Thursday, 10 March 2011

Old versus new: why work with a start-up?

As a bootstrapped company trying to make our forays into a mature market, there is one major trait that we have that our competitors can never encroach and that is that we are a start-up, having only been in existence for 7 months.  However, is this a good thing that we should be exclaiming from the roof tops or does it have a negative connotation that we should surreptitiously conceal?  Well, here are some of the reasons for why it is a huge advantage to work with a start-up like ourselves as well as some of the common objections that we have seen since our inception.

The advantages

Enthusiasm: Start-ups are typically founded by individuals who are experts in their field.  Start-ups are also hugely conscious that referrals and testimonials are their key to success.  The best way of ensuring the referrals is to go the extra mile and this is exactly what any self-respecting start-up will do.  Combine expertise with boundless desire to excel and you have a fantastic offering.  Take us for example, for our first client we analysed over £12 million of spend data and made recommendations on tender strategies at no additional cost, simply because we wanted to exceed all expectations.  The attitude of start-up isn’t just “can do”; it is “will do”.    This positive mentally can be very contagious and is hugely refreshing in a market that has gone a bit flat.

Flexibility:  Market feedback is important to all companies, but none more so than for start-ups.  In combination with the willingness, start-ups can act on requests, suggestions and continuous improvements on almost a daily basis.  The number of times we have encountered a company who is unhappy with their provider as they have failed for the nth time to listen to their request.   A start-up feels ashamed even when a client has to make a request for the first time, “doh, why didn’t I think of that already – I’ll get it done tomorrow!”.  We use start-ups ourselves for many of our requirements and on occasion it is almost like they read our mind as we think about a feature, “wouldn’t it be nice if it did so-and-so” and later that week there it is!  

Accessibility: If you were to call our switchboard phone number, you will be answered by one of the founders, equipped with the in-depth knowledge of our company, our clients, our software and our expertise.  If you are the client phoning our switchboard, then we’ll know you very well indeed!   How many times have you called a company switchboard and not even been put through to someone, even if you have a serious issue?  If your internet fails, for example, it could take hours to get through to someone who can help.  With the majority of companies, if you send an e-mail after 5pm it won’t be looked at until 9am the following day, at which point it is buried in a list of a hundred other e-mails.  Send a start-up an e-mail, you’ll likely have a response within 20 minutes, even at 9 o’clock at night.  Again, these kind of free service levels are frequently overlooked but they really do add value.

Innovation:  Start-ups are not content with the status quo.  Start-ups wish to grow their products and services, to innovate and to expand into new markets.  By working with a start-up that has such raw energy and drive, a client can feed from it and use it to their advantage.  Help influence the creation of products that will set you apart from your competitors.  Use their services to enthuse and educate your employees.  Start-ups have an eye for an opportunity and they will not hesitate to make suggestions to their clients for improvements to their way of working.  After all, it is in the interest of the start-up that their clients are growing in the right direction as well and so expect a symbiotic relationship that you may not get elsewhere.

Typical objections

Financial risk: Certainly there is a risk that a start-up can decide the pull the plug at a moment’s notice and so it is wise to have mitigation plans in place.  However in reality start-ups are more in control of their budgets than many large companies. For example we know our balance sheets implicitly and we don’t have long-term costly expenditures like employees, leases, supply contracts and so on that would drag us into the red when quiet periods occur.  In fact we can exist on a shoestring so that any money that comes in from our clients is largely re-invested into our software to benefit our clients further.

Inexperience:  A question you cannot avoid as a start-up is “who are your clients?”.  Naturally when a client wishes to work with a company, they want the reassurance they are not the guinea pig or the crash test dummy.   Unfortunately we encountered this many times in our very early days and we were honest by saying we had none.  Now some people immediately saw the advantages, as listed above, whilst others would be visibly put off by this.  Prospective clients, when faced with this situation, should bear in mind the advantages of working with a start-up and should entertain the prospect of requesting freebies in return for feedback, market penetration, referrals and testimonials.   As a start-up, we would far rather have this response from a client than a categorical “no thank you”.  And remember, whilst the start-up may be inexperienced, the people within it are frequently highly skilled and are quite the opposite.

Reliability:  As start-ups may not have proven foundations or products, prospective clients can be very hesitant to work with them on the basis that failure is deemed more likely than with an established outfit.  This is a very understandable concern and it is rather challenging to overcome.  You can make promises until you are blue in the face yet they will never be a method of prevention.  Whilst we carry out product testing each and every day for a myriad of scenarios, we cannot guarantee that everyone else in the world who uses our software will not find a fault.  However, this is not just restricted to start-ups.  Every organisation in the world has a risk of product failure, just think of Microsoft!  However, try as you might to get Microsoft on the phone to come round and fix your problem, at least with a start-up you can be rest assured that the moment you tell them of your troubles, they are probably in the car on the way over to see you!

Resource constraints:  It is recognised that start-ups typically have all hands on deck at any given moment.  This means that if a prospective client does come along with a significant project, the risk that delivery is compromised or even never materialises is significant.  Naturally, being a start-up they may not be so inclined to turn down business and so the ambition can lead to over-ambition if not carefully managed.  Clients recognise this and do take comfort from larger companies who can bring in extra resource if required.  Nevertheless, larger companies do have carefully controlled budgets and will not allocate additional resource unless there was something in it for them.  Compare this with the aforementioned passion and drive that start-ups possess and you may find that a start-up with a “whatever it takes” attitude will work a 12 hour day, 7 days a week at no additional cost and is able to achieve more than a larger company can with double the resource.  Furthermore start-ups quickly build up a network of like-minded individuals as they propagate through the market and so they can draw on partners with the same ethos if the work does mount up.

Summary 

I hope that this has provided some insight into the perspective of a start-up and the challenges we encounter and how we actually think they can be positives.  I suppose from the tone I have adopted for this article I have answered my own question posed at the beginning: being a start-up is something to be proud of.   I have encountered companies that advertise their ‘US office’ which is little more than a dedicated mobile phone sitting on the bosses desk in the UK, all for the appearance if seeming bigger than they are!  Being labelled as a start-up is a privilege with a perishable timescale, so make the most of it whilst you can.  Who knows, that start-up you partner with could even become the next Google!

About:  Market Dojo provides business-to-business e-auction and e-sourcing software.  Find out more at www.marketdojo.com.