I normally post about technology here.  Business.  Entrepreneurship.  Customer service certainly has a place.  Today gets a personal rant, with lessons applicable to the above.  The short story is that I meant to have flowers delivered on Monday to my wife, and only today found out that ProFlowers would not be able to fulfill the order because they had no local vendor.  For the tl;dr crowd, here are the key lessons:

1. Don’t take money before you can fulfill the contract – The mere fact that ProFlowers took my money without a way to fulfill my order is crazy.  The fact that all of my interactions with them since Monday indicated none of this makes it even worse.
2. Bad customer service will be cemented in search indexes – I let the woman know on the phone that the days of hanging up on an upset customer were done.  I am codifying this here.  I have set up a Facebook group.  I will request that my tweeps retweet this whole ProFlowers debacle.
3. If you are in the business of delivering happiness, deliver! – Having a scripted response for a call center makes sense.  However, the flowers I needed on Monday were to handle an issue on Monday.  With each passing day, the value of those flowers decreases quite a bit.  Flowers can bring joy, but lack of flowers can actually create problems.
4. Flowers are not harder than pizzas – It’s not like it was some crazy arrangement that was ordered.  Roses.  How hard it is to cut some flowers and get them delivered?  I was told that I was in a remote area.  I live 10 miles from the Microsoft campus.  Hardly remote.  The pizza guy can get here in 30 minutes, and they actually have to bake the thing.

The story begins on Monday morning.  I ordered flowers to be delivered because I have been working quite hard, and traveling quite a bit.  With yet another trip coming up for SxSW, I figured it would be a smart move to have the flowers delivered.

To their credit, 1-800-Flowers (the first site I visited) stated clearly that for the arrangement that I wanted, they could not deliver same day.  That’s what you should do.  Knowing that I wanted to try and get the flowers that day, I went to the next link in the search results.  Just a few minutes later the flowers were ordered.  I even paid the extra $5 to ensure that they would be delivered that day.

Sometime around 5pm on Monday, ProFlowers called to let me know that they would not be able to meet the delivery schedule.  They were nice about it, but it was a bit upsetting.  The only offer they made was to call my wife and apologize.  Given the flowers were supposed to be a surprise, that wouldn’t cut it.  I asked the best question you can ask (thanks Chemda) when dealing with unhelpful customer service people: “what do we do now?”  You have to commit to the WDWDN, and be silent.  It’s uncomfortable for everyone.  The woman eventually offered to upgrade the flower bouquet size.  Done.

Tuesday came and went.  I spent the whole day checking for delivery status.  I called into ProFlowers several times, each time they assured me that they would get the flowers delivered.  By the time I got home, around 10pm, they had not arrived.  What surprised me was that no one saw fit to call me as they had the day before.  Worse, throughout all of the conversations with the customer service reps, no one mentioned that they were having problems.  They kept telling me that the flowers were “out for delivery.”

When I called Tues night, the woman read me the exact same script they had been reading me all day.  “Can we call to apologize?”  That’s such a strange thing to offer.  I had to ask for something of monetary value.  Perhaps their customer base just takes it – feeling that it’s just flowers, and that the cost was low, so getting anything of value isn’t appropriate.  I asked, again, to get the next up-size on my bouquet.  At this point, I was at the super-ultra-mega size bouquet.

No surprise – Wed came and went.  No call from ProFlowers.  I traded emails with them all day.  They all had the same script:

What is involved in the “thorough investigation?”  Despite all of the back and forth, it wasn’t until this morning that the truth came out:

What’s nutty about this is that a) they again offer the apology letter, but b) insinuate that they can get the flowers delivered.  I called to verify, and only then did they indicate that they had no vendor to fulfill the order.  They absolutely knew this on Monday.  It’s impossible that they did not.  So they took my money, and agreed to a contract, without the ability to perform.

When I called this morning, the only thing that ProFlowers would say was “we’re sorry. We can call your wife.”  Ridiculous.  Only after venting on the poor CSR, did they offer me a $20 discount on a future order.  Why would I EVER do business with these guys with them again?  The worst part was, the woman basically said “sorry…have a nice day.”  That made me pop.  So I made today “make ProFlowers pay” day.  Bad customer service, especially of this level, should not be allowed to persist, especially from a company with such a high search index placement.

So there it is.  My poor wife the one who didn’t get nice flowers.  I will sort that out, but my ask to you – join the Facebook group “ProFlowers is Bad for Relationships.”  “Like” it.  Retweet my post.  I want this to run around the interwebs, and I want ProFlowers to feel a bit of the pain.  This is a different world we live in now, and the social graph should be able to hold bad vendors accountable.

Also, if anyone has a suggestion for the best florist in Seattle who can delver a long overdue bouquet to my wife, let me know.

What do you do when you have a large tradeshow presence to plan? Clearly you want to put your best foot forward.  If you are going to attend the Mobile World Congress, we’re talking about your absolute best foot forward.  Booth space isn’t cheap, and you have 50K people to impress.  Sadly, I feel that one company had a bit of a “lost in translation” moment when they planned their presence.

I am not sure, even now, I can tell you what CBoss does.  To the left is a logo grab from their website.  I think they have something to do with IT infrastructure, but I can’t be sure.  If, based on their show presence, I was asked to tell you what they did, I would say that they have invented a machine which manufactures women in vaguely futuristic or revealing clothing.  Though, I am not sure if they do it in hardware or software, so I’m not sure how excited I should be.

To make this point, allow me to share this photo.  You see, this booth was just across from the Microsoft booth, and it was quite loud.  At any given moment, there was anywhere from 3 to 7 women on stage.  Yes, stage.  It wasn’t clear if there was any meeting areas.  I did not see a single male working at the booth the whole time I was there.  In fact, the cynical person in me thinks that the company is completely fabricated, and the booth presence was constructed by Google in an effort to deflect attention from Windows Phone 7.  It seemed that every time our team was getting ready to do demos, CBoss cranked up the music.

Scantily clad women is bad.  Tacky.  Worse still is not even having an employee who has even a bare modicum of understanding of the subject matter presenting on stage.  Each time a presentation occurred, it was someone reading, badly and quietly, from a script.

Here’s where it get’s interesting.  The astute reader will note text on the backdrop of the stage.  I must admit, I was at Mobile World Congress for 3 whole days before I even noticed the text.  3 days.  The distraction factor was quite high.

What on Earth is that?  “CBoss presents the 55th product”?  Huh?  And how exactly do you use “network functionalities more efficient”?

My personal favorite: “Your Benefits in Post-Crisis Markets.”

If you are going to spend the money on a booth, and certainly the, erm, people talent to bring people to the booth, make sure people can understand what you do, especially if they are staring at your booth.

It seems that whenever I am talking with entrepreneurs who are looking to raise money, or are recently funded, and they find out that I went through the entire startup life cycle, from inception to something of a crash to salvation through sale, they ask me the same thing: “what are some of the lessons?” or “what pointers can you share?”  Having read one of my more favorite bloggers for his irreverence, I was compelled to post.

It seems that they sometimes are looking for the one or two things that they can do that will guarantee, or at least dramatically improve, their probability of success.  While I don’t like to call things mistakes, but rather “opportunities for excellence,” I also try to look at things in as brutally an honest way as possible.  As such, in the true spirit of a postmortem, I try to focus on the negative.  Make a mistake once, and you are OK.  Make a mistake twice, and you are un-fundable.

Since I am now close to a full year out from having sold IMSafer, and have in fact been re-assimilated to Microsoft, I have had more than enough time to think about this topic.  There are many lessons, and I am happy to share those over a beer with whomever wants to listen.  However, there are two major mistakes that I made with IMSafer.

First, never, ever, take money from professional investors for whom this would not be a professional investment.  Most of my funding came from old friends and bosses who work in VC, private equity and hedge funds.  For them, they were investing in me, and not necessarily the company.  They aren’t angel investors by trade, though some of them make angel investments from time to time.  Unfortunately, even if they aren’t making the investment as a professional investment (i.e. part of their current investment vehicle), they will still expect to treat you like one of their portfolio companies.  If you consider the tax that this puts on a startup, especially a seed stage startup, you can quickly find yourself overwhelmed with what I affectionately call seagull management.  They will come in, make a lot of noise, crap all over everything, and leave.  It’s a very hard place to find yourself, especially when you know the most important thing that you need to do is execute, not managing a board and investors commensurate with a later stage investment.

This problem further manifested itself in the security that we ultimately closed on.  We spent a little more than 10% of the round paying lawyers for the complicated, ridiculous, onerous security that the investors put on us.  This is my own fault for allowing this to happen, but as I found out the hard way, things get rough when you need the money.  The closing documents were absurdly heavy, and we were required to go with a named Valley firm in order for the investors to feel comfortable the that deal gets done right.  When you hear “named Valley firm,” what you ought to hear is “expensive.”

Second, and this is a big one, make sure that your thinking and style, for the most part, line up with whomever is writing the biggest check.  If you take money from people, they are going to expect to have a voice in what you are doing.  This is even more the case the bigger the checks get.  When you have investors with strong opinions, things can get dicey.  When your single largest investor, who is most likely going to be on your board, has a very particular way of doing things, and very strong opinions, you are likely to find yourself at the losing end of decisions.  Why is this?  First of all, there is the success factor.  If that investor has had it (which is likely the case if they are giving you large sums of money), they tend to believe that they are right, as do others.  Further, the other investors, for their part, are going to want to align with each other.  One strong willed investor, with a lot of money on the table, can have very persuasive sway over the other investors.

I know in my heart that one of our critical errors as a company (a post for another time) can absolutely be chalked up to this dynamic, and my inability to stick to my gut and disagree with the investors cost us dearly.  Hindsight is always 20/20, but I knew better, and I allowed myself to be blinded by his success aura and let my self doubt dominate my thinking. 

One of the common traps of any startup is hiring too many people too quickly.  When code is being cranked out and everyone is running around like they have had their heads cut off, there is a tendency to believe that every task needs to have a separate person assigned to it.  This is much more the case when you have engineers running the company.  They often make the mistake of thinking you need “lots of business guys.”  Trust me, as few of us as possible is all you need in a company.

This lends nicely to bringing up a conversation I was having the other day with a local entrepreneur who is trying to do a good old fashioned bootstrap.  Not only is he not going to raise any money (he has so far completely self funded), he didn’t hire out any of the development (he did it all himself over the past 12 months), and will be doing the cold calling once the product is ready.  When I asked him if he needed help, he said “yes,” but only so long as whomever comes on board works for equity and no cash.  That’s pretty hard core boot strapping.

His whole outlook on his approach is summed up in one statement.  “Watson, you are either selling or building.  Nothing else matters.”  His take on organizational development is that there is little need for anyone doing anything other than building the product or selling it.  He’s so hardcore that he would rather his demo be his slide deck – meaning no slides at all.  Product strategy means little to him unless it’s being dictated by people who are writing checks for revenue.  Search engine marketing is a wasted task unless the links are organic.  Like I said, he’s hardcore and going for the boot strap.

While I think his position is a little extreme, it does point to a very important success factor for startups – knowing that you should make do with less people, and the only thing that matters for your survival is either building the product or selling it.  In fact, when you ask anyone in a startup, from the receptionist to the CEO, what their job is, they should all say “selling.”  The selling culture is very rarely ingrained in startups, and this is a large contributor to the current mentality of thinking that business models either don’t matter, or can have an ad-supported model slapped on in the future.

It never ceases to amaze me how many smart people don’t seem to understand this one topic.  It’s basic MBA stuff, but even MBAs don’t get it.  Perhaps this is symptomatic of an era of easy financing and business models that make no sense, but I run into this issue even when speaking with colleagues seeking advice as to how to get their businesses charged up.

Cash flow is king.  If you learn nothing else during your adventures as a new venture owner, you must come to understand and appreciate just how important cash flow is to the health of your company.  There are many ways in which cash flow can and will impact your company, and I would like to lay a few of them out for you.

A question I get often from entrepreneurs goes something like this: “I am growing my revenues like crazy, but I just never seem to have any cash.  What is going on?”  Cash flow my friend, cash flow.  More specifically, as is usually the case with the folks that are asking these questions, operating cash flow.  Of the three financial statements that I look at when I consider investing in a business, cash flow is where I spend a lot of time when I see problems with a business.  As is often the case with a small business, managing the receivables and payables is critical to success.  The revenues that come in the door are only helping you, cash wise, if you are collecting your receivable.  If you aren’t, you have most probably already spent the cash to build your product for the customer.  In fact, you are probably getting called right now by your vendor looking for their money.

Your operating cash flow is chiefly governed by your current assets and current liabilities.  Any changes in these will impact your cash flow.  For example, if you are building up your inventory, it’s going to cost you money.  Sure, that inventory is available for sale, and it more or less represents money in the bank (in that you will – hopefully – sell it), but you still have to pay for it, and that uses cash.

As for your payables, one of the tactics that I tell my clients to explore is trying to take advantage of any early payment offers.  1% may not seem like a lot to you now, but when consider that on an annualized basis, that’s more than 12%, that’s not a bad use of capital.  This is because you were probably going to have to pay within 30 days anyway, maybe 45 if you stretch your payables.  By paying early, you are using cash, but you are also paying less.  Think of this as a free loan from your vendor at a very favorable rate.

It is also important to understand that a dollar today is worth more than a dollar tomorrow.  With that in mind, why would you allow the folks who owe you money to take their time paying you?  You wouldn’t.  Similarly, you would want to take as long as you can to pay your vendors, within reason of course.  This has to do with the time value of money, and the notion that you can invest that dollar you owe today and collect interest on it.  If you pay now, no interest.  If you can get the pre-payment option, that’s great, but if not, think about making sure money takes as long as possible to leave your accounts.

Cash is king.  Without it, you cannot operate.  Growing like a weed is great, but if you aren’t collecting your cash, you are going to hit a wall.  Knowing the number days it takes you, on average, to collect your receivables and pay your payables will give you a window into how your business is operating.  These tersm are usually called receivable days or days sales outstanding, and days payable.

One last note.  I bring this up only because I have seen this a few times and want to share.  If your receivables are going up faster than your revenues, then your customers aren’t paying their bills.  You see, if your revenues are flat, your receivables should be flat if you are collecting your cash from your customers.  If not, your receivables will grow, which is taking cash flow out of your pocket, and putting you in a position where you cannot have sustained growth.

Already I have posted about knowing whether or not you are starting your own gig for the right reasons, and knowing whether or not what you have is a product or a business.  Both of these items are critical to the success of any venture, but there is one factor that is at the top of my list of importance.  Talk to any other venture capitalist and they will tell you that the very first thing that they want to know about the investment opportunity is the management team.  I want to extend the axiom beyond simply those who are directly involved in the day to day operations of the business to the notion of the right team.

The right team is inclusive of your starters, your bench and your assistant coaches.  It’s important to understand that, from the first whistle, your starting team can get the points on the board, but the right team is what is going to get the points on the board during the fourth quarter.

Your management team (the starters) has to include folks that are also doing it for the right reason.  If they don’t share your passion for the product or service that you want to build your business around, then you have a problem.  In the early days of getting your company off the ground, you are no doubt going to be spending large amounts of time focused on the business, and without being surrounded by folks who can make decisions, and have the passion and drive to do the hours, you are going to hit a wall.  You simply can’t scale your available time.  Each of these folks should have complimentary skill sets to solve all of the problems that face a young company, but stack this team in favor of solving the problem of the actual product or service.

The worker bees (the bench) must also share your passion, but to a lesser extent.  You are going to need to surround yourself with people who can execute against your plan.  My experience has shown me that when you have too many people who are super passionate about a particular problem, you have a lot of “solutions” but not a lot of actual execution.  Worker bees tend to be a bit more steady and less volatile than passionate management.

The advisers (the assistant coaches) are some of the most important people that you probably didn’t think about asking to join your team.  My father once taught me one of the most important things I have ever learned.  He said, “son, you don’t need to always know the answer.  You just need to know where to look for the answer.”  Having industry veterans (where applicable and available) can certainly help shed some light on potential problems you may have with your business.  You should always think about how to approach people who might have relevant experience as potential advisers to your company.  Further, seeking individuals who have specific domain experience (lawyers, accountants, etc) will allow you to get your quick questions answered, most times for free, and save you a ton of time and frustration with issues that require professionals.

Key to hiring anyone who works with or for you is to seek those out who are smarter than you.  I have had the good fortune to have worked at Microsoft in its hay day, and was indoctrinated into their way of thinking as it pertained to hiring.  Always, ALWAYS, hire people smarter than you.  If you hire B team players, they will hire C team players, and you are in trouble.  In my experience as a board member and as senior management with startups, I have crossed paths with CEOs and managers who were more than happy to hire sycophantic workers who would yield to them.  It’s healthy to have employees push back on vision.  You, as the leader are there to provide it, but you must also know that you don’t know everything.  It’s OK to be the guy driving the bus, but don’t be afraid to accept directions.  That is why it is so important to hire people smarter than you.  You might actually learn something. 

The management team is very important.  Of that there is no doubt, but as an entrepreneur who is building a company, you cannot stop at just hiring the management team.  You have to think about the entire team that is going to get you through the fourth quarter, victorious.  The energy of your starters will electrify the crowds.  The rock solid play of your bench will keep you in the game when your starters get tired.  And the experience and training your assistant coaches bring to bear will provide the discipline to keep from making key fatal mistakes, especially at critical junctures.  Build the right team, and build it smart.

One of the more interesting conversations I have with entrepreneurs is whether or not what they have is a product or a business.  It’s a tough conversation because most entrepreneurs are very passionate about what it is they want to pursue, and believe that they are on the cusp of building a multi-million dollar business.  Sadly, many would be entrepreneurs cannot make the subtle distinction between a product and a business.

Here’s a great example.  I had one entrepreneur approach me in the last few weeks because what he wanted was guidance on building a business plan around a new idea he had for a blog program.  His program was essentially a blog editing tool.  Sounds great, right?  Blogs are hot, there is a clear market, what could be the issue?  The challenge is that this is a product idea, not a business.  The reason?  Well, most potential customers who would buy this tool would either already have a blog set up, meaning they have a blog business that is either hosting the solution for them, or has provided them with the software to manage their blog (which has fine blog editing tools built in), or this is a new blogger, and they are most in the need of a web hosting solution or the server side code to manage their blog.  Either way, how would this entrepreneur build a business when they are missing so many pieces of the value chain, especially when customers have an expectation of what should be provided from a blog business?  It’s a tough sell.  The entrepreneur got it though, and is retooling his thinking.  I can’t wait to see what he comes back with.

I really like to make things simple when I talk about topics like this.  I really want to feel like I could have the discussion with my mother or father and they would get it.  Put simply, a product is something you can sell to a customer once and you never see that customer again.  A business builds a long term relationship with that customer and sells them many things over the lifetime of that relationship.  If that seems too simplistic, then I have done my job.  It’s important for would be entrepreneurs, before they jump off the deep end and commit to their passion and pursue their new idea, to consider and understand whether what they have is a product or a business.

While it is possible to transform from selling just a product into a full fledged business, it’s a tough road and not easy.  You have to know who your customer is, and what experience you are selling them, and whether or not you can provide enough of that experience.  There are times where it would appear that what a new business has is just a product (great example: Baby Einstein), but they really do have a business with only one product in their portfolio.  The key differentiators is the ability to grow that product portfolio, leveraging the skills and experience from creating and selling the first product, which is the definition of a successful business.

I wanted to start a little series for entrepreneurs and entrepreneurs-to-be that I am calling “Success Factors.”  This series will build on itself, and I will release a new factors from time to time.  When entrepreneurs find out that I invest in start ups, and have run my own successful start ups, they often ask, “what made you successful?”  More often than not, my first answer is “luck.”  Being lucky over being good is often a preferred state of being.  However, there are certain factors on which an entrepreneur can focus in an effort to maximize their probability of success.  When I say “luck” I am saying it glibly, and what happens is that I often then go into a diatribe about the most important factor.

My personal opinion is that in order to be a successful entrepreneur, you have to have the right reason to be doing it.  A hallmark of a successful entrepreneur is that they have a passion for what it is they are doing.  You will hear things like “I want to change the world” and “I want to make things better than they are.”  You hear these things because these people are starting their own gig and following their passions for the right reasons.  Having the passion for what you do means that you will be really engaged in the work.  You will be living the life you are trying to sell, and you will be all the more successful for it.  The reason?  Your passion will shine through, and you will be eminently more believable.  You’re not a phony because you are living what you are selling.

People looking for a new lifestyle are also doing it for the right reasons.  Looking for something better than what you currently have is a fantastic motivational tool.   Beware, however, as many entrepreneurs believe that starting their own venture is the key to a better life, and that simply starting your own venture is enough to get there.  Being an entrepreneur is hard work, and it will cause many stresses.  Which brings me back to having the passion for your work.  Wanting to have a different lifestyle is a great motivational tool, but without a passion for what it is your are doing could ultimately land you in a situation where you have way more stress associated with getting your business off the ground, the lack of steady income, and the piling expenses.

If you were to ask any person off the street, the most likely response to the question “what’s the primary reason people start their own business,” you would most likely hear “money.”  Strangely, it is not the money that drives the successful entrepreneur.  In fact, more often than not, most entrepreneurs are taking significant pay cuts when they venture off on their own.  I actually have a more heavy handed view on this topic.  It is my personal belief that if you are setting off on your own thing primarily for the money, you are in it for the wrong reasons.  Money is a source of stress.  Just ask any young married couple.  If you use money as the primary metric of your success or failure, you will find that even though it is an easily measurable thing, determining how much is enough in order to call oneself successful is often a Quixotic effort.

Does luck factor into a successful entrepreneur?  Absolutely.  However, you can’t rely on luck to get the job done.  In most cases, you are going to have to create your own luck.  Unfortunately, luck in entrepreneurship is a lot like luck with the ladies.  Some guys have it, some guys don’t.  Worse still, you really can’t figure out what the contributing factors are to luck.  So don’t rely on it.  Just hope for it.  As far as money, well, it’s real simple.  Do what you love, and the money will eventually follow.  Passion is contagious, and you will be successful because people want to buy into your story.  Your story is authentic because of your passion.  It’s not to say that passion will make the money flow in immediately, but it will make the money flow.  To be successful, you have to ensure that you are doing it for the right reasons.