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Grow Through Referrals and Differentiate Yourself

How Edentity Was Started - I was working for a software company when I met up with Mike Assad, my business partner-to-be, who was doing contract work for a number of other companies. We discussed different opportunities and searched for a meaningful direction. The company I was working for at the time got bought out twice and turned out to be more stressful then necessary. Mike and I met nightly about how we could build a company together. I ended up getting laid off from my company while at the same time landing a contract job with ABS System Consultants. With both Mike and I working on projects for Edentity, we were able to focus more on the overall direction we wanted to take.

We worked onsite under the Edentity name for the first year and a half. We slowly brought on contractors here and there to do odd jobs and give us some experience in having employees. Through referrals we were able to build a small client base and moved into a shared office space on the west side of town. The first year in the office was really rough. It was our first year with any real overhead and it was a big stretch for us financially. At the end of the year we landed a few new clients that brought bigger contracts and ever since that point we’ve doubled in revenue each year.

Advice For Startups - Grow Through Referrals - The biggest things to focus on are referrals and customer satisfaction. When you first start out there isn’t the budget for a sales force or marketing. You need to gain the trust of your initial clients and get new ones through their referrals. The great thing about referrals is that the sales cycle is almost instant. Talk to friends, family, people you’ve done work for in the past to get the referrals you need to start your business.

Have a Good Relationship with your Bank - Don’t underestimate the importance of having a good relationship with the bank. All businesses have their ups and downs and having a good line of credit can really help smooth out rough times between growth phases.

Differentiate Yourself - Make sure that your offering is different from the rest. You can’t sell the same thing as everyone else if you want to be successful. For us our reputation, technology, and service have really helped us stand out from our competition. We only do ASP.Net and we’re one of only a few companies in the area that does it exclusively. It allows us to come in at a lower price point and have tested and assured software which is important for customer satisfaction.

Strategically Align Yourself - Strategic partnerships are key and allow you to focus directly on what you do. Don’t try to be everything to everyone because you’ll never be the best at everything. Find the one thing you’re really good at and focus on that. Then, find partners in your industry who you can align yourself with – either as a hidden player behind the scenes or as a joint player in your sales pitches. You can build a much stronger offering by partnering with others.

Find Good Employees - When hiring we look at who the candidates are, what their expertise is, and how they fit culturally with our company. When you’re really small you need people who can mange themselves. As you get larger you can hire less senior individuals. You need responsible self-managers. Finding good people is always one of the toughest parts of running a business. We’ve posted in many different areas and have gone through many different recruiters. Using recruiters costs twice as much, so we use them depending on how much margin we have on a contract. Do not be afraid to push away contracts if it’s not what you do. We’ve found some good people on Craisglist and also co-op students from universities.

Focus on Quality - Focus on quality assurance if you’re a technical company. Hire a dedicated tester to make sure what you’re building works properly. We spent a lot of money to hire a formal Quality Assurance person. The quality of the work from our organization goes way up and the stress levels during deployment go way down because they know someone is there to test out their work. It allows them to work more effectively and our bottom line becomes more profitable. People always skimp on testing because they think it’s expensive but it’ll cost them more in the long run if they don’t test.

Create a Board of Advisors - Set up a board of advisors with people from different areas. Make sure to cover off legal, technical, and marketing as well as other areas your type of business could benefit from. You don’t have to meet with them very often but it’s important that you have someone you can call on who has the experience. Tim Snelgrove has had a big impact on our business. He currently run Snelgrove Associates, a company specialized in management recruiting for life sciences and technology. He started Timothy’s Coffee, has experience as an entrepreneur and is connected to the venture capitalist industry. He’s been a great resource for us as well as a sounding board.

Mistakes to Avoid - Don’t Underbid On Contracts - Be very careful about under-quoting just to get a contract. Unless there are other benefits such as knowledge gain or potential referrals, if you’re losing money on a contract it’s taking away resources and energy from your company that you could be using to grow it.

Hire Slowly and Fire Quickly - If someone’s not working out, get rid of them – immediately. We originally hired full time employees because it’s cheaper but now always try to have a mix of full time and contractors. Have a probationary period to test people out. This gives both yourself and the employee time to feel out if the fit is good for both parties. It’s important to do properly because salaries are always the biggest expense in this industry so something to be very careful with.

Focus On Building the Right Way - Don’t worry about how many people are working for you. You often hear people bragging about how they have 20 people working under them – but if you’re losing money doing it, who cares? Look at what your company is doing. Look at your business as something that should be strong and growing but not so fast that it’s out of control. Don’t just grow to grow. Make sure you’re profitable, people are happy, and that you have a great working atmosphere.

Follow Your Mission Statement - Make sure you have a mission statement and you follow it as you build your business. We’ve looked to our mission statement when we decide on contracts, make decisions, hire, and let people go. Having a clear statement makes decisions much easier and will keep your company going in a focused direction.

Partner Strategically - Be very careful about who you strategically align yourself with. What they do in their business can be portrayed as what you are doing. Just like you hire slowly, the process in finding strategic partners should be a slow, cautious one. It’s even more important than employees because strategic partners are seen by your clients and are promoted in your marketing materials.

Do Employee Performance Reviews - When we first started we didn’t do reviews often enough. We didn’t know if they had any potential problems or issues with the company. If someone leaves it’s a big factor if you’re a small company. We now do a probationary review after three months and then a review every six months. You can’t do these to often…

Get It Down In Writing - At the beginning we were weren’t stringent enough in getting our clients to sign a contract. We’ve had confidentiality and invoicing issues with some clients and have realized how important it is to get signed contracts up front. If they are comfortable in paying you, it shouldn’t be a problem to get them to sign an agreement. Create formal contracts to state what the agreed arrangement is and what the deliverables are. It’s too hard to come back to a verbal agreement if anything goes sour.

If I Were To Start A New Business… - Web development has a lot of growth and potential. Everyone is pushing things to the web. The challenge is that there is so much competition that you really have to do something that distinguishes you.

If I was to do this again I would spend more time up front, searching for that differentiator. Something we could build into a product and have more of a tangible worth at an early stage. Once you have that, your direction is almost set in front of you instead of you having to search it out.

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Grow Through Referrals and Differentiate Yourself
By Jonathan Voigt

About the Author: Jonathan Voigt

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Grew from $213,949 to $507,226 in revenues in 2 years (137% growth) -----Edentity is a specialized team of technology experts dedicated to generating exceptional results for your business. Our primary focus is architecting and building custom Web applications and sophisticated Web site back-end systems. We also design and build content managed, data-enabled Web sites using our Agility Content Management System product. Edentity combines a refined methodology of requirements gathering and quality assurance testing with the fast and flexible Microsoft .NET platform to generate results quickly and affordably. Our user-friendly custom software is designed to save you time and money. We will tap into your existing systems and reuse your existing data. We will only start from scratch when there is no other option. Our business is built by referral which provides a tremendous incentive to do good work. We will stake our reputation on your satisfaction and we have a long list of clients ready to offer commendation on our behalf including TAB International, McCain, Advantex and the Ontario Government. Edentity is a Microsoft Gold Certified Partner.
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