Goodwill isn’t always so good…

OCT 01, 2013

I had a conversation I want to share with all of you. It came about when I was getting interviewed on how to start a company. We were talking about how important it is to actually ask for orders before you start the endeavor. We discussed how when you start you have to get out there and meet with associates or friends and make the meeting uncomfortable by asking them if they would pay you for the product or service you are hoping to deliver. I told him about a theory I had been working on that may seem a little counterintuitive. It was the idea that getting initial orders can often do a disservice to the entrepreneur. It can make him think that he is on the right track and might not need to test his ideas much more. (it also may make him lose a bit of his humility when he needs it most but that is a different subject)

Here is a real world example from my fledgling startup – The Portal of Pain (PoP). On day one of PoP, I had three meetings with high level execs at Trace3 clients. In the first meeting, around 40 minutes in, I asked the client whether he thought the concept was strong enough to pay for. The answer was yes so I followed up and asked him for a PO from his company for $10K. He agreed to do it! Exciting.

The next meeting I started by telling the client I wanted five reasons not to pursue the venture. I told him not to pull punches. At the end of the meeting he was interested and I asked him for $10K. He agreed to pay it. I WAS TWO FOR TWO! Super exciting.

A side note about asking for money early on: You need to master the art of asking for the money and SITTING in that uncomfortable silence where the client thinks about it for 10 seconds before answering. Those 10 secs feel like an eternity. That is the silence that so many of us jump right into and start selling before we even get a glimpse of a yes or no answer. Guthrie, General Counsel for T3 and Business Dev of PoP, was shaking his head saying I was nuts to ask for money at this point since it was just an idea. He then admitted he was loving the clarity we were getting by asking by doing it…I believe it is ten times as useful to ask uncomfortable questions before you have everything on the line than it is after. Be brave and ask the tough questions.

Back to PoP. The third meeting comes with a client that does not know me. Turns out the first two did know me. They had seen me speak at our large events in Vegas or online. They loved Trace3. They were thought leaders and some of our most trusted clients. The third meeting was with the CIO of a company I had not heard of and the person we were meeting with had a background directly applicable to what PoP is meant to do. He did NOT agree to pay for the product. He thought it was very interesting but wanted to know who else (clients) would be involved and needed to get to know us a little better. He wanted to see the product when it was devolped and think about it some more… This is a pretty normal response for a startup and can be so frustrating because you cannot be sure they will buy even after the product is developed. In fact, you might want to assume they will not.

On the drive back, Guthrie said he thought two out of three was not bad. I told him I was a bit of a mess over it. You see, I was now not totally sure why the first two had said yes!!! Was the yes heavily weighted in goodwill or based in the product value? The third client judged me purely on the merits of the product and his perception of my ability to execute. The first two had been a part of all my past success and were probably much more likely to support any new venture I did.

This matters. Goodwill does not transfer to the salesforce you will eventually build. Goodwill can make you think you are on the right track when you might need to search for a more impressive value proposition.

After that meeting, I began to change my tactics a bit. I started taking both good and bad feedback with a grain of salt. Especially the GOOD feedback. Goodwill is crucial at the beginning of any new venture but as the company moves forward many entrepreneurs get confused on why the salesforce cannot sell the product as well as the founders can. Brand, passion, product knowledge…those could all be valid reasons of why the founder does better; but you might also want to look back to your initial feedback and discover whether goodwill blinded you from digging deeper into whether the product or service really had legs.

If you are not starting a business I believe this concept of relying on Goodwill over Value still applies. As you create success in your career and your relationships with clients and partners deepen, there can be a tendency to rest on past success (or to rely on the goodwill of your relationships). I believe that the focus on value expansion in both products and relationships is the key to both startups and existing businesses. In many ways it is easier for a startup since they have nothing to lose by disrupting a market. Existing companies have to worry about cannibalizing lines of business/revenue streams. In the end I think it almost always plays out over time that real Value will triumph over Goodwill. Learn how to separate the two no matter who you are and you will be better off for it.

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