Thursday, January 9, 2014

A Business Lesson: Institutions are Clean, People are Messy

So here's a quick lesson that confirms something I thought when I went into business:  Generally speaking, Institutions are clean, but people are messy.

Here's what I mean -- my experience to date selling things to institutions (in which the person actually handing me the check isn't reaching into his or her own pocket, but is instead using a discretionary budget line) is very "clean."

In other words, there's an expectation.  I meet it.  A check is handed over.  I deposit the check.  All parties are happy (or at least seem happy).

Individual clients are not so simple.  Of course, there are exceptions to every rule, but on the whole, I've found that they are much tougher to please, and much less likely to recognize when they've been given a bargain, or when a break has been cut.

That doesn't mean I won't work with individuals, ever.  But it might mean I'll heed some advice I've received before, about "firing your worst clients."  This is something that everyone from the babysitter next door to the sophisticated white-shoe legal firm downtown has figured out:  some clients aren't worth the trouble, and all you can do is break off the business relationship.

And in case anyone formulating a business plan is reading this, I'll end on this lesson:  If you have any choice in the matter, put institutions -- not individuals -- in your marketing crosshairs.


kad barma said...

Willie Sutton is quoted by a reporter to have robbed banks because "that's where the money is", (though he claimed the reporter made that part up), and I think you're basically reiterating the point. Rather than draw an arbitrary line between institutions and people, I might suggest you also consider drawing one based on relative means.

In selling purely to institutions, my experience in business has found it to be vastly more complicated the lower down the revenue food chain you go. It's far easier to get Coca Cola to drop a few million on improving their profitability than it is Cott Beverages. I attribute this to the observation that people who don't have much are far more penurious, as a rule, than people who have a lot. And people are people, whether they represent their own budget, or their company's. Sure, there's an added built-in reluctance when it's your own cash, but I think miserliness has more to do with the perceived extent of the bankroll than it does anything else.

Put another way--if you want to sell something for a lot of money, you're best off targeting people who have a lot of money to spend, whether personally, or professionally. That's why Lamborghinis and yachts cost what they do--not because they're that expensive to make, but because it's easier to convince a wealthy person to drop the extra cash than it is someone who just worked to earn what little they have by the hour.

The New Englander said...

Kad -- great points. And sure enough, I scared a business partner by posting this (he said something similar -- don't write off 'consumers' because collectively they're an enormous segment).

But like you said earlier, follow the money. One whale would be better for me now than would 10,000 minnows..