##A set of thought leaders opened the FOUNDER.org Q3 Forum in New York with an informative and action packed panel on scaling customer development.
* Moderator: **Michael Baum**, CEO of [FOUNDER.org](www.founder.org/about)
* **Anna Palmer**, CEO of [Fashion Project](https://www.fashionproject.com/)
* **Beth Haggerty**, Former CEO of [WeAre8](https://weare8.com/)
* **Rob Morse**, Account Executive of Major Accounts at [Splunk](www.splunk.com)
* Be careful about winning customers through price. This sets a baseline for their later behavior.
* Love your early customers because they are your biggest evangelists. Do everything you can to make them happy.
* Institutionalize your learnings from your early customers in order to set up a repeatable sales process.
* If you haven’t set up a process to scale, you’re not ready to go all in.
**Beth:** I worked together with Michael and we have been long friends. I was the former VP of Sales at Infoseek and Michael was the VP of E-commerce. I have worked with a number of companies, large, medium and small. I have successfully built companies and managed global business teams across digital and television media. I have served executive roles at companies, including those that have exited to The Walt Disney Company, AT&T and Nielsen.
**Rob:** I’ve had a long career in selling technology with big companies and I’ve had my own reseller business that I’ve operated for 12 years. But the crowning achievement has been my role as a regional sales manager at Splunk, where I have been for the last 6 years. We have seen phenomenal success, thanks to Michael [Baum], and we have continued to grow at a rapid pace. The customers are the biggest customers in the world.
**Anna:** I’ve been in Consumer Internet for 4 years. I’m a graduate of Harvard Law, which is where I met Michael when he was doing a talk there. I started my company called Fashion Project. Michael has personally mentored me for several years. To date, we have donated close to $1M to non-profits and worked with customers like Nordstrom and Neiman Marcus.
### What are some war stories from finding your first customers?
**Michael:** One of the most challenging things is landing your first customers. Let’s talk about some war stories from how to find your first customers.
**Anna:** From the consumer side, we get to know our customers so, so well. For us, we needed to know our women so well. I know exactly who she is: At this point she’s getting on the subway. This is what is happening in her day. It’s very important to nail this group because your the first customers really become your biggest evangelists. So it is so crucial to put the time in because you need to get that foundation. To build this base, we went directly to where our customer was. We had to find them. For us, it was Instagram, because that is where our women were. From there, our customer base grew fast and we expanded.
**Michael:** Anna is a big student of Day in the Life Challenge.
**Rob:** When it comes to large enterprise customers, you have to realize that they have been at it for a long time and are very smart. One of the biggest dangers and challenges is that everyone wants a big customer. Everyone wants that first foothold into a big account. Often times, it’s easy to lead by price to get that big win, to give a discount to win that client. However, this can get you real trouble. Because then you are playing the commodity game. Figure out a way to not be commoditized, because that’s a sure killer. I’ve seen time and time again, where my competitors come in with price and sometimes they win because of that. But usually those customers come back to us because we are better at what we do. Really, it’s all about the value not the price.
**Beth:** When I advise early stage companies and entrepreneurs, the primary reason they fail is that [entrepreneurs] just want to go fast. If you look at all successful startups, they were all able to focus on a specific segment. That discipline is very important and very hard to maintain. Take a step back to prepare and carefully map your market, because it’s not random. Figure out where you need to go. It’s so thoughtful and carefully planned. So go get your first customer and most importantly, make sure to take your learnings to a second customer in the same market. Attrition is the most expensive thing, in any way. Investors will need to see a repeatable process for you to scale.
### What can go wrong with early customers?
**Michael:** What can go wrong with early customers? We once had a client in the early days that we failed- we had to refund them. It was devastating to the whole engineering and management team. That was a time that we could throw up our hands or fight. I actually took their purchase order and framed it for everyone to see. It was a reminder of what can go wrong. But we worked hard to fix everything and make our software great. In 6 months, we were able to turn it around. We gave their money back, but in the end we made it work. They ended up purchasing afterwards. They actually later became a great reference customer for us.
**Rob:** There are so many instances where these problems become a compelling event. From the customer perspective, it’s going to be hard to find someone to give exactly what they want. However, [these companies] can turn out to be your best client, if you don’t give up. Just by being persistent, I’ve turned many uncomfortable situations around and many turned out to be my best customers.
**Anna:** Remember, your customers are smart. They will go online and research you. You really have to love your first customer so hard. I always talk with my customers constantly. I actually got invited to one customer’s thanksgiving. No joke, that’s how close we were. On mistakes, I’d be careful in sacrificing for customers. Especially in consumer, it can be so easy to throw a discount, but you have to realize that whatever you establish as your foundation is what [your customers] will do over time. This is how they will behave. If you can’t get to the price point that makes sense for your business, then you need to figure out a work around. So here is an example: We had a big customer account, and you have to make sure you’re really ready to handle a big customer. When the promotion went out, it was crazy. To put it in perspective, we were doing 1000 closes/week which overnight jumped to 10,000/day. It was a nightmare situation to get them what they wanted. We were scrambling and we had to outsource every printer across Boston just to print the labels for shipping. But this is so critical because you can’t mess up with a big client in the first 3 days, or they will never use you again. We got saved through creativity, but it was close. It could have killed the company.
**Beth:** I would agree. Your first customer is your marketing vehicle. You never forget your first customer- you love them always. You are so grateful. It’s so careful to manage expectations. So for example, if they are beta partner, there’s an expectation that things are not always done yet. They will be more understanding. Also, choose a coach inside the customer to figure out how to succeed. Get as much data as possible, which will help you succeed in the relationship. This will mitigate hopefully a scenario of going over the edge. But to repeat, do everything you can to make them happy.
**Michael:** Be careful to what you do with the customer because that becomes your baseline. Be careful about discounting because it pushes you into a commodity space.
**Beth:** Depending on where you set your value, it’s very difficult to get out of later on. What you want to do with your first set of customers, call them your charter or first inaugural customers. If the strategy is to discount, you want them coming from a different place. Discounting as an overall strategy is very bad, because you need to first say [early customers] are a charter member. These first customers, they can stay lower, but you get out of that point as quickly as you can.
### How do you know when its time to take a process and start repeating it?
**Michael:** A lot of teams here are thinking of their first customers. How do you know when its time to take a process and start repeating it? A lot of entrepreneurs are hesitant to say now is the time we can start repeating [the sales process]. Here we are working with our entrepreneurs to put together operating plans- to figure out where they want to be in 5 years and how they will get there.
**Rob:** Repeatable processes that become part of your go-to-strategy- How do I drive adoption or accelerate growth? For me, it was with enterprise software. I was working on a major financial account, and what was starting to resonate with me was working with many different silos and lines of business. Once I find that I have representation across multiple lines in the organization. Then it’s easy to go to senior leadership to show value across the organization. That becomes a repeatable process that you share with your team- that’s the map we use at Splunk.
**Anna:** With scaling on the consumer side, I can’t emphasis enough how important building these operating plans are. You need to know how you can hit your goals. We track customer cohorts for months, which ends up telling us how much you can spend in the marketing channel. You need to figure out the whole cycle before going all in. Or else it can kill your company. If you can see that your operating plan is matching reality, then you can go all in.
**Beth: ** Right, you are always iterating and always improving. So the biggest thing is to capture and institutionalize learnings from early customers. There’s a point in which you just know when you are ready because it just all fits. Whoever is running sales needs to institutionalize [the sales process] with the team. You really need the infrastructure to support it. Especially, you need someone on the team as founder and CEO to make sure that it’s profitable. If you are starting to see that each time you are deploying sales and closing customers, that the cost is increasing and you actually are losing money- that’s not scalable. That’s not repeatable. Costs should be diminishing, not increasing. You have to know that’s an issue of scalability. If you can’t scale, it’s not a business.
###What kind of advice you would give to these teams for infrastructure to support repeatability?
**Rob:** Collaborate: the sales reps have to be working together. You need to model what your successes are. Take your biggest and more successful deals and create flow charts. There absolutely needs to be executive alignment. You need to have access to technical folks on their side and yours. You need visits for lunch and learns. All these steps are needed to get to a large financial transaction. Then share this process and make it happen. All the reps need to be able to recreate that success in their own accounts.
**Beth:** This is one of the more difficult things to track, and you don’t want to get ahead of it. There are all types of tricks. One of the things that you can do is to come up with a model where part of the proceeds is paid upfront. This way you can invest in infrastructure. It’s so critical to have infrastructure- and it can get messy- so you want to make sure that your sales projections are conservative and realistic. You are going to have investors, who are pressuring you to set sales goals higher. You are going to want to and you are going to believe that you can. But you don’t. Set the goals much, much lower. Underpromise and overdeliver. If you are exceeding [your sales goals], that’s a good problem to manage. You just need a pipeline to manage and hire. That’s so obvious, but I’ve been guilty. You are under so much pressure to hire and you have no time- you need to hire well especially in infrastructure and know how to operate. You need engineering to support you and marketing to support you.
**Michael:** [When I was at Splunk], I put my desk in the middle of the sales team, because I wanted to hear how people are pitching the company and the problems that they are facing. I would help them iterate quickly. But that’s how we got to be a successful company. Iterate quickly and fast.
###What are some strategies to tightly couple sales and marketing initiatives?
**Rob:** At Splunk, the sales and marketing teams are so well aligned. You walk in day 1 and it almost sells itself. The marketing team has a unique way to get the product in our customers’ hands. It makes my job so easy to get in the door because they already like us. We also have Splunk live events around the world, where we invite our customers and marketing gets the people there.
**Anna:** One thing we found that worked well is to have all the metrics reported together. For us, they were working closely together, almost as one group.
*How are you thinking of scaling your customer development? What challenges have you faced? Please comment below!*