As an Angel Investor, I get to work with a lot of entrepreneurs.
It’s LOADS of fun.
And even though I’ve personally mentored thousands of entrepreneurs; it never ceases to amaze me how often the pillar of business gets misconstrued.
Ironically, there are many entrepreneurs who understand the Golden Rule but still fail to respect it as they operate – and what’s interesting is how they can get away with that and still succeed…for a while.
Just look at all the Fortune 500 companies that have horrible customer service, yet they continue to grow (a little) every year. This is where complacency sets in.
But smaller businesses don’t have that luxury. They can’t do another round of public financing, or beg the government for a bailout. So for them, the consequence of forgetting the Golden Rule is realized expeditiously – and it’s usually in the form of annihilation.
Why Businesses Actually Fail (Most of the Time)
In many corners of the internet are articles and citations suggesting that businesses fail because they’re under-capitalized and/or fail to manage their finances properly.
Even though I think those are relevant contributors to business failure, they’re actually not the deepest culprits.
My justification for this position is not only logical, but it’s based on the thousands I’ve worked with.
What I have observed is many “successful” entrepreneurs are bad at financial management; but they still manage to keep their lights on. This includes the founders who use their companies as personal piggy banks, which many do.
Sorry dude, but that fishing boat has nothing to do with your janitorial empire, however I admire your creative attempt to maximize tax deductions.
Now don’t get me wrong; this isn’t ideal.
These businesses are just one bad economy away from destruction – and I will never invest in a company that doesn’t have it’s financial discipline on-lock.
But despite the lack of financial discipline, the reason why these companies still endure is because they approach customer centricity differently than how the businesses that fail do.
This is the Golden Rule in business; to approach customer centricity properly.
Most entrepreneurs and sales professionals know customer-centricity is important – and if you asked them if they were “customer focused”, they would tell you:
“#$%& yeah!”
But even though this is what they say because they know it’s what they have to say (and think); their own motivations (sales, feature development, fame, etc.) tend to take precedence in practicum.
As someone who has worked with thousands of entrepreneurs and sales professionals, I can tell you this is true.
If I had a nickel for every tech business that blew through all their cash chasing features instead of getting their software to minimal viability and then selling the jeepers out of it; I could fill up a Mason jar.
Then you have greed. I quickly observed two kinds of business owners upon starting my VC journey; those who look at customers as a means to get rich, and those who want to solve significant problems for people with the assurance that the money will take care of itself.
Everywhere you look; you can see this.
Why do you think it’s so difficult to get a hold of customer support for so many organizations?
Because it’s an expense – and for that particular business, the expense of the labor is more of a concern than the cost of customer disappointment. ’nuff said.
There are few things I hate more than a huge arrogant company that abuses customers because their segment monopoly allows them to. That shows their character, no?
Honestly, despite the fact that I enjoy being a venture capitalist, I think most of it could (and should) be unnecessary.
Founders need to learn how to bootstrap and be resourceful, because they owe it to their employees. If you look at most layoffs, you will see that most of them were avoidable if the businesses had been run correctly in the first place.
A business that observes the Golden Rule in practicum, and reinvests profits into supporting proper customer centricity; will likely not need capital for a long time.
Drawing on all my years of experience I can tell you that:
“It’s no coincidence that many companies raising capital do not have well established customer acquisition processes.”
In fact, in most of my recent investor pitches that I’ve sat through, the ventures don’t even have a sales or marketing person on their founding team yet, but they do have several administrative employees. This is asinine!
A business that understands the Golden Rule properly realizes that customer centricity begins early-on in the journey; not post-payment.
This may seem very contrarian, but it you ruminate over it; you’ll see it makes a lot of sense, because it develops a mentality of total ownership for the customer experience throughout the relationship – and all customers adore that.
So, businesses usually fail because they don’t respect customer centricity and/or they misunderstand it, and therefore approach it improperly.
Which leads us to our next point.
How should it be approached?
What Does Smart Customer Centricity Look Like?
True customer centricity is all-encompassing of the customer’s entire journey; from prospect to champion.
Borrowing from the project management field a bit, this is called a “Left to Right Boundary” perspective.
In that vain, we must start at the point before a customer becomes a customer; lead generation and nurturing.
To be customer centric, it’s important to have lead generation on-lock.
You can’t have finances to manage if you’re not generating and converting leads to yield sales. Nothing in; nothing out.
It’s also idiotic to do what many businesses do out of greed, converting prospects to customers that aren’t a great fit for the product/service.
Why? Because in the end it always yields disappointment.
So in order to be a stellar business that endures; it’s important to establish a finely-tuned process that identifies, qualifies, nurtures, and converts ultra-high quality leads.
Now for the money-centric folks, they are probably thinking, “This will yield less sales.”
And that is correct; in the short run.
But what sounds better? Get a lot more customers now, only to lose many of them and have considerable reputation damage and with little-to-no expansion opportunities with those buyers, or; have less now, but have a very high retention rate while incrementally growing?
The latter sounds better to me, because you’re not wasting those opportunities.
But, for those that want to “get rich quick”, I suppose the former might make sense. Different strokes for different folks. Good luck.
It’s important to point out though that the former approach will land your butt in jail pretty quickly these days – and I’m here to tell you that legal issues should be avoided at all costs.
Customer centric businesses are focused on under-promising and over-delivering. They don’t obsess over features, fame, furniture, and fortune.
As cliche as that sounds; it works – and it’s wise.
I see this cardinal sin in high-tech a lot.
The perspective often times is, “Let’s get the sale – and then we’ll work through the issues.” Listen to me very, very, carefully. This is a horrible idea.
Don’t get me wrong, “Field of Dreams” was an incredible movie, but we’ve all known for quite some time now that “build it and they will come” is hardly a strategy anymore for getting the right customers using your solution.
Not only is customer centricity not just a buzzword, but it’s also a trajectory altering principle. Yet it’s misunderstood, and it’s approached incorrectly.
As a businesses’ negligence in observing the Golden Rule grows, so does their likelihood of failure.
So, what’s the Golden Rule?
“To approach customer centricity as a mindset of total ownership; from the first outreach to account expansion; while considering the customer’s welfare at every pace in the journey. Always.”
This approach makes for a low stress, financially prosperous, and most importantly, ethical company. It will endure for years to come, and will have no shortage of expansion opportunities.
Ironically, by taking care of customers (with more than just words), then all the other desired outcomes, such as fame, fortune, features, and yes, even the furniture, will be abundant for the business. Under this premise, if the Founder is fishing for an exit, this business will command a higher multiple – and if the Founder is raising capital, they’ll have a line of eager investors.
Doesn’t that sound better?
Blessings.
J. Patrick Nichols