Bill Flagg

Urgency

noreply@blogger.com (Bill Flagg) — Mon, 09 Nov 2009 06:11:00 +0000

I am one of the most impatient people I know. I have urgency in my blood to see things come to life. I can't help it. I LOVE ideas that turn into reality. I love the applause of new customers, and taking it up a notch for old ones. I breath it, I love it, and I sometimes drive the people around me crazy with my impatience for creating more of it NOW.

I've become more aware of my impatience/urgency over the years and have noticed a similar trait in entrepreneurs who have grown great companies. I was talking with one very successful friend about this and our system for creating urgency with our teams:
1. Discuss & assign a project with an urgent time frame
2. Wait one week
3. Ask how it's progressing...
Good progress = applause and celebration
No progress = ALL OVER it/get involved/reassign/unblock/raise the urgency level
4. Repeat cycle every week with as many projects as possible

When projects take more than a week. I like to do one of two things:
1. reduce the scope of the project to be able to get it done in a week
2. split the project into chunks that can be done each week
Letting progress go beyond a week increases the likelihood that it will get lost. A cool offshoot of this process is it also forces everyone to prioritize and ask more about which tasks should have higher priority... leading to better ROI thinking for everyone.

This type of progress and intensity doesn't work for everyone. I've found that those who love to push the envelope and be challenged, like it. Those who like things to stay the same and do the same thing everyday, don't like it (they tend to be better at maintaining existing systems). Smaller high-growth companies need more people who enjoy challenge and change. Bigger companies that move slower, need more people who like to maintain existing systems. Personally I've found that I need the people who I work directly with to thrive with challenge and change. If they don't then it's uncomfortable and I tend to piss them off and burn them out quickly.

Also, it's important to not confuse urgency with rash decision making. It's important to take time to make big decisions and set priorities (but not more than a week).

Urgency is the key to iterating like hell into what will make our companies more and more successful. Are we driving enough urgency? Do our core people thrive on urgency?

If you ever want inspiration for the "Urgent" (and a good laugh) just watch this...

Delegate, don't Abdicate

noreply@blogger.com (Bill Flagg) — Tue, 27 Oct 2009 15:17:00 +0000

Part of the fun of being an entrepreneur for me is having a team who can help me move the needle and create great things. I've tried a lot of things over 15 years as it relates to delegating... and have had a lot of frustrating times with it too.

What's helped me the most is realizing the difference between delegation and abdication. What stuff do I delegate the implementation of and what stuff I need to OWN the strategy, design, and decisions on? What I've discovered is ANYTHING that touches ALL customers needs to be OWNED by the leader/entrepreneur... not abdicated. For example:

Mass automated emails to customers for signing up, order completion, ship confirmations, followup emails, broadcast emails and newsletters, etc.
Messaging on the homepage and through the conversion process
Prospect communications such as mailers, Adwords ads, etc.
New product design, packaging, pricing, and marketing
Support structures - such as how do we respond to, help, and WOW customers and in what modes
Development project prioritization

Now that doesn't mean that the team doesn't help with this stuff... of course that's what they are there for. But, it does mean that we don't abdicate the strategy, design, and decisions. I believe a leader who OWNS everything that touches the customer creates a much more consistent/enjoyable experience for them and more successful company as a result.

A couple examples:

Product Development project prioritization. I've seen companies let their IT team develop in an out-of-control fashion, hiring too many people, and not prioritizing in a way that makes a real difference in the customer experience and profitability of the company. It's easy for a CEO who doesn't know much about technology to abdicate that part of the business to a CTO. But again, if it touches all the customers, it's the leader's job to be in there making prioritization decisions for what will have the biggest impact and ROI for the company and it's customers. If Steve Jobs can be intimately involved with the designing of Apple's new products, than we can too.
Search Engine Optimization strategies. I've seen entrepreneurs who know that SEO is the most important driver of revenue for the company, try to abdicate that to others and lose traction and revenues as a result. With RegOnline, I personally tapped into SEO expert groups to dig for where we could take our strategy to the next level.
Customer Communications. It's common for leaders to fully abdicate customer communications to their marketing teams. And the messaging starts to sound like its coming from "marketing" instead of real people who care about their customers. If Jeff Bezos can write his own letters to customers, then we can too. I know a owner of $40 million in revenue company who write ALL mass emails to customers.

A couple years ago when I realized the difference between delegating the implementation and delegating the decisions (abdicating), I started communicating differently with my team. I would say "I'm going to be fully involved with you in designing this and then I'd like you to carry through the implementation of it."

What can we delegate more of and what can we abdicate less of to make our businesses more successful?

Thriving Companies (that Last?)

noreply@blogger.com (Bill Flagg) — Thu, 22 Oct 2009 05:11:00 +0000

I am truly amazed by all the joy & abundance that the entrepreneurs I know bring to their organizations. And while I may talk a lot about profitability, it is mainly for the purpose of being able to sustain a great environment by which we can all have fun and thrive together.

I love the thought of medieval times and living in kingdoms ruled by benevolent kings who bring joy & abundance to their communities. I view entrepreneurs and the organizations they grow as being like those kingdoms. If they can create sustainable prosperity, they can bring a life of joy and abundance to their communities of people (employees, customers, and suppliers).

Another component of the health of kingdoms is sovereignty. Which I define as the ability to make decisions for the good of their community without being beholden to others. There's something powerful about being able to make decisions for our communities that are solely focused on the good of that community. I think this is another reason why I like to talk so much about maintaining our independence as entrepreneurs so as to afford the maximum long term prosperity for customers and employees.

At RegOnline we did a lot of great things that we didn't HAVE to do, but we did because it felt like a great way to help our little community thrive more. For example: company trip to Mexico (with guests) every year, homemade breakfast every morning, consistent bonuses, random gifts for customers. The more profitable we became, the more we looked for cool opportunities like these. However, all these perks have gone away as a result of RegOnline NOT being "sovereign" anymore (owned by a parent company that has different priorities).

What kind of kingdoms are we building and will they last?

The Ultimate Secret of How to Sell Anything

noreply@blogger.com (Bill Flagg) — Sun, 18 Oct 2009 05:11:00 +0000

"Find out what others want and help them get it." - Harry Browne

A leader's most important role

noreply@blogger.com (Bill Flagg) — Thu, 15 Oct 2009 05:11:00 +0000

A couple years ago I presented to a business school class at the University of Colorado. I frequently think about this presentation in the context of being a good leader...

I put a glass fishbowl on the table at the front of the classroom and fill it to the top with big boulders. And ask if I can fit any more.
The whole class says "No".
I pull out a bag of pebbles and fill in the gaps in between the boulders. And ask if I can fit more.
Half the class says "No".
I pull out a bag of sand and fill in the gaps with sand. And ask if I can fit more.
The class mumbles a bit reluctantly saying "No".
I pull out a pitcher of water and fill the fishbowl to the top with water.

I ask the class, "What's the lesson we can learn from this?"
The class responds "You can always do more than you think in your life"

I say "What would have happened if we tried to put the boulders in last? Would we have fit all the boulders in there? No. What are the boulders in your business or in your life that you need to get in first before you fill in your life and time with all these little things?"

This is the image I get when I think about great leaders. They are the ones who figure out the most important boulders first and prioritizes them for their teams. What will create the biggest ROI for the organization? Get those done first, and then do the rest.

For RegOnline our biggest boulders were: 1. how do we get higher up in the rankings for more search terms in Google (accounts for 90% of our new business), 2. How do we make it easier to decide to and start using RegOnline, 3. How do we keep people wanting to use RegOnline

What are the biggest boulders in your organization (or life) that will create the greatest ROI?

Operational improvements that have a BIG impact

noreply@blogger.com (Bill Flagg) — Thu, 08 Oct 2009 22:44:00 +0000

I LOVE hearing about operational improvements that have a big impact on customers and profitability.

Monty Moran, Co-CEO of Chipotle, gave me a couple GREAT examples of this at breakfast a couple weeks ago. Since he joined the company five years ago, he has created not only phenomenal growth in their number of stores but, more significantly, unheard of per store revenue AND profit growth.

1. Standing outside one of his locations, he saw people turning away from going inside because the line was too long. He thought, if we could shorten the line or make it faster, less people would turn away which = more revenue and happier customers. He looked at his highest volume store in NYC (doing DOUBLE the throughput at lunch), video taped how they handled things at that store, and then replayed that video for the managers of all his other stores and had them replicate the process. Turns out, having eight people touching the burrito is a LOT more efficient than only having three.

2. Monty then paid attention to the possibility that customers may feel man-handled as their burritos were getting handed off a eight times. So what did he do? He insisted on training employees to look customers directly in the eyes and smile. So now customers can get a feel-good hit eight times with each burrito for no extra charge!

3. Since Chipotle has been growing so fast, one of their challenges has been finding good managers. Monty found that store mangers hired from outside the organization were more expensive and poorer performers overall when compared with the managers who were promoted from within. He flipped the company model to have 75% of all managers be promoted FROM WITHIN (vs. 25% before) and watched his store growth and performance improve dramatically.

Where can we turn our operational models upside down to make improvements that will attract more customers and better profitability?

Thanks for the great inspiration Monty (and for the great breakfast)!

The Profit Choice

noreply@blogger.com (Bill Flagg) — Tue, 29 Sep 2009 14:20:00 +0000

I've had conversations recently with several unprofitable companies that have significant revenues. They certainly ARE incredibly vibrant companies, but their leaders don't feel good (or vibrant) about running losses and they don't lead with as much confidence as leaders of profitable companies.

I've been in both places myself and know there's a HUGE difference in how I feel and how it affects the vibrancy of the organization that both employees and customers feel.

Do we have a choice? While most entrepreneurs don't think they do - I disagree. Once we are to a certain tipping point in revenues (let's say $1 million), I believe we always have a choice to operate leaner and/or adjust our pricing structures. Too often I find entrepreneurs (myself included) convince themselves that they are unprofitable BECAUSE they are spending/investing for future growth. This. Is. A. Trap.

Profitability and growth are NOT mutually exclusive. At RegOnline we grew revenues by 40% per year AND still had room for 40-50% NET profit margins. I know of MANY other companies that are growing like crazy AND maintain very healthy profitability.

Operating leaner and/or adjusting pricing structures are the hardest thing we deal with as entrepreneurs. So much so, that I believe that we unconsciously choose more debt or dilution (by selling equity) than tackle the issues that are more core to the viability of the company.

Be Your Own Wizard

noreply@blogger.com (Bill Flagg) — Fri, 11 Sep 2009 20:58:00 +0000

I remember being an impatient (and sometimes scared) entrepreneur who thought if I could just find the magic bullet, everything would accelerate and all my dreams would come true.

At first it was, if a VC would get behind my idea, then all the magic doors will open. Then it was, if I can just hire a superstar sales guy, the whole business will turn. And then I spent a lot of time talking to people who could be my COO and magically bring unfound gold out of our team. And then ultimately when none of those seemed to bear fruit, I focused on selling the company. If I could just hand this thing off, THEN it won't fail and I can walk away with some real cash in my pocket.

At the core of ALL of it was a fear that I didn't have what the company needed to succed. I wanted to believe that their was a "Wizard" (in the land of Oz) that could make it all magically happen. When really, what I've discovered over time is that the real Wizard is inside me. When I focus ALL of my energy into believing that I can do it on my own, THEN I come into my power and discover all kinds of things start to magically come together for me and my businesses.

I've been having a lot of conversations lately with entrepreneurs who forget that all the magic is already inside them (courage, heart, and mind). And they just need to focus that enegry, rather than give it away to people who like to make you think have the power, but just end up sucking your power away from you.

I received this email yesterday from a great entrepreneur, which reminded me of all this...
"Just wanted to shoot you a quick email to thank you for your help last year. Each time we met, you really drilled down into how we could quickly become profitable. I really appreciate the insight you provided on how important profitability is. Because we didn't raise money, we ended up becoming profitable out of necessity.

Things are going much better now! We've partnered with over 100 partners, surpassed the million dollar mark in revenue, and are growing steadily & profitably.

Thanks so much for drilling that into my head!"

Be your own Wizard.

A VC who gets greatness

noreply@blogger.com (Bill Flagg) — Sat, 05 Sep 2009 15:22:00 +0000

On the heels of my last VC-loving post, a good friend forwarded this post to me. Not only do my wife and I love Etsy because of it's organically-great nature. But it's refreshing to hear a VC talk about building GREAT, independent, long-term companies vs. companies that are there to flip to make a quick return. Thanks Fred Wilson for the great post on "Ten Characteristics of Great Companies", I couldn't agree more.

When VC money is good

noreply@blogger.com (Bill Flagg) — Fri, 04 Sep 2009 08:37:00 +0000

I have lots of friends I admire who are either VC's or entrepreneurs in VC-funded companies. Brad Feld is one of those people. He's a major force in the VC world and person whom I admire for how he handles his relationships and the world around him. I asked him what he thought about my position on bootstrapping and VC's. Brad replied "...your arguments - while cogent - are - at least in my opinion too narrow. There are plenty of reasons to avoid VC - and plenty of major successes without it. However there are plenty of good reasons to take VC dollars and loads of great companies that resulted."

Brad, I agree.

As you may have already picked up, I'm a die-hard fan of the bootstrapping entrepreneur. While that tends to put me at odds with the VC model of growing businesses, I don't believe they are mutually exclusive. In two ways. First, just because you take on funding doesn't mean you don't have a bootstrapping mentality in growing your business. And two, VC funding is better for some entrepreneurs and business models.

I see several ways companies/entrepreneurs have benefited from VC funding:
1. It's not in the entrepreneur's nature to bootstrap.
Scraping by, working day-jobs while moonlighting, supporting a family, wearing all the hats in the company, working out of your parent's basement, sleeping on your sister's couch. Not for everyone.

2. The company COULDN'T have gotten off the ground without outside funding.
Some technologies really DO take a ton of resources before you can make your first sale. Can you imagine someone developing a new pharmaceutical in their basement? Or enterprise-level software or technologies that requires thousands of developer-hours before it's ready for sale? Marketplace, sometimes developing a big enough marketplace to be able to sell advertising through can make a difference (Lijit is a great example of this).

3. The company couldn't scale in a big way without outside funding.
While I could argue that Amazon & Google COULD have scaled their businesses in a profitable way without outside funding, they clearly have made a bigger impact on the world and have enjoyed larger levels of profitability because they took big money early on.

4. The VC's connections or experience have had major impact on success.
There's is benefit to having someone on your team/board who is in the month-to-month of several other related businesses. I've seen/felt this in how I'm able to share best-practices across the different companies I'm involved with. I'm also able to facilitate faster answers/solutions/connections to get things done. VC's can also provide a ton of experience/connections for follow-on financing, sale of the company, and going public.

So, thank you to all the great VC-related folks for all you do to help entrepreneurs bring their dreams into reality, and who have put up with my relatively one-sided banter about bootstrapping.

Creative Capital

noreply@blogger.com (Bill Flagg) — Tue, 01 Sep 2009 22:15:00 +0000

I met with three startup companies this past week that are considering how to fund their operations until they get profitable.

In one case, they were not planning on selling equity to raise money, but an unsolicited VC offered them real money at a really good valuation. They have several partnership deals on the table that could bring $500k in near-term cash to them and they are short-handed on a developer they would need to execute on that partnership.

They asked me whether they should take the investor $'s? For those who know me, know I had to bite my tongue very hard to NOT blurt out an answer of "hell no!" Why sell any amount of stock for capital that could be sourced elsewhere with NO impact on equity.

For example, we discussed, why not offer a developer/contractor the ability to share in the new partnership revenue up to 3X what they would have made on an hourly basis (in lieu of being paid upfront). Or why not go to the potential partner and strike a more favorable deal for them if they are willing to pay more upfront.

Unfortunately, raising capital has become SO synonymous with DEBT & EQUITY that I think we have forgotten that there are many more (perhaps better) alternatives to that. Another example that Jeff Nabers shared with me a couple months ago is offer people a share in revenues for providing capital, up to a certain return. For example, I give you $100k and you give me 10% of revenues until I get $200k back, no matter how quick or how long it takes. It's not a fixed debt payment, it's not equity, it flows more appropriately with the business and could provide more upside with less risk to the "capital provider".

Need capital? Try to be a little more creative than the old, worn-out, boring, suck-the-life-out-of- ya, debt & equity models of the past.

Is playfulness good for business?

noreply@blogger.com (Bill Flagg) — Mon, 31 Aug 2009 05:56:00 +0000

The best part of being an entrepreneur for me is the creative freedom... the freedom to try ANYTHING that may delight or inspire customers. I love trying new things and then discovering whether it had an impact, moved the needle, or made a difference.

For example in working with PosterBrain (they make posters ) this past week, we decided to get a little playful in our followup emails to customers who had just received their posters in the mail. The email went like this:
"Subject: Hi Sharon, how's your poster order?

Hi Sharon,
Did your poster order get to you ok? What did you think of the quality (and your experience with us)?

More importantly, how's your hair today? Can't wait to hear.

Have the best day ever,
Poppy
PosterBrain.com
Customer Love Team"

Two things to note about this email:
1. It gets a HUGE 30% response rate because it's short, personable, and feels handwritten... when compared to a typical "give us feedback and click on this link to this long survey". Something that I learned at RegOnline when we did a similar automated followup email after a customer ran their first event with us.

2. "More importantly, how's your hair today?" - unconventional, but we decided to try the playfulness to see how people responded.

Half replied back playfully:

"Poster is amazing thank you! My hair is magnificant hahaha. How is your hair? Hope your day is amazing"

"The quality and experience was excellent, I rank it a 9 out of 10! Iv even told my friends about it... As for my hair...it is not looking good today at all...but forunatly I am getting a haircut tomorrow so hopefully that will spruce things up a bit!"

" I love your company. My hair looks fabulous; thanks for asking."

"And most importantly, it’s a great hair day today. (that was the funniest thing and totally made my day when I read your e-mail)"

Half didn't comment at all. And a few people replied with confusion about why we asked about their hair.

This is why I LOVE being an entrepreneur! Using creativity (and a little goofiness) to connect with customers in an unexpected way. With PosterBrain we are playing with ways to provide MORE than an amazing poster, fast & easy - we want to bring a smile or a laugh to our customers.

With help from my friend and founder of Moosejaw (they take playfulness to an incredible level) we are discovering ways to do that. Other examples:
Signing our emails with "Have the best day ever" and including lines like " If you are bored, please tell seven friends, three strangers, and two enemies good things about us." At RegOnline we made a company cookbook for the holidays and sent it to all our users. It felt incredibly goofy the first time we did it. AND users STILL rave about it every year and ask if it's ok to copy the idea for their organization.

I have found that enthusiasm and playfulness get echoed back to the organization ten fold and is great for business.

Now, there are ALWAYS a group of people who DON'T want the playfulness in their business interactions - and that's ok. I've never wanted to be all things to all people in my businesses - I just want to resonnate with those who find delight in my business creations. :-) Test out getting a little more playfulness in your organization and see what happens.

Happiness Model

noreply@blogger.com (Bill Flagg) — Fri, 17 Jul 2009 18:25:00 +0000

I just got back from two INTENSE days at Zappos.com - met with all their top guys several times (including Tony their CEO), sat on calls with their reps, dug in with their marketing team. TOTAL open book - EVERY question got answered with complete honesty, enthusiasm, and detail from EVERY one of the 30+ people I met.

What an INCREDIBLE company and experience!! Zappos is a $1 billion in revenue, PROFITABLE company, with 1,300 employees who have more passion, enthusiasm, and FOCUS for the company than I have EVER seen with ANY company (May 09 Inc. Article)

Here's some of what I learned:
1. Delivering happiness to everyone (customers, employees, and suppliers) translates into more cost-effective marketing, lower-cost payrolls, and better supplier terms/benefits/opportunities. AND a much more nimble, exciting, fun company all-together.

2. Effective leadership is NOT about command by committee. It's about listening to the people who's opinions I value and then making decisions for the company on my own (not by committee). Tony (their CEO) created the company's 10 core values just by doing that.

3. Changing the culture of a large company is next to impossible, so start as early as possible to create the foundational values of the company. Zappos really started focusing on theirs at about 100 employees I think. Tony wishes he had done it from day one.

4. Give EVERY employee the ability to WOW everyone who touches the company (refunds, flowers to customers, peer-to-peer bonuses, 2,000 thank you notes per day, etc.).

5. Know the profit model. Zappos bases a lot of their wow on providing unexpected free overnight shipping. Which means they aren't carrying $30 Crocs in that model or any shoes under $50. So they can be profitable. Also, since they give customers time to try shoes and send them back, they get longer terms from their suppliers to match that model.

I used Twitter to take some notes, pics, and videos along the way.
Read from the bottom of page two up...
http://search.twitter.com/search?max_id=2691416949&page=1&q=+zapposlive+from%3Abillflagg

Why is Zappos opening up for others to see their secret sauce? Tony made his fortune selling LinkExchange to Microsoft for $240 million. He sold it because he didn't like the culture that the company had become. He's doing Zappos not (as much) for the money, but as a way to create a great SUSTAINABLE culture to bring more happiness to the world and help other companies do the same (through http://www.zapposinsights.com) Thanks Tony, Donavon, & Robert for a mind-blowing two days!!

Going for Great (vs. Big)

noreply@blogger.com (Bill Flagg) — Tue, 07 Jul 2009 16:47:00 +0000

I've always admired GREAT companies. Not companies that have the most market share, but companies that do things REALLY well. My self-observation is that the bigger I TRY to be, the less I am focusing on doing things really well. Also probably why I am such a big fan of growing ORGANICALLY. The second I bring on investors or hire people beyond what my revenues support, the pressure is on to get BIGGER faster.

I met someone this past week who has built a nicely profitable SaaS company, just him and his wife. Growing it 10% a year, making it a little better every year for the past 10 years. LOVE it! Could they have grown more if they applied more of the profits to do more in marketing, yes. But it's really refreshing to see a tech company on this opposite end of the spectrum from the go-big-fast model that feels like an epidemic to me these days.

Jim Collins just released another great book How The Mighty Fall which talks about how companies don't fail because they do or don't innovate. They typically fail because they take their eyes off of the core of how they are most VALUABLE to the market. They bet the farm and neglect the core "flywheel" as he calls it.

This was an ongoing debate me and my partner had at RegOnline. Do we go for new products or services or focus on making our core product that much GREATER. You can guess which side of the argument I was on. Don't get me wrong, I WAS a proponent of quickly and cheaply testing new concepts to see if there was real demand. I just held a firm rudder on not sacrificing being "greater" in our core product to do it!

I'd rather be small and great than big and mediocre anyday!

Why I LOVE to Bootstrap

noreply@blogger.com (Bill Flagg) — Tue, 23 Jun 2009 20:22:00 +0000

Seven Reason Why I LOVE to Bootstrap

1. Forces me to really LISTEN to what my prospects and customers WANT and will really PAY for

2. Eliminates all the NOISE of raising and then having to SERVE investor needs... especially considering that the business' real success DEPENDS on getting #1 right.

3. Forces me think about REAL ROI on every dollar I spend. Will this extra dollar spent on hiring this new person, spending this ad dollar, or investing in new technology... give me $2 back?

4. With limited marketing dollars, I think more about how I will take such great care of customers so that they WANT to do more business with me AND tell ALL their friends.

5. Creates a more REAL, grounded, and exciting environment for co-workers to work in.

6. Once profitable growth is in hand, creates a MUCH more stable environment to work in than a company that's dependent on the next round of funding.

7. Provides ultimate creative freedom to build the company, connect with customers, suppliers, and co-workers in as unique a way as I like.

PLUS
8. Forces me to test as quickly and cheaply as possible so as to get to real revenue and profitability.

Btw, this is my first post from my phone (while waiting for a bird to be caught in the cockpit of our plane)

Pricing Options - the power of relativity

noreply@blogger.com (Bill Flagg) — Sat, 06 Jun 2009 23:11:00 +0000

I just read Predictably Irrational by Dan Airely and was BLOWN AWAY by what he discoverd on pricing options. Pricing options have AS GREAT of an influence on purchasing as does the value vs. price comparison I talked about in the last post.

Here are THREE Relative-Pricing-Option Strategies I pulled from the book...

THREE OPTIONS, MAKE TWO SIMILAR
A few years back The Economist made the following offer to prospective subscribers:
Internet-only subscription for $59
Print-only subscription for $125
Print-and-Internet subscription for $125 (yes the same price as option 2)

When Airely offered to 100 MIT students in his study, here's how they chose:
16 for Internet-only subscription for $59
0 for Print-only subscription for $125
84 for Print-and-Internet subscription for $125

When offered to 100 new students ONLY options #1 & #3 (eliminated the middle option):
68 for Internet-only subscription for $59
32 for Print-and-Internet subscription for $125

That's a 42% increase in revenue ($11,444 vs. $8,012) by offering a "throw-away" similar middle option!

Airely goes on to prove that whenever people are offered 3 options. 75% of the time they will choose between the better of the two that are MOST SIMILAR. He ran the same experiment in two other COMPLETELY different scenarios, and had the similar results (vacation packages and dating options).

Why is that? I think it's an unconscious clue that helps make the choice easier.

THREE OPTIONS - HIGH-PRICE ANCHOR OPTION
Menus that have a super-high priced option on the menu sell more higher priced entrees than those that don't. For example:
$50 lobster
$30 entree
$20 pasta
...will sell more $30 entrees than a menu with NO $50 option.

The theory is that people feel better about NOT buying the $50 option and buying the $30 option then buying the $30 option when it's the most expensive item on the menu.

FREE OPTIONS
Airely ran some studies to show that people will take something for free (like a Hersey's kiss) over something that's priced at a REALLY great value (a 5 cent high-end chocolate). People like free because it guarantees infinite value in comparison to price and also because it eliminates risk. I believe that FREE has many applications beyond "pay nothing" such as free bonuses for buying, free trials, and unconditional money-back guarantees.

ROLL ALL THREE TOGETHER
What would it look like if we rolled all three of these together? I haven't tested this, so at this point it's just me thinking out loud...
1. Provide three pricing options
2. Make two of the options similar (but one of the two clearly better)
3. Offer FREE bonuses in the better of the two options.
4. Price the third option considerably higher

As a buyer, I would see the options laid out and... feel smart for picking the BEST one of the two similar ones... feel good that it's NOT the highest priced option... and feel great that I get some FREE stuff as a result!

Most interesting line of the book: "We are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver's seat, with ultimate control over the decisions we make and the direction our life takes; but, alas, this perception has more to do with our desires - with how we want to view ourselves - than with reality."

TedTalk video of Airely

Pricing Strategy

noreply@blogger.com (Bill Flagg) — Mon, 25 May 2009 04:48:00 +0000

Creating and changing pricing strategies is the hardest thing I've done and helped others to do with their businesses. It's complicated. It's intimidating. And its REALLY IMPORTANT in order to have a business that GROWS PROFITABLY.

So what do most of us do?
1. Look at competitors' prices
2. Charge the same, less, or free
3. Figure you can change pricing later once you get things off the ground.

And then we CHANGE pricing this way:
1. Look at competitors' prices
2. Add 5-20% to pre-existing prices
3. Figure we can change pricing later once we get a few more customers

Pricing is WAY too important to the success and sustainability of our businesses to take such a shortcut approach! DON'T do it.

The BEST thing we ever did at RegOnline was ASK our CORE prospects and customers what they thought, valued, and felt was FAIR for pricing. We found that people thought we were priced way below the value we provided (as much as half-priced). I've recently helped two other companies go through the same process and make surprisingly profitable discoveries.

Asking customers and prospects about pricing sounds something like this:
1. What value do you/could you get out of this service? Why? Can you go into more detail? Why is that? What is the implication of that to you or your business? How else does it help? What does that mean? How else does it help increase revenue or profits, decrease expenses, or make your life easier? (keep asking until there's no more left to be said)

2. How much is all that worth to you?

3. What PRICE is TOO MUCH for you to pay for this value? Meaning you would say "no thanks" to all that value in #2, stick with status quo, or find an alternative. (ask this to get a more reasonable answer to the next question)

4. At what price do you feel it would be fair to pay? Why?

5. What pricing structure would work the best for you or your business (one-time, per transaction, monthly, annual, etc.)? Why? What do you like and not like about the way others charge?

You'll be amazed at how honestly and happily customers and prospects will answer these questions for you. Why? Because it shows that you CARE about providing REAL VALUE to them and charging a REASONABLE price for it.

If you have a new business or product, make sure you can REALLY make a sustainable profit at what your prospects say is a reasonable price for your services. Better to find out up-front what is reasonable to them BEFORE building a business around an unprofitable model.

Changing an existing pricing structure looks very similar to the process above. But then when you change prices, give existing customers only half the increase from their existing prices to show them that you love them.

I believe REAL businesses generate REAL cash flow. And 99% of successful cash-generating businesses that I've been involved with established self-sustaining profit models early on (by their first half million in revenue). So stop guessing at pricing, and starting asking your prospects and customers the easier-than-you-think pricing questions.

P.S. - Thank you to those of you who have recently encouraged me to write more. It's PRICELESS to get the feedback/reminder from you that this stuff helps. Please keep the feedback coming and feel free to email me with topics you'd like to hear more about - billflagg at gmail.

Online Agreements Accelerate Sales

noreply@blogger.com (Bill Flagg) — Mon, 11 May 2009 23:09:00 +0000

Don't let your deals get old with physcial contracts.

Online agreements accelerate sales. Requiring customers to physically sign contracts SLOWS sales.

Believe it or not, a couple internet-related B2B companies with pay-as-you-go services, still have physical contracts. A couple beliefs on why that is:
1. A physical signature has more teeth and is a safer level of commitment
2. Investors and potential acquirers value #1 more highly
3. Competitors are less likely to mess with clients when there's physical paperwork
4. It's what they did before and it's low on the priority list of things to change

At RegOnline we had physical agreements at first. I remember our salespeople waiting by the fax machine for their deals. When we went to an online "Terms of Service" check box, deals came in at a perceptively faster rate (I don't have the actual stats - too long ago).

Here's what happens in deals with physical signed agreements:
1. Buyer asks Boss for permission to go ahead with purchasing service, Boss says YES
2. Seller sends over physical agreement to be signed
3. Buyer puts agreement on Boss' desk and waits
4. Boss procrastinates reading through multi-page legalese
5. Seller "checks-in" with Buyer several times. Buyer "checks-in" with Boss several times
6. Boss decides maybe the attorney should look at this first
7. Attorney takes some time to review and proposes questions and changes
8. Boss asks Buyer to get answers
9. Buyer gets feedback and agreement sits on Boss' desk until they have time to talk to the attorney about the feedback
10. 3 months go buy and the Seller is still waiting by the fax for something that the Boss and Buyer said YES to months ago.

Here's what happens with simple online agreements:
1. Buyer asks Boss for permission to go ahead with purchasing service, Boss says YES
2. Buyer goes online, opens an account, and agrees to the "Terms of Service" check box.
3. Seller gets more sales faster, Buyer gets the benefit of the service MUCH sooner.

Is there more risk in online agreements? Of thousands of customers who have agreed to our terms of service, we had contractual issues with only a handful. Of those handful, we NEVER had an issue with the online agreement being unenforceable or less enforceable.

Periodically we had atypical deals or deals that were different from the published rates (due to volumes) and we also had some goverment, academic, or large corporate entities that required physical contracting. Most of the time we just did physical addendums to our online agreements that described those changes and differences. Still making it a lot easier for them to get started.

Not only do companies delay sales but they also can see terms deteriorate as a result of physical agreements. When I signed the deal to get 50 SalesForce licenses two years ago, they gave me a physical agreement to sign. I didn't sign the agreement for weeks. Everytime the salesperson called me back to "check-in", I asked if there was anymore they could do for us. Each time the salesperson came back with more (the terms kept getting better as we got closer to the end of the quarter). It was a little experiment on my end to see how they structured their sales process, which ended up getting us a much better deal in the end. I have to admit, I don't like to play games like this anymore. If we had just went online to agree to their terms of service, there would have been no more time to negotiate.

Don't let your deals get old with physcial contracts.

Better Converting Websites & Marketing

noreply@blogger.com (Bill Flagg) — Sat, 25 Apr 2009 23:58:00 +0000

Direct marketers produce ugly, cheesy, long-winded stuff that CONVERT better.

Here's an example. At RegOnline we've had a really good converting homepage that looks really good, simple and easy www.RegOnline.com.

It just got CLOBBERED by an ugly, text intensive, landing page... http://www.regonline.com/marketing/products/event-planning-software-lf.aspx

55% MORE conversion when we sent half our Google Adwords traffic to the page!

The text for the page came straight out of a 16 page direct mailer piece that two brilliant folks on my team with direct marketing backgrounds created two years ago (thanks Lindsay & Eric). The mailer gives us a 3-5x return on investment.

Why do DM writing/mailers/landingpages work better?
1. More Believable - when a site or mailer looks nice and glossy we unconsciously feel like we are being marketed to. Our best-performing mailers looked the worst (no graphics, dull paper, courier font).
2. Focused - less navigational distractions to the real conversation, and one call-to-action
3. Conversational - the voice is always like a one-on-one conversation that sucks us in
4. Sensational - the headlines are dramatic to tease us into wanting more (ala The National Enquirer)
5. Overwhelming Evidence - makes a better/longer case that you'd have to be an idiot to not take action on

It is hard to believe and seems contrary to "building a brand" but people will buy more when it is ugly, focused, conversational, sensational, and most importantly, informative!

When I first started working with Lindsay she said, "The more you tell, the more you sell!" How right she is!

Please let me know your results if/when you've tried this yourself.

The BEST Secret of Selling

noreply@blogger.com (Bill Flagg) — Fri, 10 Apr 2009 12:43:00 +0000

About a month ago I read the best sales book I've ever seen on the topic. It could ALSO be one of the best perspectives on what makes our economic and interpersonal world REALLY tick! It was a HUGE epiphany for me.

The Secret of Selling by Harry Browne
(an ebook, not avail on Amazon, but worth the effort. The juice starts on page 14)

Without giving away too much, Browne says we, as humans and organizations, all have our own unique sense of what will make us happy. And we are constantly trading our time and money for what we think will make us happier.

Will I be happier with this dollar in my pocket or with chocolate-covered cinnamon gummi bears in my mouth?

Will I be happier making more money going to work for another hour, or skiing another foot of powder?

We are ALL happiness decision engines, making trades all day long that we hope will increase our individual levels of happiness.

Great SALESPEOPLE help me to find what I WANT (or THINK will make me happier) and help me to get it. That is why Browne's secret of selling is: Listen to what people WANT, and help them get it. Salespeople/marketers/businesses who help their customers EASILY find what they want, are the most profitable.

Sounds SO simple, right? The execution is where everyone falls apart. Browne does a great job of outlining, in detail, the sales process for any sales situation.

As a salesperson, the better I understand what a person/organization really WANTS, the easy it is for me to give it to them. And IT'S DIFFERENT FOR EVERYONE. I was always surprised by how different the WANTS were for people looking at using RegOnline. It almost always fell under the umbrella of "Making it Easier" but it was always something slightly different in our system that made it easier for them.

No matter what, it's all about listening to what THEY feel would make them happier and then delivering it to them.

If you read the book, would love to hear your thoughts.

Anatomy of an Exit: Selling Your Company

noreply@blogger.com (Bill Flagg) — Thu, 19 Mar 2009 15:31:00 +0000

For as long as I can remember, I've always wanted to be a serial entrepreneur who built and sold lots of companies. It wasn't until my mid twenties when I was in the throws of my third company that the "selling" part was amplified.

Here's what used to happen to me:

Start a company, find customers, hire employees, start making real money
Someone approaches about buying the company
Fall in love with the idea of having millions in the bank. Start thinking about traveling the world, buying private islands, and never working again
Become paranoid that if I don't sell soon, I may screw up the company, miss my chance at #3, and end up sleeping on my sister's couch instead.

I've come to find that this is a common experience with 80% of my entrepreneur friends AND is what drives them to ultimately sell GREAT companies to not so great companies who then run them into the ground (which is bad for customers, employees, and society as a whole). In fact, I'm surprised by how many of my friends (a good 30%+) have bought back the companies they've sold after they've been run down.

Plus, for companies that are profitable and growing, the economics almost never make sense to sell. Here's an example of a company that sells for 10x earnings (which is considered a GREAT multiple for most private companies under $10 million in revenue):

$1 million profits/EBIT
$600,000 after-tax profits

$10 million = sell company for 10x EBIT
$8 million after-tax (20% cap gain)
$640,000 = 8% return on the re-invested $8 million
$384,000 after-tax return each year

$384,000 spendable income after selling vs. $600,000 by continuing to operate. Unless, you are planning on eating into your assets, you'll be taking home almost half what you used to.

It's even worse is if the company is growing, for example:
20% growth/year over 5 years
$2.5 million profits
$1.5 million after-tax profits

$1.5 million take-home each year versus the $384,000 off the reinvested assets from the sale 5 years earlier. PLUS, the company as an asset is worth $15 million MORE now! AND your customers and employees are happier that a big parent company DIDN'T run things into the ground!

My intent with companies that I'm involved with now is to get them to profitable growth as quickly as possible, build GREAT companies that customers and employees want to shout from the rooftops about, and NEVER sell them!!... a little bit different from that kid who dreamed of building and SELLING companies.

On Monday I spoke at SXSW on the same topic to about 200 entrepreneurs and it hit me that we are in a world full of VC's, private equity, investment bankers, attorneys who love to promote "flipping" companies because that's how they make money. And there's not many voices out there promoting the idea of holding onto and growing companies for life. I was amazed by the energy that erupted from this room of entreprenuers to hear a different, maybe more fulfilling option.

So I've come to the conclusion that Richard Branson & Warren Buffet have it right... if a company is profitable and growing, the best holding period is FOREVER!

Selling the Authentic

noreply@blogger.com (Bill Flagg) — Mon, 09 Feb 2009 17:47:00 +0000

I'm starting a new rule for blogging - if I have an epiphany that is supported by three independent unsolicited conversations, then I'll blog about it.

The epiphany in this case is about connecting/resonating with our prospects and customers on a level that goes WAY beyond just providing a product or service...

#1 A good friend of mine from college created www.Moosejaw.com and built it into a 200 employee company that REI fears. He did it by connecting with customers in a way that has LESS to do with the gear they sell, and EVERYTHING to do with interacting with some REALLY funny guys who have have pretty much the same products as everyone else. Go to the site and read as much of the text on the site as you can, and try not to laugh. We just met with them for two full days to figure out how to apply the same theory to www.StickerGiant.com (which I'm an investor/adviser).

#2 One of my all-time favorite copywritters, Gary Bencivenga, wrote this and I just stumbled across it:
" In your copy, especially your Welcome Letter, never be too timid to say with clarity and boldness what you believe and specialize in. Like the original IBM, have a company religion and evangelize it with zeal. Wear your colors proudly.

I call this the Credo Technique. Credo (pronounced CRAY-doe) is Latin for I believe. But it is much more than a technique. It is an expression of your most strongly held core values which serve as a clarion call to gather the like-minded faithful of your marketplace.

You will find that when you clearly stand for something, you will never stand alone. Indeed, standing for something special in your overcrowded marketplace sets you apart from armies of me-too competitors who strive to be everything to everybody, and wind up meaning nothing special to anyone.

Using the Credo Technique is the surest way I know to attract and bond with your kindred spirits, your true believers, your most loyal comrades in arms, your best clients and friends, as I hope I have found in you."

He's talking about going BEYOND our products to connect on a DEEPER level with our prospects and customers by being REAL. Let them FEEL who we are.

#3 I just came across this TED video last night. And it explains why both #1 and #2 makes MORE sense today than ever. It looks like a technical, boring video at first, but just stick with it, it's brilliant!... http://www.ted.com/index.php/talks/joseph_pine_on_what_consumers_want.html

AND, as I reflect back at RegOnline, a couple of the things that we got the BIGGEST response from our customers and had NOTHING to do with our software service.

Our company holiday cookbook
An email that I sent to all of our clients that said "We love you, we really do"
Building a support team environment that REALLY cared about the customers.

SO, the epiphany/paradigm-shift/new-information-has-come-to-light-MAN is THIS... show some fricken personality and let your prospects and customers FEEL why you care about being in the business that you are in. As consumers we WANT more than nice products and services WE WANT to feel and have more AUTHENTIC experiences in the process. So GIVE the REAL deal inside - it's more fun for everyone!

Focusing the Organization

noreply@blogger.com (Bill Flagg) — Fri, 30 Jan 2009 09:33:00 +0000

Someone asked me recently “What are the three things you did with RegOnline internally that enabled it to be so successful?”
I said:
1. Keeping things simple
2. Focusing on constantly making it easier for prospects and customers (see my last post)
3. Setting goals for each department each quarter (which is the topic of this post)

The quarterly goals for each department usually met these requirements (in this order of priority):
1. Would have a significant impact for the company that didn’t exist before
2. Clearly achievable within the quarter (agile philosophy)
3. Directly impacted by that department’s actions
4. Limited to just ONE #1 priority (and no more than 3 priorities total)

Some examples:
Marketing: #1 on Google for 3 new keywords
Support: 100 unsolicited “WOW” remarks from clients about our level of service
Sales: increase our conversion rate off of live demos by 20%
Development: reduce the number of reported bugs by 30%
Accounting: reduce the number of billing-related support calls by 20%
HR: produce a recruitment video

Short, sweet, focused, achievable. Having just ONE thing to take it to the next level each quarter made it easier and more fun and rewarding for our team to achieve each quarter. We did tie a quarterly cash bonus to hitting team or individual goals. It ranged over time between $250-$500. Not a lot of money, but enough to make it interesting.

Interestingly enough, I don’t think we ever focused on any goals beyond a quarter, and it was NEVER tied to revenue or profit projections. Ok not totally true, the first year we took the entire company to Mexico, we tied it to doubling profit for the year. But, we subsequently decided to take everyone regardless of whether we hit our growth projections.

To be clear, I think it’s a HORRIBLE idea to set goals longer than a quarter or tie people to financial goals that really are not under their specific, direct control. I DO believe in having longer term INTENTS like:
“Support that is the best our customers have ever received from any company”
“Marketing that is so effective other marketers constantly copy us”
“A product that is so easy to use, you don’t need support”

Making it Easier

noreply@blogger.com (Bill Flagg) — Wed, 14 Jan 2009 04:48:00 +0000

My first job out of college at Harris Bank in Chicago had nice wood signs all over the place that said "The Customer Voice Drives All Actions". I remember thinking isn't that obvious enough that people don't need signs to remind them of that? For me it was as funny as putting signs around the bank that said "Remember to Breath".

Fast forward about 15 years, and now I'm thinking about how each department in a company contributes to its success and profitability. Each department impacts profitability in different ways, but they ALL ultimately center around the same point to do so. Yep, you guessed it THE CUSTOMER and the question of:

What will make it easier for more customers to WANT to do business with us?

What will make it easier for prospects to find us?
What will make it easier to learn about our product?
What will make it easier to choose us?
What will make it easier to try out our product?
What will make it easier to use our product?
What new features will make their lives easier?
What support will make their lives easier?
What pricing structure will be easier?
What billing process will be easier?
Then, we get into what will make it easier for our employees to do all this

Each department in a company contributes to profitability differently. But they ALL ultimately center around the same point: how are they making it easier for people to do business with us.

How is each person in marketing making it incrementally easier for people to find us?
How is each salesperson making it easier to choose to do business with us?
How is the development team adding functionality that clients REALLY want?
How is QA eliminating bugs that would have frustrated customers?
How is IT eliminating the potential for frustrating downtime?
How is support making it easier for customers to get answers to their questions?
How is billing making it easier to be billed and to pay?
How is legal making policies that are fair and serve our customers as much as they serve us?

I was just going through a quarterly meeting presentation that I did about 2 years ago and one of the things that stood out on it was a couple slides that outlined how our billing department identified the most frequently asked questions and confusions in our billing and then outlined how to eliminate that confusion. Billing ALSO decided to add a line to the invoice that said "If you are not completely satisfied with your service, mark down this bill as you feel is appropriate and tell us where we can improve." We didn't want to accept anyone's money unless they felt they got fair value back from us AND we wanted their feedback.

As we do better in each department at taking care of our customers, it causes more prospects to become customers and more customers to become referrers... and a nice looping action takes place that organically accelerates the growth of the company. Anyone know where I can get some more of those "The Customer Voice Drives All Actions" signs?

10,000 Hours of Entrepreneur-ing

noreply@blogger.com (Bill Flagg) — Fri, 02 Jan 2009 23:56:00 +0000

I recently read Outliers (thanks John Fischer!) while on vacation in Mexico. It BLEW my mind! It's about how focused people produce dramatically better results. The tipping point for being an "expert" is about 10,000 hours to be exact. The Beatles Sgt. Peppers album was at 10,000 hours. Bill Gates' MSDOS started programming endless hours in middle school. Tiger Woods... you get it.

While this should not be a surprise to anyone, it is a RARITY for people to be PASSIONATELY focused on one thing. When they are, especially in an area where few others are, they stand out and tend to excel, especially if the world wants what they have/know.

It got me thinking about where I have passionately focused the hours of my own life. I've been an "entrepreneur" my whole life starting at age 11 with selling candy out of my locker and a snow blowing business, then high school with a house painting business, then college with a loft reselling business and student advertising business, then out of college with a outdoor film festival business and lecture note-taking business and a national student advertising business, and five years ago till recently - RegOnline's online event registration business. A lot of them were happening concurrently. I've REALLY enjoyed building each of the businesses customer by customer, employee by employee, one brick at a time.

I also can remember having NO CLUE on how to do most things and driving myself crazy trying to figure them out: recruiting, hiring, firing, collecting debts, being in debt, sales calls, holiday parties, marketing materials, websites, AN employee who went postal, SEO, taxes, pricing, renting office space, taking care of unhappy customers, creating bonus plans, etc. Two interesting points on reflecting back:

It DID get easier each time I did each of these things AND I did get progressively better at each
Taking care of customers the way THEY want to be taken care of was ALWAYS easy for me - the challenge was keeping it at the top of my To Do list.

I can see why 10,000 hours is a tipping point. We need about 5,000 hours to stop stumbling through all the stuff we didn't really know from experience. Then the next 2,500 hours becomes about iterating experiences that start to give us real competency. And then the last 2,500 hours is what turns our practices into art forms where we have no more fear, we can fully and effortlessly engage our minds, hearts, and souls into creating things the world has never seen before.