Earlier I told you my story of being on the board of a startup company – how I had to get in everyone’s face at a friendly dinner meeting, so they would do their ‘friggin research.’
The president of the company agrees to all of this and we head down the road.
Well somehow or another the friggin’ research never really gets done. Why? Because even though I’m the champion of this idea, it’s not like I’m getting paid to carry it out, meanwhile El Presidente has a million distractions.
To their credit, what they do have is hundreds of conversations with people in their market. Plenty o’ trips to conventions and meetings with vendors in that market. So it’s not like they don’t know what people want.
They are legitimately IN the market listening to people. So I don’t scream too loud.
By the way, we don’t have a product yet. The product was going to be a paid membership website but mid-stream they decide to make the membership and the use of the software free, then sell other things to the members once they’re in the door.
I decide that’s a good decision, a decision which 3 years later I still think was wise.
One thing that strikes me as a little odd is that there’s always some Drama Queen contention going on somehow, somewhere.
Like for example there’s this teeny tiny nothing of a company on the east coast – I’m not even sure it’s even a real company – who is bickering with El Presidente that we stole the guy’s idea (not true) and he’s trying to reach a legal settlement with him via threats of dragging us to court.
The east coast guy seems a total crackpot but El Presidente’s playing patty-cake with him anyway.
Or for example there’s the company sales manager making $120,000 a year who so far as I can tell does absolutely nothing other than try to sell banner ads to vendor companies, which is the financial equivalent of holding a bake sale.
Eventually the sales manager gets fired and then sues the company for discrimination because the sales manager is 1/16th American Indian or some such thing.
Meanwhile every time we have a board of directors meeting, El Presidente plies us to find more investors.
There are two Financial Planners on the board and they know all kinds of people with money and every month they seem to somehow find someone who is willing to invest $25K, $50K, sometimes even $100K of Angel Money into this company, which is burning cash at a rate of $1 million per year.
Meanwhile we still do not have a product and we still have not proven in any way, shape or form that we can buy traffic for $1.00 and sell them something for $2.00.
So I endure these stupid board meetings and steadfastly resist their efforts to get me to find investors.
I stick to my instincts, which are: “Dude, when you can buy ONE dollar of advertising and turn it into TWO dollars, you will find all the money you need to make this thing grow. Believe me, I know plenty of people who have enough money to put it into a deal like that.”
Well anyway, finally El Presidente decides it’s time to get some traffic and he invites me to build them a Google campaign. Which I do.
I did something which I now teach: I started with ONE keyword and spent 2 months tweaking ad copy, display URL’s and Content Network settings.
On the very first day we got sales leads – free membership trials – at a Cost Per Action (CPA) of $14.00.
El Presidente, by some MBA-ish sort of calculation, had predicted and hoped that we could get membership signups at a cost of $20.00 or less so he was quite happy about this. News traveled ’round the company and among investors like wildfire.
Well you know how we do things in Planet Perry – the first day on Google is just an early, crude approximation. One week later I had the CPA down to $6.00 and a month later, after adding the Content Network and a bunch more tests, we had it down to $3.00 per signup.
The traffic was coming in like an avalanche.
I forget the exact details but I think we got 30,000 new members in a span of several months with a 16% signup rate on the website. The cost of that Google traffic was far and away the most productive $100K the company ever spent on anything.
You’d think that victory would have bought me enough credibility for them to hang on every word.
Sorry, pal – not so fast….
I naively believed that if we were accumulating members at a rate of many thousands per month, El Presidente would finally be moved to follow my suggestions of how to actually SELL things to this audience.
The company was in an education related business and it was painfully obvious that they could easily offer online courses. Which as you know, I very much know how to put together.
“El Presidente, see how I deliver training and education online? We need to do exactly the same thing.”
I would get promises and promises that we would. But we never did.
Instead, for some reason, the guy would go all over the country like Don Quixote charging windmills, and he would put together these crazy deals. He spent a year and nearly $100K putting together an e-commerce website selling commodity products with a 15% margin that had ZERO chance of EVER being profitable.
We would get into fights at the board meetings and he would retort that my own training programs were unprofessional and he would not dream of offering something so slipshod to his customers. He said the customers would have his head on a stick, their standards were much higher than those of my silly market of ragtag entrepreneurs.
As we have these conversations, the company is barely making a dime and burning $100,000 per month.
Every 3 months we have a Board of Directors meeting and he presses us for more investors.
One day last summer all us board members get a memo asking us to increase our commitment to the company and pull harder to get more investors and secure our future as the greatest company in this space.
I couldn’t stand it anymore, and I sent this email to everyone:
FROM: PERRY MARSHALL
TO: ALL BOARD MEMBERS
There is nothing you could do to convince me to ask any of my friends or colleagues to invest in this company. In fact I think to stand up in front of a group of people and pitch them on investing in [ACME Corporation] is an irresponsible act of deception.
The strategy this company is using is a disservice to shareholders and if it doesn’t change drastically, [ACME Corporation] will fail.
Two years into it, this operation still does not even qualify as a business.
Why?
Because we still do not have anything of profitable substance to sell to our customers. No one has demonstrated that this company knows how to “make one dollar.”
That’s when the yogurt REALLY hit the fan.
I’ll tell you what happened in Part 3…..
Perry Marshall
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About the Author
Perry Marshall has launched two revolutions in sales and marketing. In Pay-Per-Click advertising, he pioneered best practices and wrote the world's best selling book on Google advertising. And he's driven the 80/20 Principle deeper than any other author, creating a new movement in business.
He is referenced across the Internet and by Harvard Business Review, The New York Times, INC and Forbes Magazine.
31 Comments on “Fist Fight at the Board of Directors Meeting – part 2”
How did you get hooked up with them anyway? Is it that easy to get you on a Board? Come be on my Board then…lol
A friend who I’d been friends with 10 years pursued me for quite awhile. They finally had a good plan and I got on board.
It boils down to one thing. As my friend Berny Dohrmann says…” Competitive Capitalism is Insane”
Thanks soooooo much Perry! This is soooooo much fun!!!!
Those guys are idiots.
Having an easy way to give value, turn a profit and ignoring it is something extremely fool. Perry, your knowledge is too much for those morons.
I’ve worked in a dozen startups. Same circus, different clowns. Except for one step-by-step success story that did everything right. Great lessons along the way.
Where’s Part 3!?!?! AARRRRHGHGHGHGH……….
You’re killing us.
Perry,
I was was just thinking the other day, when is Part 2 installment coming? What a tease. Hope we don’t have to wait as long for Part 3.
You spin a good story but oh so true. Been there, done that. I had to get out before their big head/ego was blocking the door for my exit.
Perry,
This is so instructive for “partners” in a business, or on board (like yours). I think I know already while your are still involved – your own money 9or that of family/friends) is tied up in it.
Geez, what a bunch of drop-kicks these guys are. I was in a start up with a partner, who promised to put a whole lot more money in (as we were burning cash per week on a 10 out and 1 in ratio), who did not come to the party and starved the business of working capital. My life savings went down the tube. I refer to this as my Dan Kennedy moment.
For your sake, and that of the honest investors, get your legal hands on the office chairs, computers and other assets before it is too late; it sounds like this will be all that is available at the end!
-Peter(IMC) – good point, these directors need to have their own money tied up in this thing and/or something to make them financially accountable.
Sorry if it sounded personal, it wasn’t intended to be.
It’s that I see this a lot right now, people deciding to do things themselves either because they think it’s done better, or worse, to avoid a discussion. What it ends up with is expensive people spending time on things that can easily be done by others and the result is worse,… they´re not spending their time on things that have much more impact.
And I wasn’t calling Perry stupid, if he would have been like the rest of them, he wouldn’t be writing this story.
I really cant wait for part 3. Very educational history.
Perry, I’ve read you tell a good story about figuring out (or finding out) you’re a good writer somewhere in your past. In internet marketing context that means “good copy writer.” But what you really are is a great story teller! And that’s what I’m working on. Yeah, you’re a good copy guy too, but putting that story in it makes it sing.
I study you and Carlton and a couple other guys (Sorry girls – I just don’t know about you! – yet!)
This is my favorite subscription!
Perry,
I have worked in a startup and through colleagues know of some other companies that are basically just the same. Actually most “Presidentes” and “Directors”, especially the financial managers, are all the same. They have no clue what they´re talking about.
I know one thing: Never get a CEO that doesn’t have a substantial part of his or her own money in the company.
It’s amazing how STUPID so many people are. Not only those kinds of CEO’s and Directors, but also those that invest in companies managed by these kinds of people.
I have been in a start up where, after it was sold because the whole thing collapsed, the next owner found out that 80% of the customers were never billed for more than a year. The first thing they did was send out the sales teams to try to recuperate some of that money. After the first month and about 50% of the customers agreed to pay, they found that the investment they made was already for a nice part paid back.
I mean, this kind of stupidity is beyond my understanding. Most of the money existed just on paper,…. How NOBODY ever thought of actually checking if customers are paying is …. I don’t know what word to use for that.
One of these Idiots even had the guts to tell me that I don’t have what it takes to start up a company because I’m too technical.
These people really lack a certain number of brain cells but somehow the “bla bla bla” cells seem to compensate for that in a mostly “bla bla bla” world.
But we learn from these kinds of experiences!
Looking forward to the “denouement” Perry!
A great story Perry, very Dickensian as already mentioned.
This seems like a long timeline, how come you stuck with them so long? Especially with all the frustration?
What did they do right along the way to keep you involved?
They seemed pretty forward-thinking in some respects, yet are still struggling (at this point in the narrative) to get even the basics right. And gone off at some tangents along the way.
Interesting that the basic concept of “alchemising” 1 (something) into 2 (somethings) [by proof] seems to be so alien to so many organisations.
Perhaps the standard basic opening question anyone in our profession should ask of a potential seeker after our help, would be:
“If you had a black box that gave you 2 bananas for every banana you put in, how many bananas would you put in?”
(only correct answer: “all of them” – everything else is a flunk.)
Thanks for your story, and looking forward to parts 3 and beyond!
David,
For quite a long time this thing strung along and it would appear as though they were going to make some kind of breakthrough – some big vendor partnership or whatever – and since I only had to attend 1 meeting every 3 months it was out of site out of mind. But finally I couldn’t take it anymore. Shoulda pulled the fire alarm sooner.
Perry
I’m not so sure that there’s one “the” entrepreneur in any organization. But I didn’t really mean it that way anyway. I recognize you were an expert in a discipline brought in from the outside to help, and you were (are?) a part owner. Especially if the money flowed from you to them (wish *I* could wrangle that kind of a deal out of you! Of course you paying to get in is why they didn’t value your advice…).
“Didn’t have enough skin in the game”
I know what you mean, it’s relative not absolute, and it’s not a black and white issue, because you’ve got other stuff to do with your time and money, but remember if you want something done right you have it do it yourself. I think that’s what makes people entrepreneurs, even if they don’t have their own company. I wasn’t saying you had to do the research, certainly you had no obligation to, it wasn’t your job. But when many people in an organization have that attitude, when they are not entrepreneurs in their job, even without monetary ownsership, that usually leads to going out of business.
I agree that you are without guilt, in the sense that you didn’t do anything you were not supposed to do, and you didn’t avoid doing something you were obligated to do. And certainly being ignored is very frustrating. Even so, “not doing the research because I wasn’t being paid for it” is a little short sighted if you are an owner and you know that that will make or break your investment. I may own shares of Apple and not have any control over how the place is run. You had a bit more power than that, even if you weren’t El P.
Just replying to that “if you want something done right, you have to do it yourself”
If you believe that, you’ll never be really successful. The art of entrepreneurship is found in the ability to get people enthusiastic and dedicated.
If you do it all yourself, you will be miserable for the rest of your life and work 15 hours a day.
There’s actually a lot more wrong with that statement. If you really believe that “if you want something done right, you have to do it yourself”, then that means that you literally believe that most other things that you don’t do your self, are not done right, or at least not as good as you want them done.
That’s a really bad formula for success.
That’s an interesting take on it, taken to an extreme. Though somehow I feel like you took it out of context.
Kind of like, in your other post, when you say:
“It’s amazing how STUPID so many people are. Not only those kinds of CEO’s and Directors, but also those that invest in companies managed by these kinds of people.”
you’re basically telling Perry he’s stupid (in caps, no less).
I think neither one of us intended for our comments to be generalized too much. We each probably could have put the word “sometimes” in from of our remarks.
I´m Can’t wait for part 3.
This is what corporations are like. But while there are lots of problems there, you’re not without guilt either:
“even though I’m the champion of this idea, it’s not like I’m getting paid to carry it out”
That type of attitude contributes to the atmosphere you describe. OK, I don’t know the particulars of your relationship with this company, but it’s the kind of statement I can hear people saying at all levels of the organization, and it’s cancerous.
You don’t sound very entrepreneurial in this story yet. Does that change later?
In this story I’m NOT, I repeat, NOT the entrepreneur. I’m a minor investor.
I’ve put money IN and they’re not paying me to do the things they’re failing to do.
I’ve invested assuming that what they have told me is true, namely that they’re including me because they value my input and will carry it out.
I don’t have enough skin in the game to make it worth trying to take over. It would have been a complete waste of time to try and do so.
I am 100% without guilt because I am in no way obligated to go do this stuff for them. I was not passing the buck. I was objecting and getting ignored.
El presidente is very thick headed.
Deja vu Perry?
It sounds like Synergetic M. all over again.
Dr. Howell,
This really was nothing like Synergetic. At Synergetic I had an evil boss but the president Mike was a pretty cool guy. Synergetic had real products and a real business plan and successfully pulled off what the guy at [ACME] was dreaming of. What I would say is that the earlier evil boss and the [ACME] president had similar ability to live in a world of their own making and delusions of grandeur.
Perry
Perry,
This story brings back memories. My last corporate job was for a company that ran lawyers.com. Putting up with all of the corporate politics, wasted resources, and low morale among many IT employees helped inspire me to start my own business.
Funny thing is when they got into using Google AdWords, I offered to help them a couple of times and was willing to provide them with a free copy of my adwords tool, AdWordAccelerator. (http://www.adwordaccelerator.com)
Both times I received no response from the people in charge of the AdWords campaigns, and later I discovered through a manager that they were spending ten times more than I was in the same market! (I had built a small legal information website to experiment with AdWords ads for my own edification, used your Definitive Guide’s principles, and had some very good results).
I still find it both intriguing and frustrating when someone offers useful knowledge and information to others, genuinely willing to help, and such things fall on deaf ears.
Fortunately, these dynamics often create new opportunities for many entrepreneurs.
Steve
So far the story just goes to prove, “You can lead a fool to knowledge but you cannot make them think.”
Great quote Gerry Shand “”You can lead a fool to knowledge but you cannot make them think.”
I can’t wait for the next part Perry. I feel your experience typifies why we had a global financial meltdown and a recession. Bankers in pinstripe suits (Change the B for any letter you like) with egos bigger than their depreciating assets.
My friend works with a top ad agency who now think they’re in the adwords management biz. They charge thousands of dollars for a campaign, deliver nice presentations and yet they haven’t got a CLUE what they’re doing.
He often calls me for advice and will ask things like ‘So if you pay more money per click, then you get to the top of Google right?” This is after they have taken some big corporation for tens of thousands.
So anyway I forwarded him some of Perry Marshall emails. Considering he was now a Google Search consultant, I thought he would find it useful.
He came back saying he thought this approach was unprofessional and his clients wouldn’t buy it. We’ll maybe that’s true, but I thought ripping off customers was somewhat unprofessional.
Any advice I have followed from Perry has brought me success and my mate knows this. Like may corporate guys though, their ego gets in the way of making the right decisions.
I’ll have a go at a quote of my own.
“You can’t teach a corporate guy new tricks, no matter how old he is”
Perry,
You sure know how to weave a Dickensian serial.
I too am reading this like a novel – don’t make us wait for part 3 so long ! :-D
Perry,
So why, pray tell, after two years of this are you still representing these folks?
Stay tuned for part 3….
I don’t use adwords, I don’t think I want your products and I don’t know why I signed up for your emails. But I’m really glad I did because they are great!
BTW, that’s not a business you’re describing. It’s a scam on the investors. Can’t wait for part 3.
Perry this is a great Story! I’m glued to it like a Travis McGee novel.
I graduated with an Engineering degree and discovered direct response marketing and copywriting at the same time. Bought your whitepaper course and decided to get a job in a tech company offering to create lead generation systems for them.
I was fresh faced kid asking VPs of marketing and sales what they were spending to get a customer. They didn’t know. And when we worked it out it was always above $5,000.
I would then show them I could get the same customer for $50.
They still laughed at my ideas and that’s why I became an entrepreneur.