Client: “Why the *#@! are we still losing money?”
Two years ago I founded Ladder.io, a growth marketing agency working with startups and large businesses in the Fortune 500.
Since then we’ve worked with 102 startups.
I count 28 that failed.
This is to be expected. 92% of startups fail so it stands to reason that no matter what we do, a large proportion of our clients won’t be with us this time next year.
I’m proud of the work we do, and marketing is an important part of success, but it’s just one of many things you have to get right in order to grow a successful, scalable business.
Sometimes failures turned ugly… and that’s what I’m here to talk about.
I’d never name any names, but failing founders have done everything from lie to us and curse us out to incessantly calling our personal phones – or worse, refusing to pay their bills.
Below are a few choice quotes.
- “I can’t pay you anymore. I need that money to fix my product.”
- “Your strategies aren’t ‘advanced’ enough; I want to see magic”
- “If you still want me as a client, you need to give me this month free.”
- “I don’t give a &%!^ if new users are up 1,500%, nobody is booking.”
FYI – Looking at the data for these situations, I see no correlation between the strategists that worked on the accounts and the toxicity of the relationship.
Some of our best strategists were working on clients that gave them rave reviews, while simultaneously being ripped to shreds by the clients I’m quoting above.
I felt Donald Trump channeling these ex-clients in one of the 2016 Presidential Debates when he said “Maybe he didn’t do a good job and I was unsatisfied with his work.”
You don’t get to stiff someone just because you were “unsatisfied.” That’s why contract law exists.
The contract enshrines expectations into a legal document; it means you can’t conveniently change your expectations after the work has been done, to get out of paying your bills.
Contractors have their own bills to pay, and as long as they delivered what they said they would to a reasonable standard, they can’t be held responsible for your success or failure.
Most entrepreneurs put up their own savings, take on credit card debt, work 80 hours a week, and still make less than their employees for years. And that’s just for a 1 in 10 chance that they’ll make it back in equity.
Professional service workers and agencies can’t afford to take that type of risk.
If they wanted to bet on the performance of their work, they wouldn’t be working on retainer. They’d be building their own products and taking their own risks, like you are.
Growing a business is hard for exactly that reason.
In return for the lion’s share of rewards, you take all the risk and absorb the costs of failure. That’s why it takes such a rare person to be an entrepreneur. Most people don’t want that life.
Look, I get it.
When a founder shouts at me, I know it’s not personal. It’s about survival.
As a founder, you’re under immense pressure and you do what you can to keep going. If yelling at their marketing agency gets them to pull off a Hail Mary pass and the business lives another day, then hey, maybe the ends justify the means.
But it’s more than that. Founders are trained to be unreasonable.
“The reasonable man adapts himself to the World; the unreasonable one persists in trying to adapt the World to himself. Therefore all progress depends on the unreasonable man.”
- George Bernard Shaw
To justify quotes like the one above, they only need one case study as evidence:
Jobs was unreasonable.
Steve Jobs’ preferred parking spot.
Examples are easy to find:
While working at Atari, Jobs recruited Wozniak’s help to build a scaled down version of Pong. There was a big bonus involved in getting it done quickly and efficiently, and Jobs lied about how much money was involved, pocketing the majority of the money for himself. (source)
VLSI Technology, a chip company, was having trouble delivering enough chips on time. Jobs stormed into a meeting and started shouting that they were “f&^king d!%kless a#&holes.” The company ended up getting the chips to Apple on time, and its executives made jackets that boasted on the back, “Team FDA.” (source)
The Xerox Star was supposed to be the hot new computer that came out in 1981 (it was ultimately a flop). Jobs and his team went to go check it out, but were absolutely unimpressed. A few weeks later he called Bob Belleville, one of the hardware designers on the Xerox Star team. “Everything you’ve ever done in your life is s#&t,” Jobs said, “so why don’t you come work for me?” …Belleville joined the team. (source)
…when he became Apple’s CEO he stopped all of their philanthropic programs. He said, “wait until we are profitable”. Now they are profitable, and sitting on $40bb cash, and still no corporate philanthropy… (source)
“Steve is the guy who owns us—but he’s never been one of us,” Pam explained. “We’ve long felt unvalued, unappreciated. People worry that if he gets too close, he’ll ruin Pixar, and destroy our culture. (source)
According to the mythology, it was Jobs’ willingness to be unreasonable that got him results.
He acted like the normal rules didn’t apply to him, and his overbearing perfectionism took Apple’s products to new creative heights.
His exacting standards and “reality distortion field” forced people to do the best work of their lives and produce computers with a level of craftsmanship not seen before in the industry.
He revolutionized personal computers, animated movies, music, phones, tablet computing, and publishing. He turned Apple into the most valuable company in the world in the process.
When asked about his tendency to be rough on people, he replied:
“Look at the results… these are all smart people I work with, and any of them could get a top job at another place if they were truly feeling brutalized. But they don’t.”
Then after a pause, he wistfully added “…and we got some amazing things done.”
Shortly after Jobs died in 2011, Walter Isaacson published a biography of the man, and it immediately become a must-read for entrepreneurs everywhere.
And that’s the problem.
A-hole founders everywhere rejoiced; they finally had justification for their behavior. Steve Jobs’ unreasonable nature became their cover fire.
Being a jerk suddenly became a humanitarian mission; it was in service of the greater good of shipping products that revolutionized anything and everything.
“The people who are crazy enough to think they can change the world are the ones who do.” – Apple’s “Think Different” commercial, 1997
This was bad enough, but what I really want to talk about here is the good guys gone bad. The leaders who aren’t natural a-holes, but now think that they can’t be successful without being one.
This is the real shame, because this is the type of client you can’t spot ahead of time. For all intents and purposes, they’re awesome, friendly, they get it…
…until their company runs into trouble. That’s when it turns ugly.
They think they’re in trouble because they’ve been ‘too soft’. Desperate to do anything to get back on top, they bite the bullet and try to act like an a-hole. They try to emulate what they assume Steve Jobs was like.
But they’re missing something.
Jobs was unreasonable, but he was also a creative genius. The ‘unreasonable’ part is much easier to copy. So that’s what they do.
And guess what… It’s completely ineffective.
There’s actually a term for this. It’s called a cargo cult.
“In the South Seas there is a Cargo Cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas—he’s the controller—and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land.”
- Richard Feynman, Caltech commencement speech
Just like cargo cults, these good-gone-bad founders think that by replicating some of Steve Jobs’ personality or recreating the conditions he thrived in, they’ll magically produce iconic products.
They crank up the pressure, set unrealistic targets, and unleash hell on anyone who doesn’t live up to their expectations. For good measure some even buy a turtleneck and move to California.
Then they try and outsource the ‘creative genius’ part.
They expect the agency or the consultant they’re working with to be the brilliant side of Steve Jobs for them.
They want Steve Jobs on tap.
Steve Jobs ‘as a service’.
…but that doesn’t exist.
No agency strategist or consultant is going to walk in, draw a simple chart on the whiteboard, and build the foundation for a multi-billion dollar business.
Of course, agencies and consultants are complicit in this fiction. That’s why, as the founder of an agency, this is so hard to write.
But transparency is in the DNA of our business at Ladder, and this needs to be said: I’ll take one honest client relationship over three clients expecting magic — expecting to outsource the Jobs-style creative genius to us.
Most agencies are happy to keep playing along and take the money. I have to admit that it’s tempting to let the client believe a white lie in order to keep ramping up top-level numbers, but in the long term it’s unsustainable.
Think about the incentives.
As an agency or consultant, you get paid no matter what happens. And who knows? Maybe you really are a budding Steve Jobs waiting in the wings.
There is no budding Steve Jobs waiting in the wings. The future Steve Jobs doesn’t work at an agency. It just wouldn’t work out.
Jobs Would Have Been A Terrible Contractor
How long would a guy like that last at an agency, or better yet, a client relationship?
He didn’t even last that long at Apple, a company that he founded. He was forced out of Apple due to leadership conflicts with the board, ran NeXT into the ground, was hated at Pixar, and was only invited back to Apple as a Hail Mary pass.
The truth is that Steve Jobs was constantly derided and unpopular… until he wasn’t.
Eventually his genius shone through, and it was only then that people started to forgive his eccentricities and the myth was born.
But at an agency, he wouldn’t have had the time he needed to shine. Even if he owned the agency, he’d not survive more than a couple of big clients leaving when he told them no.
“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.”
- Steve Jobs
I’m not saying that people who work at agencies aren’t talented. Remember, I’m the founder of an agency. I’m proud of the rockstar team we have at Ladder, and I’ve worked with plenty of smart people at other agencies.
But for agencies to become Steve Jobs as a Service? The model isn’t right. The incentives aren’t aligned.
The flipside of not losing if you fail is that if you succeed, agencies get a tiny fraction — mere decimals — of the upside.
Even if they do put in the blood, sweat, and tears needed to deliver a World-changing impact, all they is a case study and a logo to put on their website.
Founders like you get to become the billionaires.
If growth strategists were truly convinced they could manufacture success, they’d start their own companies and realize returns many times higher than the rate you’re paying them.
Nicholas Nassim Taleb calls this ‘skin in the game’.
The fact that they’re marketing strategists at an agency rather than creating their own company means that they’re happy to trade potential upside for a predictable salary — at least for the meantime.
And that’s why SJaaS (Steve Jobs as a Service) doesn’t exist.
If the clients I quoted at the beginning of this piece understood this, the relationship would have never turned so ugly. It would have saved us a lot of psychological stress and would have saved them a lot of time and money.
I’m writing this piece largely as therapy, but if I manage to help one consultant, agency, or client avoid a doomed relationship, I’ll be happy.
But agencies do good work!?
If they’re still reading, then by now agency people are protesting, “Ugh – the ‘Think Different’ campaign that relaunched Apple came from TBWA/Chiat/Day!”
Yes, it certainly couldn’t have happened without them…
“…although the ‘‘Think Different’’ concept itself had emerged from a collaborative effort between the agency’s worldwide creative director, Lee Clow, and Steve Jobs” (source)
That’s right. The agency was involved, but it took the firepower of the worldwide creative director to get it right, and even then it only happened in direct collaboration with Jobs.
You also have to ask yourself how well that ad would have done without the $90m spent on airtime, the network premiere of the ad during Toy Story (Jobs owned Pixar), the aggressive leverage used to get famous celebrities like Muhammad Ali in the ads, and a thousand other things Jobs did on the business and product side to set Apple up for success.
If the ‘Think Different’ campaign was a bacon-and-egg sandwich, the agency was the chicken, but Steve Jobs was the bacon.
They were involved, but Jobs was committed.
And really that’s how it should be.
In every startup, and every ambitious business.
Every first year business student gets told to only outsource the parts of your business that aren’t core to what you do.
“Do what you do best and outsource the rest”.
It really is business 101.
So while outsourcing is an essential part of any smart business strategy, you shouldn’t be outsourcing essential parts (i.e. the creative genius) of your business.
Nobody outside of your company has the incentives that you have to do what it takes and beat the odds. They’ll do a good job — a professional job — but they’ll never start a revolution.
What you should do about it.
If SJaaS doesn’t exist, well guess what. YOU have to be the Steve Jobs.
As a founder, you’re the only person properly incentivized to play that role. It’s your responsibility.
Don’t believe agencies or consultants that sell you the dream or imply they can turn your company into a billion-dollar business. Don’t yell at agencies or consultants who don’t deliver Jobsian magic. Don’t be surprised when an agency doesn’t revolutionize your business.
That’s not what they’re designed to do.
A great agency can greatly magnify the effect of your efforts, like Lee Clow and TBWA/Chiat/Day did for Apple. But they can’t work in a vacuum. They have to work with what they’re given, and you’re their most important resource.
Instead, outsource anything that isn’t mission-critical to your business, ignore any distractions, and hold yourself accountable for the handful of things that will move the needle. When you’re choosing what to focus on, don’t look for silver bullets; You need a whole lot of lead bullets.
When you do outsource, go into it with clear expectations.
If you don’t understand how to do something yourself, as a rule you probably don’t understand how to outsource it. You’ll hire the wrong person or pay for something you don’t even end up using. To use an exercise analogy: invest in a bike because you use Citibike every day; don’t buy a gym membership because you think it’ll magically make you work out more.
Don’t expect an agency to know your business better than you do. Go for a vendor who doesn’t sell you the dream, but talks frankly, values the fundamentals, and doesn’t assume they know what works until they’ve tested it. Delegate via cell-division, not abdication.
If you don’t have the technical skills to do at least a ‘good enough’ job yourself, recruit a technical co-founder. Be generous with equity so they feel fairly treated and are motivated to do all the things a third party could never cost-effectively do for you. 50% of something is worth much more than 100% of nothing.
For the sake of your sanity, enact a ‘no a-hole rule’ at your place of work.
For good measure, avoid people in black turtlenecks.
Make your own “dent in the universe”.
You can’t pay someone to do it for you. You can only pay them to magnify it.