Why start-up businesses are unattractive customers
“MY LEAST favourite customers are firsttimers. I have found it so stressful to work with them that they are no longer my target.” Those were the words of a veteran real estate broker uttered during her presentation at a real estate salesman course I attended a few years ago. No one wants to hear that they may be undesirable or unattractive, but she made a strong case that not all customers are created equal, and that up-andcoming real estate professionals needed to be strategic when selecting a niche. Her main reasons for shunning first-time homebuyers were that they had unreasonable expectations, focused too much on the aesthetics of a property instead of the bones, and were too indecisive because they were constantly conferring with several people who had widely divergent perspectives such as their parents, siblings, other family members, and friends. As a result, first-time home buyers were more time-consuming, overly demanding, and more difficult to satisfy than other customer segments, making them less attractive in comparison with other segments of the market.
It is important for start-up businesses to understand that just as first-time homebuyers are undesirable for some real estate professionals, they, too, may be unattractive for some service providers, such as landlords, accounting and legal professionals, marketing and advertising companies, financial institutions, business support services, and others.
CASH-STRAPPED AND UNREALISTIC
One of the main reasons startup businesses are unattractive is they are always strapped for cash. Most entrepreneurs bootstrap their way when launching a business, and limited cash on hand is one of the inherent challenges.
Landlords tend to be very cautious when doing commercial rentals because of the highrate of business failure and the significant risk of late payments, unpaid rent, or early termination of lease. Although service providers may be sympathetic to the cause, the reality is that many of them can’t afford the uncertainty or delays in receiving payment, or haggling over costs or requests for discounted goods and services, which is commonplace for many start-ups.
New entrepreneurs sometimes also have unrealistic or unreasonable expectations which are difficult if not impossible to satisfy. For example, I have heard many entrepreneurs complain bitterly that they spent money on an advertisement but didn’t see an immediate result, and as such, they wasted their cash.
The reality is that advertising is not meant to be a one-off investment because it takes numerous and consistent impressions for advertisements to convert to calls or sales. Therefore, one-month advertising contracts or social-media campaigns may not yield a substantial return on investment, if any, because they didn’t meet the required effective frequency.
Effective frequency is A marketing term that refers to the minimum number of times a message must be exposed to a prospective consumer to change his or her behaviour or get them to buy into the message, product or service being advertised. However, because most entrepreneurs have no formal training in business, finance, operations, marketing, or advertising, their expectations are understandably far removed from reality in many cases, thus making them overly challenging to work with.
Additionally, one of the most significant risks that serviceproviders try to avoid is bad word of mouth from start-ups whose complaints result more from their own inexperience than from the fault of the company with which it is doing business.
Unfortunately, inexperience has several negative connotations, especially in business. It is often associated with timewasting, costly mistakes, poor productivity and work quality, undesirable attitudes, lack of critical skills, and more.
Start-ups can be unattractive because of the limited experience of the principals. The biggest issue for some service providers is the time and effort it takes to educate prospective customers on the nuances of executing various forms of work.
For example, a web designer recently shared that she no longer works with start-ups because they don’t know how to put together a brief or clearly outline the desired specifications for service, as a result, she found herself spending unbillable hours trying to ferret out their needs and helping to create their own wishlists.
Start-up businesses may take solace in the fact that no one is born with knowledge of how the world works and every business goes through the growing pains of inexperience. However, understanding how your entity may be perceived by some is helpful in most facets of doing business, particularly when selecting service providers. Start-ups should not only be mindful when building relationships with various stakeholders and partners, but also be deliberate in seeking out those who are empathetic to their circumstances and are willing to grow with the business through its life cycle.
Yaneek Page is an entrepreneur and trainer, and creator/executive producer of The Innovators TV series. Email: info@ yaneekpage.com. Twitter: @yaneekpage. Website: www.yaneekpage.com