Insisting Exclusively On Evidence Of Past Clients Before Doing Biz With A Startup Could Cost You Money

By Tayo Solagbade

Every New Business WILL Startup With Zero Customers! Does not sound nice to the ears BUT that is A FACT of life. Even the great Bill Gates, difficult as it is to imagine today, at the point when he had just started out must have had to find a FIRST paying customer or client. This article suggests other "indicators" you can use(aside from evidence of past clients patronage) to decide whether or not to hire a startup to do a job for you - pointing out how doing this can get you MORE value than you pay for!

The question this article addresses is: "What if Gates and other first time startups - who today are BIG names - NEVER found their first PAYING customers who gave them a chance to show what they could do?"

The obvious answer is: "Gates, and other first time startups like him would have been unable to "graduate" from being startups to become full fledged successful entrepreneurs".

But THAT would not be all.

The rest of society who today find it beneficial to spend their hard earned money to gain access to products and service offered by Gates and other one-time startups would NOT have access to them. Imagine a world without CNN, Microsoft, Fedex etc?

“A global, twenty-four hour news network will never work.” – Network executives response to Ted Turner’s plans for CNN

“This concept is interesting and well-formed, but in order to earn better than a ‘C’, the idea must be feasible” – A Yale University management professor in response to Fred Smith’s paper proposing reliable overnight delivery service.(Smith went on to found Federal Express Corp).

The First Customers Of Sincere First-Time Startups Often Get Served With Passion, Sincerity PLUS Get EXTRA VALUE

Someone has to give the startup a chance to serve and usually those first customers/clients get rewarded via services and products delivered with enthusiasm, passion and sincerity because the startup provider is HUNGRY for success and desirous of recognition - and referrals.

Of course, if the startup is smart, that attitude of giving MORE value than clients/customers pay for is one that s/he will make a PERMANENT feature of his/her business if it is to succeed for the long term.

Here's A Short, True Story: A gentleman named Mr. Segun who purchased the first copy of a little spreadsheet software application I built for Business Centers' Income/Expenditure monitoring is today more of a friend than a client.

In fact not long ago, after weeks of teasing me on phone, he finally got me to spend two hours in his office during which time I built - at NO COST to him - a 250KB automated workbook(for which I would normally charge at least $200 US Dollars equivalent) to handle payments recording/reporting in the small computer training school he runs.

That was something I had promised to do months back but which I had been unable to find time to do. The point I'm making however is that Mr. Segun got an EXTRA product from me at ZERO cost because I developed a soft spot for him, for buying my product when no one else was willing - thereby giving me a "past client patronage" evidence to show one month later to a hospital's accounts department that subsequently engaged me to build an application for them!

You MAY Need To Assume Some Risk(A Real-Life Case Study)

I do not know the details of how Bill Gates got his first customer, but for very many people who start out in business for themselves, I think the following case study will be representative of their experiences(at least to some extent):

Start --- "Ahmed has just started his custom software development service, and has sent out over 100 hundred introduction letters to companies in Lagos. One morning he follows up one of his letters to a company in Ikeja, and the CEO - James - (following two subsequent meetings) awards him a project." ----End

From the brief narrative it is obvious that James could not have asked Ahmed to mention names of his(Ahmed's) previous clients, since Ahmed was a first time startup. This implies that James must have had to LOOK closely at Ahmed, listened carefully to how convincing/competent and sincere he sounded PLUS possibly asked questions(or made enquiries) about his background etc. James would then have decided to "trust" that Ahmed knew what he was talking about - and could deliver the results he promised.

By taking THAT risk or "leap of faith", James would effectively have afforded Ahmed the opportunity to get a paid job under his belt, which he would then use to "sell" his services to others not willing to proceed without evidence of past clients patronage.

The point being made in this article is however that if EVERYONE he approached insisted that Ahmed FIRST produce evidence of previous clients' patronage, the startup would probably have had to travel to outer space to find someone willing to give him a chance to serve - even if for FREE.

Apart from the "impossible costs" of getting there(I mean "outer space"), I believe language would have been a bit of a constraint for Ahmed :-) Thankfully, most entrepreneurs starting up do not have to go that far before they find their first willing clients.

BUT You Should Do It Intelligently - & Protect Yourself

If you want to try giving a FIRST TIME startup (with no clients portfolio) a chance, I suggest you proceed using the following suggestions as a guide:

1. Ask For A Demo: Try and see if s/he can do some kind of cost-free preview, sample, demo or prototype for you to study/evaluate in making up your mind. A willingness to provide this kind of "evidence" to buttress his/her claims of proficiency would guide you to decide how far to go in trusting him/her.

2. Get A Bio Or Profile: Where has s/he been? What was s/he involved in prior to starting up? What kinds of achievements did s/he have e.g. reputation/pedigree ? work ethics? Any testimonials (of any sort) from a past life?

3. Enquire About His/Her Rationale For Choosing Target Audience: Why did s/he pick you or your company? What exactly does her company offer that s/he feels is of compelling relevance to YOU? Is s/he just "shooting in the dark" approaching everyone or has there been conscious effort made to narrow down to a certain group of prospective clientele with defined demographics ?

4. Discuss A Case Study: Depending on the type of product or service to be delivered, and so long as it does not pose the risk of getting misconstrued as an attempt to "pick" his/her brains*, try to challenge the startup with questions about what exactly s/he can do to solve a specific problem you have. Get the specific MEASURABLE deliverables s/he promises to produce written down on paper.

*I assume here that you will NOT be guilty of trying to take advantage of a "newbie" entrepreneur, like some people I have encountered :-)

5. Ask About After Sales Policy: Ask what happens if s/he delivers but fails to meet the agreed standards or deadline etc?

One Suggestion: You could FIRST ask the startup to work with you to generate an "FRS" detailing the measurable results to be delivered.

For instance, in my work I use a Functional Requirements Specification (FRS) checklist which is generated for EVERY project in collaboration with the prospective client at NO cost to him/her.

At the end of the project, the client runs through that FRS checklist and ticks off those deliverable outcomes that s/he agrees appear in the completed work. Any "missings" are brought to my attention for action.

When the client's (in-scope) changes or modifications have ALL been made, I send in a feedback/Job Completion Testimonial form(click here to view one completed by a recent client) to be filled/signed by him/her. This way both parties are agreed on the final outcome of the project.

6. Be Clear About Your Intentions: If you're not interested, say so. If you cannot say so(or don't thing you can do so without hurting the startup's feelings), then at least don't encourage him/her to make follow-up visits. Here's one way to deal with this problem:

Don't say: "Why don't you check on me again next week", when you KNOW you will be away on leave!

Say instead: "I'll think about it, and give you a call if i'm interested."

If s/he does not hear from you, the message would likely be clear - AND you would at least be sure s/he would not resent you deliberately fixing appointments you do not intend to keep with him/her!

It's A Bit More Difficult For The Nigerian Startup Though

Having said that, my experiences as an entrepreneur here in Nigeria remind me that it CAN sometimes take a startup a relatively longer while to find ANY kind of first customer - EVEN if s/he expresses the willingness to do it for FREE, just to prove him/herself.

Why this happens I remain uncertain, but I have noticed it happens MORE frequently to startups engaged especially in delivery of intangibles(i.e. services) that are considered - rightly or wrongly - to be NEW, untested, unproven or unpopular.

Let me say however that I am proof that the situation is NOT hopeless. This is because I successfully transited from the stage where no one gave me the chance to do for them what I claimed to be able to do,(in custom spreadsheet software development) for two years UNTIL my persistence led me to find paying clients who readily agree to reward me profitably to work for them.

Maybe it did not have to be that difficult and traumatising, but looking back, I really don't think I would have wanted it to be different! I am tougher mentally and MORE competent/proficient skills-wise as a result of having to go back AGAIN and AGAIN to refine what I had to offer and return to try selling it in the somewhat hostile market place of my society.

If You Need The Product/Service, Give The Startup A Chance!

Having said that, I do believe YOU would be better off (if you TRULY have need for his/her product or service) giving a startup a FAIR and IMPARTIAL opportunity to serve you.

If s/he offers to give you a FREE sample, give it a try. If not, consider hiring him/her for a small project(remembering to protect yourself by applying some of the suggestions offered in this article).

Use the outcome to decide whether or not to hire the startup for a bigger project and/or to give him/her testimonials or referrals. As I have illustrated at the start of this article, both parties ultimately stand to benefit.