How to Break the Trust of Your Customers in Just One Day: Lessons Learned from a Major Mistake

As entrepreneurs and human beings, we make mistakes everyday in our business, but most of the time the mistakes are small enough so that it doesn’t land us in the press for all the wrong reasons. On Monday, October 11th, Chargify made a massive mistake in making the announcement about a change in pricing; as far as mistakes go, this one was pretty gargantuan. Plain and simple, we did a horrible job of communicating a change that wasn’t driven by greed or stupidity, but was part of our desire to better support our customers that are really trying to grow viable businesses.  I could sit here all day and try to convince you that our change in pricing really was part of a plan to provide better service, but really, does it matter? When it comes to matters like these, the intentions do not matter as much as perceptions, emotions and how we treated the community.

Having spent the last two days focused on what we did wrong, and responding to the numerous inquiries and complaints from customers, I’ve had a great opportunity to identify where we screwed up. If that reflection were not enough, I also watched as two (1,2) posts about the Chargify price change made it to the top of Hacker News with over 180 comments (mostly negative). Then, of course, there was the article on TechCrunch, and a blog post on Inc. pointing out our blunder, too.  To put it simply, the last twenty-four hours have sucked, and they should never have happened, but they did, and now we need to learn something and try to earn back our customers’ trust.

Communicate early and often
Just one of the huge mistakes we made was sending one email, without any warning, notifying all customers of a large price increase. This broke a trust that we had developed with our customers over a long period of time, and will take much to repair. We should have communicated our need and desire to remove free plans and provided more information about how this would happen, and over a period of time leading up to the change. Maybe this could have been as simple as starting the communication three months ago, or as difficult as calling every single customer and talking to them on the phone to notify them of the change. Bottom line is that we should’ve done it better. It just wasn’t right.

Perceptions matter, so be open with information
As a result of our horrible communication, the perception of the pricing change was that it was because we just wanted more money, but that wasn’t the case. We should have shared the data we collected for over a year that demonstrated quite clearly to us that only 0.9% of customers were paying us at all, and that there was a direct correlation between those that did not pay anything and a high volume of support requests. Even though this informed our decision to make a change in Chargify pricing, we didn’t bother to share that with you. Mistakes like these are important lessons and we learned that we should’ve told you a long time ago what we ourselves were finding in the data collected.

Free customers go out of business or never launch
Many of you have asked why we don’t just go back to offering some kind of free service. A year ago, we here at Chargify thought it made sense to offer a free plan—after all, wouldn’t it just allow more people to start and grow their business to the point where they’d be paying customers anyway? It’s a good idea, but as it turns out, that’s not what happens. In the past year, we discovered that those businesses that we thought would initially pay nothing and then grow into paying customers just never ever did; for the most part, launches never happened and they went out of business.  The hard truth is that many, many people try to turn hobbies into businesses and it just doesn’t work. While everyone deserves a shot to start a business, our theory that non-paying customers would eventually turn into paying ones just didn’t pass the test when it was put into practice. Although we should’ve shared this with you so that our decision didn’t seem out of the blue, we simply can’t support free accounts and provide the kind of service we want, plain and simple.

“What bleeds, leads”
Everyone knows this phrase from our media-obsessed culture, and it holds true for tech blogs and the related community when a company makes a gargantuan error. Chargify’s price change hit the top of Hacker News twice, garnered almost 200 comments, and then the icing on the cake for a shitty day were a couple of articles on TechCrunch and Inc.com. Like other web app startups, we had tried to get TechCrunch coverage for a long time, and although they loved covering one of our competitors, they never covered Chargify until it was time to report something negative. We can argue about the merits of even wanting to be on TechCrunch, as my friend Paras Chopra did in his post, “Demystifying the TechCrunch Effect,” but we did actually get the coverage we wanted, and had very high signup days. So, while we should issue a big thank you to TechCrunch for the press, we don’t plan to screw up as royally as this again, which means we probably won’t ever be covered by them in the future. That’s fine; we’d rather have happy customers instead.

Free customers have the time to complain
There is a big difference between bootstrapping a business, which I have done a number of times, and trying to test a hobby to see if it is viable as a business.
Over the past year, we discovered that the customer that never paid had the highest support load. Once we made the announcement about the price change, the same applied to complaining about Chargify across multiple public channels. Those customers that were working on a hobby business, or just something they were not investing in significantly, seemed to have the time to tweet all day long, post multiple negative comments on every possible channel available, and shout the loudest. This is not to say we did not get valid complaints from great customers—boy, did we ever—but their complaints were well considered, included real information and were mostly in private forums.

Freemium gets a lot of talk; thankfully few use it
Everyone’s always talking about freemium, but very few people actually use it, and we discovered this in looking at our customers for the past year. The reality was that less than 0.4% of customers had any sizeable number of free customers on their accounts. For the small amount who did, Chargify has taken care of them and will not charge them. We should have communicated why the pricing was simplified to include just customers with no distention and handled the few edge cases better. Freemium is a hot topic these days, but far less people are actually using it than is widely reported.

Stand firm, but listen
Making a big decision that may change the direction of a business is not easy and you must stand firm in that decision, but be open to listening to and engaging the community. We will not offer a totally free option as that is not good for our business or for our customers, but we did make a $39 plan available to those that supported us during our growth.  Should we have offered this option before our major announcement? Yes. Would we love to go back and do it over again? Yes, but the reality is that’s not happening, so we need to do the next best thing and support those who have supported us with a $39 plan.

Grandfathering
This is a huge and unsettled topic about which we are still getting feedback on each day. Maybe we should have offered a grandfathering option, maybe we should have given a grandfathering option to those that already integrated, maybe we will do all of this, but at this point we have not. The issue here is that it really depends on the business, the pricing change and how dramatic it is for each customer. Looking back, the best option would have been a grandfathering option which allowed the previous pricing but only included community support. Still an open topic.

After personally replying to more than one hundred tickets, tons of comments across multiple publications and on Twitter, threads on Hacker News and many other channels, it was important to look back on all of this feedback and see what went wrong so our team (and others) can learn from it. Regardless, we broke your  trust, trust that took a massive amounts of time to build, and now we may never get it back. I don’t have any neat solutions for you and I don’t want to feed you crap. All I can say is that we have learned more from this mistake than from anything before and will use that knowledge to change the way we think about everything related to Chargify. That might not seem like enough of a mea culpa from me, but our desire has always been to empower entrepreneurs to succeed with real tools and solutions for growing business, and that mission hasn’t changed.  That was the driving force behind this pricing change, and whether you believe that or not is your call; we will show you our commitment to you, our customers, with our actions now.

(Totally Manageable) Risks and Dangers of Having a Co-founder

Having a co-founder comes with amazing benefits, as I outlined in the first post in this series. However, having a co-founder is not without some inherent risks. The good news is that when these risks are well managed, the relationship can be beneficial for everyone involved, and can drive your company towards success. As any project manager would tell you, the best way to mitigate risk is by identifying potential problems, and then creating a shared plan to address them. The following are the biggest risks that I have observed as an entrepreneur:

  • Confusion about leadership
    Starting a company means making big decisions, and big decisions can sometimes be stressful. When there are two or more people in control, there’s sometimes confusion about who the leader is in any given situation. People (employees) want to know who to turn to for answers, which quickly leads to the “mom and dad game” where people try to play the leaders off of each other. This can easily be solved by dividing up responsibilities, making this clear to everyone on the team, and always being on the same page with your co-founders by communicating the chain of command with regard to each task.
  • Lack of alignment
    If co-founders have different long term goals that are not aligned, this will quickly cause problems. Decisions will become an area of stress because you’ll continually have to address the fact that you’re not headed in the same direction. How does this play out in real life? Imagine if one founder wanted to build a great company and the other wanted to build a company for quick sale—the decisions made with those divergent goals are vastly different. This is not to say that there will always be agreement about the future of your start-up, but if the long term goals are aligned, things roll along more smoothly. Be clear about your goals from the beginning so that you’re all on the same page, and frequently “check-in” with each other to make sure you’re in sync. Everything should be aboveboard.
  • Questions about ownership
    This is a no-brainer: When you have co-founders, you will own less of the company than if you started it on your own. However, the benefits of having a co-founder far outweigh the fact that you’ll own less of your company. Why? Because successful partnerships come from the shared mindset that owning a smaller amount of something bigger is better than owning a bigger amount of something small. Simple as that.
  • Unclear expectations and rewards
    When a co-founder relationship is unbalanced, it’s more likely to fail in the long term as these imbalances grow larger. This is not only about percentage of ownership, but more about the expectations for individual contribution, fair compensation and building an environment that rewards everyone.
  • Your best friend is your co-founder
    Opinion is divided around starting a business with a friend, but my belief is that it should be avoided. When you go into business with someone, it’s different than a friendship. You have to ask yourself if you’re ok altering a friendship over your business. You have to ask yourself if you’re ok getting into heated discussions and passionate debates with someone you normally have a beer with on the weekend, someone who knows you better than anyone else, can push your buttons and confuse emotional issues with matters of business. For many, it’s a sticky situation, and for that reason, I don’t recommend going into business with your friends. On the other hand, many people find a lot of positive aspects to going into business with friends; for example, some say that trust with friends is greater, so you know you’re all in it through thick and thin. My feeling is you should 100% trust anyone you go into business with, and you don’t have to find that person in your circle of friends. This doesn’t mean you can’t know the person ahead of time, or have worked with the person in the past, but I would not suggest starting a business with your best friend.

All of these risks can be managed, so there’s no reason not to have a co-founder. From the start, building a better relationship with anyone which will lead to more success and more authenticity. So start the conversations with your co-founder(s) early, be open and honest, and make sure everyone can be successful.

What are some of the other risks you have seen as an entrepreneur, and how did you manage past them? Share your story below.

Ride the Entrepreneur Rollercoaster

Life is full of ups and downs. If you’re an entrepreneur, there are a whole lot more of them. The ride many entrepreneurs take is so bumpy that many have dubbed it “the entrepreneur rollercoaster.” As you struggle to launch and grow your business, you’ll experience those highs and lows over and over again, sometimes with the same venture, and most definitely with each new business you launch. To give you just an idea of what an entrepreneur goes through, I brought together some resources to create this animated video, “The Entrepreneur Rollercoaster." It provides a brief snapshot into what life is like for an entrepreneur, and how cyclical the process is. Enjoy the ride.

Why you should have a co-founder

Welcome to a series of posts on the subject of co-founders: why to have one, finding one, dangers or risks associated with co-founders, and then, finally, how to work with them. I am a firm believer in the value of having a co-founder, both from personal experience as well as talking to other entrepreneurs, many of whom had co-founders when growing their businesses, and some that did not. Even those who did not have co-founders later realized the value of having a partner with whom you could share the stress and success of running a business.

There are very few examples of super successful companies that have a single founder. Think about it… Microsoft (Bill Gates) comes to mind immediately, but then, not too many more. Yes, if you combed the annals of entrepreneur history, you’d likely come up with a few. Even Venture Hacks calls Mark Zuckerberg Facebook’s only founder (under “The power of two” section, second paragraph), even though he arguably had quite a bit of help (remember that nasty lawsuit by three other Harvard students?).

Having a co-founder may be a crucial factor in the success of a company. But beyond that, as an entrepreneur, are there clear benefits to having a co-founder by your side? Yes. Here are a few:

A co-founder can:

  • Fill in the skills gap
    You may have a well-rounded education and ample professional experience, but one person can’t be an expert in everything. Everyone is missing important expertise, experience, and most importantly, management skills. What’s more, as entrepreneurs, although we’re willing to do any job to make our company successful, we do have interests and enjoy certain activities more than others. A co-founder can help complement your skills and fill in the skills gaps in a way you’ll never be able to do on your own. Even if you think you can cover everything, why should you if you have a co-founder to lean on who can do it better than you? If they enjoy fulfilling a certain role more than you do, let them take responsibility over it. Something perhaps even more important than the skills gap is the difference in management style. If you’ve started and grown your own business before, you know that as time progresses, different management styles work better than others. Having a co-founder with a different skill set will likely mean he or she will also have a different management style. It’s just one more weapon on your arsenal.
  • Provide you with a real companion on the start-up journey
    Starting a business means a bumpy road may appear on the horizon at any point, and it can be a lot easier to handle those bumps (and have more fun) with a co-founder. Advisors, boardmembers and mentors are great, but there is nothing like being able to talk to someone that is going through the exact same process as you are, facing the same risk, the same problems, and the same potential reward: a successful venture.
  • Serve as a backstop when you have an “off” day
    We all have those days when we are just not feeling it (and “it” can be any number of things with a start-up), and having a co-founder provides a backstop for those days, even for the simplest of matters. Need to go out of the office for a day or two after spending a week-long stretch glued to your computer, but need checks signed? Your co-founder can sign them. Have a big meeting scheduled when another prospect comes your way? If you have a co-founder, your company can be “present” at both meetings. Having someone you can trust, and is just as invested as you, makes what could be a huge worry just a little bit smaller.
  • Balance the extremes
    Entrepreneurs just want to get things done, and they’re always moving forward, but they can also face obstacles. It helps to have someone to balance the extremes we all face along the way.
  • Point out blind spots
    We all have blind spots in how we manage, implement projects, and go through life. Having a co-founder gives you a peer that can point out these blind spots so you can improve. From personnel issues to how to launch a product, a co-founder will open your eyes to things you might not see.

I’m not trying to say having a co-founder is perfect all of the time. There are always bumps in the road, but the benefits outweigh the very, very small drawbacks. Up next: the risks of having a co-founder.

Entrepreneurship isn’t one-size-fits-all

With the advent of so many awesome resources for entrepreneurs, there’s no lack of advice out there for the smart and enterprising entrepreneur. But after you’ve heard from the thought leaders, advisors, board members, family, friends and maybe even the person you sit next to on the plane, what do you DO with all of it, and how do you even know if you should take advice? I like to tell people that entrepreneurship isn’t one-size-fits-all. You’ve got to find what works for you after a lot of hard lessons and figure out what you’ll do with the information. Here are a few tips to get you going.

  • Listen, listen and keep listening
    No matter what you think you know, you should continue to listen to what others have to say. You don’t have to follow all of their advice (or any of it), but hearing what they have to say expands your mind and forces you to think differently—and that’s what will clear the way for your next “big idea.”
  • Filter
    As any successful entrepreneur knows, you must filter the sources of advice you seek. It might be helpful to think of all of the advice you get as belonging to separate categories. If you’re really conscientious, you can file the good information you receive into groups like, “start-up phase,” “hiring,” “getting focused,” and so on. When you want to return to these areas later, you can do so easily. It just creates a reservoir of information you can return to again and again.
  • Look for advice from people who have actual experience
    It seems like a no-brainer—look for advice about entrepreneurship from actual entrepreneurs—but nowadays, a lot of people pass themselves off as “experts” in subjects about which they’ve no first-hand knowledge. Many “experts” on entrepreneurship gather their “data” from other people’s anecdotes and experiences. That’s not what you need. The best advice comes from real life personal experience, plain and simple.
  • Have passion, but also rock-solid core values
    No matter what, you must follow your passion and core values. This is to say that no matter what advice you receive about running your business, ask yourself, “Does this fit with my core values? How so?” Not everyone’s advice will work for you or take into account your particular passion. So don’t think there is only one way to do things—there isn’t. Even if you get advice from one of your personal entrepreneur icons, always ask yourself if it fits with what you’re trying to achieve. As I’ve said, entrepreneurship isn’t one-size-fits-all.

Every entrepreneur should listen to all the advice out there, filter it and then select what best matches your passion and values. Never forget valuable, experienced-based advice. Seek out mentors and surround yourself with people that have been there and done that.

"Ultra-light" Entrepreneur Toolkit

With lots of talk about “cloud-this” and “outsourced-that,” it’s becoming easier than ever for an entrepreneur to start their journey. While these tools are probably best suited to online or technology companies, many of these same things apply to any new business venture.

  • "Cloud" or "shared infrastructure"
    There’s no need have a datacenter with fixed costs when you can pay for what you need when you need it “in the cloud”. As an added bonus, working in the cloud allows you to make use of others’ expertise in running what you need. Whether it’s storage from Amazon AWS, or Ruby on Rails hosting from EngineYard, infrastructure can be a variable cost with little to no capital investment.
  • Remote employees, worldwide
    Offshore resources have been available for a while, but Amazon Turk and oDesk have widened the market for remote employees and provided important systemization to the process. It is now possible to give tiny tasks to a massive worldwide workforce to complete almost anything. Assign automated tasks or hire developers from anywhere in the world. Scale your team up or down, the choice is yours. Some of these changes have also started to influence the testing or QA market place, another incredible advantage for building an “ultra light start up.”
  • Outsourced services
    Very similar to cloud resources, but these services have been around longer and just don’t have the buzz word of cloud. Despite not being new, outsourced services still provide infrastructure at lower rates, and access to features not otherwise available. From phone systems and email to accounting.
  • Crowdsourced design
    Despite their abundance, entrepreneurs still tell me they have a tough time coming up with logos or brand identities at good prices. Now, thanks to sites such as 99Designs and crowdSPRING, getting great logos, corporate identity and other design services are becoming much cheaper. While you may eventually need the design skills of a well-honed (and more expensive) design professional, if you’re just starting out, crowdsourced design is the way to go.
  • Community
    There is a growing community talking about how to quickly and profitably launch a startup with groups like Ultra Light Startups and lean startup movement with local meetups all over the world. Take advantage of these groups, concepts and lessons learned from people that have been there and done that.

With all these great resources, it’s easier (and cheaper) than ever to start a business. It can be a side venture while you work another full-time position, or if you’re ready for some sacrifice, you can pursue an “ultra light” venture full-time. The best part is that, moving forward, entrepreneurs have made traditionally fixed cost become variable, which only increases your ability to be profitable very quickly.

What resources do you use, or what is missing from the entrepreneurial toolkit?

LessConf 2009: How to build a company beyond the start-up stage

I had the privilege of being invited to talk at LessConf in October and it was one of the best conferences I have been to in a while. The other speakers were amazing and I learned a ton. From thinking differently about design and conventions from the Contrast.ie guys to how Wufoo does support, it was an all-around awesome experience. I had a great time chatting with Mike from FreshBooks and even stole his customer dinner concept. Better than any of the speakers were the attendees and BarCamp the next day. Everyone there was doing interesting things, engaged in the community and super passionate. This is what makes a great conference.

While I am still not sure why the great guys (Allan and Steve) from LessEverything wanted me to talk, they did a great job recording and editing in my slides. Watch the full presentation below.

Learn how to fund a web app startup from nothing to $170M acquisition

If you’re in the web app startup space, no doubt you’ve heard the big news during TechCrunch50 that Mint was acquired for $170M. That’s a very high return on a company that did a great job visualizing data from Yodlee. What is Mint? It’s a great service that allows you to track all your accounts, expenses, budget and more. Many people, even ones that use the service, didn’t know that Mint actually gets their data from Yodlee, which preforms all the heavy lifting and connecting with financial institutions.

What’s even more interesting than the fact that Yodlee feeds all of the info into Mint.com, is the presentation that Aaron Patzer, founder of Mint.com, gave, which was subsequently released online for the Founder Institute. If you’re interested in getting funded or curious about the process at all, I would strongly suggest watching the video and viewing the slides as Aaron walks through the process of funding the startup, his views around value contribution, as well as some original slides from investor presentations.

Aaron talks about and provides great insight into the typical angel-to-VC model for web apps, but why not talk about the other model where companies are bootstrapped and actually charge for their service from day one? I know, I know—it’s “sexy” to say you’ve raised money and there certainly are many incubators, angels and others that support this perception, but we need to focus on value generation. There are way too many startups focused on social media, news aggregation, and crowd sourcing that have no real business model other than to raise money and hope to figure something out. Is that really a plan?

Getting funded can work for a few companies, and there will always be huge success stories like Twitter which didn’t have a business model when they started, but there are far more failures sitting in the deadpool. I am all for innovation in any industry, and if you have a passion for social media, launch something there, but at least have some model for making money. The model may change, you may give the service away later, but put some value on it today.

Now that my mini-rant is over, watch the video and slides. It’s well worth the 30 minutes of your time to gain some insight into an interesting process that might be right for your startup. What other great resources like this are there to get an education about startups online?

Mint CEO Aaron Patzer on Startups from Techcrunch on Vimeo.


Startup Building 101 -

Fred Wilson talk on Disruption

Another great @Google, this time from Fred Wilson a well known VC and blogger. Fred has interesting things to say, while I may not agree all the time he is very open and honest in his communication. Stay tuned for the questions at the end.

Richard Branson, entrepreneur, dresses in drag to launch Virgin America

About a week ago, I went to a breakfast talk featuring Richard Branson, who happened to be launching the new Boston to Los Angles Virgin America route the very same day. Having been interested in Branson and his success at building the Virgin brand into over 400 companies, I was very much looking forward to the talk. Unfortunately, soon after the talk began, it seemed as though most— if not all—of the questions had been rehearsed ahead of time. Disappointing, but I did get some key takeaways:

  • Branson structures smaller divisions of his company as separate entities and as entrepreneurial ventures. Branson spoke only for a few minutes about this, although I wish he went into more depth. He discussed how his companies are structured as independently run businesses, each with their own goals, advisors, and employees, with the common tie being the overarching brand. By keeping tabs on the number of employees in each “company,” he can keep them from getting too big, and losing the entrepreneurial perspective. Very powerful concept of creating self-sustaining companies all of which further the brand.
  • Branson got the audience to participate and interacted with them, too. Any public speaking book, seminar, or course will tell you to get the audience to participate, and when speakers take a question, it’s recommended they acknowledge the question in some way. Branson did something that was very interesting that although might not have worked well in the large forum of this particular event, was very effective in engaging the audience, and acknowledging people: after answering a question from a member of the audience, he posed another back to that same audience member. This meant fewer questions were asked by audience members overall, but it was effective in producing more substantive comments.
  • Simple solutions for complex problems. As of late, Branson has been interested in using his success not only to further the Virgin empire, but to do good in the world, from stopping global warming to halting food shortages. His approach to complex socioeconomic problems is ridiculously simple: bring together the best minds in the world, free from constraints bureaucracy can impose, and they innovate solutions to a wide range of problems. When they’re proven effective—on private companies’ budgets—they hand over the plan to various governments for implementation around the globe.

After the talk Branson left for Logan Airport, where he dressed in drag to launch the new Virgin route from Boston to Los Angeles. Good times. Check out this video from CrunchGear: