Cloak Yourself in Credibility

Lee W. Frederiksen, Ph.D.

"Cloak yourself in credibility." That's the advice Arun Gupta offered to start-up companies trying to gain traction with Venture Capital firms when he participated on a panel at the annual Venture Capital Outlook conference presented by Potomac Tech Wire last week. A partner in Columbia Capital and a very active player in the tech and services arena, Arun knows a thing or two about venture capital. And his comment is obviously right on point for firms seeking venture funding.

What struck me about his advice is how relevant it is to all professional services firms. You see, venture firms are betting on entrepreneurs to solve difficult problems. The same could be said of professional services buyers and the firms they hire. Credibility is the coin of the realm in both cases.

Arun had two additional comments that rang true. First, he emphasized the absolute importance of knowing and tracking the cost of acquiring a new customer. Far too few firms have any idea what it takes. If you don't measure what it costs to acquire a new client, you will have a difficult time improving your closing rate. When you are armed with this information, you are in a position to accelerate investment when you discover a technique that works exceptionally well. For example, today I was talking with a client who was evaluating a lead generation program with a cost per lead of around $50. When I asked him what the value of a lead was, we calculated it to be about $5000 (average contract size multiplied by closing percentage). Who wouldn't be interested in buying $5000 bills for $50?

Arun's final point was to stop focusing on what's hot today. If it's hot today it's too late. Your firm needs to be focused on what will be in demand in 2-3 years. How do you do that? Start by understanding trends that will shape the industry you serve. Then get in front of them. Easy? Not really. Can it be done? Absolutely. And the rewards for getting it right are very great indeed.