepare financial statements for review.
