About ten years ago, I launched my company and was full of hope it would grow quickly. Like many founders, I had carefully planned everything – to the dot. I had the spreadsheets and the business models to prove it!
As a cautious person, I launched the company in stealth mode while I was still working at my previous job. This wasn’t easy and took a lot of work. But I wanted to test the concept to be sure it would work for me. My only objective was to start getting customers so the business could generate revenues.
Paving the way
One of the biggest challenges for startups is getting their first batch of customers. Landing real, cash-paying customers is what proves that your concept is going to work. And they are also your source of revenue – which is essential if you are going to succeed.
I am a big believer in trying to build revenues as early as possible.
In the good old days of my industry, the way to get customers was through referrals. Everyone tried to get accountants, lawyers, bankers, and brokers to send business their way. I was told it was your golden ticket to success and I bought it. It made sense.
My first step was to focus on building a broker network. So, when I started my company, I joined an association that catered to brokers in my industry. I attended local meetings and “networked” with everyone. I did this for a while but had nothing to show for my efforts, even though I had presented in front of many groups.
At the same time, I noticed that some of my industry colleagues were featured in the broker association’s monthly magazine. They were also bagging lots of clients, so a light bulb went on in my head. I called the editor and asked her if I could write an article for the magazine.
By a stroke of luck, she said yes. The article was published and was well-received. Having nothing to lose, I decided to take a risk and asked her if I could write regularly for the magazine. Keep in mind, I was new at the industry and mostly unknown.
She said yes (hint: always ask for what you want!). And, much to my surprise, my column became a regular feature in the magazine. Now, instead of building a local broker network, I could build a national broker network.
I got emails and calls from brokers asking for my advice and looking to work with me. From a marketing perspective, I had struck gold.
Or so I thought…
My first customer arrives
Finally, my first customer arrived. It had been a marathon, but the phone was finally ringing. The business owner called me out of the blue and told me she needed factoring financing. I was delighted to sign her on. Then, something interesting happened. I had assumed this was a broker referral, so I asked her how she found me. She said she found me on the internet.
Remember, this was 10 years ago… not everyone was searching the internet like they do today.
This was odd. I had put all this effort into doing the smart thing (at the time) and had not signed a single client from my broker network – yet. However, I had little more than a website and that brought my first cash-paying client.
By the way, most in my industry said they hated internet prospects. They called them “shoppers and tire kickers,” presumably because they were doing the smart thing and were comparison shopping – like any start business person would do.
Brokered clients finally arrive
Eventually, I met with some brokers who referred business to me. However, it was not at the volume or quality levels that I had hoped for. Those clients that I did sign on ended up being good clients. With few exceptions, they were good people who tried to manage good businesses.
The problem is that most referrals were duds. Filtering through leads and helping untrained brokers required a lot of work and did not yield the results I had hoped for. Don’t get me wrong, I am very grateful for the opportunity to write for the publication. I am also forever grateful to their editor for taking a risk on me.
But the strategy did not pay off.
This situation left me confused. Many people in my industry were praising their broker networks. I had a reasonably well-known position in the industry and I had only signed on a few clients. On the other hand, I also had a website which I barely promoted that brought almost as many clients.
Something didn’t make sense.
Following industry assumptions can lead to lost opportunities
This situation was a head-scratcher for me. At that time, my industry had the following mantra: to succeed, you have to work with bankers, CPAs, and brokers. On the other hand, if you want to waste your time, focus on online marketing, online sales, and so on.
Frankly, I had taken the industry advice and did not have a lot to show for it. Sure, I had some clients, but it had also taken a lot of effort. This would not scale and grow into a large business.
One day it finally hit me. The assumptions that these industry veterans had were simply wrong – at least for me. After asking more pointed questions to some of my industry colleagues, I found that those assumptions were actually “mostly hearsay” that everyone repeated. In fact, many competitors were getting clients through other means – and doing well.
Challenge assumptions. Always be testing and improving
One thing I learned from this experience is that you should take everyone else’s advice with a grain of salt. The wisdom comes in determining which advice to take and which to challenge.
However, common sense industry assumptions are not above this rule. This led to my philosophy that I have implemented in all my efforts: always be testing and improving. As a matter of fact, everything I do in my company is an “experiment.”
I call it “managing by experiment.”
This applies to everything, from operations to sales. We define an assumption and we test it. If the assumption works for us, we implement it. If it doesn’t, we drop it.
This way of thinking has led to an increase in clients. It is one of my biggest “sales tools,” for lack of a better term. Actually, I can attribute the majority of clients we got to this method, regardless of the marketing/sales channel.
Let me share some examples with you and discuss how these led to business growth.
Test #1: Do long applications impact sales? (I know, sounds obvious)
Most financing applications in my corner of the finance industry were tedious. They asked for tons of information about our clients. For example, they asked for CPA references, banker references, lawyer references, etc. Never mind the fact that few people have a banker or a lawyer nowadays.
Regardless, those fields were on the application, taking valuable space. This led to longer applications, which all prospective clients unanimously hate.
Actually, few people ever provided those references. However, the underwriting folks still requested that we ask for them because they could be useful. Actually, they demanded that we ask for that information. And, by the way, everyone else’s applications had them, so why not us?
Yeah – why not us?
I decided to run a test to see if it was impacting sales. We created a smaller application that asked for less information – only the essential stuff. Obviously, we still asked for everything that was crucial for underwriting.
In conclusion, the test proved we were losing sales due to a longer application. I won’t disclose the exact numbers because I consider them proprietary. However, our application submission ratio increased. The closing ratio stayed about the same. But, thanks to more applications, we got more clients. Over the long term, these clients have performed just as well as previous clients.
So much for that assumption.
Test #2: Do some ads perform better than others?
For most companies, online can be an effective but expensive way to get clients. Since we wanted to get the most out of our marketing dollars, we started testing ads to see which would perform better. This is what many smart companies do. It is called conversion rate optimization.
We would test new ads against a control group to see how the ads performed. Low-performing ads would be discarded, and high-performing ads became the new control group. This cycle goes non-stop.
As you might expect, the results from this test were positive. It’s well-known that testing ads is a must if you are doing online marketing. Again, the data is proprietary, so I cannot disclose specifics.
Test #3: Should we do business overseas?
This is a trickier thing to test, but we recently decided to offer factoring in Australia. This is a huge leap for us. However, we are treating this business opening as an experiment. Obviously, we are hoping it works.
It is the most complex set of experiments and tests that we have ever done. We are actually implementing findings from other tests into this launch. Hopefully, that approach will help this launch go smoother than previous launches.
Things we are testing include:
- What are the most profitable products to offer?
- What client demographics work the best?
- How does this country perform against other countries?
This is an ongoing test, and I may provide the results in a later post. But it shows that experimenting and testing is a great tool to get clients.