The Newbie Conundrum: Landing Contracts Without Contacts
When Tommy Woycik, co-founder and president of Nextep Systems, launched his touch-screen kiosk company in 2004, he figured he might have to deeply discount a couple of systems in order to get his first clients. Well, he ended up practically giving away at least seven products at a total cost of $100,000.
"Sometimes, when you introduce a new product, selling the first ones can be a major issue," he explains. And he was prepared for the challenge, securing enough funding to be able to go a few years discounting products until the company was established.
Luckily, within nine months the Troy, Michigan-based company landed its first big, standard contract, signing up a company that ran stadiums and arenas. "They paid full price," Woycik recalls, "and that felt good."
Nextep, which employs 20 and provides automated ordering system solutions to everything from food courts in airports to casinos, offers a textbook example of how to handle a major business conundrum: getting business and landing those first few contracts without an established reputation.
"It's the classic dilemma for new businesses," says Paul Kurnit, Pace University professor and author of "When the Going Gets Tough, Tough Businesses Get Growing." Most potential clients want to know whom you've done business with and how it went, but startups, obviously, are lacking in this regard. That means you'll have to be prepared to give some things away or offer cut-rate prices, Kurnit notes, in order to garner some business props early on.
Getting those props--aka references--were all part of Woycik's master plan. When he gave away or discounted the company's solutions early on, he asked the firms he was working with to give him endorsements in return--but only, of course, if they loved his products.
Here are some of the ideas Woycik put into action:
- Get testimonials. He asked his initial customers to agree to act as references and provide quotes about their product satisfaction, which Nextep could use for marketing.
- Go all out no matter what. Nextep concentrated on doing everything right, from installation to customer service, even if the products weren't being sold at full price. "Those first installations are so critical," Woycik says. "If anything goes wrong, you can't use them as references and it can set you back."
- Get professional feedback. The company hired a third party to write independent case studies on installations of its products. The cost was nearly $3,000 for about eight such studies, giving Nextep documentation it could present to potential customers.
The ideas above worked! Here's a case-study testimonial from an early customer, Nino Salvaggio International Marketplace, a grocery chain that received a discounted rate:
"This has been a huge hit. It's one of the most well received projects we have ever done from a customer perspective and an employee perspective."
In addition to gathering customer recommendations, according to Pace's Kurnit, new businesses can gain credibility by enlisting assistance from people who have expertise--and have been successful--in the industry they're trying to break into.
Here are a few ideas on how to get outside experts involved:
- Create an advisory board for your business with established business leaders and experts.
- Consider bringing in experts to be partners or major players in the company.
- Network among colleagues and friends--it's a great way to get people to vouch for you and your business. An effective way to pull this off is by using social networking sites like LinkedIn, where connections can make recommendations for you right on the site.
Industry associations and all kinds of business events are also good places to make contacts, maintains Michael McGrath, a management consultant and author of " Business Decisions!"
The bottom line, says McGrath, is that you shouldn't even start a business if you don't have a solid group of contacts and you don't know who your clients or customers are. "That first contract can make or break you," says McGrath, and that means you should be thinking about how you can realistically land that first contract or contracts, or else end up "burning through money."
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