Not too long ago I was having coffee with a fellow entrepreneur. As we talked over what was working and what wasn’t with his business model, he asked me a question that really made me pause:
“If you could press the reset button on my company and start from scratch today, how would you do it?”
If I only remember one sentence that this guy ever says to me, it will be that one. Not because I went back to his fundamental assumptions with the data we had and either accepted or threw them out one by one, but because I applied this same process to my own company the next day.
With 3+ years of experience, data and revenue, there are a lot of things I would have done differently. Before I could answer that question, I had to ask myself two others: what did I get right and what did I get wrong? Some of the answers were obvious to me and some were not. I think it’s the type of exercise that every entrepreneur can benefit from, so I’ve decided to share my analysis with you all here.
What I Got Right:
1) Long Term. I suspected that once a client selected Chicago Art Leasing for artwork in their offices, we would be there until the walls fall down. This part of my equation was spot on and, with just one exception, the only professional service firm clients we’ve lost have been those that closed. I’ve succeeded in making it easier to stay with me as a client than to seek out an alternative. This was a critical piece of my recurring-revenue model and it’s held up, which is encouraging.
2) The Visit is The Close. I had hoped that this would be the case and it turned out to be true. Once I have a client in front of artwork (at an artist’s studio) or artwork in front of a client (at their space), we’ve had something like an 80% closing rate, which is even higher than I anticipated.
3) Low Cost Maintenance. This is another aspect of my concept that has borne out. Generally clients haven’t wanted to change their artwork more than once or twice a year, which means that maintenance consists of more or less monthly contact to make sure that their needs are being met and that they’re happy with the service.
These three factors mean to me that I’m on to something. But getting it “kind of right” means that I also got it “kind of wrong,” so now it’s time to parade all of those false assumptions and missteps out into the light.
What I Got Wrong:
1) New Client Acquisition / Sales Cycle. This is the undisputed heavy-weight killer. I expected to be able to make a couple closes a week and while we’ve had a week like that here and there, they are far more the exception than the rule. Has the market a factor? Probably, but even in a boom time, I think one or two new clients a month is a much more likely result (assuming an advertising/marketing/PR budget of around nil). I think the cycle has been a lot longer than anticipated for a number of reasons, each of which warrants scrutiny:
a. First and foremost, I spent a lot of time and energy chasing the wrong prospects. Admittedly I can be a bit dense, so it took some blunt force trauma before I realized I should stop banging my head against certain walls. I went after a lot of interior designers, hospitals and hotels, which all constitute significant and logical buyers of art. But that’s just it, they are buyers and their procurement models are structured for purchases, not for leases. So I was trying to fit my model to the prospect, when what I should have been doing was looking for better prospects.
b. I let myself be bullied. Consignment is so prevalent at retail stores and restaurants that I agreed to provide work on consignment when I shouldn’t have. It was a lot of work and, predictably, little to no return. I did get some valuable marketing materials from it, but I probably should have walked away from certain projects.
c. I counted my eggs as chickens. I also call this “death by false positives.” On my hot list each week and each month there was a solid block of people who were quick to tell me how deeply they supported the idea. It turns out that “supporting” an innovative service translates to “using” an innovative service a lot less often than you’d think. Several of these did eventually convert, but it was over years rather than months or weeks.
d. I spent time on the wrong things, including trying to train contract sales people who were never going to be as motivated as I was and flirting with the idea of raising capital. If I had taken even half the hours I spent on just these two things and put it into prospecting, meeting with and closing clients, I would have been a lot closer to hitting my projections.
2) Financing. It’s a rookie mistake, but I started on the company on what scant savings I had. I tried to be realistic and double my estimates of what I needed to bring in top-line. Unfortunately realistic and entrepreneur are seldom on the same planet. I should have not just doubled my estimates, but then doubled them again. That would have been a lot closer to reality.
3) Urgency. During my first few years there was a very compelling sense of urgency to what I was providing. That urgency, however, was mostly just on my end of the phone. While I used a lot of the same tactics that I would if I was selling a phone system, there is a key difference with art: without a phone system your business stops functioning; without art on your walls your clients may snicker for a moment but then they still pay you and life goes on much as it did before. So it took me a while to realize that a cultural/lifestyle sale to a corporate client really is a bit unique in some ways. It requires not just a brute force approach but also a degree of finesse that has been difficult for me to learn.
4) Staying In My Comfort Zone. What I know is largely inside sales or “dialing and smiling” as it’s also called. This is a great skill and no one is typically going to fault a business owner for spending so much time making calls… unless they look at the numbers and realize that something is out of whack. I went through more than a year of making an average of 80+ calls a day, but when I looked at the resulting appointments and closes, the numbers fell off a sheer cliff. What was even more enlightening was that when I looked at my clients, less than 25% of them came through inside sales. Most sales came from unsolicited, inbound callers who found us online, referrals or connections through networking functions. So I should have wised up to what sales activities were working and which weren’t a lot sooner… but it’s hard to see the obvious when you’re busy putting dents in your head with a wall.
There are other things I got wrong as well, but those listed above constitute a four-headed hydra that could easily devour most novices like me. That I’m still going and growing has more to do with luck and persistence than anything else.
This is a long post, so I’m going to spare you from reading all about what I did with the information I uncovered. Your business is almost certainly different than mine, so I think it’s the process rather than my specific conclusions that will have value for you. If you do want to hear about my next steps or just want to share your own findings with me, I’m happy to hear from you.
As always, thank you for reading my mind,
Josh
