I recently switched cellphone carriers from Bell (one of 3.5 carriers we have in Ontario) to Rogers. There is a 30 day cancellation notice required, which I happily gave a couple weeks ago and was told that my next bill would lower the plan pricing so that I would only be paying for cancellation date + 30 days. Sounded fair to me. I get my bill and of course there is no discount so puzzled I call up the customer service. It turns out that my credit will come on my final (Nov 1) bill* Fine, so will Bell refund me money when my Nov bill has Bell owing me? Oh of course… in 6 to 8 weeks.

* if you haven’t had the pleasure of spending exorbitant amounts of money on phone service in Canada an explanation of the billing process is in order. Each bill received contains the charge for the next month of service plan as well as any extra usage charges for the previous month. Therefore the Oct 1 bill was charging me for October’s service and any long distance I used in September. My phone service ends partway through October.

Bell has effectively scored a 3 month interest free loan from me and every single other person in the ranks of those leaving their service. Is this final move to squeeze every dime from their (former) customer base really going to affect me? Of course not, but this kind of treatment is exactly the sort that leaves a bitter taste. Although I wasn’t satisfied with Bell as a carrier perhaps I would have subscribed to their DSL service or their satellite TV. Clearly this will no longer happen since I’ve experienced their customer service first-hand. This little rant leads nicely into the point of this blog article…

Companies Are Losing Easy Profits By Devoting Exceptional Resources to Alienating Hard-Won Customers

It is well-established that it is far more expensive to acquire a new customer than to sell to an existing one. If acquiring new customers is so difficult it should make sense to do everything possible to keep your customers, and certainly a business should not be actively devoting resources towards the opposite effect. There’s no doubt in my mind that at least the executives in major companies acknowledge that this is true, but this truth becomes lost the further down you dive into the structure of a corporation. Each department has its own responsibilities which in turn spawn its own priorities, objectives, and metrics of success. If these metrics are left to be devised strictly on the basis of the department’s role, then a billing department may be concerned mostly with maintaining a healthy cash flow by collecting money due as quickly as possible. Sounds reasonable enough, but if that’s your only metric of success, where is the motive to maintain high customer satisfaction (something that the entire company presumably cares about) and not take actions that will hurt satisfaction?

This is the perfect breeding ground for policies like taking money from a customer that you aren’t owed and returning it three months later (whilst not extending payment terms anywhere as generous to customers). It certainly provides a rosier cash flow and opportunity for a nice interest return on money that isn’t yours. The costs of these policies are charged to the company in the form of reduced sales and lost customers, but the department responsible for these costs does not directly bare them (and may in fact be rewarded for its high performance against the metrics set out for it).

On the outside the company appears to be growing miniature heads moving in different directions and causing the corporation to sabotage itself needlessly. This inconsistency is noticed by both employees and customers, creating resentment in both groups towards the corporation and its suicidal tendencies.

But I’m a small business owner and don’t have a large bureaucratic organization. How does any of this help me?

As a small business it’s tempting to blindly copy what the big boys do since they are making money hand over fist. I’ve fallen into this trap many times myself, happily creating my own virtual bureaucratic procedures with no thought as to their real effect. It’s unlikely that a single corporation will change its ways as a result of this post, but if you are a small business owner you have the agility advantage to quickly re-assess how each aspect of your business operates and realign it with the overall company strategy and beliefs.

Should you really require 60 days notice to cancel a service just because Mega Lawyer Driven Corp Inc. does? What kind of refund policy will avoid needless resentment towards your business? Does your existing customer support focus on making life easy for the customer or easy for you? Are you nickel and diming people (*cough* activation fee *cough*), which could be costing you return business, referrals, and larger contracts? What sort of policies have you enforced on customers that are a nuisance or are based on using punishment to coax desired behavior?

Don’t bother spending money on advertising that extols virtues which only parts of your company follow. It’s a basic fact that people hate feeling lied to, cheated, disrespected, deceived, or otherwise treated unfairly, no matter what section 10 paragraph 4 of your “service” agreement might state.

We all get the same 24 hours each day, of which almost half is devoted to attending to sleeping, eating, transportation and errands. On a good day this leaves 12 hours with which you are free to do as you please to further the achievement of your goals and desires. How is it that some people manage to get so much more out of that 12 hours than others? Why is the time of some people so valuable that they can command $250/hr for their attention? How do I go about earning that, and perhaps more?

The answer to this lies in the prehistoric days, a vague and poorly documented era that I am free to take artistic liberty with. Og was a particularly smart caveman living in that particular era and like all good cavemen he spent the bulk of his days hunting animals while simultaneously avoiding being hunted by said animals. Og was rather fascinated with the world around him, often getting lost in his primitive caveman thoughts as he spied a particularly interesting leaf. It was perhaps the first case of ADD ever noted, and unfortunately for Og it meant that animals would often creep up on him and catch him off-guard. Many wounds later Og realized that he was very poorly equipped in comparison to the saber-tooth tiger that had just run him up a tree. Something had to be done lest he starved.

Og did some heavy thinking and came to the realization that a wooden stick would help him fend off attackers if wielded in the right way. It was a bold idea with much potential. Up until now everyone simple wrestled smaller prey to the ground or settled on sharing termites with the chimpanzees (history suggests it was them that first invented the stick, but accurate patent records have yet to be dug up). After much testing and determination Og had his first functional hunting stick and the first real meal in weeks. The human race had its first tool and soon Og became the most well-fed caveman around.

Other cavemen began to take note of his bulging waistline and came to Og hooting angrily. They too wanted to hunt more effectively as the cavewomen at home were beginning to notice how much better Og was fairing. Og pondered this situation carefully and gestured wildly that yes he would share the powerful secret of the Hunting Stick. In exchange each caveman using said stick would be required to provide Og with one chunk of mammoth meat per month. It was a fair bargain and so Og was able to provide food for himself and his family nearly effortlessly.

So much is written about how to manage your time effectively, but performing low-output tasks efficiently will still get you far less than performing high-output tasks inefficiently. Og’s key to success was his propensity to find ways of leveraging his resources to achieve exponentially higher gain. His first breakthrough came from the stick, which allowed him to catch bigger prey faster than the other cavemen. Rather than using just himself to perform the work, he had transferred some of it to the stick. With the spare time this provided Og was able to think harder and an even bigger breakthrough came next. Og realized that he could equip others with a marvelous Hunting Stick in exchange for food. Suddenly Og didn’t have to do any hunting at all thanks to properly leveraging his resources (the stick idea). At this point historical records are again rather faint, but we can theorize that Og continued to profit from his invention by creating product upgrades like the Sharpened Hunting Stick, Hunting Stick Classic, and the Armored Tank.

You don’t need to be an inventor or a caveman to have this model work for you. What you do need is a change of mindset from the rat race of getting as much done as you humanly can within those 12 free hours into figuring out how much you can leverage your resources and abilities to exponentially increase the return you receive on each hour you work. As a work machine a human being is actually quite terrible. We are high maintenance, error-prone, and can only do so much work in a given period of time. The most productive use of that 12 hours is thinking up ways to generate value through available resources, and then putting those resources together to generate that value. You don’t want to get stuck requiring yourself to be able to generate the value, as the opportunity for expansion becomes highly limited. Og could have sold his hunting services rather than the Hunting Stick, but then he would have to be constantly working to receive payment and would have likely been stomped on by a mammoth. Remember that as impressive as a consultant’s $250/hr rate may sound, many millionaires are making much more than that from passive income streams and doing so while they sleep.

Successfully building a business around a product is a wholly separate area of expertise, not something that you kind of pick-up as you release it. Yet that’s something I very much did with CustomBar, a terrific piece of productivity software that I devoted the larger portion of 2 years of my life to developing. I was very much a software geek first and business man a distant second, consequently making many of the same mistakes as hundreds of other shareware authors. The result was making only 10% of the profit that the software could have made (a very conservative estimate).

The initial launch did fairly well and my inbox filled with sales. This is also the only time where I really thought about the marketing and spent serious time putting things together. However I lacked the knowledge that I needed to build something that would continue to grow and receive attention long after the last news article on a popular software site had sunk to the bottom.

Two years is a long time to invest in a product when you end up making a grocery list of amateur mistakes when finally selling the thing. Yet that’s one of the reasons the business start-up failure rate is so incredibly high; I was the rule and not the exception. I was very strong in a technical skill (programming in this case), had a great product idea, but not nearly enough business knowledge to make it viable.

If you are the brains behind the world’s next big mouse trap then learn from these mistakes. It’s not easy to come up with a viable business model and strategy to execute it. Top CEOs of billion dollar companies get it wrong all the time, and surely they must have a little bit more experience than simply picking-up a marketing book. Aquiring a combination of experience and knowledge will put you light years ahead of the inventors out there that dived right in. If your Big Idea will still be there in a year or two perhaps it’s best to try a smaller business first? If you don’t yet have a Big Idea then there is even more reason to start a smaller business now, as you will have the necessary experience when you do have that Idea.

Inevitably the next question that has come up in most readers minds is “but what other business could I possibly start?”. Believe it or not, you don’t need to create something new and revolutionary to launch a company and start making (or losing) money. That’s actually a very risky path compared to taking an existing product or service and simply doing a great job of providing it. Businesses that tend to be inexpensive to start are those that do not require a large investment in materials or commercial location. Digital products work well, such as software, ebooks, online courses, web services and so on. The internet also happens to be a fantastic way to get experience in marketing strategies as investment is generally low and you can accurately measure results within days instead of months. If that’s not your fancy do not worry. You can take advantage of virtually any real skill, and the less formal education it requires the better for you (it is much easier to start a landscaping business than a biotech company).

One catch is that you do have to put serious effort into the business and want it to succeed. You are starting small so that later on you have the foundation to go big. It may even be that you succeed on your first try and want to continue developing the business. My own primary business, which I plan to grow and expand for many years to come, started out as a side web hosting venture years ago by another name. You won’t get anywhere putting in a half-hearted effort into something, and you won’t learn a whole heck of a lot either.

If all that you do is Build It, the only customer will be your mom.

You want your dream to succeed. Maybe it’s a great piece of software that you are putting every bit of effort into after 8 hours of database programming in some dull cubicle (if that’s the case read this legal issue). Maybe it’s a music school you’ve been sketching plans for while finishing your degree. Maybe it’s a $29.95 product that will be sold in retail stores across the country if you can just convince them that people will buy in droves. Great products are created by people specializing in the related field, not by armies of people in suits and ties (those guys are all managers and accountants working for someone else). You don’t necessarily need a business degree to succeed in running a company. However don’t let yourself stumble so hard that the fall kills you just because you’ve never navigated terrain like this before. Aquire all the business knowledge that you can for your new company, either by getting some experience launching a smaller venture first or by finding a partner who has done it.

What happens with CustomBar you ask? It gets a new 1.1 release in Winter, accompanied by major fixes to the business model (which is where the delays on the update actually come from). That’s the first block of time I will have since Tilted Pixel’s launch in September to revisit things and get it moving again. In the meantime sales continue to trickle in, but at a much slower rate than I would ever be willing to find acceptable.