First Real Client Remedy

Pitfall Remedy

Pitfall: Approaching all clients as if they fall into the same “pattern”. Failing to recognize the difference between Early Clients, First Real Clients and subsequent real clients.

Remedy: You’ve outlined your clients in your business plan, now find them and close them. The first ones are usually very different than the rest. This remedy shows how to best take advantage of those differences.

Track: Sales and Clients

Stages: Initial Operations and beyond

Symptoms/use this if you see one or more of:

You are ready to close your first deal!
You have your first prospect who appears to fit your actual “business plan” client profile.

Resources, Actors & Participants: Entrepreneur, sales team, sales prospect.

Tools (links): Crossing the Chasm , Inside the Tornado: Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets (Collins Business Essentials) ( both by Geoffrey Moore)

Parable:

This is the story of how this entrepreneur came to understand the difference between Early Clients (i.e. Vanguard), First Real Client (Bank of America) and subsequent real clients.

In 1994, I started Destiny Software by rolling my existing consulting business into an “S Corporation”. For much of 1994, I was trying to figure out what Destiny Software’s mission would be. However, my old consulting business continued to generate revenue. This allowed me to claim some “Early Clients” for Destiny. Many of the clients were companies like The Vanguard Group and SEI, which are well known financial services companies. That provided an important leverage point for building my business down the road.

Unfortunately, they weren’t my “First Real Clients” as defined by this remedy.

Once I settled on a mission for Destiny, defined a product direction and created a business plan, I began pitching my vision to prospects. My prospects included some of my Early Clients. As I had built a strong reputation for delivery and quality and I had high visibility/access inside some of these clients, I figured they would be a shoo-in for my first deal.

I was wrong.

I remember sitting in a Senior VP’s office being grilled about the state of the product I was proposing (it wasn’t built yet), how many clients were using it (zero) and what my development team looked like (me and a kid fresh out of college). I was told in no uncertain terms that, “Our company is not in the software development business. We are a financial services company. I’m not about to allow you to build something on our dime. Come back when you have a product.”

All was not lost, though. Through my relationship with Vanguard, I had met some of the content producers at America Online. I told them about my company’s vision and profiled what my “Real Clients” would look like.

Shortly after that conversation, one of the producers called me and asked if I’d be willing to speak with a VP from Bank of America. They wanted to build an online banking system through AOL and needed a product similar to what my company envisioned.

I met with two senior managers, Robert and Paul, from Bank of America in Vienna, VA. Robert represented a new eCommerce unit at Bank of America and Paul represented the IT group.

My “sales pitch” was a one page visual diagram of the “Rivers of Data” architecture we envisioned put together by Russell Holt, my newly minted computer science “development team” from Indiana.

Robert and Paul had great fun with the name, but they grilled me on my understanding of the protocols, the architecture, the ability to plan and execute. In the end, I had inspired the necessary confidence to convince them that Destiny could get the job done. And we did.

Not only did we land our first client, but we also retained the intellectual property to the system. We created an incredibly valuable marketing partner and reference point in Bank of America. This opened doors to the subsequent real clients, who would not buy unless there was proof of our product, our team and our vision.

Description:

The First Real Client Remedy hinges on recognizing the difference between Early Clients, First Real Clients and subsequent Real Clients. Your First Real Client’s have an entrepreneurial streak just like you. They are looking for partners, not vendors.

A review of the critical success factors outlined below should help you better prepare to close this important deal.

Please also see the linked proposal (see links above). This proposal was not for a “First Early Client”, but illustrates some key requirements for inspiring confidence (understanding your value proposition to this specific client, inspiring confidence with team and plan, creating a partnership). It also demonstrates the benefits in terms of credibility established by having and leveraging earlier clients.

Critical Success Factors:

Understand the difference between Early Clients who pay the bills and the First Real Client, who help to realize your dream.
Understand your value proposition to the client. Make it specific, tailored and visible in your proposal.
Develop thick skin. You may have to knock on a lot of doors before you get a yes.
Identify the visionaries in your target market. Every industry has early adopters that like to work with small innovators to develop a competitive edge. Examples of companies that fit this profile include Schwab, Fidelity Investments and United Parcel Service.
Inspire confidence. They need to believe in you and your team. You can do this with credentials, a strong execution plan and an easy work-with-me demeanor.
Be a partner first, not a vendor. The First Real Client views you as a development partner, not as a vendor. They need to be able envision what it will be like to work with you from those early meetings. Down the road, there will be times when you will yearn for the days when you worked with clients as partners, not as a vendor!
Watch out for the “Small Company Hammer”. Sometimes your First Real Client will pull out this hammer and ask you questions about how many deployments you have, how far along the product is, etc. They already know the answer to this – and are just trying to negotiate something. Don’t let them use this. Call them on it and remind them why they are doing this – as in “C’mon, Robert, you know perfectly well what our status is. We need to work as partners on this so you can be first to market.”
Don’t be greedy. Cover your costs and, maybe, a modest profit – but don’t try to fund your business on this deal. You will get enormous value from marketing and intellectual property development.
Establish expectations of co-marketing and reference-ability. Joint press releases, ability to use the client’s name and ability to use the client as a reference for future sales will be critical. You should try to do this contractually, but should at a minimum ensure that your key sponsor will take calls – and you should be able to put the client on your collateral and web site.
Contractually establish reservation of Intellectual Property rights. This is a critical component that you and your attorneys need to ensure. Your client is giving this up in exchange for being first to market and a very low cost.

Resource Books Mentioned: