|
|
| Customer Service Tip | Skills | Information | Articles |
|
Leverage Customer Capital First
If you're still dreaming about raising outside capital for your business before you have any paying customers, I've got a nice big bucket of ice water to throw on you. Wake up! The cold reality is that investors aren't interested in your business idea unless you can demonstrate that you've got customers who are actually willing to buy. Before you try raising outside capital, you should focus on building your Customer Capital. Customer capital is the value you create for your company and your idea by getting real customers to buy your product or service. Let's take a look at why customer capital is so important in the early stages of a business. Paying customers validate business models Even the most cynical investor will agree that a paying customer is the most powerful way to validate a business model. Anyone can debate whether or not your business will make money when it's still a bunch of wild ideas on a piece of paper, but few people can contest a steady stream of paying customers. Finding a handful of paying customers early on will provide a firm foundation for the future value of your company. In some cases it may be difficult to find a paying customer before a product or service is fully mature. In this case getting a formal commitment (a Letter of Intent) or a contingent purchase order based upon meeting a customer's conditions is a powerful first step. Either way, demonstrating that a customer is willing to say "yes" and write a check goes a long way toward validating your business idea. The value of a dollar earned A dollar earned from a customer is worth twenty raised from an investor. When raising capital you are really putting all that money to work so that in the end, the customer will pay for your product. A paying customer alleviates that risk and capital and gets straight to the foundation for why you are running a business to begin with ? to make money. Not only does this offer a more direct impact on the value of your business, it also keeps you from diluting your equity position in your company. Netscape's $4 billion "blunder" Netscape Communications found an effective way to use customer capital in their heyday. In a time when software companies were judged on the strength of their sales, Netscape did the unthinkable ? they actually gave away their software for free. While industry pundits laughed at their strategy Netscape ultimately had the last laugh. They quickly developed a market share in the Web browser market of over 90%, launched one of the most successful IPO's in history, and sold to AOL for nearly $4 billion, all based on the massive amounts of customer capital they raised. While I'm not advocating giving your product away for free, it's important to understand how Netscape leveraged their customer capital in a most ingenious way. Consider how much it would have cost them to bring a paid version of their product to market and drive customer acquisition that way. Now consider the cost to Netscape if another company had offered it for less (or for free!) or if they had not achieved market dominance at all. In the end Netscape's customer capital was so valuable that even after losing the browser wars to Microsoft's Internet Explorer they were still able to sell the company to AOL for $4 billion. Flip the script As you're building your business, consider every alternative to raising investment capital. If you're worried that a customer won't buy your product for reasons that more money or a larger customer base would cure, consider offering them a discount or other incentive to do business with you. The relative cost to acquire early customers might be nothing compared to the amount of time and equity it could cost you to raise outside capital. Remember that, unlike customers, your outside investors will demand equity for their investment, and they don't plan on giving it back! Send in the Investors If you've truly exhausted all possibilities to leverage your customer capital, then maybe it's time to call in the outside capital. Be certain, though, that if there's any angle you've overlooked to drive the company without needing capital, your investors will be quick to point it out and question your resourcefulness in the process. Forcing your attention toward acquiring customers will not only uncover ways to increase the value of your business in the short term, it can also generate the cash flow you need to alleviate your investment capital needs. Learn to leverage your customer capital and you can leave conversations with bankers and investors for your IPO! - Wil Wil Schroter is a serial entrepreneur, author, and public speaker. Wil has been recognized as U.S. Small Business Person of the Year, twice as the Ernst and Young Entrepreneur of the Year (1999 & 2004), and is a member of the Business First Top 40 under forty. Connect directly with Wil at wschroter@yahoo.com. Visit http://www.goBIGnetwork.com.
|
|
|
|
RELATED ARTICLES
Wholesale Buyers Versus Retail Customers Are wholesale buyers and retail customers really different? Frankly, there are two answers to this question: yes and no. Yes, because they are different from the buyers and those selling to buyers' point of view and no, because the principles that apply are the same for both types of buying. The Marvelous World of Metaphors Recognize metaphors from every angle and round up more insight into your own innovation. Nobody can do it better than you can! The Nine Principles of Customer Service for the Travel Industry© If you want to learn how to get your clients to do your selling for you through excpetional customer service, read on. Learn customer service secrets from tourism professionals, apply them to your business and prosper. Customer Service - A Lost Art? Is customer service a lost art? Before you answer that question, take a moment and think about the last few times you have gone shopping or out to dinner. Okay, now that you have really thought about it, is your answer any different? Why is it that when we actually DO receive excellent customer service that it makes such an impression on us that we usually choose to go back? Why - because the occurrences are so few and far between!!! We Sell For Less and Our Stores Are a Mess! What kind of image do you present when marketing your products? Are you professional and well organized or does your store/site/whatever scream, "sloppy!," to those who matter the most: your customers? Let's see how one leading retailer is winning the sales war, but losing an important battle: store organization. Oil Change Customer from Hell or Hoax; You Decide Evacuation, "E-Vac" Oil System for Oil Changing Is Your CRM (Customer Relationship Management) System Doomed To Fail? "Right, People. Let's blast out that mail campaign we've been planning for so long." Are You Satisfying Your Customers? The latest report from the American Customer Satisfaction Index (Michigan School of Business) reports the following: When a Customer Has Done Everything to Get Your Goat You try to make your customers happy. You sincerely WANT them to be pleased with your products and service. You go out of your way to provide quality and integrity in everything you do. The Death of the Loyal Customer One of my classes in management focused on the repeat customer. The course stressed the importance of the repeat customer to the financial welfare of the business. We spent hours discussing ways to turn "first time" buyers into repeat customers. This is not a new concept. We've all heard the term "the customer is always right". And then there is the movie we watch every Christmas where Macy tries to out "customer satisfaction" Gimbel. I prefer to take that concept one step further with what I consider the most valuable asset of a business, the loyal customer. What Type Of Software Is This? The other day while at the book store, I came across some accounting software CDs strewn with other CDs and books in garage sale box. Call Center Software - Your Tool of Choice in Customer Relations The call center represents your first line of communication with customers and potential customers. Whether you choose to outsource this service or to establish an in-company call center, this is one area in which quality is paramount and cannot be compromised. Clients' questions and concerns need to be dealt with courteously and effectively, and sales calls require careful handling - as some members of the public have grown wary of unsolicited calls due to the sheer bulk of such calls that they receive, it is imperative that these interactions are the very embodiment of tact, timing and effective communication. This is a tall order, but increasingly, there is software available that is tailor made to fill it. A New Way To Handle Complaints, Or Is It? What a lot of money we have been wasting on dealing with customer complaints. Ten Ways to Help You Improve Your Customer Service 1. Stay in contact with customers on a regular basis. Justas it is bad news to send out too many emails to customers,it is just as bad to not stay in contact with them.Customers don't want to feel abandoned. So don't. Stay - Say - Pay Would you like to have customers that stay with you and don't buy from your competitors? Customers that say nice things about your business to other people; pay you on time and accept the fact that you might be a bit more expensive then other suppliers? Of course you do but how do we perform this miracle? It's dead easy really; you only have to consider two factors: be Reliable and be Likeable. Invalid Excuses for Poor Business Results - The Weather Note to Kmart: It wasn't about the weather Doors by Catering to Your Clients Clients? they are the most important influence in the success of any business. It is vital to keep them satisfied and happy. Making the Connection: Customer Relationships That Build Your Business Have you ever wondered why you often find a coupon tucked inside your cereal box, or get invited to a customer preview sale at your favorite department store? Those companies know that their existing customers are the best - and most profitable - customers they'll ever have. So it's not surprising that they'll do whatever they can to keep these customers happy and coming back again and again. Are You A Coward? I Was Over the last month, I have come to hate emails and answerphones; not because I get 100 emails every day but because emails and answerphones are fast becoming the tool of the coward. At Beyond Philosophy we worked with a client a while ago whose account managers and sales teams never used to speak to anyone! They just used to send emails. If the customer called in they were greeted by answerphones which were kept on all day. You see the sales teams were all busy doing "real" work. The customers were just interrupting them. Surely this must be the height of "inside out" behaviour. Should I Have My Company Mystery Shopped? I wish I had a nickel for every time someone said to me, "Oh, you do Mystery Shopping; I always wanted to do that!" I think most people do find the thought of posing as a customer and reporting back on how they were treated, rather intriguing. But there is a lot more to it that skulking around in a trench coat and spy glass!
|
|
|
| Home | Site Map | Salesmanship Ebook | Motivational Ebook | Job and Resume Posting| Affiliate program | |
¡¡ |
| 2006 All Rights Reserved. by Mp.sg Term of use and service for the articles and information |