Understanding Your Customers

UNDERSTANDING YOUR
CUSTOMERS
Written by Tom Walker
in conjunction with
1275 Kinnear Road, Columbus, Ohio 43215 614.487.3700 techcolumbus.org

TABLE OF CONTENTS
1.......................Entrepreneurship is All About Customers
2...................................Ask These 3 Questions to Really
Understand Your Customers’ Pain
3...........................................Customer Buying Decisions
4................................People Buy from People They Like
5.................Sometimes Firing a Customer is a Good Idea

1
Entrepreneurship is
All About Customers
Modified with permission from Flazingo Images. Some Rights Reserved.
To paraphrase the baseball great Yogi Berra,
entrepreneurship is 90
percent about customers
and the other half is hard
work.

Every successful business
exists because it provides
a product or service that
customers need and are
willing and able to pay for. “ “

When we’re helping entrepreneurs start companies, keeping
this reality front and center isn’t automatic—especially for
entrepreneurs who come from scientific and technical fields as so
many company founders in technology businesses do.
Early on, there necessarily is so much emphasis on product—
designing the solution, securing and protecting IP, creating a
prototype, and so on—that focusing on potential customers and
markets can take a back seat.
Instead, develop a company where customers are
the pivot point from day one.

Talking to people in the industry you seek to
serve is a great first step toward matching your
solution to their needs.
• Use your personal, professional, and industry connections to
reach out and connect with individuals who have the problem
you are trying to solve. You can do this on the phone or in
person. The way not to do it is via email or text.
• Compose your questions ahead of time. Listen and take
notes. You are not there to validate your assumptions as much
as you are to discover where your assumptions are wrong.
• Talk to people who are using competitive or alternative
solutions. Find out what they like and what they don’t. Find out
which features they are willing to pay for and which features are
“nice to have.”
Create a system for the company that
allows you to collect anecdotal information
about customers and use it in product
development and fund raising.

2
Ask These 3 Questions
to Really Understand
Your Customers’ Pain
Modified with permission from Lisa Brewster. Some Rights Reserved.
Your startup may have the best technology in the universe,
but
if it doesn’t solve a problem
that real customers are
willing to pay real money for,
your business can’t succeed.
This is especially true when you’re selling B2B.

To solve a customer’s problem, you really understand what that
problem is. Do not wait until you have your prototype built.
Here are three questions to get you on the right
path.
1. Ask the first question of yourself.
• Talk to the people doing the work. They will understand
problems with process and execution. If your target market is
manufacturing, reach out to the folks who work in the plants. If it is
software, the IT folks who install and maintain application systems can
tell you things you need to know. If you have a physical distribution
solution, talk to the drivers of the trucks and the managers in charge
of the warehouse or inventory.
• Functional managers with profit and loss (P&L) responsibility live
and breathe margins, pricing, and costs. Use your network to gain
appointments with upper level managers with responsibility
for markets and product lines.
• Sales, marketing, and customer service teams know better
than many in the company what their customers want. If you
can come up with something that produces an advantage over the
competition, these groups can become your internal advocates.

Now start talking to potential customers.
2. If you could change one thing about your
business, what would that be?
• Every customer has this hot button. If someone tells
you they like things just the way they are, you’re talking to
the wrong person. Go back to question #1.
• Your customers have the same concerns you do—
it’s just the specifics that are different. You’ll hear about
increasing sales, reducing costs, finding the best people with
the right skills, keeping customers, beating the competition,
dealing with regulatory issues, speeding up product
development, and finding the right strategic partners.

3. What would you like to do with your business
that you can’t do today?
• In well-managed companies, there are lots of individuals with
vision. Imagining new possibilities isn’t the exclusive territory of
senior management. Open your aperture.
• From wish list to strategic plan, the more you hear about
the direction of the company, the better you can aim
your technology to match the pace. There’s nothing worse
than having a solution that solves a problem that your customers
won’t have five years down the road.
Googling gives you a great head start, but nothing,
absolutely nothing, beats talking—
and listening—directly to customers.
• We’ve been in many investor presentations where the
entrepreneur refers back to actual conversations with potential
customers. It adds impressive credibility.

• Keep in touch with the potential customers you talk to
as you are developing your prototype. Share with them how
their input influenced your solution. They might never turn into
paying customers, but again they might.
• Be on constant lookout for beta sites or early adopters.
To be successful, an entrepreneur must like his or her customers
and be liked in return. That starts by being genuinely interested in
their business, interested in their problems, and respectful of their
time.
• Practice by thinking about customer problems as if they
were your own. If your startup is successful, they will be.
• Be open and willing to share your ideas and your
dreams—especially with customers who may have started
as entrepreneurs themselves. It’s a bond.

There are a million and
one new things that every
successful entrepreneur wants
to learn–financial reporting,
tax considerations, and team
building. Make sure that
customer relationships are at
the top of your list. “ “

3
Customer Buying Decisions
5 Things Every Entrepreneur Should Know
about B2B Customers’ Decisions to Buy
Modified with permission from Franck Blais. Some Rights Reserved.
You understand your market. Your solution is
out of beta test. You’ve identified a funnel full of
prospects—profitable companies who need your
solution.
Here are five things to
understand about any
B2B customer’s decision
to buy.

1. B2B customers make buying decisions that are in
their own best interest, based on some rationale.
This does not imply that customers are selfish, self-serving, or out
for themselves. Nor does it suggest that decision makers ignore
the good of the whole. In fact, in well-managed companies “best
interest” will be defined through a 360 lens, taking a broad view
that considers all participants.
What it does mean is that to achieve any B2B sale, entrepreneurs
need to dive deep to understand potential customers’ true
decision criteria. You can’t figure out ways to influence or change
the customers’ rationale until you thoroughly understand what it is.
Even though it might feel otherwise, B2B buying decisions are
never random.
2. Timing matters.
Timing may not be everything, but it can be a huge part of getting
a B2B customer to buy.
In B2B purchasing decisions, timing is often determined by
budgets. Budget cuts can postpone or cancel purchasing
decisions. Budget surpluses, especially at the end of a quarter or a
year, can accelerate decisions to buy.
The lesson is to understand the customer’s budgeting process—
and to be in the know when budgets go up or down.

3. In every B2B transaction, there are multiple
humans who influence every decision to buy.
Some influencers are visible and obvious on the organizational
chart—executives and senior functional managers who believe
that your solution will increase their divisions’ revenue or reduce
costs; CIOs who believe (or don’t believe) in your technology.
Other influencers may be more behind the scenes–people who
work in the warehouse or on the production line, office workers
and administrative assistants, accountants and analysts—people
who are likely to use your solution to do their daily jobs.
There are many more people who have informal and influential
input into B2B decisions than just the executives who own the
P&Ls.
There are many more
people who have informal
and influential input into
B2B decisions than just
the executives. “ “

4. Value will trump price almost every time.
Almost.
Startups don’t succeed by selling commodity solutions. Angels
don’t invest in firms unless the company has a convincing value
proposition for its customers.
In most companies, functional managers and executives make
decisions based on justification models that tie solution costs to
anticipated benefits.
The mission of most purchasing departments is just the
opposite—find ways to lower total costs and to deal with fewer
vendors.
This is a difficult scenario for any supplier, but especially a startup
company. If a purchasing department is setting the rules of the
game, think long and hard before you sign up to play.

5. Sometimes “non-decision” is more formidable
than the real world alternatives from your
competitors.
If your customer doesn’t believe that there is a real cost to a
non-decision or a delay, the process of deciding to buy hasn’t
even started yet.
Some would say customers don’t buy because of product
deficiencies or price points that are too high. Others might
blame it on external factors—regulations, competition, or the
economy.

“
While any one of these might
be true, in most situations
where a startup is unsuccessful
in closing a B2B sale (and
in every situation where the
startup is surprised that this
turns out to be the case),
the entrepreneur doesn’t
completely understand the
way the potential customer
makes decisions to buy.
“

4People Buy fr om People
“I never yet met a man I didn’t like.”
-Will Rogers
They Like
Used with permission from Wikimedia Commons.

Cowboy, entertainer, and social commentator Will Rogers traveled
around the world three times. He learned a lot about people and
wrote about it in more than 4,000 nationally syndicated newspaper
columns.
There’s a little more that goes with this quote. In its original
context, Rogers was referring to Leon Trotsky, a controversial
revolutionary figure then and now.
“I bet you if I had met him and had a
chat with him, I would have found him
a very interesting and human fellow,
for I never yet met a man that I dident
[sic] like. When you meet people, no
matter what opinion you might have
formed about them beforehand, why,
after you meet them and see their
angle and their personality, why, you
can see a lot of good in all of them.”
For startups that seek to lay the
foundation of excellent customer
relationships, developing a mindset
like Will Rogers is a pretty good place
to start.

People buy from people they like. This is true in both business-to-business
and business-to-consumer sales.
If you want your customers to like you, you have to
like them first.
This is like breathing for some entrepreneurs, but it’s not automatic
for everyone.
Whether you are a person who feels a nearly instant rapport
with most people, or whether you are a person who’s a bit more
reserved, here are five beliefs that make it easier to appreciate,
respect, and, yes, even like customers:
1. Customers buy things. Their dollars become your revenue.
Their problems help shade your solutions. They are the only
reason your company exists.
2. Customers know things that you don’t know. Your
customers are knee-deep in the industry you want to serve. They
have relationships and contacts. They have an insider’s viewpoint
of how things work.
3. Customers start out every day wanting to do the best
job they can. In this respect, customers are just like you. They
get up, have their coffee or tea, and head out the door or to their
computer, intending to be the best they can be. Very few humans
in our experience start the day intending to make a lot of mistakes
or do a bad job.

4. Some customers are faster, smarter, and more
competent than others. These folks may be your early
adopters. They also may be more challenging. When you’re
dealing with customers that aren’t quite so quick or competent, it’s
your opportunity to help them succeed.
5. Customers are human beings. They have good days
and bad. They have budgets and pressures that they have to
meet. Sometimes their well-intended decisions get reversed, and
sometimes they do make mistakes. Anticipate that these events
will occur and do some scenario planning to protect your own
objectives.
Will’s words reflect his great appreciation
and respect for the humanity and
diversity of people. His interest in other
people helped him build his brand and
enduring relationships with huge and
widely diverse audiences.
There’s a lesson for every startup in that. “ “

Sometimes Firing a
Customer is a Good
Idea 5
Modified with permission from Silive Media.
I believe in firing customers. Not very often, and never
casually or in frustration or anger.
But sometimes there are individuals
and companies that a startup simply
can’t afford to do business with.

How do you know when you have a customer you
need to let go? Look for these signs.
1. The company or its employees are engaged in Illegal
activity. This one is black and white. Don’t do business with a
customer you know is breaking a law. You may even have a legal
responsibility. Consult your attorney.
2. The company behaves unethically or against the
intent of the law. Even if there is no legal responsibility, do
you really want to build a business that “looks the other way?”
That’s not the type of startup that attracts investors, customers, or
outstanding employees.
3. The customer has a pattern of treating your
employees disrespectfully. Harassment, bullying, even
perpetual rudeness is not something your employees should have
to endure. Everyone has bad days, and we can all be short or ill-tempered
with others. But if this happens repeatedly, it’s your job
to address the situation appropriately.
4. The customer demands price over value. Unless
your vision for your company is to be a low-margin commodity
business, be wary of purchasing-agent driven customers. It’s hard
to create a successful new business where price is the only “value-add”.
5. The customer doesn’t pay. Who needs accounts
receivable headaches every month, especially when cash flow is
such a challenge for new companies?

Firing a customer is serious
business. Proceed cautiously
before taking such an extreme
move. “ “
If the issue is law breaking, talk to your attorney immediately.
For other situations, the goal is to repair the relationship if at all
possible.
1. Call a roundtable meeting with all employees who
have anything to do with the customer. Discuss what you can
do to improve the relationship. Talk to the customer openly and
honestly. Assign the customer to different employees. Change
service terms. Lower expectations.
2. Determine if the customer is one that the employees
want to keep? If so for how long—from a month to forever, until
replacement revenues can be found, for as long as they can stand
it, only if the customer will change behavior?
3. If yes, define a path to improving the relationship,
with specific actions and owners. Set a 60-day review.
4. If no, what has to happen before your company can
terminate the relationship? Fulfill contractual terms, find a
replacement customer, reduce expenses to offset revenue loss,
notify the Board, or nothing—the situation cannot be allowed to
continue.

Most of the time, the process of talking through
the situation with sales, engineering and the
administrative team identifies ways to keep the
customer.
However, if the customer has to go, put a plan in
place to disengage as efficiently, and respectfully as
possible.
If you would like personalized
advice on this and other
topics, fill out our Get Started
form to see how we can help
you.

Understanding Your Customers

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