Can your client trust you to stick around?
I talk to many entrepreneurs about how they view their business. They would like to fail fast, learn fast, and find success. The problem is that the first two parts happen too slowly.
But whether fast or slow, customers know about the "fail" part. They have heard all about MVPs and "move fast and break things." For this reason, customers are appropriately cautious about adopting products by startups taking this kind of "lean" approach. They want solutions that their vendor will commit to supporting. They are not interested in being a footnote in your "journey" toward the next big thing.
At the same time, many entrepreneurs are skittish about making commitments. They got into this game for freedom! You can see this phenomenon all over the business.
This tension shows up immediately in financial transactions involving entrepreneurs. Small leases and loans often require that a human being bear ultimate responsibility. A business might poof out of existence or just run out of money. It defaults. The whole idea of the modern corporation is that an equity stakeholder is not liable for the enterprise's debts. Knowing about this legal reality, creditors and landlords require that someone be around to pay the bill.
The compensation, however, is that buying small can be cheap! Small office space is often substantially less expensive per square foot than more expansive, "class A" leases, often with shorter terms. The obligation is much smaller.
More minor debt obligations are cheaper too. Such loans are subsidized in the United States by the Small Business Administration to offer lower rates.
In other words, there are good deals in return for a certain amount of commitment that attaches to the founder. Consider the implications of not being willing to take them on. What does it say about one's dedication to the business? What about the belief in the market opportunity? And if you won't take on the risk for the company, why should your counterparties or customers?
None of this is to say one should accept unnecessary or ill-advised risks. It's good not to take on obligations one cannot keep. Listen to yourself when you think about these specific decisions to see what they tell you about the broader opportunity - and what you would ask of your customers.
I sometimes see this reticence to commit to the client on the pricing page. I've seen many products that offer monthly plans but nothing further out than that. I never really understood why until I heard Ben Orenstein and Derrick Reimer connect the ideas of pricing and commitment in a 2021 episode of their podcast, The Art of Product. Both had monthly subscriptions. And they discussed the inbound inquiries they were receiving from larger businesses. But they were skittish about offering annual pricing. "Then we have to be around for the year!" I am sure most of this was joking around - both are long-term entrepreneurs, and Tuple has been around for years now. But the sentiment is very much in the market. Do you have an annual plan?
Hiring is another place we see that reluctance to commit. People are expensive. In the US, hiring an employee has the social meaning that you will provide employment indefinitely. Are you ready to take that on? Many founders will hold off on bringing on staff to avoid having to fire staff or eat salary costs while the business cannot pay with current income.
This reluctance is perfectly reasonable at one level - let's not ask employees to go on a journey we are not ready to complete. Further, this hesitancy is usually a smell for hiring someone on the overhead side rather than value delivery. Hiring an engineer is often a temptation, but the lower-risk mode is customer success or billable services. If you are not confident that hiring someone will make you money and deliver value to customers, a bootstrapper is wise to hesitate to pull that trigger.
On the other hand, if you have an ongoing concern, hiring to trade out your time for the expense of staff should be a good thing for your economic health and the confidence of your customers.
For my part, I try to avoid hiring staff in favor of tooling as much as possible. But there is a difference between investing in tooling and filling in by using your own time. One is creating medium-term stability and leverage. The second is a focus on the short-term - and co-relates with burnout.
The above considerations create a problem for a customer. Once you get past friends and followers who think you have something cool and would like you to succeed, a customer needs something they can trust will be there for them when they need it. What are the signs that they can put this trust in your business? Have you taken on obligations they can see as signs of your commitment to others? Have you offered them a promise in the form of longer-term agreements?
Some products are just immediate use-and-go. A lot of info products are like that. This transaction does not require you to be around long-term, though the value would compound.
Subscription businesses create a relationship, and the customer wants to trust in that relationship early on to stick with you. Slashing the product's price does not do that. Offering extra up-front service does not tell that tale either. So what does?
Offering a long term contract shows a long-term focus. Higher prices to cover your expenses, so the client knows you have an economic leg to stand on helps. But the biggest predictor of long-term stability is the longetivity of the founder and enterprise. Make promises and keep them. This is building a "credit score" of business trust. This road takes time, but it delivers compounding value.
One should not make unnecessary investments, but signaling your commitment to the business as an ongoing concern and provider of value will allow your clients to reap the benefits that can only flow from trust.
Photo by Cytonn Photography on Unsplash