Sunday, September 20, 2009

Confusing Activity with Productivity

I think one of the things as an owner of a start up that's challenging and interesting is you always have to figure out what to do next.

Let's say we had an increase in our budget for the next month:

Should you bump up your marketing budget?
Should you increase the number of direct salespeople?
Should you use the budget to improve your website/product?

I believe that most start ups nowadays are constantly torn by these decisions that they have to make.

Some people end up doing all three - and most of the time this is when all three components suffer from a mediocre improvement. The key is figuring out what's most important. Will you get more customers if you invest in more sales and marketing if your product sucks? Probably not. So instead of dumping money equally into the three components, you should prioritize. Have a list for what you want to achieve and number them.

  1. Improve Product
  2. Bump up marketing
  3. Increase number of salespeople
Here's the rationale behind these choices:

  1. With a product that sucks, bumping up marketing first means telling MORE people that your product sucks. Go figure.
  2. Yes - bump up marketing after your product has been improved, then at least you have progress to show to your existing userbase and a better chance of attracting new prospects that have higher standards than your version 1.0 product.
  3. Lastly you increase salespeople after you bump up marketing because you don't want to send them in to die. Literally. Have you tried knocking on a buyer's door and telling them that you are from P&G [or insert other big name recognizable brand]? Now, have you also gone knocking on doors when you first started your business? It's much easier to get in the door when people have at least heard of you.
Here are some stats to prove it.

We had a list of people who had signed up for Beta testing back in December of last year - we couldn't fit them into the testing group given our constraints, so we emailed them back when we launched our commercialized version. More than 30% of them converted within 2 days.

We then got a list of importing businesses in Canada, and tried emailing and calling them; we had about 3% call us back or at least take our call - because they had never heard of us. Plus, we're asking them to trust us with their money - what do you think happened?

So go through that process to prioritize the tasks for your company and the results will differ by a great deal. Good luck!

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