Vlad Mazek – Vladville Blog

Henry Ford, father of the 20th century corporate slave model and racist, once said that “customer can have any color he wants so long as it’s black” and some 100 years later we still put our process over service because it keeps us from making new mistakes and our costs are predictable.

This is one of the most fundamental concepts in economics and business and everyone adheres to it, even the ones who make themselves to seem like a blatant exception to it. Enzo Ferrari, Donald Trump, solid gold toilet manufacturers and guys that build cell phone towers in the middle of an Arabian desert for Prince Al-Waheed all work on the same principle of a single price for a single service/product and then extra cost for any wild thing you can dream up. Again, nothing new here.

There are many people just being handed their pinkslips right now that are entering the business market and clearly separating themselves from anyone with actual business training or experience. How? They want the pink Model T. They also want it at the same price of a black one. When told that it is something we don’t do, they try to phrase the same thing in another way, as if they are going to trick you into saying something else. It’s like a four year old trying to outsmart a grownup. To their little mind it just does not make sense how an organization has set a deliverable, a process, a support structure, a pricing model, a marketing message, a roadmap… and uweeee, they need to change it. They want their Model T.

This is where I generally hang up and wish them best of luck on Monster.com because that kind of attitude will not get them any business.

But truth is, we all meet clients with exceptional demands that have exceptional needs. I will sell you a gold toilet with an Exchange mailbox, I promise. It will just cost you more than you are prepared to part with.

The worst thing you can say to someone is that you just don’t do X. Sure we do X. We do X and we like it. You just can’t afford it, but I’ll let you figure that out yourself, I won’t be the one to spell it out.

We all are challenged by customers with unreasonable expectations, but if we behave in a way that points out their own inadequacies to them instead of us picking on them, we still might win. Who knows, they may just be completely insane with money to burn. Who am I not to take your money?

Fundamentals of whoring: Set your service, set your price, and be willing to do anything and everything their bank account can support. Now go on ho, make me some green.

What can I get for $10? An Exchange 2007 mailbox with 1GB of storage and a copy of Outlook 2007. Oh, I need UM, too. If you got the money honey, we got your disease….

The last few posts really started burning the vlad@vladville.com inbox so here are some of the points I thought I should discuss in public. I always like hearing from people, please drop me a note if you’ve got something on your mind.

Vana: Am I next?
Yes, thank you for saving me an email and a phone call.

No, of course not. Really, out of the 20 people I talked to, not one of them was surprised. They knew things were not working out and for the most part we all agreed that parting ways was in the best interest of both organizations. Some relationships work, some don’t. Try to understand the nature of a problematic client. They are likely always on your radar or something is always demanding your attention. You are burning time trying to make them happy and getting nowhere.

As I said, 90% or more of our relationships are just perfect. People approach us or we approach them, we find a profitable relationship, stuff breaks, we fix it, they tell us what their clients need and we provide it, everyone in the equation makes more money, the conversations are pleasant (actually, the conversations are the BEST part of this business, I LOVE talking to my partners)

Dan: Are you afraid of the retribution?
I have to be honest, yes, I am. Whenever you upset people you have to be prepared for some blood in the streets to make you look like the devil.

However, the business case for a service termination is not an emotional fear of you missing out on some potential business down the road, the business case is optimizing the company so you are no longer demotivating your workforce and losing money. If you have to do this, don’t let the fear overcome you: It’s like saying you don’t want to go to the hospital for a cut because they might use painful stitches, so you sit on your ass until you bleed to death.

The negativity of having an unhappy client is far worse than the retribution after you’ve parted ways. What is worse, to have a few of your partners badmouth you on the forums all the time, or to just part ways and have them say you’re not friendly to ___ people?

Allen: What the heck is Walmart Chopper?
We come up with entertaining names that make us laugh about the stuff we are doing that are vague enough to be brought up in a conversation and don’t make anyone take themselves too seriously to lose perspective. I know this sounds amateurish but stick with me, I’m about to let you in on a big secret to motivating a cynical workforce. I could have called this “Vlad takes ten days to clear out ten years of mistakes by forcing us to focus on accounts regardless of if they are losing money” which just screams bad leadership. Or I could have titled it “Succession planning, strategic customer base realignment” which is what any “real” company would have done. But here is what happens when you put a serious title in front of people who try to be serious – they start providing “input” which is just another word for unwanted advice: “Well, if we are working out a succession plan should we not also do ___” and you spend more time in meetings deciding what you’re about to do than actually doing it. This is why most meetings end in a stalemate and agreement to meet about it again – I choose to set the agenda and spend more time measuring the actions because thats where you find the faults in what you are about to do, not brainstorming all the possible things you could do.

We make a decision, set the parameters, do, measure, do, measure, do, measure and then if something needs to be changed we’ll look at it when we’re done. Works for us.

Eric: Why is this not a daily/weekly/monthly/yearly chore?
As I tried to explain, this is a seriously draining exercise and your client base should not be dismissed on a whim, or the second their P/L dips below 1.0, or their credit card is declined. If you do that you are clearly all about money and you will have 0 loyalty from your partner base if you behave in such a way. Works for monopolies, cable companies, etc. But for a rapidly growing company, in a high tech market, with a ton of substitutes you need to show a bit of leniency.

I am not saying that one should be careless and just let things slide, but imagine what message you are sending if you’re just randomly kicking people out because you don’t like them or they aren’t profitable at this moment? People are difficult. Making money takes hard work. Getting clients and partners is tough business. Keeping your existing client base happy, or turning an unprofitable client to a profitable client is possible. Just don’t rush.

What I am saying is that you need to have a pattern. You need to have tried to fix/salvage the operation. Only when you’ve failed at that, when you feel that both organizations would be better off do you move to part ways.

Dan: Should this not be done from the start of problems?
Yes, if I had a crystal ball and knew every lead personally, checked their credit, got brought into their board meeting (or sat in their car while they called their Visa to check the balance) or… you get the picture.

Some clients you can tell from the moment you talk to them that they are not going to work out. I have not had a problem with that, I happen to be brutally honest (those that have met me will vouch for that) about all the options so I know that the people that choose to work with us know the very worst of what may happen. I believe my job as the CEO of this company is to explain my business model to my partners, understand theirs, and find profitable opportunities. It is not to cram stuff down their throat and sell them the dream, I want my partners to be around for a while, not sign a perpetual payoff contract for 1,000 seats or invest $18,000 in my software and vanish.

But, over the course of business, things change. Business objectives change and the partner stops training their people, floods us with support calls and makes training of their staff our problem. Management changes, and you get to deal with someone that you really can’t work with and make a positive relationship. Budget allocations shift, people cannot afford all the services they subscribed to and require for their business operation and they complain to you about the software not meeting their needs. The list goes on.

Natural part of business is change, those who embrace it are called leaders, those that sit back and hope for the best are called employees. You do not have 100% vision of the future and at times you need to react after the fact.

Bob: I assume you are clearing shop for something, is it more Shockey Monkey?
No, the primary objective behind this was to make sure that when I take my leave we are not left with the same problems that overwhelm me today. We happen to have some room for a few weeks before things really ramp up for the summer and I made a decision to optimize the business now instead to act on a whim later.

This was not tied to a particular product, plan or anything else.

Day 1? What happens on day 2?
Vlad creates the sky 🙂

The other day I wrote a rather emotional recount of getting rid of a large number of clients. Thank you for the feedback, it was overwhelmingly positive from some of the successful shops that I work with, and the only negativity came from the people who wanted the clients themselves. Quite a few “Dude, why did you dump them, I would of taken them” messages and believe me, no, you would not. I know the revenue number looks nice, but the cost of service provided was far above it. The 20 or so companies we chose to stop working with were not done on the whim or out of spite or without lots of data. Which brings us to a point:

When do you decide that a client shouldn’t be one anymore?

This is likely a 200 page book, but really there are only two reasons:

1. When they are no longer profitable
2. When they are no longer respectful

An account can be unprofitable for a number of reasons, they can be rude for a number of reasons too. However, in order to continue to exist in the professional world you don’t just take out the axe and look for blood, you carefully find the problems that cannot be overcome, and if they can’t be fixed you send them to your competitors as the last possible alternative. How do I decide? Monitoring, go figure..

Step 1: Which do we provide?

Are we a service organization or are we a support organization? Most companies in the SMB IT solution provider space are support organizations, they trade time for money and the only thing that matters is that the job gets done when its requested and that the invoice gets paid. Service organizations (like mine) are a little different in a way that when we burn time, we burn profits. Service organizations are designed around a service level (SLA) and whenever we go against our SLA we are losing reputation (and money) and whenever our clients challenge our SLA, we lose money.

Step 2: How do we lose money?

For example, ExchangeDefender is generally sold at $1.50 per mailbox. Part of that fee is a set of antivirus engine, operating system, database, content licenses. Part is bandwidth. Part is infrastructure and infrastructure support. Tiny part of it is marketing, presale support, ongoing maintenance support and so on. The less support we provide for the product, the more money we make, and that is our only variable. There is a built-in incentive for us not to suck because when we suck, we don’t get paid. That’s my challenge when I run the organization.

However, what happens when the problems are external? What happens when the support skyrockets because the user doesn’t read the documentation? What happens when the user never troubleshoots on his own but instead opens up a ticket? What happens when the user never checks their systems but instead calls from a cell while he is driving to a client site and “just want to check if anything is broken”

Those things cost money. The more stupidity we put up with, the more money we lose.

Unfortunately for all of our clients, the shit cascades from there. There are a fixed number of man hours that can be applied towards support and a limited amount of issues a single support tech can handle. So as we have to cut and paste something for the 1000th time from www.ownwebnow.com/help or www.exchangedefender.com/support.php the service to people who have actual problems, who experience true issues with our products goes down.

Step 3: Measure, Measure, Measure

Every time a support request ticket is closed we track the issue. Here are our “Resolution Status” codes stamped on each ticket as it’s closed:

RTFM

Software bug – ongoing

Software bug – fixed

Hardware Event

Network Event

Onetime Event

Information Request

Reassigned

The top case is the most common one for us, followed by Network Event and Software bug – ongoing. On the face value this means that our support sucks, our network is trash and we might as well all go get jobs as professional developers because we can’t code to save our lives.

The numbers tell a different story. If we indeed sucked as bad as our statistics indicate, we would long be out of business. When we plot our companies on X and their support count on Y, we see what seems to be a vertical asymptote around X = 40.

If you’re not into math, what I’m trying to say is that around 40 companies contribute close to 90% of our support cases while the remainder of the distribution produces close to nothing. When normalized for the client count, about 20 companies created more support cases per $ earned than any other client. We aren’t talking a few tickets a month, or a few tickets a week. We are talking hundreds of tickets a month, mostly for the events that have already been explained. Most of these people could have had their own dedicated Own Web Now Corp employee but were bringing in $150/month.

Step 4: We’re not DMV

Some partners make a mistake of thinking that we are a government operation and that we will sit and take their abuse continuously. No, we sell services and partnerships, and if the partner is not looking to buy that they have to go elsewhere.

To me, partners are gold. I take their feedback to create products, I design software they can turn around and make money, I do whatever I can to make sure they get their deal, even when I am the tiniest fraction of their transaction. Why me and not some monkey off the street? Because I know how the business world works, and when you can show alliance with the management of the company you can get the people to sign off on your proposals. I do it, Ballmer does it, it’s just good business.

When my partners take their clients side, and try to shift blame instead of working with us on solving the problem, I generally loose the leash a little and get things working. Then I let go of it completely, because someone that wild does not have our partnership interest in mind and only their own. This is perfectly normal and natural, however, successful people tend to know that long lasting partnerships continue to make tons of money for both sides and clients come and go. So when someone treats us without respect, does not want to work with us, and is just looking out for their currently-golden-egg, there is no partnership there.

Limited time and limited resources. With my limited time and limited resources I choose to go after growing companies that are striving to work harder and do more for more businesses that depend on technology. My mission, my message, to staff, to customers, to partners, to the bank. It’s OK.

Step 5: …. and the horse you rode in on!

Ending partnerships, or any client relationship for that matter, needs to be done professionally and at your expense. See point 6. No matter how much you hate the account and want to inflict them as much damage as humanly possible within the bounds of your agreements, hold off on the legal team jumping in just yet.

Step back.

Why are you terminating relationship? Because they aren’t profitable.

How will a lawsuit, immediate termination, phone calls and paperwork make you more profitable?

They won’t. So let go of your emotional need for retribution, step back, treat the customer in as good of an attitude as you had when you first got them. Can’t get a smile on your face about someone who cost you $5K in support this month but only brought in $150 while cursing you out? Here is my tip: Think about how much this client sucks. Now, pick up your closest competitor. Let this nightmare ride on their books and cripple them, all the while smiling. It’s the equivalent of an SMB IT Services Trojan Horse: “Dear Postini, I got a lead for you,” – you are making your competitor that much weaker by sending them a profitability parasite.

Step 6: Courtesy, Courtesy, Courtesy..

Remember that you are a business professional and that you have a reputation to uphold and that you are not just representing yourself but your partners, your other clients, your staff, organizations you sponsor, etc. Nobody wants to be associated with a knife throwing maniac that runs around and yells you’re fired to complete strangers.

Moreover, it suits you to be as courteous because you are not terminating the relationship out of spite, you are terminating it because it is no longer in the mutual interest of the two organizations to work together. The real reason you are doing this, or at least should be doing this, is so you can free up your resources for your actual business and I honestly believe that every partner we’ve let go would be happier elsewhere.

Step 7: At our own dime…

When people leave us, or when we ask them to leave, the last month is always on us. The labor is always on us. Why? We want the transition to be smooth and easy.

Also, we want the transition to come out of our pocket. This way the partner can go their own way without feeling like they are being penalized for leaving, like they are paying to quit. Here is a little secret: when clients cancel and move they have to cover the month. If you are terminating the relationship because they cannot pay their bills the last thing you want to do is throw yet another invoice their way. Sometimes there is just a little bit of courtesy and white glove service that needs to be extended. You never know. I certainly don’t so it is our policy to cash customers out on our dime.

Secrets aside, people appreciate good service. Even if they felt that we were a terrible provider because they just did not read the documentation, there may be a time in the future when they will need you and will think of you first. We do a lot of things, people move around a lot, etc.

We do not terminate relationships with individuals, we terminate relationships with organizations. In a serious organization you have a number of personalities and decision makers, some that will like you, some that won’t. Part of life and business is working with difficult people. There is no reason to put up with and work with difficult organizations. Most of the relationship problems do not come as a result of a guy being difficult, but because of an organization taking a turn or being run in a way that devalues the relationship, service and what is provided.

Step 8: Got nothing bad to say…

Much like employees who have left the office by setting it on fire and a Texas standoff style shootout but still put you on their reference sheet, do not badmouth the people that you kick out. This is something that is lost on the people in the SMB segment because they probably never had a pleasure of a multimillion dollar company coming after them with a lawyer assault team, but you could just say something stupid at a wrong time that might get back to the person whose relationship you just terminated.

Businesses are not a happy little family. They are fortresses armed with lawyers, debts and bored attorneys just loaded into the cannon and looking for a match. Realize how small the world is, and how quickly the news will travel if you don’t do the right thing. Consider the backlash you are about to bring onto yourself.

Step 9: Process, process, process..

You got to this point by determining which relationships to terminate based on the measurable criteria and you should deal with disconnections with the same courtesy as you did coming to that decision.

Process:

Email

Voicemail

Written letter of cancellation

30 day notice

Transition assistance (recommendation, service documentation preparation)

First, email the person you are about to terminate. You do not want to call them out of the blue and blindsight them. Next, call them or leave a voicemail. This isn’t your girlfriend you are breaking up with, this is a business relationship that went bad on a documented (hopefully) stream of events. Note them, apologize, it’s not you it’s me..

Send a 30 day written notice of cancellation, get it notarized if possible. If you cut someone off at the knees, even if it is in your TOS and AUP, they can come after you for lost wages because there is no written notice of them being cancelled.

Offer assistance in making a transition. Whatever you feel about your partner and their company, your service is provided to an unrelated party that is just struggling to make a buck – just like you are – so being difficult here is just bad karma, you will only be inconveniencing someone that likely had nothing to do with the whole episode. Keep that in mind and smile as you go.

Step 10: Malibu Maccaw, Mojito & DD’s.

This step depends on your personal preferences, so far I have not found much that rum and boobs can’t fix.

I am in this business to help people do what they dream up. The company that exists for the purpose of letting me fulfil that hope is driven by investment, payroll, royalties, licensing and relationships. In order for me to be successful in helping other people be successful, I choose to surround myself with the people that help me accomplish bigger and better things. If thats not you, I am really sorry, the big picture is that there are thousands of companies that are and we will do whatever we can to make them happy. If you don’t already use OWN web hosting, email, offsite backups, virtual servers, dedicated servers, colocation, ExchangeDefender spam filtering, virus filtering, archiving and LiveArchive, Shockey Monkey… well, I hope you consider it.

Above is my mission, it’s how I roll, pushing my partners towards greatness. Literally!