The Biggest Cost your First Customer has to Bear

I have already written about how your cost does not equal your price. Normally price is only a small part of the overall cost that a customer suffers from doing business with you. However, as a startup what is your biggest cost to a B2B customer?

To answer this we have to get away from thinking that we sell to companies and instead recognise that we sell to people. Your biggest cost is not to the company but to the person in that company that is taking the risk of doing business with your startup. 

You biggest cost is career risk. The person who is purchasing your product or service is genuinely taking a real risk that you won’t deliver and they will forever be known as ‘that idiot’ that decided to go with an untested startup rather than a stable alternative. 

Recognise this when you are selling.  Not only do we have to convince the company that you will give a Return on Investment, you must also convince the person you are talking to that it is worth the career risk. 

Your job is to make them a hero – after all they are the one suffering the largest cost. 

Declutter your Business

Everything you own has an ongoing cost. A cost that is distinct from what is cost to acquire it in the first place. It takes up storage, it needs cleaning or maintenance, it gets in the way – making it difficult to find other items. At a very minimum, just knowing that you own it takes up mental cycles.  This is why we all know that decluttering our house is a good idea, yet very few people actually actually do what’s necessary and get rid of the stuff that gives them no value. Instead it goes in a drawer, attic or suburban storage.

It’s exactly the same in business. Every initiative, partner, customer, feature comes with an ongoing cost that is distinct from what it cost to start. 

I worked with several companies that are nearly paralyzed into inaction by volume of clutter. Products with features nobody uses, marketing campaigns where no one has mowed the lawn in the last year, reports that have no value and sometime no audience and whole departments created for an initiative but nobody knows if it is successful or not. 

All of this happens because of lazy belief that once the initial cost of something has been paid that it comes with no further costs. Product bloat is a great example of this. Once the code has been written, tested and shipped then there is no further costs – right? So even if no one uses it you might as well leave it in the product?  Wrong. 

That code adds complexity to your product – it makes every future line of code more difficult to write and every historic line of code more difficult to maintain. Your product managers will still talk about it and report on it and sales people will occasionally ask about it. It’s the same with break-even customers or marketing campaigns or poorly performing resellers.

This is compounded by the fact that killing features, initiatives, customers, etc. forces you admit you were wrong. No one likes admitting they were wrong. We need a process and structure to force us to do it.

So if your company doesn’t have a process for periodically examining all aspects of your business with a view to decluttering I can guarantee you suffer from this problem.

Every new initiative should be timeboxed with clear success and failure criteria set before the initiative starts. There must a rigorous process to review them and not just let things slide. If results indicate failure then the initiative is binned, if success then continued and if somewhere between the two then a new time boxed and criteria defined. 

This is not sufficient as everything changes over time – maybe that feature in your product was wildly popular 5 years ago but the world has changed and now no one uses it.

Create a culture in your company where you clean up behind you.