Sunday, March 30, 2008

The Magical, Erratical, Sometimes Tragical Money Shrinking Machine

It should come as no surprise, given the fiasco I've been documenting on this blog, that my company isn't profitable. We burn through an amazing amount of money per month. Given our bottom line, our only viable option as a business would be to become money launderers. Although, I'm not sure a 10 to 1 exchange rate of dirty to clean is all that good.

I know the person reading this blog is wondering how they too can successfully waste tons of investor money. Well, luckily for you, I'll give you a sneak peak of some of the business strategies that have made us a negative profit powerhouse.

Never Say "No"

The first has to do with the fact that we're giant pussies when it comes to dealing with our customers. As an example, we had one of our installers call our technical support line when he was having a problem configuring his network. We didn't sell him anything dealing with his network. We weren't responsible for his network problems. He was having problems configuring his DSL modem. Initially we said we wouldn't help him.

The installer then called the CEO directly and pitched a fit. Since he's an A++ customer (our customers are rated A, A+, A++, A prime, and A++ super prime I believe) the CEO assured him we'd fix the problem. We spent a couple of days trying to figure out what his problem was and how it could be fixed, all for free.

Fly Someone Out

The next tip I have is for you to fly a person out to babysit any install, free of charge. Any time an installer has an issue with our product we like to fly someone out for free to do the install for them. Sure, we could try and work them through it over the phone but that wouldn't waste enough money. We could even require them to complete our training program before helping them. Again, that's just not realistic. We could even bill them something for the fact that they couldn't do their job. No, the better plan is to provide a way for them to get free consulting and install labor whenever they want (and it turns out they want it quite a bit). On a plus note, all of our sales and support guys have shit loads of frequent flier miles that they've amassed on the company dime.

If You Burn It, Just Return It

We resell some hardware components from other companies as part of our overall solution. We frequently have installers that don't understand electricity wiring up these components. As you might guess, they often fry the components by wiring them incorrectly. What's an installer to do? They can just return it to us, claim it never worked, and get a free replacement shipped to them overnight.

We then spend more time testing the returned equipment to verify that it is ruined. If we don't have time to test it, we throw it in a bin of test equipment for our QA department to use. Inevitably, they grab the damaged equipment, things don't work, then they report bugs on the software. The developers then spend time chasing non-existent bugs. It's all very well planned from the perspective of wasting money.

Sell It, Then Make It

The other way we screw ourselves is that our sales people promise customers that our product will do anything and everything (who doesn't have that problem?). On the rare occasions that they close a sale we're then on the hook for implementing something that didn't previously exist (for free of course). And, since it's already been sold, the time line for implementation and testing (ha! testing...) is extremely short. Finally, it's often a feature that no one else cares about. But, once it's in the product, it costs us money in terms of code complexity, maintenance, and testing time. It also prevents the developers from implementing features that a larger group of people want, which could theoretically increase the product's ability to compete long term. It's sweet, sweet genius.

Sustaining This Model

How can we afford to keep doing things this way? You might be tempted to think that we make it up in volume, but you'd be wrong. We usually just find a way to dupe investors into giving us more money. This is usually sold to them on the "Amazon Land Grab" model where you spend a lot of money to be the first business into a relatively virgin market. You build your customer base so large, so quickly, that it becomes very difficult for people to compete. Then, you crank up the profit machine and hire people to count your money.

The problem is we're not Amazon (those guys are smart), it's not virgin territory, and there's not enough money in the industry currently for us to make up the amounts of money we're wasting. Sometimes investors still fall for it. But, what happens when they get tired of giving you money? We'll talk about that next time.


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