Get Marquee Customers Not Frigging Reference Accounts

In my last post, I discussed how I was influenced by David Thomson's book.  Some readers privately told me that I probably went a little off the edge in my praise.

That's OK though, as the end result was that the author agreed to come to our offices last night while he was in town for a small powwow with me.  So I decided to test the hypothesis of how full of BS I was.  I quickly corralled a group of about 20 local entrepreneurs  including some of the CEO's I've backed in the past, like Peter Lee of Datasynapse (recently made the #39 spot of the Inc 500 list), and Dean Summers, the founder of Partsearch (the biggest and fastest growing NYC based company you have never heard of, and also on the Inc 500 list), as well as guys like Peter Stern (Datek) and Steven Krein, and Jeff Stewart (Mimeo and Monitor 110).    Email feedback today from many attendees was off the charts. 

For me, the biggest takeaway was that having marquee customers is a critical element of building an exponential growth company. Yesterday, I met with an entrepreneur, who referred to his biggest customer as a "reference account".  It's a big one, with a great brand--- but his company loses lots of money on them; they are what many entrepreneurs and VCs call a "reference" customer. I have always hated that word and now I know why.

David's perspective on what a "marquee" customer differ greatly from the concept of the typical "reference account" marquee customers are actually customers that make up a big percentage of your revenues and are among your biggest customers; in addition, they also grow their business with your company in terms of revenues exponentially each year and,most importantly, they are profitable for your firm.  And, get this, they then call up their buddies and refer your company to other big customers, not because they have a sweetheart deal and "owe" you because of all the extra money losing customization you do for them, but because they really love your product or service.  Neigh they insist that their corporate buddies use your product or service.  Customers should be so excited, they should be motivated to sell for you, kinda like me here selling Dave's book, unabashedly.  This dramatically cuts the sales cycle down to 1/3 of what it normally is.

David pointed to one company, Cerner I believe, a healthcare industry enterprisesoftware solution that recently hit $1B in sales, that had customers manning its trade show booth.  Put that one in front of your CMO, and see if he can make that happen.  If not, time to get some marquee customers... Or a new CMO/product manager to create a product or service that enables you to get some marquee customers.

It occurred to me, that a lot of companies do the hard work of acquiring a great brand name customer, and then take a loss and then try to acquire more companies like that, figuring it's a great way to building a business.  David's perspective is that if your best customers are losing money for you and not growing exponentially, and not referring business to you, it's a lot harder to get profitable exponential growth, and grow to be a big profitable company. Doh! Very counter-intuitive to the get big fast crowd, but it's all vcball to me. 

Thanks David for coming.   I learned a lot, and I am sure we'll see you again.  Happy to be your marquee customer of your book.   

Comments

[Ken Berger]

I really enjoyed this talk-- and a lengthy group dinner w/ Dave afterwards. Critics might say that the 7 essentials of this work could be self-evident, but the treats were in the details Dave outlined on the "hows" backing up the "whats".

There also were some key jaw-dropping findings that differ from common thinking, such as mentioned in this post.

A fundamental takeaway I noted was that the key to building a $B co is actually in building a $50M company (more specifically $30M-$70M depending on some variables), and then course-correcting on an upward journey. The details behind which companies surpassed and thrived beyond this point and which did not, made for a compelling presentation.

[Howard L Morgan]

Excellent post, steve. By the way, Partsearch was just named to the Inc 500 for 2006.