Ought to your agency steer clear of startup consumers? Likely.
Several agency owners like functioning with startups, since startups are commonly enjoyable, magnetic, and interesting—and your agency’s operate can make a large influence.
Sadly, startups are structurally problematic, which implies your agency will face predictable issues as you serve them. Every startup’s issues will come to be your problems… and you are unlikely to get fair compensation for the dangers involved.
Now, I’ll share why most agencies ought to steer clear of functioning with startups as consumers. (I know, “should” is a sturdy word.)
Why most agencies ought to steer clear of startup consumers
In 2015, one particular of my consumers asked agency owner Robert Glazer if Acceleration Partners nonetheless worked with startup consumers.
Bob responded: “Primarily based on previous practical experience, we steer clear of functioning with consumers exactly where they would be our smallest client, but they really feel like they are breaking the bank. These under no circumstances appear to finish properly from an expectation standpoint.”
Or as I have a tendency to paraphrase: “Prevent client scenarios exactly where a thing that is compact for you is huge for them.” Let’s take a closer appear at the 12 widespread issues you will face if you pick out to operate with startup consumers.
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12 widespread issues with startup consumers
Every single startup is unique—technically, “startup” could imply “bootstrapped solo company,” “profitable organization with billions in funding,” or something in amongst. But startups have a tendency to have a mixture of particular challenges as agency consumers. Right here are 12 issues to contemplate:
- Undersized Budgets: No surprise, startups will need a lot of help… but they cannot normally afford it. This generally leads to startup consumers expecting your agency to do huge operate on a compact price range. This tends to be accurate regardless of whether it is a tech startup receiving an agency’s assistance developing a SaaS solution, needing an agency to brand the startup, or wanting assistance with ongoing advertising. Some consumers will supply equity in lieu of money, which is a risky method for your agency.
- Unproven Enterprise Model: You are assisting a client that hasn’t figured out their company however. In some circumstances, the startup could be pre-income in other people, they’re pre-profit. When most agencies seek 12-month retainers for ongoing assistance, startups may perhaps not be in company in 12 months… or they could be in an completely distinctive company.
- Speedy Pivots: Beneath the Lean Startup Methodology, startups “pivot” when they understand they’ve been going in the incorrect path. The pivot is fantastic for them—it keeps them viable—but it is generally negative for your agency. Soon after the pivot, your group may perhaps have produced operate that is not longer relevant… or it is no longer a best priority. That is negative for your team’s morale, and it implies you will need to have however a further sales conversation with the startup.
- Commence-Quit Urgency: At times your agency is the founder’s #1 priority… and other occasions, you will be chasing them for weeks or months to get a response. Pivots have a tendency to do this—to make factors go more rapidly or slower—but you could see shifts other occasions, as well. Mainly because startup group members are generally generalists, you are functioning with somebody who’s attempting to do the equivalent of 3 distinctive jobs. Your operate is not normally their best priority… and when it does come to be their best priority once more, they’ll want it to be performed “yesterday.”
- Stress to Succeed: No matter how a lot you care about every single client, the startup’s group requires the startup to succeed additional than you will need them to succeed. This creates stress to succeed… which implies you will really feel their stress to succeed. For instance, a particular startup could be 1% of your income but they demand 10-20% of your team’s time since they will need their startup to succeed.
- Magical Pondering: Are the founders attempting to run a viable company, or are they hoping to make a swift exit right after hitting the unicorn startup jackpot? I sometimes see magical pondering amongst agency owners—usually in the type of hockey stick development ambitions. But the challenge appears to be far additional prevalent amongst the “we’re going to modify the world” tech startups. Possibly they are going to modify the world… but they will need to spend their agencies relatively along the way.
- Poor Management: Even if the startup’s leadership group incorporates fantastic managers, they may perhaps be struggling to remain above water. And if they’re not fantastic managers, you could see issues ranging from micromanagement to abdication. Most businesses endure from mediocre management skills—after all, it is really hard to be a fantastic manager, but quick to be negative manager. But rapid-expanding startups have a tendency to be specifically negative at vetting persons, which implies negative managers are additional probably to get in. (Send them a copy of my 2016 book Produced to Lead.)
- Higher Employees Turnover: Staffing is not steady at startups your make contact with will ultimately quit, get fired, or move to a new part at the organization, Employee turnover takes place at non-startups, as well, but generally at a additional manageable pace. This gets worse as startups develop, considering the fact that the founders have a tendency to employ middle managers as your new contacts. At times this is an improvement… but the additional you get from the founders, the additional probably you are to be functioning with persons with individual agendas.
- Restricted Loyalty: Even if your contacts do not modify, the startup is unlikely to stick with your agency forever. Why? Mainly because their requires modify more than time, and you may perhaps not be in a position to meet their new requires. Or possibly their new CMO desires to bring in their personal agency. Some startups will guarantee, “Help us now and we’ll spend you additional later”… but I do not suggest relying on the guarantee.
- Investor Interference: Prepare to deal with some surprise stakeholders—the startup’s outdoors investors. Forgot to ask about them? Oops! Outdoors investors are probably to swoop-and-poop at the least opportune time. Even if you are undertaking a fantastic job, the investors may perhaps count on more rapidly benefits than your day-to-day contacts at the startup… which implies added stress on your agency.
- Delayed Payments: Even if a startup is receiving income from its items or solutions, that does not imply they’ll prioritize paying your agency. And if the startup is possessing a money crunch, they’ll have a tendency to spend their staff 1st. Watch out for excuses made to get you to hold functioning, even as invoices come to be increasingly previous-due.
- Bankruptcy or Shutdown: Any of your consumers could go bankrupt… but startups are the largest dangers. Bankruptcy could variety from reorganization to liquidation. You may perhaps have some recourse to gather a fraction of what you are owed—but odds are fantastic you are an “unsecured creditor” at ideal. Possibly you will get a thing in a year or two. In other circumstances, the startup could just shut the doors and disappear into the evening, leaving with your unpaid invoice(s) and any sense of closure.
Enjoyable occasions, proper? All of these can absolutely take place at your non-startup consumers, too—but they generally take place much less generally and much less abruptly.
If you are an optimist, you could be pondering, “But not every single startup is like that!” That is accurate, but…
Are there exceptional startups? Occasionally…
Startups will need assistance, yes—but I do not suggest developing your agency’s company model about inherently shaky consumers. Could your agency operate with a startup client that is the exception to the rule? Of course… but they’re uncommon.
Think about that venture capitalists (VC) are picky about their investments… however nonetheless count on single-digit accomplishment prices. And a failing startup will not place the VC out of company. In contrast, you are mainly risking your personal revenue, and you will need constant money flow to spend oneself and your group.
For most of my consulting and coaching consumers, their agency is their #1 or #two monetary asset. It is up to you, but—do you want your family’s monetary future to rely on money-starved, often-pivoting consumers?
Query: What’s your agency’s policy on functioning with startup consumers?