The company I founded, CarEdge, turns five years old in July. This milestone has me feeling sentimental. For posterity’s sake (and to the benefit of other early-stage entrepreneurs), here are a few things I have learned from this journey.
Take the first step
When I reflect on starting CarEdge, I feel so proud that I took the plunge and started building it when I did. The original pitch deck is nearly identical to the one we have today. Taking the first step allowed us to get momentum and continue growing. Just do it!
I remember that it took me about a year to gain the courage and strength to quit my job to pursue CarEdge full-time. I am glad that I took that year to get clarity on the business and gain confidence, however, in retrospect, I think I would have likely ended up in a similar situation as to where I am today if I had started even sooner. This conjecture is pointless, however the principle is valid: take the first step. Stop waiting around for someone or something to give you the signal. If you feel the pull to start your company and pursue the work, do it.
The original slides for CarEdge in 2019, which at that time was called Your Auto Advocate.
My identity is more than my company
This was a fucking big one. Wow. I had the realization that my identity is more than my company during the Summer of 2024. My girlfriend and I had broken up a few months before and I was in California at a founder’s retreat when it happened.
“What do you do to relax, Zach?” I still remember when Rob Go asked me this in 2022 after a board meeting. I replied with something to the effect of, “I don’t, I am addicted to building this business.”
He was visibly put off by my answer. He had genuine concern.
Well, fast forward to 2024, thousands of miles away from home in beautiful and sunny California, and heartbroken Zach had an epiphany.
“My identity is more than my company,” I said to Rob, and about 50 other founders and investors at the end of the retreat. We were in a big circle sharing our takeaways from the retreat. I felt strong, powerful, and confident with the words coming out of my mouth.
Rob came over to me and gave me a hug afterwards.
What I realized during those days at the retreat is that the value I bring to the world is measured by more than the P&L of the business I founded. It always was, and always will be. I did not believe that in the past, and, fortunately, I fully embrace this reality now and into the future.
What allowed me to have this breakthrough was strikingly simple, yet deceptively challenging to do. I was in a very emotional state, still processing the end of my previous relationship, and at the retreat I didn’t work for three straight days. Instead, I played tennis, golf, and went swimming. For the first time in four years, I took a few days entirely off. I didn’t work, I didn’t think about my company, I just played some sports, felt my feelings, and hung out. (Side note: I went on a few vacations during those prior four years. Sadly, I never took a break from working. I feel regret, sadness, and frustration when I reflect on those times. Lesson learned.)
And you know what happened? CarEdge still existed when I came back. My team was shocked I wasn’t there and found ways to push ahead. This allowed me to have my identity epiphany.
This was a huge moment, and one that I continue to cherish. I grew up that day, and my approach to building my company and my personal relationships became more sustainable and thoughtful as a result. I feel more whole and complete today thanks to this experience.
Thank you for your concern, Dan!
It is hard to be happy or satisfied
“Success breeds complacency. Complacency breeds failure. Only the paranoid survive”
This quote, from Andy Grove, makes me sick. Why? Because it so perfectly encapsulates my existence as CEO of CarEdge, and shocker: being paranoid for five years straight is not the most pleasant experience!
Founding and growing CarEdge has reinforced for me something I knew existed within me, yet I never named. I have struggled with happiness. Swap “happiness” in that quote above for “success” and the meaning stays the same.
“Happiness breeds complacency. Complacency breeds failure. Only the paranoid survive”
This hits on a concept I am actively working on with my coach, the notion of doing versus being. Doing is about action and accomplishment, while being is about presence and mindfulness. Doing is future-oriented and goal-directed, while being is present-oriented and focused in the moment.
For me, I have learned that it is hard for me to “be,” and it is much more comfortable for me to “do.”
I think about the next milestone and struggle to sit in gratitude for what I/we have accomplished.
I feel sad when I acknowledge this affliction, and I also feel excited that I have this disposition, because it is what propels me and motivates me to continue to do hard things. It sucks that having a mental model of “I am not good enough” drives me to push harder, and it also serves as a damn good motivator.
I hope that over the next five years I can find a more peaceful balance between doing versus being and experience more happiness and satisfaction.
There will be a lot of noise
I think there is a correlation between a company’s material success and how many people give you their opinion on how you should be operating it. Seriously, the more our team has accomplished, the more we hear from people who either:
Tell us all the things we are doing wrong and how we should change;
Attack us for reasons that don’t always feel logical or coherent; or
Sabotage our progress by instilling their ego in the process.
Whether it be competitors, the wrong hires, investors … Everyone will have an opinion. Listening, learning, and making decisions amidst this noise is a skill I continue to hone.
Building in public is the way
Founding and growing CarEdge has taught me a crucial lesson: I can only lead with transparency and authenticity. Over the past five years, there have been moments when I felt misaligned with my own values. When those moments arose, I learned to lean into the criticism and use it as a catalyst for change. Every misstep, every tough critique, became an opportunity to realign our mission and build a stronger, more resilient company culture.
It’s all about delivering, nothing else matters
Winning teams deliver shit. Plain and simple.
Making mistakes is the fun part (it’s about the journey, not the destination)
I have fucked up so many things building CarEdge. Easily we’ve lost $1-2m because of wrong decisions I have made. AND you know what? We wouldn’t be where we are today without those lessons learned. Mistakes are the fun part. What a privilege it is to go through tough shit and come out stronger and better off on the other side.
Work with people you like
Gamechanger: work can be FUN and you can surround yourself with people you enjoy spending time with. I am not saying you should hire “yes” people … Far from it. You should hire people you want to actually spend time with. When your company is less fairly small (say less than 100 people) you have the privilege of knowing everyone. Work with people who make showing up at the office fun and engaging!
Looking ahead
Reflecting on CarEdge’s growth from $0 to $10M in annual revenue over these five years fills me with gratitude. Every challenge, every mistake, and every hard-won victory has helped shape who I am as an entrepreneur, a leader, and a person.
For all the early-stage entrepreneurs out there: take that first step, stay true to yourself, and remember that your value goes far beyond what any balance sheet can capture. Embrace the noise, build in public, and don’t be afraid to make mistakes—they are the building blocks of success.
Thank you for being a part of this journey with CarEdge. Here’s to the next five years of growth, learning, and becoming more than we ever imagined.
At that time (the first week of March), it wasn’t clear what effect coronavirus would have in the United States. As the days and weeks unfolded I couldn’t help but get depressed. I’d talk with family or friends, and they’d say, “Boy, don’t you wish you had kept that job just a bit longer?” And I’d think to myself, “maybe?” I was confused, scared, and certainly not making much progress on my new business venture.
Then, amidst all this negative energy, my dad had a great idea; “Why don’t we film YouTube videos via Zoom?” Before working full time on CarEdge I had filmed a handful of videos with my dad. He would talk about the car business, I would post them on our YouTube channel, and we’d get a few hundred views. I had a vision for growing our YouTube channel into something sustainable and scalable for the business, but it never really took off.
Until… We started recording Zoom conversations like Ray had suggested. Here’s the story (and lessons learned) from growing CarEdge’s YouTube channel from 0 to 14,000+ subscribers in three weeks. Below you’ll see I am as transparent as I possibly can be, with screenshots from Google Analytics, Webmaster Tools, and Youtube Analytics. I hope you find this valuable.
What is CarEdge?
To provide clarity on what you are about to read, you need to have a brief understanding of what CarEdge is, and how YouTube (and content marketing in general) play into the company’s overall growth strategy.
Let’s say you’re in the market to buy a new vehicle. Odds are, the thought of going into a dealership (or in our current state, going onto a dealer’s website), makes you queasy. That’s because most people do not trust car salespeople. I can’t blame them. Interacting with car dealerships is far from pleasant, and it’s tough to walk away from buying a new car feeling confident you got a great deal.
No one wants to be the guy or gal that makes the dealership a lot of money.
That’s where CarEdge helps. Instead of going to a dealership, you hire CarEdge. You tell CarEdge what vehicle you’re interested in, and they handle all of the dealer outreach and negotiation. Their only compensation comes from you, the client, so you have confidence they’re working the dealers for the best deal possible without a “kickback” of any sort.
That’s CarEdge in a nutshell. We make car buying simple, easy, and fun.
Now, to gain awareness for this new venture I was adamant that we needed to leverage Ray’s 43+ year career in the car business to teach consumers the ins and outs of how dealerships work. That led us to create videos and write written guides. My thought process was that if we could build trust with our audience early on, and give them the tools they needed to feel more comfortable buying a car on their own, then eventually, we’d find prospective customers that would pay us to simply do it for them.
Before we got traction
It’s important to recognize that CarEdge’s YouTube success did not occur overnight.
Before gaining traction, I fumbled around with a few videos that didn’t get more than a few hundred views. Those videos were shot in 4k, with professional lighting, a microphone, and more. The “new” videos we created from recorded Zoom calls (using our free Zoom accounts of course!), were in 360p, with no microphones, and no editing.
What changed from those original videos, to the recorded Zoom calls that allowed us to get over one million views in a few short weeks? Here’s what I think happened:
People enjoy the back and forth banter and authenticity between Ray and I;
People enjoy the poor quality of the videos, it appears more authentic than well produced content. I think this is really important to understand this point. Here is an email from a customer that sums it up well:
Ray and I began creating videos that were topical and relevant based off of current events, rather than focusing on “general” information on the car business.
These three characteristics are what I think allowed us to find traction on YouTube.
The growth we experienced
As I wrote about a few months ago, finding your first paying customer is not easy. It was on April 19th, nearly 6 weeks after I quit my job, that we had our first paying customer. This is an important date, because it was just four days later that our YouTube videos began to pick up steam.
As you can see in the screenshot of our YouTube analytics, we saw a massive increase in viewership over the past week or so. Before this spike, we were averaging around 100 views per day across all of our videos. On Thursday April 23rd we knew something was happening, because we spiked to 1,852 views.
I sent my dad this message on that day:
Views on Friday the 24th grew to 4,400, then 21,916 on Saturday. This kept going until it reached the top on Saturday, May 2nd at 131,417 views in a single day.
We’ve seen viewership decline since then, and if you asked me “why,” I wouldn’t be able to provide a concrete answer. I don’t know why.
We have a base of 14,000+ subscribers now though, so each of our new videos receives a few thousand views when we upload them. We’ll see if we’re able to grow more rapidly again in the future.
I have a lot to learn when it comes to developing a YouTube channel!
Converting viewers into customers
The goal of content marketing is to generate customers for your business. One of the benefits of YouTube is that you can monetize your content (you may have noticed in the screenshot above it showed nearly $3,000 in revenue from ads on our videos, for example), but the primary goal is to convert readers or viewers into customers.
We saw a huge spike in website traffic in conjunction with our growth on YouTube. People that found CarEdge on YouTube would then google search our name. Here’s the search data for “CarEdge”:
Once traffic reaches your website it’s important to have a clear “flow” for how users can convert into customers. Fortunately for us, the traffic that made it to our website was converting at a high clip! In the screenshot below you can see (to the right) the “goal conversion” for Marketing Qualified Lead. That is anyone that completes our Sign Up form.
The bounce rate has been incredibly low, and the time on site has been incredibly high.
About 2% of traffic has converted into MQL, and over two thirds of that traffic has converted into a Sales Qualified Lead.
Those SQLs have converted into paying customers at a high clip too!
The funnel (as of writing this) is:
67 MQLs, converting into
26 customers
39% of visitors that fill out our sign up form have gone onto become paying customers!
Anecdotally speaking, the other 61% who are not converting into customers right now, have told us they’d like to work with us in the future, when they are ready to buy their next car. That being said, I anticipate more than 70% of our MQLs will convert into paying customers over the next few months. There really has been limited to no negative reaction to our business model, pricing, or value proposition. People really hate going into car dealerships or dealing with car salespeople, and we can take them out of that pain.
As in any service business, the more you can delight your customers, the better your chances are of gaining referrals and word of mouth recommendations. With that in mind, we created a compelling thank you page after paying your final invoice:
And, new reviews have been coming in too!
Where do we go from here?
Well, all this growth has forced CarEdge to mature more quickly than I had previously imagined. Our first employee will be joining us on May 25th to help us expand and meet demand! If you had asked me if this was possible one month ago I would have said “No way!” But look where we are now.
It’s truly incredible that some Zoom recordings with my dad have enabled our business to grow as quickly as it has. Authenticity goes a long way I suppose. Incredible.
There are a few high priority tasks I will be focusing on over the coming days and weeks:
We need to find other marketing channels. YouTube as a marketing channel is great, but being entirely dependent on it as your growth engine is not smart. What if YouTube changes its algorithm and you don’t get as many views? Over the coming weeks I will be exploring and testing new marketing channels such as:
Affiliate marketing;
Referral marketing;
Direct mail marketing;
Social media marketing; and
Partnership development (employee benefits programs).
We need to make service delivery simpler, easier, and more fun. The other area of the business I will be focusing on is developing a product to wrap around the service we are currently providing. I have a vision for how we can make the user experience for both the customer, and the CarEdge representative that is working with them to be efficient, convenient, and seamless. If we do this right we’ll be able to scale the business in a way that is profitable.
I need to create a timeline with goals, financial projections, and expected hiring dates. Since we’ve proven the business model, one of my primary responsibilities is to develop clarity around how quickly we can (and should grow), and what type of investment that will take. I owe it to myself, and all future team members to provide a clear roadmap of where we’re going and how we plan to get there.
I hope you found this interesting and valuable. I’ll post another update once I get a chance, sometime in June I imagine. Thanks for reading.
As the title of this blog post suggests, finding the first paying customer for your new business is not easy. This week (March 8th, 2020) is my first one spent working full-time on CarEdge. Since December, when I began working part-time on the business, to now, we have yet to attain one painstakingly important milestone — getting our first paying customer.
That’s not to say we haven’t tested our service and validated its legitimacy. Since December, CarEdge has assisted four people in their car buying process.
The results have been inspiring, and have proved the effectiveness of our service. We’ve also researched and determined that the market size is sufficiently big to pursue. Where we’ve run into trouble is finding someone to be the first paying customer.
It’s deflating to start a company, know your services help people, and still not have a true customer. These are the joys of entrepreneurship though, and trials and tribulations of starting a company while working another job full-time.
Now that I am working full-time on CarEdge, I anticipate we’ll get our first paying customer sometime soon, but I’d be foolish to suggest I know exactly who it will be or when that will happen.
If you are anything like me, you Google search for answers to your questions. Type into Google, “how to get your first customer in b2c” and you’ll see myriad results. Too many. It’s overwhelming.
After reading through the first page of suggestions you’ll begin to notice a theme, at least I did.
The articles, albeit long, well thought out, and detailed, lack legitimate insight into how startups found their first customers. Instead, most of the results talk about the importance of “building your brand,” or “talking to customers.” Yes, I get it, those are things we should do, but tell me how you did it, was the thought that repeatedly went through my mind.
That was the impetus for today’s blog post. I’d like to share with you the tactics (not strategies or theories) I have employed over the past three months in an attempt to get our first paying customer at CarEdge. This may be less of a “guide to getting your first customer,” and more of a “learn from our struggles” type of post, yet either way I trust you’ll find it interesting and valuable.
I’ve broken out our tactics into two categories; short-term and long-term. Bear in mind that generating sales is nothing more than helping people move through a sales process, commonly referred to as the “funnel.”
Every marketer has a different “funnel” that they prefer. My go to is AIDA; awareness, interest, desire/decision, action.
At the end of the day, every tactic you read below is in an attempt to get someone into the funnel at one of those four stages, and then help them move themselves towards taking action.
Let’s dive in.
Short-term tactics to get your first customer
Some tactics are designed for “quick wins.” In sales and marketing there are (generally speaking) no silver bullets. If someone could flip a switch and generate hundreds, thousands, tens of thousands of dollars of revenue, they’d be worth their weight in gold.
Unfortunately, such people don’t exist. Although the thought of a marketing “genius” coming up with a master plan to generate instant revenue is “sexy” and portrayed in the aggrandizement of Silicon Valley super heros, the reality is that getting your first customer comes from “grinding it out,” not finding the elusive silver bullet.
Bear in mind that I have only had the capacity (up until this week) to work on generating leads and sales on a part-time basis. With that in mind, here are the three short-term tactics I have tested since December:
Scouring reddit and other online forums;
Sharing with family and friends;
Offering our services for free to get referrals, press, etc.
Reddit and online forums
Online communities exist to connect like minded individuals. When it comes to online communities, no website is more robust and trafficked than Reddit.
Broken into subreddits that focus on specific themes, Reddit is home to millions of users, and is a prime target to find your first customer. There is a subreddit for anything and everything, and if your business targets consumers, then you should be able to find a community of people who may be interested in your product or service.
You may be thinking to yourself, “Great! I just found the community that should be interested in my product. Let me submit a post about my company!” DON’T!
Similarly to how no one wants to be pitched or sold in the real world, people don’t want to be sold your product on reddit. There is a minuscule chance you’ll have success posting to a subreddit to promote your product. There’s a better chance you’ll end up getting banned.
Instead, what I would suggest, and what I have tested for the past few months, is reaching out to people via direct message. For example, for CarEdge, we help people buy cars. So, every morning I review the latest posts on:
r/whatcarshouldibuy
r/carbuying
r/usedcars
Within each of these subreddits I identify 10-20 people who are looking for help buying their next car. They’re literally posting to reddit to ask for help. Since our service could alleviate the pain that they’re in, I reach out to them, one by one with a personalized message.
Over the months I have tested three different types of messages. Two have been effective, and one has fallen flat.
Asking for general feedback about our new service has worked well. Here is an example from the forums at Edmunds.com.
As you can see, this conversation provided us with a lot of great information. All it took was being proactive!
Offering our services for free in exchange for a Google and Yelp review has worked well. Within a few days of sending this style of message we had helped one customer get their new car. They’re ecstatic, and so were we
Another example of proactive outreach yielding a positive response.
What didn’t work was offering our services for a discount. In retrospect, this makes plenty of sense. For the same reasons I outlined above (no one wants to be “sold”), this message I sent was me “selling,” but at a discount. Not only was I not providing value to the prospective customer (I was selling), I was also undermining the value of the service we provide. I sent out dozens of these messages, and no one responded. I don’t blame them.
Would you respond to this? I don’t think so.
Sharing with family and friends
As far as “no-brainer” short-term tactics go, this one is at the top of the list. Unfortunately, for us, with CarEdge, we need to be talking to people who are considering buying a car sometime in the near future. As I engaged friends and family about my new business there was some interest, but primarily in the future. I can’t force my family and friends to want to buy a car right now, and that’s something you come to accept!
Not now, but in the future…
Just because this has not proved effective for us is not to say that you shouldn’t engage with family and friends and make them aware of your new startup. From posting on LinkedIn, to simply having conversations with my peers, we’ve been able to get a lot of value from our network.
My friend, Ryan, provided some of the most in depth feedback we had received to date. Further evidence to involve your family and friends in the process!
Offering our services for free
This tactic has been painful, but beneficial. Like I mentioned above when discussing reddit, this was the “offer” in one of the messages I’ve been testing. This tactic is painful because it’s hard to justify trading your time for no money, however, it’s incredibly beneficial, because it has already yielded evangelists for our service.
The idea here is to delight your free customers so much that they refer you to other paying customers in the future. Although we have yet to get our first paying customer, this tactic has generated a lot of optimism amongst our team.
For example, one family that we recently helped in Savannah, GA shared this email with us:
It feels good to help people!
By helping this family for free, we’ve created one of our first “evangelists,” and the value of that cannot be understated. However, just like we discussed at the outset of this blog post, what we need are people who are interested in buying a car today. Yes, having an evangelist, and someone who sings our praises is valuable, but no, that doesn’t actually get us any closer to finding more people who are interested in buying a car right now.
You see the predicament, don’t you?
One of the additional tactics we’ve tested in conjunction with offering the service for free, is to be proactive in requesting press outreach from the people we help.
For example, for this family that we assisted in Georgia, I researched all of the local reporters in their area and identified those who I thought would be most interested in running a story about our services. I then drafted an email template for our evangelist and sent the list of reporters and the template to her. My request was simple, if you feel comfortable, please reach out to the reporters and cc me on the email.
This is my attempt at “teeing it up” for the person we helped for free.
At the end of the day, our job is to make it as easy as possible for evangelists to spread the word about the work we are doing. I refer back to the book, Don’t Make Me Think by Steve Krug in situations like these. The book is for web design, however its concepts hold true across a breadth of topics. Your responsibility is to “tee up” the next step after you help someone for free. Don’t make them think, just give them what they need to spread the word.
These are the three short-term tactics we have deployed. The process is a grind. In conjunction with these short-term initiatives, there are long-term tactics we are working on as well.
Long-term tactics to get your first customer
Unlike their short-term counterparts, long-term tactics to generate your first paying customer are less stressful, make more “common sense,” and are worthwhile distractions from the pressure to find someone to pay right now.
When starting a new company there is a lot of pressure to get a paying customer, and with good reason. If you can’t find people to pay you for your product or your service it’s a strong indicator your business won’t have much of a future.
However, when you execute long-term tactics to build your sales and marketing funnel you find yourself (at least I do) having more fun, feeling less stressed, but also not directly affecting your number one priority (getting a customer yesterday).
This is the super “unsexy” side of startups and entrepreneurship. It’s the daily struggle to focus on short-term “quick win” tactics that provide validation that you aren’t crazy for going into business, while wanting to spend your time working on long-term tactics that feel a heck of a lot more “kosher.”
With that preamble out of the way, it’s time I share which long-term tactics we have invested in to generate sales opportunities for CarEdge.
Engaging with people
It shouldn’t come as too much of a surprise that you need to feel comfortable engaging with people to get your first (or second, or third, actually, all of your) customers. Engaging with people in your industry is one of the most foolproof activities you can take to build your sales pipeline. What does that actually look like?
There are two primary resources I draw on to identify potential high-value relationships for CarEdge. The first resource is Help a reporter out.
Help a reporter out (commonly abbreviated to HARO) is a matchmaking service for journalists and their sources. I have had a registered account with HARO for years, and have always wanted to become an active participant. With CarEdge in full swing, I have made a habit of searching each of their three daily emails to see if I could provide value for any of the journalists looking for help.. I search each topic for anything relating to cars, trucks, suvs, or automobiles.
This outreach has yet to lead to anything substantial, however the potential is there.
The second resource I look to is Google Alerts. No matter what industry you’re in, Google Alerts can help you stay on top of relevant news. Currently, for CarEdge I have two alerts set, one for “car buying help” and the other for “how to buy a car.” I receive an email from Google (two actually, one for each keyword) with relevant news associated with the key phrase.
Every morning I review these two emails from Google.
This has proved highly valuable.
By getting the alerts directly to my email inbox at 6am each morning, I am able to connect with journalists that are writing relevant content in my industry. If it weren’t for these resources I otherwise wouldn’t be able to proactively engage as many people.
Content marketing & search engine optimization
If you start a startup in 2020 and you aren’t focusing on “content marketing and SEO,” did you really start a start up at all?
All jokes aside, content marketing is incredibly valuable. Join me in a brief thought experiment…
If you had an infinite advertising budget, and your boss tasked you with “figure out which google search ads make us the most money,” which keywords would you target? Keep in mind you have that infinite budget, so money isn’t a factor — you can simply outbid your competitors for the first spot in the search result every time.
Do you have your keywords in mind? For CarEdge we would target; car buying help, car buying consultant, car buying service, etc.
With your infinite budget, you could easily spend tens of thousands, if not hundreds of thousands of dollars on ads to rank first for your “best” keywords each month.
This is the value of content marketing and SEO. Instead of spending hundreds of thousands of dollars on ads that cost you per click, you spend hundreds of thousands of dollars to create the highest quality content so that Google places you on the first page (preferably the top spot!) for the keywords that are most meaningful for your business (the same ones you would spend your infinite budget on to drive revenues).
There are two primary benefits, and one major drawback of content marketing and SEO when compared to buying search advertisements.
The two benefits are; your cost does not increase on a “per click” basis, and you can position your company as being “customer centric” by teaching your audience what you know. The downside? It takes a long time to reach the first page, let alone the first spot on Google.
With CarEdge we don’t have an infinite budget. Actually, we don’t have much of anything allocated to spend on advertisements. That means we’re investing our time heavily into content marketing and SEO.
So far the results have been promising. For a brand new website it can take anywhere from three to six months to truly get on Google’s radar. At the three month mark, we’re certainly on their radar, and we’re already ranking for quite a few keywords.
You can see back in January there was no organic search traffic. Now in March, we’re getting some traction!
As you can see, organic search traffic has been rising steadily since the website was created. You can even tell when Google first started to recognize that our website was worth indexing.
The increase in organic search traffic is thanks to our consistent publication of guides on the CarEdge blog (each of which is focused on a particular keyword). In addition to the content, we’ve made an effort to optimize each page for the best user experience (and ultimately the best chance to rank higher with Google), thanks to Google Lighthouse page audit.
There are entire blogs, forums, and books on content marketing and SEO, and at the end of the day, you can read, watch, and listen to every voice in the space and still come away with the same realization — you need to give people valuable content that is engaging, useful, and helpful. If users click through on a search result, spend actual time on your website, and occasionally share your content, you’ll rank well on Google. That’s SEO for dummies.
We will get customers from our SEO and content marketing efforts. I envision that this marketing channel will be the primary driver of revenues in the future (12 to 18 months from now). There is no reason we can’t out rank the current #1 results for the keywords we are targeting.
Youtube content marketing
Part of the fun (and struggle) of being an entrepreneur is the constant nag to try something new and to feel challenged. For me, Youtube represents that challenge right now.
Inspired by the hundreds (if not thousands) of videos I have watched over the years, and the appreciation I have for individual Youtube personalities, I convinced my father, Ray, that we need to film him talking about the car business. After some initial reluctance, he was on board.
As a long-term tactic to generate sales opportunities, we see a lot of promise. As of writing this we have 140 subscribers to the channel, and nearly 200 hours of “watch time.” Ray is bewildered (the number of times I’ve heard him say “I don’t know why people watch this shit, but damn is that neat!” has to be more than fifty at this point), and it appears there is a lot of potential growth. I feel confident there is.
Some automotive youtube channels have over one million subscribers, and although our ambitions are not that high, I envision a world where the CarEdge Youtube channel has thousands, if not tens of thousands of subscribers.
Ray represents an “insider” and that persona on Youtube has the potential to be a big hit. There are Youtube channels for airline pilots that have hundreds of thousands of subscribers and their video content is relatively simple — they talk about things only airline pilots know.
We’re doing the same thing with Ray. He is “pulling back the curtain” on the retail car business and giving viewers insight into how car dealerships operate.
It’s exciting to see people comment, like, and subscribe to the channel. Plus (and this is just a hunch, I have no backing for this assumption), I think there are positive SEO implications for having a Youtube channel and embedding our videos on our website’s blog posts.
Youtube is owned by Google, and it’s my presumption that they can figure out that our website is associated with our Youtube channel, and that by having “rich media” (videos) on our website we increase the amount of time someone spends on our site, thus increasing Google’s perception that we should rank higher.
This is all conjecture, but it is part of the long-term sales and marketing strategy.
What we’re going to try next
So there you go, that’s what three months of part-time work on a startup looks like (in terms of sales and marketing). In an effort to get your first paying customer you need to be willing to grind it out, engage with people in a value oriented way, and test some long-term tactics too.
At the end of the day though, we’re still looking for people who are actively interested in buying a car. Where are they? The tactics listed above are all great, but three months in and they have yet to yield our first paying customer. What gives?
Well, no matter how quickly I want something to happen, I have to respect the timelines of other people. I have no doubt that our efforts from the past quarter will yield customers in the future, just not right now. This does bring to mind the need to test other tactics and there are two I plan to introduce into our marketing mix.
One of those short-term tactics is to get business cards and put them at restaurants, golf clubs, etc. I have no clue if this offline marketing will work, but it feels productive and will force me to engage with local business owners, which certainly isn’t a bad thing. CarEdge offers national service, however taking a regional approach to get our first customer is a concept that resonates with me.
The other short-term tactic I’ll be working on is contacting employers, wealth management firms, and professional associations to see if they are interested in underwriting our service as a perk for their employees and clients. There are a lot of unknowns with this tactic, however it feels worthy enough to investigate further.
Remember the sales and marketing funnel
Finding your first customer is arduous, stressful, and fun. Don’t have fear! Remember to trust the funnel!
As we navigate this process with CarEdge I am reminded of how challenging starting a company is. The last time I did this I was a freshman in college, and my naivety guided me. This time, I feel a bit more confident, yet that confidence brings an added layer of pressure.
If you have any ideas or suggestions for how you think we could possibly find our first customer, or you want to be our first customer (more power to you!), please don’t hesitate to contact me.
Stress stinks. I know because of the recent comments I’ve received from staff, family, and friends.
“Zach, you should take a break, you don’t look so hot.” “Zach, you’ve got bags under your eyes and they’re red.” “Zach…”
We’ve all been there. It’s not fun.
Operating a small business requires a few key ingredients; something to sell, people to buy “it,” and cash. If you are missing even one of the three, your small business will end up in the “small business graveyard” with millions of others.
Getting all three in place (something to sell, people to buy it, and cash) is no small feat. Google search “how to sell,” and you’ll find hundreds of millions of results. Research how to develop products/services/solutions that people (or businesses) want, and you’ll find entire “courses,” that will teach you.
Google search “what to do when you don’t have cash,” and you’re SOL (shit out of luck). In small business (and truly in any business), cash is king.
Not having money has its perks (stick with me here…). When you don’t have money you behave differently. Your organization can evolve more rapidly and the iterative process of company development can occur more quickly. Why? Because when there is pressure (and associated stress) to pay staff, bills, and your landlord, you’re forced to think outside of the box.
Status quo in business doesn’t work. What got you to where you are won’t get you to where you hope to go. Developing a stable, secure, and successful organization requires both iterative and innovative evolution.
When money gets tight and you face the stress of not making payroll, you begin to think innovatively. “Okay, what can we do as an organization to spur sales?” That question can be asked when bank accounts are flush, however it seemingly carries more weight when paychecks are on the line.
Of course as a business operator (and financer) you can’t scare staff into looking for another job. You can (and should, if you’re a small team) be transparent with your team. Saying things along the lines of, “It’s going to be all hands on deck for the next few months while we look to weather our cashflow storm,” is a direct, albeit only somewhat nuanced way to inform your team. Heading to an all staff meeting and saying, “We may not make payroll this week,” is a sure fire way to instill fear (and flight syndrome) in your team. Don’t do it.
Cash flow problems come with downsides too. First, when you don’t have money, you begin to think more short-term. “What can I do today to save money today?” May seem like the right train of thought, but you need to manage short-term and long-term objectives. Financing and running a businesses means you make an investment in people, and you don’t want cash flow problems to inspire short sighted layoffs that undercut longer term needs. Of course, you’ll never get to those long-term needs if you don’t make it through the short term challenges you face.
Second, cash flow problems can ruin your books. Accepting subpar financing terms because you’re in a pinch can greatly impair an organization’s future growth. Whenever taking on financing, be diligent, and don’t move too quickly.
All in all, not having money is a good thing. In my experience, cash flow problems have served as the catalyst for dynamic and innovative changes. Where taking potentially risky action would have previously been dismissed, not having money suddenly justified giving them a shot. The result? Meaningful and impactful changes in our company’s growth.
If you’re reading this and you’re strapped for cash, don’t fret. Leverage the situation. Pull out all the stops. Figure out what your customers will pay for and work tirelessly to deliver it. That’s what I’m doing, and even if my eyes do go red, and there are bags below them, it’s some of the most fun, rewarding, and inspiring work I have ever been a part of.
The world is changing. Wow, I don’t think I’ve ever started out a piece of writing with something that ambiguous and open-ended.
Everyday new technological advances come along. There are autonomous cars, AI that tickets you for jaywalking, and myriad other interesting (and scary) enhancements to our way of life.
There is an undeniable shift occurring on planet earth. Human beings (and computers) have more information available to them at all times than ever before. This information overload has led to some wacky and ingenious developments. However, one thing (at least in my four years of experience) has not changed with the times.
Since 2014, I have lived, breathed, and worked in the nonprofit sector. I haven’t been employed by a nonprofit, no, instead I have worked for a tech company building solutions for nonprofits. Over the past four years I have written nearly 100 blog posts, been interviewed on close to a dozen podcasts, and built one new product. It’s been a fun, interesting, and rewarding ride!
Information accessibility is at an all-time high, and it’s certainly impacting our society, but what I have seen from my professional career is that in the nonprofit sector we haven’t been able to keep up with our peers. As individuals, companies, and even governments evolve to exploit the benefits of information overload, nonprofits simply haven’t.
It was this realization, paired with some great foresight by my mentor, that our company, MarketSmart decided to build Fundraising Report Card. Some nonprofits would be able to catch the information wave, and others would not. With Fundraising Report Card we thought we could help as many organizations as possible get on board.
These organizations (whose leadership I have gotten to know and engage with), are forward thinking. They caught the information wave and have been proactive in leveraging data. That’s not to say either organization is perfect — they’re both far from it, but they are at least leveraging data (information) to make strategic decisions.
During this time of change there will be winners and losers. Just like their for profit peers, some nonprofits will figure out how to leverage data to grow their organization sustainably, while others will continue to go with “gut feel.” Those that rely on guesses will not sustain themselves, those that leverage information will.
Well known and well respected organizations that don’t hop on the data-driven train will be left behind. This isn’t my opinion, it’s simply the truth. Compare Charity Water and March for Dimes. One is leveraging data at every step of the donor journey, the other still sprays and prays their constituency like it’s 1980.
What is Fundraising Report Card?
Every product (at least those that grow and are profitable) needs to solve a problem. If you build something and it doesn’t help someone (or some organization) relieve some sort of pain, you aren’t going to have many customers.
With Fundraising Report Card, we set out to build something that made the barrier to entry lower for nonprofit organizations to leverage their data. You see, the issue nonprofits face is not in collecting information — they truly have plenty. Instead, the issue they face is making sense of all that information and turning it into action.
Business intelligence (BI) is an abstract and nebulous phrase within the walls of a nonprofit. To some BI means you need Tableau, to others, BI might signal the need to hire an outside consultant to produce a 50 page report. BI, for better or worse, tends to fall upon deaf (and unaware) ears.
This isn’t the fault of nonprofit staff however. Third party vendors in the nonprofit space (like the company I work for), are notoriously bad. The products they make are clunky, their systems are outdated and antiquated, they frequently tie up organizations in multi-year contracts that they cannot get out of, etc, etc.
For us, this created a unique opportunity to produce Fundraising Report Card.
Fundraising Report Card is essentially a simple version of Tableau that is geared towards fundraising data. Instead of building something overwhelming and clunky, we built something dead simple and easy to use. Users upload their anonymous donation data to the web application and then receive a series of reports, interactive dashboards, and insights.
For many organizations, what we created could help them reach the promised land (leveraging data) in a way that was respectful of their knowledge of data analysis, skill-level with software, and limited time and finances they could invest.
We had built something that solved a problem and people were buying it.
How we grew Fundraising Report Card
Growing the business didn’t happen overnight. Attaining $160k in ARR over two years is far from the most impressive business feat. Our growth isn’t staggering, and our customer retention could (and should) be better. How then did we grow to where we are today?
I did one thing, and I did it well. I became an expert in the field.
It may seem foolish to suggest this, but over the past 24 months I transitioned my career from designer, to developer, to nonprofit data guru. I’m not kidding either. My blog posts have been read over 100,000 times online, an article of mine was published in an industry journal, and I’ve even been paid to speak (what 21 year old knows what an honorarium is?).
This marketing approach (becoming an expert) wasn’t intended to boost my ego (although I’m sure it did), instead it was utilized to position Fundraising Report Card as authoritarian in a space that lacked any real leadership.
It worked.
If you look at our Google Analytics data you can see that thousands of individuals arrive at Fundraising Report Card via organic search traffic each month.
This is great, because those individuals are searching for information, things like, “What is donor lifetime value?” and they end up reading one of my articles. After reading the article they may subscribe to the blog, sign up for the free version of the software, or leave the site. Regardless of their next action, they’ve begun to build some familiarity with Fundraising Report Card, and that’s a big win. Plus, visitors from organic search traffic are exhibiting a need — they’re obviously looking for information to help them solve some sort of problem.
Investing time, energy, and effort into original content has proven incredibly valuable for us to grow the business. But, marketing (lead generation) is only one half of the battle, the next is sales (closing deals). On our path to $160k ARR we did a few things well in this realm as well.
Closing deals
When you build something brand new you have a lot to learn. What are people willing to pay, how do they want to pay, will they even pay? The questions go on and on.
One of the things we did best, especially when we “launched” Fundraising Report Card, was that we got on the phone with our sales prospects. Fundraising Report Card has a freemium business model, which means there is a free version of the software with limited features and a paid version that provides more value.
Our first customer came from me getting on the phone with the (then free) user and discussing his specific needs and how we could help address them. This pattern of behavior has continued on to today. Just this past week I spent time on the phone with a development director of a nonprofit helping her understand what she has access to within Fundraising Report Card.
This high touch and involved sales process was heaven sent at first, but today it is one of the key contributors holding Fundraising Report Card back from more explosive growth.
There is a certain price threshold that indicates whether a product can be sold through a high touch sales model, and our price points (tiers ranging from $200 to $5,000 annually) are not high enough. When you come to this realization the first thought that goes through your head is, “How can we mitigate sales prospects from needing our assistance in order to purchase?” and myriad ideas come to mind. The issue with this is the realization that you have limited resources.
Our team on Fundraising Report Card was stretched thin. I couldn’t get engineering time to help me build a more friendly on boarding workflow. Adding seemingly small features that would assist users in selling themselves in the software was unattainable, thus high touch sales has persevered.
Unfortunately this hurts profitability (for two and half years my time has been spent selling when it could have been happening without me), but on the plus side it has allowed me to learn the exact roadblocks we face in truly automating the sales process.
For example, a lot of my conversations with sales prospects focus on what data to analyze. You may not know it (honestly, you shouldn’t know it), but nonprofits have different ways of “coding” their data in their database. From my high touch sales engagements I’ve learned the idiosyncrasies of hard and soft credits, pledges and pledge payments, and more. All of these (seemingly) minute details impact the value that Fundraising Report Card is able to provide. Since we are aware of them now, a salesperson can be prepared for these types of questions and provide workaround solutions, increasing the likelihood of a sales occurring.
High touch sales has its pros and its cons.
Retaining users year over year
Acquiring customers isn’t that important. What’s truly on the top of my list is retaining the existing base of paid users. Any recurring payment product lives and dies by retention rate and it’s no different with Fundraising Report Card.
Since the product has been on the market for over two years, we have learned a lot about retaining nonprofit clients. First there were two big realizations:
The staff member that bought the subscription might not be there a year later;
The credit card on file most likely will need to be changed.
There is notoriously high turnover amongst nonprofit professionals, and that has been a retention challenge for Fundraising Report Card. Imagine Jane purchases Fundraising Report Card, trains herself, and then moves to a different position 8 months later. A year passes and the organization gets an invoice for a product that no one else has ever heard of. What do you do? You have to start the sales cycles all over again. This happens too frequently.
Another common challenge we face is out of date payment information. You’d be amazed how many company credit cards go out of date each year… at times it feels like Fundraising Report Card has gotten all of them. Even when credit cards are still in service we run into “do not honor” rejection codes from banks. Too frequently we have to engage with our point of contact at the organization to ask them to talk with their billing department to approve the charge.
All fun stuff.
Where is the future and how big can it get?
There’s a lot of potential with Fundraising Report Card. Over the past two and half years more and more nonprofits have jumped on the data-driven train, but there are still plenty that have yet to come on board. In particular, smaller nonprofits (think those that raise less than $1M a year) could benefit from Fundraising Report Card.
One of the biggest problems Fundraising Report Card solves is one that we did not recognize when we initially built the software, that is for reporting key metrics to the board. Unfortunately, not much of our marketing or product are geared towards board reporting.
When we initially built the software we focused on business intelligence, for example you can click into segments of the reports, manipulate them, and then export data. However, what users really want is a better way to print key metrics in a presentation-ready fashion. We didn’t know that at the time, and since then we haven’t invested the engineering time to make it happen. Nonetheless, hundreds of nonprofit professionals use Fundraising Report card to do just that.
There is an awesome opportunity to take what we’ve learned over the past 24+ months and re-imagine Fundraising Report Card. With a focus on board reporting, providing more actionable insights, and removing some of the most unused features, we could (and should) be looking at a $1M ARR business.
As I have taken over a new role at MarketSmart, I no longer solely focus on Fundraising Report Card. Plus, with our limited engineering resources we are not in a position to modify things immediately, however, if I still was in charge, and if I did have engineering resources to make changes, here is what I would do:
Reposition Fundraising Report Card as a database agnostic add-on;
For example, a competitor in the space offers their own solution that is positioned as an add-on for specific CRMs. Fundraising Report Card should do the same. Imagine Fundraising Report Card for Raiser’s Edge. Fundraising Report Card for SalesForce. Etc. This would help with recognition amongst existing CRM users and it would also position Fundraising Report Card as complementary, and not competing against existing platforms (ie, we make your existing reporting even better, give us a try).
Focus high-touch sales efforts on a chapter-based organization;
Instead of signing up $200 here and $500 there, I’d engage with leadership at chapter based organizations (think Boys and Girls clubs, or YMCAs) and try to provide a comprehensive solution to their network. This could (and should) be a five or six figure annual agreement.
Make it easier to get to the “aha” moment;
Right now, for more than 50% of all paid users, they required some human touch to reach their “aha” moment. That’s not sustainable, unless you drastically raise prices. For many users the “aha” moment is realizing that they have so much interesting and compelling data in their database that they previously weren’t aware of, but the issue is, they currently require some handholding to make that connection. Well designed software should mitigate that need, but someone needs to scope that out.
Re-up marketing with cornerstone content;
It’s been a year since I published an e-book on Data-Driven Fundraising. That e-book was one of our best marketing efforts, and Fundraising Report Card could greatly benefit from providing existing users with more content of that nature. This would help with retention and acquisition because both existing users and new users could refer to it to help make sense of all the information they have access to through the software.
What do you think?
So that’s that. In two and half years Fundraising Report Card has grossed over $200k in revenue, assisted nearly four thousand nonprofits, and has allowed me to become an industry expert with no real qualifications. I told you it’s been a fun ride!
If you’ve made it this far, what do you think of the little business we’ve built? I look forward to hearing your thoughts.
Back in October of 2015 I wrote an article titled Notes From Creating a New Product. In that post I shared my excitement about beginning to work with Greg Warner, the CEO of MarketSmart on a new software. Today I’m even more excited to share an update on our progress.
If you’ve chatted with me in person, I’ve probably tried to explain to you what the Fundraising Report Card is. But, to be entirely honest, I most likely left you feeling confused — I struggle to describe what I’ve been working on for all these months. By writing it out here I hope that I’ll be a little more effective in sharing what exactly I’ve been up to.
What is it
The Fundraising Report Card is a business intelligence and data analysis tool. The Fundraising Report Card empowers nonprofits to make data-driven decisions.
Data-driven decision making is such a buzz phrase, so let’s breakdown what it really means. And, more importantly, what it implies in the context of fundraising at nonprofit organizations.
First though, I need to share a brief overview of how donations work.
When you donate $20 to Save the Children (or any nonprofit organization) 35% (sometimes more, sometimes less) of that money goes towards overhead expenses. Overhead expenses include paying for consultants, investing in infrastructure, and sending letters to you asking for more money. (Yes, it’s a tough reality, but your donations are part of what gets invested in the “fundraising budget”). In a perfect world all $20 of your donation would go straight to the children that need to be saved — but in reality there are operating costs that need to be paid.
Okay, with that in mind let me frame how important data-driven decision making really is.
Right now, in this very moment your favorite nonprofit is spending thousands and thousands of dollars on direct mail appeals to try and raise more funds from you. There is nothing wrong with that (although some people might argue otherwise), they need to raise money and they need to ask you (and others) to help. Fine.
Behind the scenes most nonprofits are relying on a consultant (or a consulting firm) to help them decide who to mail to and what to mail to them — should this letter with a picture of a starving kid go to this list of donors or that list? This makes sense, right?
Like any good business the nonprofit wants a sound strategy before taking any action. Spending an extra $5,000 or $10,000 on a consultant to try and make sure you get the highest return on investment (ROI) makes sense.
This is the current system — hire a consultant, send out a bunch of mail, wait for results. You experience it, I experience it, it’s kind of shitty from the donor perspective to be honest (you end up with a lot of letters in the recycle can). Of course there are different techniques for different segments of donors (major donors don’t get mailed letters, they get a fundraising officer at their doorstep), but the process is generally the same.
It should be apparent that there are a few obvious issues with the current fundraising paradigm.
The Fundraising Report Card disrupts this pattern.
A user of the Fundraising Report Card (usually a fundraiser or executive at the nonprofit, but also consultants) uploads anonymous donor data to the Report Card. With this data the Report Card calculates fundraising key performance metrics. Also known as, “really important statistics we should have been monitoring and analyzing for the past few years”.
Here’s an example, taken straight from the for-profit sector — customer retention broken down by engagement channel. Think about it for a moment, what do you think the odds are that Netflix keeps track of how many users they retain each month? High, right? They have shareholders to report to every quarter, and you better believe those shareholders want to know how many users Netflix has been retaining. (More on this here).
Internally, Netflix may break down that metric even further. They might segment the data by plan type and demographic information. What is our retention rate among users paying $20 or more a month on the east coast?
Answers to questions like these help inform strategy and are fundamental in setting realistic goals.
Yet, when it comes to the nonprofit sector a void exists. Sure, data abounds, but how can a fundraiser, executive director, or director of development really be asked “what channel provides your best ROI?”, most don’t have the tools to answer that question. And if they have the tools, they are not easy to use. They are inconvenient and clumsy… not to mention expensive. This is the void that the Fundraising Report Card fills.
By providing fundraisers, executive directors, consultants, and and even board members with access to easy to comprehend key metrics and interactive reports, we’ve created a platform that allows for data to be a vital part of decision making.
For example, we generate a retention analysis report, just like the one Netflix would use internally. And, one of the great things we do right off the bat is segment that data by giving level. Users can take it one step further and upload historical data based around specific appeals, and before they know it, they are taking a peek under the hood of their fundraising machine.
How is our donor retention among mid-level donors who have received our end of year appeal letter? With the Fundraising Report Card the nonprofit can answer that question, and depending on the answer they can adjust their strategy. Ultimately the nonprofit cuts costs and invests in fundraising efforts that prove to have the highest ROI. Cool, right?
You can learn more about the Fundraising Report Card here, and you can read a short case study from one of our early users here.
What I’ve been doing
Since August of 2015 I’ve been working with Greg to develop our strategy for the Fundraising Report Card. Beginning in January of this year, I was given the resources (money, time, people) and the responsibility (hit deadlines, set product demonstrations, build my network) to take this idea and make it into a reality.
On April 4th 2016 we launched the beta version of the Fundraising Report Card. Leading up to that event I spent most of my time focused on product development. I consider this my “product manager” phase. A lot of my time was spent on:
developing a product road map
determining which features would be included in which release
managing expectations of key stakeholders
learning about software as a service business models
reaching out to industry leaders who were interested in providing feedback and testing
designing the logo and front-end of the application
and writing a lot of Angular and JavaScript code (user interface stuff)
The objective early on was to get a minimal, functional, viable product in the hands of our potential users. We started working towards our April 4th release date at the end of February. We hit our deadline and we got plenty of engaged users to test it out. We found a lot of bugs, got a lot of great suggestions and learned a ton about the market we were trying to position ourselves in.
After the initial product was out in the wild I pivoted my focus towards getting people to use it. And, most importantly, getting those people to talk to me. This was, and still is part of the “collect feedback” phase. I’ve spent a lot of time…
reaching out to people on LinkedIn
setting up screen-share demonstrations
holding phone calls with existing users
hosting webinars with industry groups
configuring automated emails to nurture and engage users
and playing the role of “support agent” on our live-chat widget
Today my role has evolved even more. Elements from the product management, and collecting feedback stages are still part of my day-to-day, but now I have started the transition into “sales”.
This stage has involved a lot of…
researching pricing psychology
developing relationships with potential “partners” (consultants, consulting firms, data CRM companies)
organizing sales materials
building the foundation of a sales funnel (deal stages, workflows, etc.)
writing marketing and sales copy
talking with more and more users
and getting people (nonprofits) to give me their money
Sounds kind of fun, right?
Moving forward
Taking the Fundraising Report Card from idea to fruition has been an educational, challenging, and unbelievably fun process. Yet, the most exciting and compelling moment so far has been receiving supportive feedback from users.
For example, I recently I completed our first case study. The client, the Director of Philanthropy at a multinational relief organization with over $60 million in annual budget, used our beta tool and had a great, positive experience.
Creating that case studymeant talking with the client and learning how they used our platform. Hearing their Director’s comments and learning how powerful our software was for them made me feel vindicated.
Receiving positive feedback is some sort of validation for all the work our team has put into this project. For me personally it has helped frame how important what we are working on really is.
Learn more
If you’re interested in learning more about the Fundraising Report Card please take a look at our website (press play on the video and you’ll even get to hear my voice!).
If you have any questions for me, like, “Zach, how the hell did you end up making some data analysis tool for nonprofits?” please don’t hesitate to reach out.
And finally, if you want to learn more about the nonprofit sector and how you can make an impact check out some of these resources…
At the core of any startup are the people. The founder(s) and whoever they bring on as employees are the lifeblood of that business. When a company is small, but growing, building a great team is a priority.
The challenge of building a great team confronts all startup companies. Small businesses must demand a high level of return on their investment (employees), whereas large corporate or bureaucratic organizations can afford to have a handful of employees who do close to nothing. At a small company though, this could potentially be deadly.
This is not to suggest that one employee should be so valuable that if they were to leave, the organization would collapse. (Think of the hit buy a bus theory). Rather, if one employee does not share the same passion and alignment with the company goals that others in the organization do, it could potentially cause negative effects.
Bringing together 5, 10, or even 15 people to operate, grow and expand a small company is no easy task. This is something I am learning first-hand at MarketSmart.
Sam Altman recently published his Startup Playbook. The second section of his guidelines for startup companies talks about building a great team. It is important.
I am learning first-hand at MarketSmart what it takes to build a great team. A so-so team will not build a great company. It takes a united group of people to create something special.
How to hire
Hiring must be treated as a numbers game, it simply must. Think of a sales funnel. At the top you have hundreds of prospects, at the bottom you have a five signed contracts. At every step of the funnel you refine your prospects, leaving you with your most promising sales leads.
Hiring at small companies should employ this same tactic. The consequences of not talking to enough candidates is deceivingly expensive and disruptive.
At MarketSmart I have worked closely with our CEO to develop our Careers micro-site. On the site there is a short 10 question survey for all interested applicants. Questions attempt to make the applicant think, a noble cause in a world of “click-to-submit” job postings.
This survey serves a dual purpose for MarketSmart and the candidate. One, it weeds out candidates who obviously are not interested in MarketSmart. Two it allows us (the company) to spend more time talking to people who genuinely are interested in us.
For the candidates it has the same effect. Candidates will “opt out” and simply not apply if they are intimidated by the survey, or vice versa, candidates will relish at the opportunity to express themselves and share their interest.
The more I interview, phone screen, and watch the hiring process play out, the more I think of it as dating. Dating is not easy, hiring is not easy.
Be honest and transparent
If you are trying to build a great team you should probably be honest with your employees. That extends to potential employees as well.
When interviewing candidates I like to ask them about their most recent previous work experience. What did they like? What did they dislike? Why did they leave or get relieved? Etc.
I am young and naive, but I find it interesting the number of people that mention being lied to by their previous employer.
I doubt these organizations flat-out lied to these people – I simply can’t imagine that. What I suspect is that these companies “misspoke” during the hiring process. They needed you (the candidate), and were willing to tell you what you wanted to hear to make sure you took the job. Then, three months down the line when you were unhappy you went back on the job hunt and ultimately left.
That is my suspicion, and from talking with candidates that is the story I have heard.
So, when building a great team how can you avoid this? How can you avoid “misspeaking” during the interview process? At a small company one employee may very well wear many hats which makes outlining a specific positions roles and responsibilities difficult.
One surefire way to avoid lying to candidates is to create a timeline. At MarketSmart we explain that the roles and responsibilities you are taking on can vary day to day, month to month. What I do during an interview is layout a twelve month timeline to help the candidate understand what role they would be filling now, and what role they could potentially be in then.
I am honest, candid and forthright. Some people I talk to find this refreshing, others are intimidated by the lack rigidity in the plan.
By being honest, open and transparent with potential candidates I am helping MarketSmart find the best fit. Building a great team is difficult, but being honest helps.
Good founders have a number of seemingly contradictory traits. One important example is rigidity and flexibility. You want to have strong beliefs about the core of the company and its mission, but still be very flexible and willing to learn new things when it comes to almost everything else.
The same idea that he touches on applies to all employees of the organization. Good employees have strong character and contradictory traits.
Traits are differentiated from skills. Skills can be learned, traits are more innate.
At a startup company candidates who are willing to learn and of high character will be of more long term value than a similar candidate who has high technical ability but a limited desire to grow in the organization. When a team is small, 15 people are less, you need a core group of individuals who have traits that align with the company’s mission.
As the company does space will open up for other individuals who are simply “looking for a job”.
Building a great team is hard. It is necessary. And, it is fun.
When I interviewed for an open position at MarketSmart I made it very clear to the CEO that I was passionate for entrepreneurship. I was hired as a web developer, and since then I have spent most of my time writing code. But, I have on occasion sat in on sales calls, made cold calls to potential clients, and received lessons from Greg, the CEO in startup financing.
At MarketSmart I have been given the opportunity to learn how nearly all aspects of the business function. I leave work every evening with the same feeling I used to get when I would walk out of a calculus class. I take in a lot of important information throughout the day.
About a month ago Greg approached me with an idea for a new product. For the past thirty days I have been working side by side with him to develop our plan of attack. I have learned a lot, actually more than a lot.
I am in an extremely fortunate position to be working with an experienced entrepreneur in a real world setting. I am playing a major role in a project that could generate millions of dollars of revenue and be extremely beneficial for nonprofits.
I have a rare opportunity to “build” a meaningful business with no financial risk. This is the type of experience that will pay off dividends when I found a company five or ten years from now.
Having started up a “company” when I was a freshman in college I thought I had experience in developing a business. As I have learned over the past month, that experience is not nearly as practical as I thought.
At MarketSmart we are developing this new product while also growing a multi-million dollar business.
Here is what I have learned so far. These notes are for my own reference in a few years when I attempt to found something of my own.
Ideas are worthless. Execution is priceless.
This mantra has become overwhelmingly clear to me. An idea is awesome, it can be cool, it can even be great. But an idea is exactly that, it is in a idea. A business, a real revenue generating machine needs to be more than just an idea.
To build a business you need a plan. Keep in mind this does not mean you need to write a standard business plan, rather I’m suggesting that you need to have every thought laid out before you begin spending money.
Working with Greg on this new product has required hours of note taking, organizing and editing. We have taken the original idea, spun it around in every possible direction and then spent hours writing down every thought that came up in discussion.
Next we (I) took these notes and developed a scope document. In this case it is simply a power-point with 30 slides that outline every single far-reaching idea we touched on in our discussions.
The scope document is our plan. It serves as the blueprint for the products foundation.
Don’t build an MVP, build a MFFP.
Like many people I have read Eric Reis’ The Lean Startup. Reis preaches to the reader that they should develop a Minimum Viable Product before investing heavily in building their business.
Greg brought this up in one of our earliest meetings. He agrees with Reis that the concept of an MVP is powerful and important but counters with his own acronym. He suggests building a Minimum Functional Flexible Product.
The distinction between viable and functional is moot, but the idea of flexibility has been ingrained in my mind.
The goal of a MFFP is to spend the necessary money (not the least, not the most) to develop a product that provides the the base functionality to the end user while also having the capacity to easily be extended upon.
For example, the software that MarketSmart currently sells to some of the largest nonprofits in the world was developed so that a developer like myself (one that is not an expert) could come in and develop meaningful upgrades. I could not have created the MarketSmart software, but I sure as hell can build on top of it.
That is the idea. Build a product that provides the must have functionalities while also keeping in mind that the product needs to be flexible enough to support the “nice to have” features down the road.
Get other stakeholders involved.
So far I have not played much of a role in this area of the products development. I have recognized though that it is very important to develop strategic relationships with people who hold power in the marketplace.
I need to learn more about this.
Identify influential people who will help market what it is you are selling.
The previous note piggy-backs into this one. This is more of a coming to market strategy, but it is something I have identified as important thus far.
You don’t want everybody to have access to your product at once. Greg has devised a really simple plan to get influential fundraisers excited about our new product before we even build it.
He did the work here, but the principle will need to replicated in any future situation. When developing a new product you need to align with people who have influence over the market.
More to come
I will be adding to this list in future blog posts. I want to create a repository that I can reference a few years from now. Stay tuned.
I am 20 years old. When I was 18 and a freshman at Pitt I co-founded a company with two friends.
We founded GymBro. GymBro sold protein powder and other nutritional supplements on a subscription basis. It was really, really fun, plus it gave me an excuse not to pay as much attention to my academic studies.
Now, almost a year after we abandoned the idea I am ready to reflect. My time spent working on GymBro was an invaluable learning experience. It is interesting to think about what we did at the time, and how I would approach similar situations now. There is no better way to retain what you have learned than to write it down.
That is the goal here.
Have a Plan
“Business plans are old school and a waste of time”, that was the general sentiment I found in my research before launching GymBro. My co-founders and I took this to heart.
We had no plan, no guide, no road-map. We were three college guys with an idea and that was about it. Looking back on it now, this is where we failed most.
It may be cool to start up a company with only an idea. But if that is the case then there is no company. Without a plan an idea is just that, an idea.
GymBro was doomed from the start. We never took the time to formulate how we wanted the business to run, how it would execute day to day, and most importantly how it would grow.
We didn’t need a 30 page business plan, we simply needed a plan.
Build a Foundation
Without a foundation (technical, organizational, legal, etc.) any idea, minimum viable product, or business is screwed. This was the second fatal flaw (of many) that we encountered at GymBro.
We had no building blocks in place to support or grow our business.
Technologically we had no advantage over our competitors. We barely even had a functioning website. We rushed through the process of building our online store and that hurt us in the long run.
Organizationally we never assigned roles to one another. No one knew what there responsibility was. Frequently the three of us were unsure what we could be doing to help the company grow.
The three of us thought we could sprint past the basics and end up at the finish line. Ultimately, the opposite happened – every time the business took one step forward we would end up moving two steps back.
Without the proper foundation in place we were doomed from the start.
Provide Real Value
It is surprisingly easy to get people to give you money. It is surprisingly difficult to get them to do it again.
GymBro aimed to generate monthly, recurring revenue from customers.
This never happened.
Customers did not want their supplements delivered to them on a monthly schedule. Some preferred bi-monthly, tri-monthly, or even quarterly. At GymBro we had no way to letting customers choose their subscription frequency.
Instead, we provided the one option that we could program into our website – a monthly subscription. After half a year of stagnant business we all realized that we were doing something wrong.
We were not providing the customer with what they wanted. We were not giving them any real value.
We could convince people to order from us once, but after that they were gone. We did not give them a reason to come back – we did not provide more value then our competitors.
In order to retain customers you need to provide extreme value.
Peter Thiel writes about this in detail in Zero to One.
Act on Feedback
At GymBro users frequently communicated to us the importance of quick shipping. We listened, sort of.
In retrospect, we were extremely fortunate to have such vocal and open customers. We had an amazing opportunity to learn exactly what our customers wanted. Sadly we did not execute on this.
We listened when customers talked. We took a genuine interest in hearing what they had to say. Ultimately though, we did not act upon the information they provided.
When the people who give you money give you feedback you should do something. I wish we had put more time, money and effort into taking action on our customers feedback.
Making progress is difficult. You are only shooting yourself in the foot if you do not listen to the people who generate your revenue.
More on GymBro
Even though we went out of business we still had fun doing it! Here is more information about GymBro, including our application to a startup accelerator in Pittsburgh, a progress report, and a newspaper article.
YC Fellows will receive a $12,000 grant and advice from the YC community for 8 weeks (from mid-September to mid-November) to go from an idea to a startup. Fellows need an idea or a prototype and the ability to work on this full-time for 8 weeks.
If you are unfamiliar, Y Combinator is a seed investment firm targeting startup companies. The combined market capitalization of all the firms YC has invested in is over $30B.
I have replicated the YC fellowship application questions here on my blog. (Keep in mind there are 120 word limits on every question.) Below are my answers where I outline a company called Assure.
What is your company going to make?
This company provides benefits to employees of the sharing economy.
Independent contractors miss out of the benefits that come with full-time employment. Assure changes this.
Assure bridges the gap between full-time employee and independent contractor. Assure provides retirement contributions, medical insurance, and general liability insurance to members of the sharing economy.
In two sentences, say the most impressive thing about this team / startup.
I want to do something important. I want to create something of value.
Please tell us in one or two sentences about the most impressive thing that each founder has built or achieved.
I dropped out of college when my mom was diagnosed with lung cancer. A month later I was hired full-time as a web developer with skills I taught myself.
Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
A lot of my peers are oblivious to the benefits that come from being a full-time employee. (Something I have learned only recently after being hired full-time). Retirement contributions (401k), medical/dental insurance, and general liability insurance are the three areas I have a touch of experience in.
The sharing economy is expanding. A large number of jobs are tied to this industry. That number will continue rising.
Assure provides the safety and security employees need to maintain the growth of the peer to peer sector.
What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?
Providing benefits to employees who are independent contractors is not new.
Currently a contractor at Uber has scattered benefits. They have an IRA for retirement savings. Then, general liability insurance to protect their interests while working. And finally medical and dental insurance from their parents.
Assure brings these three interests together. Contractors wish to legitimize their employment. They will turn to Assure when they want their retirement contributions matched. When they want more protective liability insurance. Or when they turn 27 and no longer qualify for their parents medical coverage.
Who are your competitors, and what do you understand about your business that other companies in it just don’t get?
Companies that hire full-time employees are competitors. As are insurance companies that cover individuals.
Companies that hire full-time employees limit potential customers. While Insurance companies provide similar coverage to what we offer.
Our competitors are too slow to adapt to the sharing economy. Assure is agile enough to adapt as the peer to peer employment market grows.
How will you get users? How do or will you make money? How does this become a giant company?
Assure must educate people to turn them into users. Assure must provide information that allows millennials to see the value of working in a sharing economy while also receiving traditional full-time benefits. There is a knowledge gap.
Assure collects monthly premiums from members. Premiums are aggregated and invested. Profit is made from investment income, not premiums.
Assure is a component of the sharing economy. Employment opportunities are changing. Workers in this new economy will want benefits, Assure makes sure that happens.
Applications for the YC Fellowship are due by Monday, July 27th, two days from the time this post was published.
If you have feedback, please share it. I would appreciate hearing it before I press the submit button on Monday!
