thederekjohnson.com

I took this video of LiquidPlanner CEO, Charles Seybold, speaking to the Bellingham Angel Group regarding raising Angel capital from the entrepreneurs perspective. Enjoy!

I was listening to fellow startup CEO, Charles Seybold of LiquidPlanner yesterday and he said something that resonated with some of the new initiatives I am working on at Tatango. He said his company is currently spending money on conversions, not demand. Wow, what a simple phrase, but so powerful for any entrepreneur starting an SaaS (software as a service) company… Spend money on conversions, not demand.

But Derek, your traffic is crashing… this can’t be good for your company. To be honest, right now I could care less about my Compete traffic. This is definitely a far cry from when I would wait for this information like a kid waiting for Christmas morning. You can see evidence of this from a 2009 Tatango blog post where we touted that we had made the top 100 Seattle Startup Index.

Let me give you an example of what a conversation with my team would be like during that time….

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Being an entrepreneur means you are a leader, and being a leader means you will have to make tough decisions. Colin Powell said it best, “Good leadership involves responsibility to the welfare of the group, which means that some people will get angry at your actions and decisions. It’s inevitable.”

My responsibility as a CEO is to take actions that benefit the welfare of the company as a whole. Most of the time this means doing fun stuff like implementing new products, hiring key employees, developing strategy for the future, but unfortunately it also requires doing the not so fun stuff, like terminating employees. I’ve had to terminate my fair share of employees in my entrepreneurial life, and it’s never easy. Not very many employees are very happy when they get terminated, neither are their families, friends and if you live in a small town like I do, anyone else that is within earshot of the news.

So what do you do to deal with the heat? Follow these four steps…

1) Take the high road - Just because you Twitter, blog and Facebook every moment of your life, doesn’t mean you have to talk about what just happened. If the employee decides not to take the high road, still keep your mouth shut, even though it will be hard (trust me). What you have to realize is some people may sympathize with them, but most business professionals know that being a CEO means you have to make decisions that aren’t always fun, but are done in the best interest of the company.

2) Talk to employees - Employees are the most crucial part of any company, you will need all of their help to reach the goals you have set for the future. Make sure they are aware of the reasons for termination and be sure to let them ask you questions.

3) Talk to investors - Investors only hear what the street tells them, until you tell them. Be sure to explain the reasons behind an employee termination and re-assure them of your long term vision for their investment.

4) Get back to work - You have a company to run. By spending any additional time on someone that doesn’t work for you and isn’t sharing the same goals any longer, means you’re wasting your time.

As I wrote before, I am in the process of re-thinking a lot of the things we currently do here at Tatango. To help other entrepreneurs, I’ve been writing about these changes. Below is another post about some of the things I’ve learned along the way and things that are changing at our company.

One of the things we spent an enormous amount of time on at Tatango was generating press. For being a small startup from an even smaller town, we have received more than our fair share of press coverage. We have been covered in TechCrunch, Mashable, Wall Street Journal and a host of other very notable blogs, newspapers and even radio shows. Was this done to satisfy my ego, boost employee moral, generate links, impress investors or have something cool to hang on my wall, most likely. What I’ve realized though is that during the first couple of years, press is only good if it generates revenue. For some websites that may mean traffic (ad-supported), but for Tatango it means generating subscriptions. What’s interesting is that in regards to subscriptions created on Tatango, all the big articles combined, don’t even compare to what a small (17k uniques a month) Christian Youth Ministry blog has generated.

The lesson learned, while resources are scarce and revenue is your main goal during the startup phase, focus only on generating press that generates revenue, leave the rest for the future.

Over the last couple of weeks we have gone through some major re-thinking about how we do things at Tatango. As I re-thought things, I realized we had to get back into the trenches with our users, making sure that we built a true, meaningful, and long-lasting relationship with each and every group that is using our service. This is why I hired a full time “Community Manager”, in which her only objective at Tatango is to make sure every potential and current customer is happy.

During this re-thinking, there was a pivotal moment, which seems like a no-brainer after the fact. This pivotal moment came after I grabbed a ridiculously thick marker and where everyone in the company could see, I wrote the lifetime value of a customer at all of our different price points. For example, our lowest plan at $19, had a year value of $228 (I know this doesn’t mean “lifetime value” but you think I’m really going to disclose that, come on). The minute I did this, things started to click within our company. Employees started to finally understand why I fretted over one missed call or even one support email which went unanswered because of the spam folder. The lesson learned, make sure everyone in your company, most importantly the people that have interactions with your customers, know how valuable every single one is. For our company all it took was a marker and big handwriting.

There are a lot of other changes happening at Tatango and hopefully over the next couple weeks I will be able to share a few of these with you and let you in on the results.

I was looking around the Tatango office and it struck me that not one person in our office today was there at the beginning or even part of the original management team at the company. Ok, I realize most people are going to say this is because I’m almost impossible to work with. They are right. Anyone that knows me or has worked for me, knows I’m a perfectionist, I expect 200% out of my employees and anything less isn’t tolerated. This can either drive an employee to become a powerhouse or crush them. This blog post however isn’t about how difficult I can be to work for. It’s to bring up the point that when you as an entrepreneur start a company, you have to take into consideration that there is a good possibility that most of the people you surround yourself with at the beginning won’t be around in the end (or even in the middle). Don’t believe me, check out some of the companies I highly respect (Facebook & 37Signals) and see if all of their original founders are still there…. nope. Actually at both of these companies only one founder remains.

So what’s the point? Business is like chess, you have to be thinking multiple steps ahead to succeed. I have been very lucky to have amazing advisors and legal counsel that made me think about these harsh realities and plan for this type of thing from day one. If not, we would have never made it as far as we have. Plan for the worst, expect the best.

A great response to this blog by Bob Pritchett, check it out.

Companies like Ford are embracing social media on point. Who have you been following that is killing it in the social media space?