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In all honesty I was dreading this trip before in the weeks and even hours leading up to it.  I didn’t understand how a full day was needed to train people on how to use a system that they won’t even be using months from now.

I woke up around 6:00 AM local Boise time and started preparing for the training.  I had intended to do some dry runs earlier in the week, but really things just kept piling up. Fortunately, I had put together a word doc on “next steps” for Jeffrey about a month ago.  I used this mostly as a guide for my live demo.

I loaded up some 40 tabs to test everything out — and of course the last thing I check (public judging) didn’t work due to some recent form builder updates.  Our developers already had a fix ready — I was hesistant to deploy it for fears it might break something else, but decided around 8:00 AM that I had no better choice.  I also practiced my “ask for a referral pitch” with Zack some time that morning.

I hopped into a cab and reached the AAF conference around 8:45, just in time for the 9:00 AM training.  The training started out as planned, George introduced me, I spent about 2 minutes introducing myself and went with the canned “we are here to not only meet but exceed your expectations…..” I messed up the close where I should have asked for introductions, instead I said to “spread the word” about our customer service.  The message did come across heartfelt, but I rate my pitch as a 6 out of 10.

Anyways — the training, it turns out, was not a training at all.  It was a group of 25 super users who had been masters of running their district ADDY programs for years.  These are the people that should have been part of the beta test, so in a sense this was more like a final chance for them to make requests / tweaks, rather than training.

Because of that it turned into two 3 hours sessions of slowly showing how things worked, hearing argument and counter argument within the group.  My role was more of a moderator, hearing all sides of how the system should work in various cases and presenting options.  Most importantly for me, I connected with about a dozen people on a personal level.  As the day progressed people’s attitudes and body language changed and the sense was that “CMS was here to protect us.”  During the meeting people were texting their various club representatives with messages like “I am jumping for joy” and “thank god for the new system”

I feel if we had sent someone else, the level of instant feedback and promising would not have been possible.  The meeting would have left these power users in a sense of anxiety.  The truth is, AAF did not pay for this privilege — this type of session is not something we can consistently deliver, it would in essence put us back into an over delivering unsustainable routine.  Having said that as the first real introduction to the system, I do believe it was a great investment.

I talked with Joanne and asked her if her doubts will end in “January” when most clubs are done.  She said that her doubts will only end in June.  For me, it means we should prepare for another 6-7 months of tiny features here and there — but it also means after that we too can exhale and provide a more standard level of service.

This trip was more about relationships than training.  While AAF district heads surely feel great about us, I don’t think we’ll get any direct benefit.  However, the relationships with Joanne and George did achieve a high bounce from what was already a great relationship.

When it comes time for them to ask us to rebuild their member database, I do believe we’ll have the full support of the AAF clubs behind us.

In summary, I believe this trip helped shave off 4 months of trust building.  My opinion is that we should plan a once a year in-person training where we send a principal (Zack, Tim or Myself).  If additional face to face training is needed, we should ask for AAF to pay for it — and send traditional support staff.

Well as I mentioned last month, the cash flow pressure should peak this month.  I really hope I am right 🙂

 I’m staying calm, but I expect us to be at or near $0 cash in bank by the end of the month.  That gives us 2 months of borrowing ability.  My current focus is to keep our websites moving along so that we can get paid.  In terms of future work and receivables we should be fine, but it is just one of those hold your breath and wait things.

About a year ago, I made the call to Brian to end the relationship with B2R.  At that time, I decided my role at this company is to ensure everyone else believes in the dream so we can get their together.  At this point everyone does indeed seem to be chipping in, so now it is a question of is our business model the right one, or will I have to make some tough choices.

For now, I’ll stay positive — we should collect a ton of money in the next 2 months, and next year we should start getting our renewal fees, so just have to make it there.

Hey guys,

Just wanted to thank you for the tremendous efforts you put in this summer.  We would not have made the deadline if you did not only meet, but exceed the goals I had set out for you.

The launch has gone smoother than any other release, and considering the level of change — this is some great news.

While AAF I’m sure will still come up with new requirements that will surprise us, I believe we should a strong effort to give them confidence in us.  With their last vendor, their “Sept 1” deadline was missed, actually they launched “Oct 1” — but the system wasn’t totally ready, so they had hell to pay for nearly 7 months of system usage.  Because of that mess-up, we were able to come in and steal AAF who had a 15+ year relationship with our competitor.

We got news that our competitor is hurting badly without AAF.  They fired 2 developers and 1 support person, but we are looking past them onto the #1 Awards Software in the market: WizeHive.

Over the next set of versions we’ll really solidify our base (Faster Performance, Azure) and place the features that are needed to make ourselves #1.

In some regards, it is hard to believe we made it this far.  Features like Bulk Assign of Winners (which went live yesterday) seem like necessities that we lived with out.

Behind the scenes, we “faked” a lot of these features to clients on demos.  When the need came, we would have our support staff, and often myself + Zack doing massive amounts of data entry.

Now we are probably the #2 maker of awards software.

I don’t think that’s good enough for any of us.

So thanks again, and I look forward to the journey to #1,

Kunal

Much to my surprise — the actual price war was more of a price discussion and within about 40 minutes we were able to come to some useful conclusions.

Outcome #1 – Having a Price Strategy is Essential
We agreed that having no price strategy was unacceptable.  This may seem obvious, but we went without a price strategy for 18 months.  Even if a price strategy isn’t perfect, not having one let customers see right through us for this random / adhoc pricing.  That led to uncertainty and undoubtedly had left us to giving lower prices than we should have.

Outcome #2 – Price on Value not on Costs
We agreed to eliminate terms like ‘hours’ and ‘GB’ from discussion of pricing.  If we price on costs it will have the customer try to game the system to get the lowest cost — and in the long term we’ll not be able to collect as much revenue.  Sure we will meet costs, but this tactic will quickly wipe away profits.

For example, a customer won’t know how to measure GB of storage, but they might be willing to pay an extra grand for video streaming.  Video streaming might cost us a few more dollars a month, but a customer is more willing to pay for the feature with a large markup, than a GB overage.  What I mean is $1,000 for GB overage is ridiculous compared to $1,000 for streaming video.

Outcome #3 – Base a Price on All Components
We need to be able to react really quickly to a customer who changes the rules on us.  Like if someone says 2000 entries and reduces to 400 — we should be able to adjust the price without blinking.  This will give them confidence in our prices.  The price different from 400 to 2000 may not be much, but if we can back it up it will go a long way in avoiding more questions.

Outcome #4 – Do not be flexible
Our pricing should be firm — we should not use vague terms in defining our pricing.  It will give clients the impression that we are weak and there is more negotiating room.  2501 entries?  You move to the next price — no wiggle room.  At least that is our tone.  Any negotiations should be at the end of the contract discussion, not on the initial sales calls.

Next Steps
Using the initial spec sheet from the google doc, I plan to come up with a calculator the sales team can use.  We’ll price everyone through it, prospect, actual quoted price, etc.  Over time we’ll refine the mechanics, but this should be a good first shot at standardized pricing.

We will also update our contract language to better account for this consistent pricing.

Fresh off of our Zack Chase intelligence gathering session we realized we needed finally come up with firm pricing for our awards platform.

I felt the pain of a sales call last week for conference.  “So did you just come up with that number randomly?” — the truth was yes, but there was some awkward and noticeable backpedaling.  Timmy had just told the prospect that the price of our conference software was based on the number of attendees and the number of programs.  When both of those were halved, somehow the price still stayed the same.

The problem actually wasn’t the pricing — it was being confident and comfortable in how our pricing works.  I set a price floor of $4,000 for conferenceCMS.  We probably should have just told that to the client — “you guys fall into our minimum plan.”  Instead we tried to make them feel valued and it backfired.

Anyways — this motivated us to come up with proper pricing for awardsCMS.  Tim, Zack and myself all wrote out in a massive google doc some competing price plans.  Tomorrow we’re going to have a ‘meeting’ to try and square all of this away.

My opinion is that since we’re not putting prices on our website — we need a clear way internally to be confident about the pricing we give prospects.  More importantly we need to deal with a lot of the price questions that have come up.

Tim’s Plan

TIM S. – The Standard, see: http://www.sitefinity.com/purchase

	Standard (click here to sign up)	Professional (call us)	Enterprise (call us)
Yearly License Fees
Year 1 License Fee	$3,000	$5,500	$10,000
Subsequent Year (30% off)	$2,100	$3,850	$7,000
Features, Data and Support
Data Usage (video uploads)	10GB	500GB	2TB
Domains	1	1	1
Themed Site	Optional add-on +$500	included	included
Single Sign On	Optional add-on+$1000	Optional add-on+$1000	included
Multi Organization Rollup Competition	Optional add-on +$3000/year	Optional add-on +$3000/year	included
Winners Gallery	Optional add-on+$1000/year	Optional add-on+$1000/year	Optional add-on+$1000/year
AMS Data Sync	Optional add-on+$5000 + $2000/year	Optional add-on+$5000 + $2000/year	Optional add-on+$5000 + $2000/year
Support	Regular24 hour response time through ticketsUpgrade to Elite for $1000.	EliteDedicated Phone SupportOptional add-on +$1000/year per admin	EliteDedicated Phone SupportOptional add-on +$1000/year per admin
Initial Contest Implementation	Optional add-on+$1000 per contest	1 includedOptional add-on+1000 per contest	1 includedOptional add-on+1000 per contest

Zack’s Plan

BASIC – “CLICK HERE TO SIGN UP”

Base w/ a default template	$3000 per year
Respond to ticket in 1 business day
Access to training documents / documentation
Unlimited submissions, unlimited programs that you can set up yourself

BASIC + EVERYTHING ELSE ADDED ON IF NEEDED (LINE ITEMS)

Theme	$200 one time
Program Setup + Unlimited support	$1000+ (est based on program size)
Streaming video	$1000 per year
SSO	$1000 one time
Role up w/ chapters	Talk to us
Public Vote	$1000 per year
AMS Two-Way Data Sync	Talk to us

My Plan

Price Discussion

We typically assess a fee to a client based on the complexity of their awards programs.  We work with you in good faith to ensure we have a clear grasp of your programs and then we issue a flat rate for the year which includes unlimited support and unlimited usage.

[[During the call you should have figured out the answers to most of the questions below]]

I can give you a rough estimate based on what we’ve talked about

– You have 2 major programs and get about 800 entries between both of them

– The entry forms for both programs are straight forward

– You have just 1 round of judging

– You don’t  get video uploads and really just 1 or 2 admins on your end

– That comes to a year 1 fee of $5,300 with subsequent years at a 20% discount.

“So…what if we get a lot more than 800 entries”

– As mentioned we take your word on your program size.  Your year 1 costs won’t go up.  If you get say 2,000 or 3,000 entries, then in year two we might ask for a modest fee, but we’d let you know way in advance.

“Can we use this system for other awards programs”

– Our policy is to give unlimited support to those programs we have discussed together.  Having said that, we don’t put on any restrictions, and many clients do end up using the system for a lot more than they originally planned on.  We are happy to answer basic questions on programs you have setup by yourself, but if you need the full service of our implementation team, we might ask for a nominal fee for other programs.  I think the key here is that there are no surprise costs and on the same note there are no surprise restrictions.

“$5,300 is over our budget, is there any wiggle room on price?”
“I’ll see what I can do, ….was there a high water mark”

“Yea – $4k tops”

—- next call—–

“I was able to get my manager to sign off on waiving the skinning fee, and taking another 15% off”  ($4,250).  Renewal fee would be $3,500.

Step 1: Tell us About your Competitions / Programs (See Pre-Contract Worksheet)

# of Entries		First 2500 included$1000 for each additional 2500
# of Entry Forms		$500/each
# of Rounds of Judging		$500/each
Public Vote		$500 each
Winners Gallery		$750 each

Step 2: Choose Features Needed

Basic Features	$3,000
+ Streaming Video (waivable)	$1,000
+ National / Regional / Chapter	$5,000
+ Supported Admins (2 included)	$1,000 each

Step 3: Any One-Time Add Ons?

SSO (waivable)	$1,000
AMS Data Sync	$5,000
SIte Skin (waivable)	$300
AMS Data Sync Adjustment	(varies $100-1000)

Step 4: Your Pricing

– Year 1 = Steps 1, 2, 3

– Year 2 = Steps (1, 2) with 20% discount

Pre-Contract Worksheet

Program / Competition	# of Entry Forms	# of Judging Rounds	# of Entries	Public Vote?	Winners Gallery?

Some quick opinions
Tim’s plan: My opinion is that we don’t have the right kind of market segments to create plans.  With all the add-on options and with our sample size of clients always picking different combinations, there is no “Enterprise” plan.  Everyone is a Basic + or a Pro -.  I also don’t think we should put anything like this on our website.  No one falls into any of these buckets.  Tim highlighted Sitefinity, but my thoughts are that most people who buy Sitefinity  DO fall into a major bucket.

– Do I need load balancing: No — ok I can get standard, YES — I can get pro.  Do I need more than 5 concurrent users?  Yes – I need enterprise.  It is pretty clear.  With Tim’s it is always N+1 or N-1.  Not consumer friendly.

If we are to put something on the website — I would opt for a table like this.  Segment people by audience type, and give them an understanding of their starting point.  Not sure this is a good idea though.

Magazine / Newspaper	Collect entries online for one or more contests.  Automatically generate and showcase winners in an online gallery.	Starts at $3,000 | get a quote
Broadcaster	Forget about mailing DVDs with our support for streaming audio and video	varies | get a quote
Trade Association	Ditch the binders and run recognition programs and committee / board nominations online	varies | get a quote
National Organization	Avoid the duplication of efforts.  Have chapters winners automatically roll up into a national competition.	Starts at $7,500 | get a quote
Scholarship	Simplify the entry and selection process with a unified system for students and judges.	Starts at $3,000 | get a quote
Corporate Grants / Prizes	Collect entries and have a panel of judges review online.  Run a public vote to help select the top candidate(s).	varies | get a quote
IT Manager / DIY	Run unlimited competitions using our platform.	Starts at $3000 | get a quote

My Opinion on Zack’s  Plan
It’s actually pretty similar to mine.  His emphasis is people should pay based on hours they consume.  My thoughts are that sounds like a consulting company, rather than a product company.  What happens in year 2 when they consume less hours.  His opinion is that means less support for us, so less time spent.  Might sound fair, but I think this is a flaw in the model.  We built a product and we service that product.  We should charge based on value given, not based on our costs — otherwise we’ll be stuck in consulting land forever.  Our markup is really based on the fact that year 2 has less support than year 1.

Tomorrow should be interesting.  3 stubborn people + Timmy + Marc to go over all of this.  I’ll report back on what we decided to try.

Probably about 3 years ago we released our “WordPress World Map” plugin.  We thought we had struck gold, with a “lite-edition” plugin on the WordPress store we were sure to get a ton of upsells for our premium version.

It is going to be a tsunami of business, but make sure I don’t get swamped with all these shitty leads. — another “Sean-ism.”

He was right — a ton of shitty leads came through looking for our Premium Plugin which barely worked.

We are at it again with our memberCMS plugin for WordPress.

This time around we are not expecting any miracles, in fact we are expecting an onslaught of cheap WordPress webmasters looking for free advice.

If this plugin generates even $10k in revenue, I would consider it a success.

Morale with the sales team has been at a lukewarm level.  The late summer months aren’t seeming to yield too much success with our predictable revenue sales approach.  The SEO leads we’ve been getting in have always followed the same pattern, us, Omnicontests, and w******.

On one hand we should be grateful because we didn’t even have that going for us last year, on the other hand it’s frustrating not understanding why we win some and why we lose some against w*****.

Omni is a worthless organization — our coup of taking AAF from them in June is the beginning of their end.  But w****** which has closed 2 rounds of seed funding constantly frustrates us.  It is our Goliath.

Their software isn’t significantly different or better than ours, but we speculate that their sales approach or marketing collateral puts them over us.

Enter Zack Chase – Zack is our go-to barbarian when it comes to our fake it till you make it strategy.  (Having just finished reading Barbarians at the Gate we all are starting to express a bit of hunger for stirring the pot up.)  We have Zack go by the pseudonym Zack Chase and leverage his connections in New York to keep the ruse going.

Each time we invoke Zack Chase we justify it and tell ourselves it is the last time.  Today though I think we accepted Zack Chase as a permanent fixture, a mechanism to elevate our company position.

Zack Chase now comes complete with an e-mail address, phone number, and alibi.  We setup our attack plan — get a demo of w******, get their marketing collateral and learn their approach.

To be continued

I think Sean started working with us around the beginning of October of 2010.  We had just moved from Affinity Lab to Washington Offices, but they were low on space, all they could give us was a single cubicle for a few weeks.

The cube was about 100 sqft, and in it you had Tim, myself, our intern, and Sean.  We must not have noticed the k-mart jeans or smell of BO when we interviewed him 2 weeks prior, but it was hard to miss when we all sat close enough where we could “smell each other’s farts.”

We should have cut the cord just in those first two weeks.  Of course we rationalized, this is a 100% phone sales job, it can’t be that bad.

We got that second office and the air for Tim and myself was a lot cleaner.  Sean would stack up the empty McDonalds bags on his desk, and there was always a new coffee stain to greet me when I came by.

Still, at this point things weren’t so bad.  Tim had put together the “Nonprofit Website Sales bible” which explained his process.  The problem was that neither Tim nor I did anything more than dabble in outbound sales.  The Google Gods were nice to us.  Being #2 on google for Nonprofit Web Design meant we’d get a few leads per week.

The first few weeks went by without much traction through the cold calls.  We felt like we needed to motivate Sean so we started giving him the inbound leads we’d get.  We were too petrified though to let him take the call himself (we needed the money badly and could not take losing a project to chance).

By December the calls were like clockwork.  Tim would do most of the talking, once the prospect was ready to work with us, Tim handed the phone over to Sean to “close the deal” aka write up the paperwork.

Instead of having someone help grow the company, we now had an extra administrative resource who was getting a 20% commission on sales.  We also increased our average sale price from $5k to something like $15k.  With each sale we were now doing more work, and digging ourselves into a bigger financial hole.

Our terrible planning was playing out and we were paying for it mentally and financially.  We’d have anxiety coming to the office knowing that the little money we had was being wasted.

Food for Thought
To add to the hassle, our salesman thought he was the shit.  After he had a great call with someone who wanted to use CiviCRM + Drupal as their system of choice, he came to us.  “Guys, people will pay $15-20k for this kind of stuff.”  I dismissed him, I probably could have been politer about it, but I equated doing 6-8 months of work  for $20k as charity work.  Later that day he drafts up an email titled “Food for Thought” in how we should make investments in CiviCRM so that getting these kinds of projects will be like “Shooting fish in a barrel”.

Superbowl Week
One week we got a lead in from Alante Financial.  It was one of the few times that we let Sean handle the entire call himself.  We were happy to hear he got an in person meeting and he came back with great news.  “Alante wants to use us for 4 websites!  We just need to give them a deal on the first one.”  I had explained to him my parents love to do this to contractors who work on their house.  ‘Yea we are going to redo our bathroom, kitchen, and den so give us your best price’ — then just get some minor work done.  Whenever he’d send a proposal, he’d call it superbowl week, and he’d respond to my naysaying as raining on his parade.

Considering his total revenue was less than $10k excluding the sales Tim literally handed to him there should not have been nearly as many superbowl celebrations.

Hire Slowly, Fire Quickly

We did a terrible job with the first part of this advice, but we were not going to wait around and watch our company sink.  With our horrible planning, we figured we expected to break even on him within 3 months.  Anyone with any experience in sales would have scoffed at our expectations.  We had no idea what kind of ramp up time was needed for website sales, we didn’t know how to sell, only how to respond to requests for proposals, we didn’t even have a real concept of a pipeline.

3 months went by with no real sign of improvement, but we finally came to terms with the fact that it might not have been Sean’s fault.  I read that at Zappos they offer employees a few grand to quit after their training is over.  The idea is that if an employee is not happy, it is cheaper to get rid of them with a cash incentive than to find out the hard way.  At the end of the day if someone is not happy at work, what is the point in prolonging it?

Tim and I decided $2,500 would be a good number to offer him – but we also realized we needed to reset expectations.  It was early January 2011 and we told Sean, “let’s chat after work, maybe get a drink.”  The air was cold, he expected to get fired and looked nervous.

Safe to say, going to a firing meeting over a drink is never a good idea.  We got 2 rounds of drinks before getting into the tough talk.  I was already tipsy and feeling better about the prognosis.  We explained to Sean he needed to get his own deals and sell a certain kind of website.  It was our first attempt at formalizing a process, we calculated our profit after his 20% cut and still found several kinds of websites he could sell that could be win-win. We were all buzzed, the talk of $2,500 to leave never came up.  Tim and I reset the clock for another 3 months.

Looking back at even this revised plan, there  really was no way for us to keep Sean.  20% commission on a service is massive.  Competition is cut throat and margins were at best 30%.  I really don’t know what we were thinking, but I do know we had no real idea what our margins were and what they could be best case.  We kept working to find a way not to fire Sean, but really had he stayed with us we’d always find ourselves working hard to line his pocket, there would be no money left to grow the company, let alone line our own pockets.

Well anyways we soon learned a lot about Sean.  We never really thought it was important where someone lived, after all our company was built up while I was living in Brussels and Tim was in San Diego.  We didn’t realize for staff there needs to be some routine in place for success.  Sean was living out in Fairfax County, accessible by a 45 minute train then 45 minute bus ride.  The daily commute was well over 2 hours in each direction.  He had to leave by 5.  On a normal day it would be hard for him to give us 110% what would we get when shit hits the fan?

This was the year of the Snowpocolypse.   Tim and I lived just a few blocks from the office, but we told the intern and Sean to get going around noon.  I had one of my parade raining talks with Sean the day before, so he felt he needed to prove his work ethic.  He stayed till around 4 PM, as the metro was moving into emergency weather mode.    I think I left the office around 6 that day and remember walking with snow up to my knees.  After I got home, I sent an email saying to everyone should work from home tomorrow for sure.

No response from Sean.  We wondered if a branch had fallen on him, but the next day he comes to work looking very sick.  Apparently, by the time he got to Fairfax around 5:30, bus service was already cancelled.  He had to walk another 7 miles in the blizzard.  He was pretty pissed, really I guess it was just another turn for the worse for his life.

It turns out that Sean has 2 kids from 2 ex-wives.  We were issued several court orders to garnish his wages to pay off his alimony debts.  To put things in perspective, Tim and I were frustrated that there was no money left after paying him, well he was frustrated that even if he knocked it out of the park, he’d never have enough money to improve his own lifestyle.

When we hired Sean, we didn’t ask for W-2s, we didn’t do a background check, we just hired him on likability.  I’m not saying we shouldn’t hire someone who has 2 ex-wives, but it sure as hell would be good to know to frame interview questions around.  Maybe someone like that would work 10x as hard to overcome the immediate financial burden, but it was clear he was just there to exist.

I am not Your Intern

My demeanor must really have set Sean off.  I can’t blame him, during our holiday party I was a drunken mess.  I was walking around telling people “fuck my salesman” and “our company is going down the drain” — I’m not sure how much he heard, but it could not have helped that I was constantly suggesting his work was sub par.

It was now the end of March our Tim and I were deliberating the next step.  On one hand Sean had built his pipeline up to $100,000.  On the other hand, not a single deal of his had closed.  We could wait it out another 3 months.

On the first week of April tensions finally peaked.  Sean would spend most of his day writing proposals, and little of his day prospecting for new business.  I had told him a few times to just work on a proposal outline and not to waste his time trying to figure out how to write up something technical.  He comes to my desk with a 40 page document he spent the last 3 days working on, and I quipped with, “I can’t do anything with this, give me just the outline.”  He had no outline and loses it, I am not your Intern!  I am a professional.  Your ways don’t work, I need to do things my way.  This is the proposal I’m going to send.

Tim and I decided that’s it.  6 months was up, too many red flags, this was just the last piece.  Sean was constantly finding ways not to prospect.  He’d poke into our office, “oh I;m just stretching my legs” or encourage us that his circular calls were going well, “as you know the goal of any meeting is to get another meeting.”

I can’t argue with his mentality.  When I tried cold calling, I’d hate it so much I tried to find any other work so that I wouldn’t have to.  It’s mentally easier to write a proposal or to send emails than it is to call.  We didn’t have a plan for his success, so he was simply demotivated.

The fact that he was also a D player just made matters worse.

The Firing

We thought we’d ax him the next day, but he called in sick.  The next morning, Tim and I did a run around Hains Point, roughly an 8 mile run, in part to ensure we were awake early, and also to calm nerves before our first firing.  Since Tim was technically Sean’s boss, he got to do the honors.  I thought I’d avoid it all and spent 10 extra minutes at CVS before heading to the office.

Tim and I agreed to pay 2 weeks of pay + commission on all closed deals he had made.  Most of the deals were Tim’s doing anyways, but we felt it would be hard to argue otherwise.

Apparently Sean was pretty good at getting fired.  When you are getting fired, if your boss is inexperienced, they will probably be emotional about it.  We genuinely felt bad about the firing.  In the process we got hosed.

Sean knew his gig was up, so it was really a take as much as you can maneuver.  He “sold us” his $100k pipe, claiming that we were firing him to rob him of future commissions.  Somehow he managed to get us to commit to paying an extra $9 grand to compensate him for lost future commissions.

I wanted to split the severance into his next 2 pay checks.  He would not leave without a check in hand, he also demanded we make car payments for him since he would be unable to get another job without a car.  He must have had some real shit happen to him, but this was getting ridiculous.

Tim walked to him one last time, offered to his termination letter which included the extra pay he wanted + the severance we decided to pay.  He he didn’t accept, there was a second piece of paper that only had his 2 weeks of salary, this second piece of paper would be signed by Tim only.

Sean could feel it was over.  He bargained up a good offer and never even knew about the second piece of paper.

After nearly 2 hours of yelling and telling us that we were screwing him by withholding taxes, he comes shakes my hand, and reminds me that “Tim was the glue that held the team together.”

He leaves and we never hear from him again.

Aftermath

About 5 months after Sean leaves we get a strange call from Priscilla.

Woman: Hi is Sean there?
Tim: He is on extended leave, how can i help you?
Woman: I really need to talk to Sean, it is a personal matter
Tim: Sorry, … <she hangs up abruptly>

We search his email for the phone number entered.  Apparently he had met this woman at a training event we sent him too.  They had kept up a relationship on email, but I guess he didn’t have enough minutes on his cell plan, so she had him call his work number.

When Sean left, we mulled through his files to follow up with his outstanding leads.  In the process we found out he did all of his work on an external hard drive.  Every night he’d take this hard drive home.  Nothing of use was on his laptop.

Not a single deal from his “$100k” pipe closed.  Not even a single call came through on any deal he worked on.There was not much he could have done on his own with the prospect list, and even to a competitor it was not worth much, but it was just another reminder that we were a bunch of fools.

We should never have hired him.  Sure we learned a lot in the 6 months he was there about what never to do again, but at a direct cost of $40,000 + probably another $10-30k in lost bushiness.

At the end of the day, the fault comes back to Tim and myself.  What did we expect with no plan and no past history to measure success with.  We were flying blind.  Sean probably sensed this and figured it was best to milk it for what it was worth while it lasted.

A month before firing Sean we let our Intern go too.  He gave us similar feedback, “I was wondering why you guys kept me here this long.”

Winners are always hunting to make sure their plate is full.  As employers it is hard to attract a winner, and it is hard to keep them.  Losers on the other hand will leach on and won’t go away by themselves.

Had I written this in 2011, I would end with something like, “hopefully we’ll never make this mistake again.”  While not as bad financially, we did repeat this error at the end of 2012.  More on that when I write about why you shouldn’t hire friends.

Back in the summer of 2010 I had summoned Tim to move back to DC.  We both felt like either something was going to happen with the company, or it was best we parted ways.  At the time our revenue was 90% coming from projects that needed strong software development oversight and the nonprofitCMS projects just were not bringing enough money to sustain a full time salary.

When we started nonprofitCMS just a year prior we were idiots.  We charged something like $600 to build a website based on a template.  We thought since we are more skilled than the average web developer we could crank out websites in just a few hours.  We were wrong and I’ll probably write more about that in another post.  Either way we had slowly moved up our pricing from $600 to $2000 to I think what was around $5000 per web project.  Tim and I both decided the next move was to hire a salesman…

We had read a lot of business books.  SPIN Selling, Good to Great, How to Build a Sales Machine, who knows what else.  We were also advised by our mentors constantly about how important that first hire is.  “Making a wrong hire can set you guys back…” (and presumably making the right hire will take you to the next level.

This story is no different than the classic business case studies.  Considering I didn’t follow the advice of the business books or the advice of my mentor, I’m sure even if I had gone to business school I’d have made the same $50,000 mistake.

We Did Everything Wrong

When we hired our second salesperson at the end of 2012, we went through almost 9 months of searching.  We got professional salesman hiring training.  In a nutshell before you hire someone it is a good idea to come up with a list of job functions they will do.  From there you can create a matrix of past experience they must have to confirm they can do a good job.  While there is no guarantee, if someone doesn’t have experience doing something similar, you are really just rolling the dice.  When your company is 2 people, and you are about to bring on your third to be the messiah, you want to make sure as much as you can upfront.  Check W-2s, background check, have them take a psychometric assessment to predict success — it might sound silly, but that extra $400-500 can save months of time and tens of thousands of dollars.

Of course we had all of this advice, we just chose not to listen.  The question is why?

Mistake #1 – Rushing into things
Tim: “We need to get this coming off the ground, we really need a salesman”
Kunal: “Absolutely, let’s put out an ad on craigslist and start looking.  I’ll ask my cousin for a sample job description”

Within a few days we had conjured up a job description and found some interview questions on the web.  We also decided to post the job ad on craigslist.  At the time we figured the person would make maybe $60k per year 40k base, 20k commission.  Where we got these numbers I couldn’t tell you.  We were selling websites for $5k, we didn’t even bother to look at our profit margin which was actually non-existant.

We also didn’t realize how coupled we were to the sales process.  Meaning people did business with us because we sounded like we knew what we were doing.  We never tried isolating sales from engineering.

It seems obvious now, but how on earth could we expect someone who used to sell mortgages in a subprime market to now sell websites.  How could we pay them commission if there was not even profit after operational expenses?

So bottom line we had no plan for the salesperson.  He or she was doomed right from the start and we didn’t even know it.

Mistake #2 – Likability

So let’s say even with a piss-poor plan, we got a rockstar.  Instead of selling websites for $5k we could sell them for $10k.  Perhaps if we hired the right person we could grow to this level and make up from our error in judgement.  A lesson we learned a year later when we hired Zack was that if you bring on the right person, even if they were hired for one job, if they are willing to wear multiple hats, you’ll find a way to succeed.  Good to Great and Delivering Happiness both talk about this a lot — worry about getting the right people on the bus, then worry about where the bus is going.  Great people fill find a way to develop the company.

Anyways – we hired this person because we felt good talking to him.  The interview lasted a total of 15 minutes.  We explained what the company did and he said “guys I’m totally in!”  We were excited that someone else was excited to work with us and we pulled the trigger.

Mistake #3 – Desperation

How did we even fall for this guy?  I mentioned we put out a job posting on Craigslist.  Don’t waste your time posting on Craigslist.  You’ll quickly get flooded with tons of applicants who are self-qualified.  Most are vastly underqualified and the ones that are overqualified are just shotgunning out their resumes, rare chance you’ll nab them (and can afford them).

We were in a rush to bring on a salesman.  More sales = more revenue and we needed more revenue to stay in business, so it made sense.  After all we figured, with no sales experience we made it this far, someone doing this full time must at least do as much business as we did. (wrong again)

We had one decent candidate apply.  He used to sell search engine optimizations services and was just laid off.  He was clean cut, had a great font on his resume, and was energetic when we met him.  He wanted a $50k base which we simply couldn’t afford at the time.

The only other candidate who was worth interviewing was this guy named Sean.  He was fine with the money we could pay and was ready to get started right away.

After 3 or so weeks of looking for a salesman we were already frustrated with the process and were relieved we could focus back on the company.

The excitement level was high, finally we thought we could stop working in the business and start working on it….