Company of One

by Paul Jarvis

  These days, of course, most consumers take to social media to complain about mistakes or missteps by companies. A study done by Liel Leibovitz, a communications professor at New York University, found that 88 percent of consumers were less likely to buy from a company that didn’t answer support requests on social media. And for customers who took to social media to voice their concerns about a product they had purchased, 45 percent said that they’d be mad if they received no response and 27 percent said that they would completely stop doing business with that company. We have to pay attention to our customers in the places where they’re spending their time — on Facebook and Twitter.

  YOUR WORD IS A CONTRACT

  Nicholas Epley, a professor of behavioral science at the University of Chicago Business School, says that maintaining good business relationships with customers doesn’t require superhuman efforts. Rather, you simply need to do what you say you’ll do and customers will be grateful.

  Nicholas says that people tend to evaluate each other based on two general dimensions: how interpersonally warm we appear to be, and how competent we seem to be. His work suggests that the way to be positively assessed by others is by making promises, and then keeping them. This advice is especially important to companies that serve customers, since customers who are treated with warmth, understanding, and competence turn into loyal customers.

  As a company of one, you have to be very careful in what you tell your customers, or even potential customers, because your word is your social contract with them. It doesn’t do you any good to overpromise the effectiveness of your products or pitch false information, even unintentionally. In these days when almost all information is available online, you need to be clear about what your business does and how you do it. Is your data secure? Are your overseas factories safe and paying fair wages? Did your car rank well on Insurance Institute for Highway Safety crash tests? Are the companies in your socially responsible exchange-traded funds lobbying against environmental concerns?

  Several studies, like one done by Luigi Zingales of the University of Chicago, have shown that businesses with a culture of keeping their word are much more profitable than those that go back on their word or only say things that don’t align with their actions. He finds that proclaimed values are completely irrelevant without proof that those values are backed by corporate actions.

  What does it take for a company to keep its promise? And why do so many businesses fail to keep their promises? This “commitment drift,” as Maryam Kouchaki, Elizabeth Doty, and Francesca Gino describe it, is defined as systematic breakdowns in fulfilling a company’s most important commitments to its stakeholders. These researchers believe that commitment drift stems from several factors that are related to a business’s perceived short-term gains and that end up compromising the stated promise. To avoid going back on a promise, a business needs to put a few strategies into practice, from leadership to customer service reps.

  The first strategy is to make fewer and better commitments to customers. A business that believes it should “underpromise and overdeliver” sometimes fails to even simply deliver on par with expectations. Next, a company that isn’t tracking its commitments — for example, through support system software or by noting promises from leadership — can easily forget what the original promise was. Finally, having actual processes in place to meet these commitments is required; assuming that such processes won’t be relevant until sometime in the future will only lead to broken promises. By focusing on these three strategies, companies can learn how to better keep promises to their customers.

  The best approach is to treat every agreement with a customer (or even an employee) as a legally binding contract because, on a societal level, that’s what it is. If you promise to give someone something at a certain time, then do it, and do it on time. Whether it’s a quote or a deliverable or a customer service response doesn’t matter. If you aren’t sure whether you can deliver, either say that you can’t deliver or negotiate for a longer delivery time so that you can be sure you will.

  Anytime you don’t keep your word you’re not just letting down one person or one business — you’re losing the opportunity to work with every single contact of that person or business, because you can be sure that they won’t ever send business your way. Or worse, they’ll tell everyone they know that you don’t keep your word. A broken promise balloons outward, like our ever-expanding universe: you ruin not just your relationship with one potential client or contact but your chance to work with everyone else they know.

  Bear all that in mind the next time a problem pops up in your day-to-day business. If you want your company of one to succeed, it’s essential to do the right thing when it comes to owning mistakes and errors.

  BEGIN TO THINK ABOUT:

  ■ What you could do to ensure that your existing customers feel both happy and acknowledged

  ■ Where you could exceed expectations with your customer service

  ■ How you could create opportunities for word of mouth and referrals

  ■ How you own and then fix mistakes

  ■ What you could do to ensure that your customers end up with wins

  8

  Scalable Systems

  If the point of a company of one is to question growth and challenge scale, the answer might sometimes be that growth is in fact required — when it aligns with your overall purpose. When growth in profit, customers, or reach is needed, however, companies of one can look to simple and repeatable systems to facilitate scale, with no need for more employees or resources.

  Marshall Haas, cofounder of Need/Want, used to think that a company needs to scale in proportion to the revenue it generates. Thus, a $100 million business needs to have at least hundreds of employees and several layers of bureaucratic managerial hierarchy. What he’s found in practice, though, is that, with fewer than ten employees, his company can grow very slowly and still increase revenue — which is currently at nearly $10 million.

  Most people would assume that only tech startups or software companies could manage to scale revenue far quicker than they add employees and expenses, since their products exist in the ether of the web. But Need/Want, a physical product company that sells everything from bedding to notebooks to iPhone cases, has managed to build a big business with only a tiny team.

  Need/Want uses scalable systems and channels to increase profits. They use prepackaged software, Shopify, to run their online store, which can handle anywhere from one order a day to over a million. They stay out of big-box stores, so they don’t need a dedicated outside sales team. They don’t do trade shows, and all their marketing efforts stem from a team of three who focus entirely on online channels, like social media, paid ads, and a newsletter (all of which can increase reach without too many extra resources to manage).

  Need/Want outsources manufacturing to a factory with which they have a close relationship; it can handle anything from handfuls of orders to tens of thousands of orders in a day. The company also outsources shipping and fulfillment to a trusted partner. In other words, Need/Want is a perfect example of a company of one that utilizes scalable systems. Its direct-to-consumer sales model keeps things lean and enables the company to really experiment with the best way to find and sell to new consumers.

  The company started when founders Marshall Haas and Jon Wheatley became interested in applying the knowledge they’d acquired from working at tech firms to physical products. Prior to their partnership, Marshall was making money selling products that you couldn’t actually touch (software), and Jon was creating things that could be touched, but without making any real money (VC-based startups that never got off the ground or made any profits).

  They treat their company like a tech startup, but instead of selling software, they sell products, relying heavily on technology, automations, and the scalability of online channels. Their team, even at nearly $10 million in yearly revenue, remains small: besides Marshall and Jon, who run the business and handle marketing, t
here’s a head of operations, four support staff (two of whom are part-time), a CFO, and a developer. When they require more help, they hire freelancers and contractors and outsource until it’s cheaper to bring the job in-house. That is, they hire only when it’s too painful or time-consuming not to, or when the salary for a hire could easily be justified by the return on investment. The Need/Want model is growth based on realized profit, not growth based on potential profit (the model adopted by most startups or VC-backed companies). They operate out of St. Louis, where it’s far cheaper to rent office space and to live, rather than in a typical startup hub like San Francisco or New York.

  Because Need/Want’s heavy reliance on social media and newsletters, which are both infinitely scalable systems, creates a one-to-many relationship, the company doesn’t need more staff to reach more people. They simply need increasingly effective messaging and positioning — which they’re always testing with tools like A/B tests in their ad campaigns and email campaigns. A/B tests let a company test a few variations of a small subset of a list, see which variant performs best, and then send the winning variant to the rest of the list.

  James Clear — the author and photographer introduced in Chapter 2 — has developed scalable systems in his own business, which creates and promotes digital products. With a mailing list that has more than 400,000 subscribers and increases by 1,000 new people per week, he could have his pick of goods to create and sell to them. His focus for paid offerings follows two simple rules that help him remain a company of one (with a single assistant) and serve both the many people in his audience and the people who buy his products.

  James’s first rule is that his products must take little to no management. The digital courses he sells have no ongoing live webinars or training sessions — customers merely buy the content and then watch the prerecorded videos in their own time. His second rule is to charge a onetime fee for everything he offers; he accepts no retainers and no ongoing consulting work. To give a keynote speech, he’ll fly in, give the talk, answer questions, and then be gone the next morning. These two rules help James keep his business small, his overhead and expenses light, and, most of all, his time freed up to do what he wants to do: researching, writing, and sharing. By creating goods and offering services that are scalable without any actual major scaling on his part, he’s optimized his profitable business for the life he wants.

  Of course, most people and businesses don’t work backwards like James did. People tend to start with a business model and then become unhappy when their days are filled with tasks they don’t enjoy. Instead of thinking, What product can I create? or What service can I offer, James believes that we should first think: What type of life do I want? and How do I want to spend my days? Then you can work backwards from there into a business model that allows you to create scalable systems to deliver your product to your audience.

  Let’s break all of this down further by looking at how systems can be put into place to assist companies of one with creation, connection, collaboration, and support.

  CREATION AS A SCALABLE SYSTEM

  It’s not news that companies separate product ideas, marketing, and sales from physical production. If done poorly, this practice can create problems ranging from low ethical standards and unfair wages to vast amounts of waste as a side effect of manufacturing.

  In the beginning of separating branding from production, large companies believed that great fortunes could be made by achieving the lowest common denominator in production, and in recent years that belief has been propelled by the forces of globalization. According to author and activist Naomi Klein, however, globalization has had negative effects on workers, including poor conditions, low salaries, and unfair treatment. Klein believes that a new movement, one very much in line with the mind-set of companies of one, is breaking away from global brands with questionable morals that focus on maximizing profits over people, and that this movement will shift businesses toward slower, smaller, or on-demand strategies, making them more “fair” in all senses of the word.

  For example, trend-setting companies like Arthur & Henry advocate for “slow fashion” and encourage customers to wear their clothing longer, and in stages — first at the office when a garment is fresh and new; then casually on the weekend, rolling up frayed sleeves; and then, when stains and small tears appear, for garden work. Ideally, the final stage for a worn-out Arthur & Henry garment is use as a rag in the garage. When we extract every ounce of usefulness from each piece of clothing by reusing it over and over, we get the most out of the work of the farmer, the miller, the tailor, and the factory employee. Arthur & Henry’s metric for success is sustainability in all forms: earning steady revenues, raising money for charities, minimizing environmental damage, and maximizing benefits to all workers.

  Another example of a beneficial separation between brand and factory that has resulted in an ethical and profitable scalable system for a company of one is Girlfriend Collective, founded by Ellie Dinh and Quang Dinh. They sell bras and leggings that are manufactured in Taiwan, using mostly recycled plastic from used water bottles. Girlfriend Collective advocates for slow fashion and against pumping out large numbers of poorly made products; although its product order wait times can sometimes be long as a result, customers are happy to wait. The company pays workers 125 percent higher than minimum wage and offers free catered lunches, guided exercise breaks, health insurance, and free health checkups every six months. Its environmental practices exceed government standards for manufacturing as well as for recycling and waste water management.

  Many overseas factories turn out vast numbers of brand-company products, which helps them stay busy and keep costs low: when one partner company sends in a smaller order, a factory can switch to producing for another company with a larger order. Not tied to any one brand, an overseas factory can work with any number of partner companies. This practice sometimes slows down production, but it also creates a more sustainable, almost-on-demand system in which production never outweighs demand.

  CONNECTION AS A SCALABLE SYSTEM

  By constantly working toward reducing one-to-one points of contact with customers and focusing instead on one-to-many relationships, a company of one can scale its connection with customers without actually scaling its business. Yes, personal touches, as we saw in Chapter 7, are essential, and direct communication with customers is always required to learn, empathize, adapt, and revise — yet the majority of connecting can be done en masse.

  A perfect example is email marketing. It requires the same amount of effort to send an email to 50,000 people as it does to send that same email to one person. This is precisely why most companies of one rely heavily on newsletters and email automation: these are powerful tools for building relationships, trust, and even revenue. With an average return on investment of 3,800 percent, according to the Data & Marketing Association, email marketing is a valid model for scaling without scale.

  Systems for connections don’t work simply by turning them on and watching them increase profits. (This would be like believing you can plant a real money tree.) Work is required, at the outset and through iteration, to ensure that these systems are functioning optimally. And as discussed in Chapter 6, personality is still required, even with automated customer communication, in order for these systems to be effective. The point of scalable connecting is to make customers and potential customers feel as though they’re getting on-demand information as they need it, not being relegated to an infinite loop of unhelpful and frustrating computer-generated responses.

  Using personalization and segmentation in connection channels like email is key. You want to send the right email, to the right person, at the right time. Otherwise, you may be sending out a firehose blast of messages that may not even be relevant — like a sales pitch to a customer who’s already purchased the product. Tools like MailChimp are great for filtering and targeting an audience, allowing you to send emails with product pitches only to people who have not yet purcha
sed the product, or notices of in-store sales only to people who live in the particular geographic location, or up/cross sells only to people who already own the relevant products. Also, a study done by Campaign Monitor showed that emails with personalized subject lines are 26 percent more likely to be opened. The Epsilon Email Institute found that segmented automation emails have a 70.5 percent higher open rate and a 152 percent higher click-through rate than “business as usual” firehose blasts.

  To increase the effectiveness and the conversion rates of connection channels, you need to do careful testing. Luckily, systems like email marketing software allow for A/B tests. Similar A/B tests can also be run with marketing messaging on websites to increase engagement and commerce.

  In my own business, email marketing accounts for more than 93 percent of revenue each year. It allows me to connect with thousands of people who have opted to receive updates, education information in the form of articles, and even product pitches. I can write a single email that is instantly delivered to 30,000 people. I can teach 10,000 paying customers how to use my products without communicating with each of them every day.

  Newsletter automation can also be used to increase customer education and retention at scale. Automated emails sent to people immediately after purchase can show these customers how to best use the product they purchased or answer common customer questions, greatly reducing customer support requests. Automated updates and notes and even simple check-ins with customers after a set amount of time can also increase the likelihood that customers will keep using the product, as well as the likelihood that they’ll tell others about their purchase (for instance, via social media sharing buttons within the emails).