Business is not as complicated as we like to imagine. While me might associate complex spreadsheets, novel technology, complicated financial instruments and 200-slide PowerPoint decks with successful businesses, the fact is that every successful business comes down to five words, and two steps:
- Set expectations
- Deliver on expectations
That’s it. Boil any business you admire down to its core elements, and I guarantee you’ll find an organization that sets and manages expectations well for clients, employees and partners, and delivers on them each and every time. Conversely, find a firm who’s out of business, and it’s probably as simple as them not executing on what they promised.
My first entrepreneurial adventure was a direct-mail college newspaper at Boston University. The value proposition for an advertiser was powerful: the paper was the only thing in the mailbox of every single student, every week. We offered 100% market penetration in a market that’s very difficult to reach!
A restaurant signed on as one of my initial advertisers. It was an easy sale, and I was all too happy to run out the door with my company’s first check. Each week the ad ran, I dutifully dropped off a paper and checked in on the client. I went to renew the contract after the ad ran for four weeks, and was flabbergasted when the owner of the restaurant said no!
He’d received forty coupons over three weeks, which translated into $800 worth of revenue for an outlay of only $200 in advertising. I couldn’t understand how he didn’t see value in what we were delivering.
I never set an expectation. Since I hadn’t, he created his own, unreasonable expectation, on which I failed to deliver. Every business relationship I’ve had since begins with a clear outline of the expectations for both sides.
If you’re going to agree to an expectation, you need to be damn well sure you’ll meet it. My companies have seen a number of relationships unravel because a rep agreed to an unreasonable expectation, under the belief that if they just closed that first sale the customer could be won over long-term. Not only does this not work, it creates hostility in the market. You never want to be known as the company that does not do what they say they will.
When the financial crisis really peaked in 2009, my company fell woefully behind with our vendors. Revenue bottomed out, and it took us some time to get our expenses in line with our new reality. We knew we’d fall behind with our vendors and partners, and had a long conversation about the best way to handle that.
We’d initially considered treating our vendors the way many delinquent customers treated us: ignore them, avoid them, and hope to string things out as long as possible. That was an appealing solution – it spared us the embarrassment of needing to discuss our situation, and avoided a painful conversation.
It became clear that if we survived through that period we’d need these vendors again, and that we valued the relationships we’d built over the years. We called up every vendor and laid out the exact situation. We told them how much we could pay, and when. None of them were happy. I think exactly zero of them believed we’d actually pay when we said.
Over two years we caught up with everyone, and never missed a single payment. I remember after we made our last payment to a large staffing vendor, and he called us up:
I can’t believe you guys actually paid us everything. When we agreed to this payment plan, I wrote the balance off because I never thought you’d actually stick to it. You’re the only company we’ve ever worked with who’s done business like that – thank you.
Since we continued to meet expectations with those vendors, they allowed us to keep doing business with them, and those relationships buoyed us through the company’s most challenging time. It also cemented our reputation in the market: I’ve continued to do business with those vendors over the years, and the trust built from delivering on those expectations has delivered exceptional value.
Business is not complicated. As long as you're executing on two basic things, your business will have the goodwill to work through any problem:
- Set expectations.
- Deliver on expectations