Instigator Blog

Too many businesses ignore the lifetime value of customers. Doing so will lead to failure.

You can measure the lifetime value of a customer in two ways:

1. The total amount a customer will spend; and,
2. The total amount other people will spend after being told about your business by a customer.

Without getting into precise dollar values, it should be obvious to anyone that the lifetime value of a customer for most businesses is significant.

A few weeks ago, my wife bought a pair of sandals for my son (the older one who is two and a half) at Panda, which specializes in children shoes. They cost $50.

After a day we realized there was a problem. His feet kept slipping out the back of the sandals, causing him to trip and fall, resulting in numerous scrapes and bumps on his knees.

We went back to the store to see what could be done. The store has a no-return policy once shoes are worn. The size was correct, verified by the store, but somehow the fit was wrong. Or perhaps something was wrong with the sandals themselves.

Either way, we asked the store what they could do about it. The answer, “Nothing.”

My wife pushed (kindly) for a better answer than that, but the store manager (or perhaps the owner; clearly she was in charge) started getting argumentative, always coming back to the same old line, “Sorry, we have a no-return policy once shoes are worn. We can’t resell them. You’re out of luck.”

We left the sandals there. We should have thrown them in the garbage and made more of a public display. But oh well…we’re nice people.

So now my son has no sandals and we’re out $50. (Last weekend we bought him sandals for $15 which are just fine…)

Panda committed a cardinal sin of business (and primarily of retail, where you see this sort of behavior TOO often) by not appeasing the customer in a smart and reasonable way. Panda completely ignored the lifetime value of the customer.

Let’s look at the facts:

1. We’ve purchased goods at Panda before. Several times in fact. Probably a couple hundred dollars worth. They could have checked that in 5 seconds and realized we were good customers.
2. My wife was pregnant, and they should have realized that meant one more pair of feet I’d be accommodating in the near future.
3. Every frustrated customer (in any situation) goes out and voices their opinion very strongly. Disgruntled consumers are much louder than satisfied ones. Any business that doesn’t realize this has its head in the sand.

To toss your hands up, and tout policy over a $50 pair of shoes is foolish. I will never shop at Panda again. Not only that but I’ve just told many hundreds of people about the negative experience, and I’ll tell every parent I know as well. If one parent decides to stop shopping at Panda because of my experience, the store’s losing big time. That’s on top of the hundreds of dollars they won’t get from me, which I’ll spend elsewhere.

Too many businesses are shortsighted in their approach. Close a deal, take someone’s money and get ‘em out the door. That’s their way of doing business. And it’s just not good enough.

The power of choice and word of mouth means businesses need to be extra vigilant about keeping customers happy.

The lifetime value of the customer is more important than one sale.

Are you a leader?

Truth be told, not everyone is a leader. It’s just not meant for everyone. And that’s OK.

But more people are leaders than they realize. Leadership takes on many different faces; it’s just a question of understanding how you lead and why.

Here are 10 key business leadership skills you’ll need to succeed as a leader:

1. Lead By Example. You can’t be an aloof leader, someone that’s never around and incapable of getting your hands dirty. One of the best ways to lead is by example - pitching in where needed, lending a helping hand, and making sure that the work you do is clearly understood by your team.
2. Passion. A leader without passion isn’t a leader. He’s a paper pusher. Or a taskmaster. Or a government employee… Passion drives a lot, and you can inspire so much in others through your own passion and enthusiasm. That doesn’t mean you have to be constantly cheery, it means you’ve got to believe in what you’re doing and what your company is doing.
3. Be Organized. A disorganized leader isn’t leading, he’s chasing his own tail. Disorganization breeds nothing but more disorganization. If you’re frazzled and messy, your team will be too. When you’re organized you’ll be much more productive and so will everyone else.
4. Delegate. You can’t do everything. A great leader needs to be able to delegate effectively. The key to delegating successfully is giving employees ownership of the work you assign them. They can’t just feel like they own the work, they really have to.
5. Take Ownership and Responsibility. Although you’ve just delegated work and truly given your team ownership, you also have to take ownership and responsibility at all times. Your team has to know you’ll be there for them through the good and the bad times. That doesn’t mean you absolve people from making mistakes or ignore crappy work/effort, but it does mean you take responsibility for the big picture.
6. Communicate Effectively. Duh. Everyone knows great leaders have to be great communicators. But there are certain points of communication that many people forget. For example, it’s critical that you communicate to employees how their work matters in the bigger picture. Are they a cog, or does their work truly make a difference?

   Communicating success is also something leaders forget to do. People need affirmation. They want to know they did a good job. You just have to tell them.

And be precise. Insecure leaders will often ramble; uninterested leaders cut things off to quickly. Whether you’re giving praise, providing constructive criticism, or defining goals and to-dos, you have to figure out how much to say and in what order. Be precise, specific and concise. Get to the point.

7. Be Brave and Honest. Cowardly leaders will shy away from any number of situations that crop up regularly when running a team. The project your team has worked on for 6 months just got shelved. Now what? Or you have to talk to someone about their lack of effort recently. Do you ignore the problem? Or maybe it’s time to take your product into a new market. Do you hobble forward, scared and nervous, or do you grab the market by the throat?

   Leaders are brave.

   And honest. Tell it like it is. Don’t sugarcoat, don’t obfuscate. Don’t be a jerk either. You have to learn how to present things to your team in an honest but balanced manner.

8. Great Listener. A huge part of being a great communicator is being a great listener. If all you want to do is talk, you’re not a leader. Keeping people motivated means listening to them, asking them questions, understanding their issues. When you listen more, you can respond more effectively and get to the heart of things much faster.
9. Know Your People. You have to know your people. You don’t have to be best friends or even socialize outside work, but you do have to know what makes them tick. You need to know something about their personal lives because their lives outside work matter. Their lives outside work drive a great deal of their success (or lack of) at work. Keep track of simple things: birthdays, marriages, children, etc. The more you know your people the more common ground you’re likely to find, the more you’ll be able to connect.
10. Be a Follower. Benjamin Disraeli said, “I must follow the people. Am I not their leader?” That sums up many of the other points so beautifully. Great leaders are followers too. If you’re a leader without following, you’re a dictator. And as fun as that sounds… Being a leader-follower means finding value in your team, getting inspired by your team, encouraging your team to communicate, brainstorm and be open.

Very few people are great leaders overnight. It takes time and practice. As long as you’re open about learning along the way and working with your team on leadership versus dictating to them, most people will be happy to go on the journey with you.

And without getting too mushy, here are some great quotes on leadership:

“Don’t tell people how to do things, tell them what to do and let them surprise you with their results.” - George S. Patton

“Delegating work works, provided the one delegating works, too.” - Robert Half

“The very essence of leadership is that you have to have vision. You can’t blow an uncertain trumpet.” - Theodore M. Hesburgh

Very, very carefully.

Hiring people is the biggest, most challenging decision a business owner has to make. This is even more true for entrepreneurs starting new companies.

When hiring people, there are two ways to do it:

1. Build a core, passionate team.
2. Or don’t.

Very few people would admit to choosing #2 as an approach, but lots of companies do exactly that — they hire for reasons other than passion and fit. How many companies start with salary as the key decision point for hiring someone?

Companies don’t put enough stock in the importance of building a real team; they focus on getting people on board with the right qualifications at the right price and that’s it. It’s an easy trap to fall into because it’s an easier way to hire. And when your company is growing fast and doing well, and you’ve got more work than you know what to do with, to heck with building a core team…you need warm bodies at desks!

The end result of building a team without really thinking about the team is usually not a good one. Higher turnover. Dissatisfaction at work. Lower productivity.

A core team of passionate, true believers will always go the extra mile for each other and by extension the company they work for. People will stay at jobs they dislike if they love the team.

The problem with hiring the right people is that it takes a lot longer. You have to be prepared to invest a good chunk of time in the process — finding candidates, interviewing them, testing them, trying them out — it’s more akin to dating than anything else; there’s a dating dance or ritual that has to take place.

But the payoff is enormous. This is especially true for startups - those first few hires are going to be key ones. Those people are practically partners. You need them to stick it out through thick and thin, and be as devoted as possible. You need them to create the culture and spirit for future hires. You need them evangelizing the business. You need them taking ownership. You need them to be the driving force of success.

It’s a tall order, which is why you need to invest the time, thought and energy into hiring people properly. And you always need to focus on building a great team, not a bunch of people connected together by the fact that they work in the same office.

A few days ago I was stuck behind a bus, late for a meeting. And not just any meeting. An important meeting. (Are there any other kinds? Heh. Kidding.)

Between cursing myself out for not leaving 10 minutes earlier (too busy checking email - stupid) and scrounging around in the car for a mint (Swiss cheese for lunch right before - stupid again) I stared up at the huge ass of this bus and quickly contemplated my options.

I didn’t really have any, short of waiting and driving forward at the pace of a dead turtle.

That gave me some time to think, and quite quickly, the Blogger Mindset kicked in. Questions started popping into my brain —

• “What’s relevant about that bus to my life right now?”
• “What can I say about a bus on my blog? Why would anyone care?”
• “What parallels can I draw between the bus, being stuck behind it, being late and the world of business?”
• “Is the bus real? Am I real?”

A nascent thought formed in my head. Competition. That big, fat, unmoving bus was competition. In my case, competition to get where I needed to go - but so many parallels in today’s crazy-paced tech world can be drawn between that bus and your competition.

I thought about the competition I’ll be facing with my new startup. A lot of it looks like that bus. But what’s your competition look like?

Don’t Obsess Over Competition But Keep An Eye Out

I don’t advocate tracking your competitors’ every moves, but sometimes they just hit you right in the face. They’re so slow, big, unmotivated and uninteresting but they’re there. And they can still be quite dangerous. Just imagine if any of these animals sat on you…

Be Yourself - Be Better

Turn the question around for a moment and ask yourself, “What do I look like?”

What’s your “one thing” that’ll make you stand out? What’s unique about you?

When faced with competition like my bus, or any other big beastie, I always think:

• Be faster.
• Be more daring.
• Be smarter.
• Be more adaptable.

What do you look like?

Let’s hope it’s not that bus…

Photos by baconstand, bobfoldsfive, erglatz and spynotebook

You’ve just decided to leave your job. Or maybe you’re moonlighting. Either way you’re out there, offering your services to the highest bidder. Congrats!

The world of consulting and freelancing is a vast, mercurial place filled with all sorts of opportunities. But there’s danger lurking about as well. When you first jump into the game, eager for that first contract, you can find yourself in trouble with difficult clients, overblown projects, time constraints and more.

Here are 10 tips to help new consultants and freelancers get a headstart:

1. Set Expectations As Clearly As Possible. This is harder than it sounds. Clients are notoriously bad listeners. They want the moon, but they want to pay in loose change. Or they don’t quite know what they want but they want a super-accurate quote. Your job as a consultant or freelancer is to explain what you’re going to do and for how much and in what time frame as clearly as you possibly can. Write it down. Tell them. Repeat yourself. Write some more. Get them to sign proposals and specifications.
2. Get Money Upfront. Always ask for a percentage of the contract upfront - to be paid before you start. A decent amount is 25% or 33%, but even 10% of the contract in your bank account before you do a lick of work is better than nothing. You’ll have to ask for it to get it, very few clients will hand it over.
3. Make Sure Payment Terms Are Agreed On. There are two key elements when it comes to payment terms — (1) When you can invoice, and (2) When they’ll pay. Setup a payment schedule and make sure you know their payment terms. Oftentimes it’ll be Net 15 or Net 30 - which means they’ll pay an invoice in 15 or 30 days, but some companies have 45 or 60 day terms (which are not good for you!)
4. Get Expenses Paid For. Try and get the client to cover your expenses. The most common would be travel costs. There may also be specialized equipment needed to do a job, or other things you need to purchase. A web designer might need to purchase some stock photography, for example. If you can’t get this stuff paid for, consider increasing your contract price to cover any expenses you foresee.
5. Be Ready To Stop Work If You Don’t Get Paid. This is tough because it’s the start of a souring relationship, but you’re not a volunteer. You might consider having something in the contract/agreement that clearly stipulates work stoppages upon non-payment. Or, you leave it open-ended, at your discretion; but be mentally prepared and tough enough to tell the client, “No money, no work.”
6. Get a Testimonial or Reference During the Project. You don’t have to wait for the end of the project to ask for a testimonial or reference. Hit ‘em up in the middle, assuming things are going well and you’re getting positive reviews from the client. How do you get a testimonial? You ask. Sounds silly, but it’s true.
7. Track Your Time. Even if the client isn’t expecting timesheets from you, track your time anyway. Do it for your own understanding of how long things take. Do it so you’ll get more accurate at pricing projects (cause you’ll probably be lousy at it for awhile.) Do it in case a client demands justification for work you’ve done.
8. Don’t Ignore Client Communication. Managing and communicating actively with clients is critical to success as a consultant or freelancer. It’s not enough to do the work. They’ll want updates, status reports, etc. The more handholding you can do — without it consuming too much time and taking away from getting your work done — the better. A well-updated client is generally a happier one, even if you’re bringing them bad news, because they’ll feel on top of the situation and more in control.
9. Network Within the Organization. It’s always a good idea to inculcate yourself as deeply into your client’s organization as possible. If you’re hired by a District Manager, try and get introduced to her boss or other District Managers. The more connections you have the better. For starters it can lead to more work. It can also help in situations where your primary contact disappears - maybe they quit, get transferred / promoted, etc. Lots of opportunity is lost by consultants and freelancers when they’ve only got one contact in an organization and that contact is no longer in a position to hire them.
10. Document Everything. The more you track - in writing - the better protected you are in almost every imaginable circumstance. Miscommunications can be minimized and disasters can be contained by documented proof of what’s going on. As well, documentation is a valuable asset for setting clear expectations, defining goals and understanding project scope. Just write it all down.

Being a consultant or freelancer can be one of the most rewarding professional experiences. You’re an entrepreneur, growing a business. Opportunity abounds. You finally get to take your expertise and leverage it the way you want.

But it’s a learning process. Sometimes it can be a fairly steep learning curve, and you have to be prepared for that.