Flint's Blog

No Sacred Cows

Seth Godin had a great post today titled What's off the table?  In it, he asks us not to consider what the possible options are, but what are the impossible options - those options that are absolutely off the table, not worthy of consideration, no way we should even be discussing.

When I was 17, I worked for a painting company for the first part of the summer. We were on a job which entailed painting a waste disposal plant with some kind of noxious paint.  We were inside all day, painting pipes alternating shades of gray, without proper ventilation.  After a few days of inhaling way too many chemicals, a coworker and I decided to point out to our boss that the warning on the paint can was very clear that we should have some kind of breathing apparatus.  His response, "If you don't like it, quit".  So we did.  Walked right off the job and drove home and decided we would start our own painting business.  How hard could it be?  A few of other coworkers laughed at us and said you just can't start a painting company.  Why not, are there laws, will people die, will our parents force us to move out?  We were two 17 year olds, why not?  Thus was hatched our first business, Sunbright Painting - Quality painting at affordable prices, only the finest in Benjamin Moore paints.  (Actual text from our first pennysaver ad.)
 
As the CEO of Billtrust, I'm a huge believer that there are No Sacred Cows.  As far as I'm concerned, everything reasonable is on the table whenever we're making decisions. 

Current pricing plan not working, OK, let's blow it up.  Customers don't like the User Interface of one of our systems, OK, let's fix it.  Sure we have our problems like every other business, but the first step is admitting it and then the second step is getting down to fixing it in any way that is reasonable.  As far as I'm concerned, everything is on the table.

Payments 360

One of the favorite parts of my job is working with our development and product marketing teams to come up with new product ideas that we think our customers will like. 

Today we launched a new product called Payments 360  (Press Release Here).

100% online bill payment is a lie.  If you pay your bills online at your bank web site or pay your bills via Quicken, you've always been able to pay all of your bills this way.  So most consumers assume that the payments are being sent to the billers electronically because they didn't have to write out a check.

The reality is that the majority of billers are not setup to receive electronic payments.  Most billers do not have the technical infrastructure or the budget to enable receipt of electronic payments.  So what winds up happening, is that a paper check is mailed to the biller.  These are called "Third Party Checks" and they are are the worst kind of paper check.  They don't include the tear-off remittance stub, they might not have the correct name, they may even be missing the account number.  These are payment exceptions and billers and lockboxes hate them.  They're slow and very expensive to handle.

That's where Payments 360 comes in.  We've built an extremely low cost solution that allows billers to convert these expensive Third Party Checks into streamlined electronic payments.  They're cheaper to handle, they settle over night, and they can be automatically posted to our customer's accounts receivable system.

The feedback from our initial Payments 360 customers has been extremely positive so far.  Funny thing though - not one customer ever asked for this kind of product.  They knew that third party checks were a big hassle but didn't know to ask if there was way to make them go away.

Products that nobody asks for are the toughest ones to fund the devlopment of. It's either one of two things - customer aren't asking because it's not a product that would be useful, or they're not asking because they don't know they have the need.  We like to take the occasional gamble and build something in advance of demand.  It's risky, but when it pays off, it's a whole lot of fun.

The Electronic Billing Landscape

One of the challenges that has hampered electronic billing growth in the U.S. is what I call the "forced philosophy" problem.  Forcing your philosophy is trying to convince customers that they should do things in a certain way because it's easier, faster, cheaper for them.  The problem with forcing your philosophy is that it almost always doesn't work.  People don't want to be forced into doing anything. Electronic billing is a perfect example of this.

In the early days of electronic billing, billers made a big push for auto-debit - automatically deducting the amount billed each month from the customer's credit card or checking account. This was far easier for the consumer: they never would forget to pay their bill, never have to write out a check, they could save a stamp, etc.  Sounds great, right?  Well not so fast.  For the most part, consumers hated giving up the control, allowing their biller to take money from their account whenever they wanted.  Auto-debit has been a modest success at best, mostly appealing to people who prioritize convenience over control.

When the web came along, billers hopped on the bandwagon and decided this was going to be the answer to their billing issues.  Let's convince all of our customers to sign up to receive and pay their bill at our website.  We save a fortune on printing/mailing of bills and the processing of inbound paper checks.  The benefit to the consumer is that they don't have to deal with either their paper bill or writing a paper check AND they have more control than auto-debit. This type of electronic billing is called "biller-direct" and has had better success than auto-debit, but again not the success that billers had hoped for. The problem with biller-direct is that consumers have 12-15 bills per month and don't want to go to 12-15 different web sites with different user ids and passwords; and deal with all the complexity.

The next generation of electronic billing was going to solve everything.  What was needed was a way for consumers to receive and pay ALL of their bills online - often called electronic bill presentment and payment (EBPP), consolidator billing, or aggregator billing.  The basic idea is that consumers could go to one web site, review and pay all of their bills online.  You get the convenience of auto-debit, the control of biller-direct, and remove the hassle of remembering a bunch of user ids and passwords.  The problem with EBPP is that it never really completely worked.  You could only get some of your bills online - only big billers that could communicate with one of the billing networks.  The objection to EBPP is that consumers didn't want to receive some of their bills online and some at home, they'd rather just stick with what's working.

There have been a number of other attempts to "solve" electronic billing - email billing, fax billing, mobile banking, Paytrust, Quicken, Yodlee.  Each have their advantages and disadvantages and haven't seen widespread adoption.

So what's a biller to do?  They can't force any of these philosophies because that won't work.

The answer is simple, the solution is hard. 

If a biller wants to maximize their electronic billing percentage, they need to do everything.  You can't force any of these philosophies, because different consumers want different things.

If you can get 10% on auto-debt, 20% on biller-direct, 25% on EBPP, 15% on email billing, 5% on fax billing - that's 75% and that would be great adoption.

Why is this solution hard?  Because the vast majority of billers don't have the budget, the bandwidth, the IT infrastructure, or the desire to pull these disparate systems together.

That's where companies like Billtrust (shameless plug) come in.  Billtrust offers all of these solutions to billers of all sizes so that they don't have to build it themselves.  In a tough economy, CFO's are focused more than ever on cutting costs and building electronic billing solutions is not the core competency of most billers, nor should it be. 

One of the big reasons Billtrust has been successful is because we don't force a philosophy. In fact, we're proponents of the fact that you simply can't do this, or you will fail.  Offer your customers everything and provide the right incentives to drive the behavior you prefer.  If 50% of your customers want fax billing, then be happy - it's way cheaper than postage.

Customer Testimonials

Just about every business web site has a section devoted to customer testimonials - little blurbs written by the customer that says how great you are.  Lots of obvious reasons for this - shows that you have have real customers in real markets, good customers are your best salespeople, etc. 

The Billtrust web site is no exception.  We cycle through a number of testimonials on the secondary pages.  Keep hitting refresh, you'll get another one.    I'm not even sure how many different customers we list but it's a lot, far more than most sites.  Our marketing team does a great job of keeping this fresh.

What we do that's fundamentally different than most sites is that we list actual customers - full name, title, and company name.  Most sites list "CFO from a Fortune 500 Manufacturer" or something equally vague.  From a competitive perspective, listing specific people is a very bad idea.  Competitors will go to your web site, hit refresh a lot of times, and will call on your customers trying to convince them that their service is better, faster, cheaper, etc. 

We look at this a bit differently.  We think our service is so far superior than our competition, that we're willing to take this competitive risk.  In exchange, we get the benefit that potential customers get to see real names from real companies that they know.  In addition, people realize that if you're the kind of company that lists actual people as references, than you're the kind of company that has a special offering that's worth talking to.

Which kind of company do you work at?

The Obama IPO Challenge

One of the dreams of many entrepreneurs is to come up with a killer idea, start a company around that idea, pour your heart and soul into the company, and hopefully have the company go public at some point down the road.  Going public used to be the big prize, the ultimate sign that you made it, your company was successful, the market believed.  Not any longer. 

Ben Howe, the CEO of America's Growth Capital, wrote a piece for the Boston Business Journal that I include below with his permission.  The IPO market has just about completely evaporated for a variety of reasons.  This isn't just bad for entrepreneurs, it's bad for job creation, it's bad for the economy, it's bad for the country.

Ben does a great job of outlining the problem and suggesting some solutions.  Enjoy.

A rejuvenation of the IPO market for emerging growth companies is more important
now than ever before.  With the massive buildup of venture capital and private
equity-funded companies, due to the illiquidity in the market and record levels
of fundraising, these firms have the largest number of portfolio companies in
history.  Many of the funds have reached or are near their
end, yet most funds have not generated much, if any, liquidity or distributions
to their investors.  The combination of many funds nearing their end, record
levels of portfolio inventories, and a better economic environment for liquidity
will cause M&A and potentially IPO activity to take off in 2010.


The Obama IPO Challenge

The once powerful U.S. IPO market for emerging growth companies has devolved
into a long-shot consideration for investors and entrepreneurs.  The U.S.
averaged roughly 500 IPOs annually during the '90s but only 150 annually over
the last seven years.  Approximately two-thirds of the U.S. IPO market has
vanished, and along with it have gone hundreds of thousands of jobs.  Where
would America’s competitive position be were it not for the most effective and
vibrant IPO market in the world, which allowed access to public capital for
promising young companies, entrepreneurs, and eventual tech giants like Apple,
Cisco, Google, Intel, Microsoft, and Oracle?

Spurred on by the Internet and clean tech revolutions, there are thousands of
growth companies whose prospects could be greatly enhanced if the U.S. had a
vibrant, sub-$300 million market cap IPO market today.  Highly knowledgeable
investors in the U.S. and across the globe — who collectively oversee trillions
of dollars — are interested in investing in companies of this size and growth
trajectory.

Today, four main impediments exist for a U.S.-based emerging growth IPO market: 

• Wall Street investment banks have grown so large that they are neither well suited, nor economically motivated, to bring emerging growth companies public.
• The cost of regulation makes going and staying public prohibitively expensive. 
• CEOs who once viewed their IPO as a badge of honor and an opportunityto access growth capital and raise their company’s visibility now see an IPO as a litigious, highly stressful, economically meager and illiquid proposition.
• Many of the institutional investors of the ‘80s and ’90s have gotten so large that sub-$300 million market cap IPOs are outside of their charter or area of interest. 

The new administration can revive this once powerful economic vehicle.
Deregulation may be contrary to current sentiment — but it makes sense in this
case.  Nurturing innovative growth companies on U.S. exchanges would provide a
significant spark to the domestic economy, huge employment opportunities, a
market stimulus, and dissuade young companies from selling to large,
multinational buyers too early. Furthermore, it would rejuvenate the US venture
capital industry, a critical enabler of emerging growth company formation.  The
U.S. Government and the powerful private equity, hedge fund and venture equity
participants need to collectively rejuvenate the U.S. IPO market with the
following medicine:

• Providing a tax credit of $20 million for companies going public in 2009 and 2010.  With a mere $5B, the government could turbo charge 250 of the fastest growing U.S. companies into the IPO market in 2009.  The stimulus dollars would be put rapidly to work employing highly-skilled U.S. workers.
• Establishing regulations that are suited for the sub-$300 million revenue companies as opposed to Sarbanes-Oxley, which is suited for the multi-billion dollar giants like Enron.
• Modifying the SEC requirements for smaller companies to go public, such that the IPO candidate could file a simplified S-1 for a directed initial public offering and eventually complete a public follow-on offering with a much broader investor base.
• Promoting the return of the boutique investment banks.  With the demise of many of Wall Street’s powerhouses, it will be imperative to modernize IPO regulation in order to enable boutique investment banks to once again bring small, emerging growth companies to market. 

By pursuing the steps outlined above, we can overcome these main obstacles and
bring back the U.S. IPO market. There will be strong interest by venture
investors and entrepreneurs, and a variety of growth investors, who would prefer
to have this market opened up than wait for Cisco or IBM to buy these companies,
or Goldman Sachs or Morgan Stanley to bring them public.

Best Regards,

M. Benjamin Howe
Chief Executive Officer
America's Growth Capital

You Don't Ask, You Don't Get

A few months ago I was talking to our middle daughter Kacy about something she thought was  incredibly unfair - the absence of Pajama Day at her school.  Kacy's younger brother Tyler goes to elementary school and he has a Pajama Day.  Kacy's older sister Amanda goes to middle school and she has a pajama day.  For whatever reason, Kacy's school never scheduled a Pajama Day.

I agreed with her that it was very unfair.  So I asked her what she was going to do about it.  She was confused at first so I asked her "Who would make a decision to add a pajama day?"  She answered, a little unsure of herself, "Uhh, ask Mrs. Capaci, my Principal?"  I agreed with her and told her she should do something about it. 

She thought about writing a note but was afraid that her principal might say no.  What a perfect time for a life lesson.  So I asked her, "What's the worst thing that can happen?  She says no and you're no worse off than you are today.  If she says yes, you'll be the kid that convinced your principal to have a pajama day."

Below is the letter that Kacy wrote to her principal making the case for adding Pajama Day. 

Dear Mrs. Capaci,

My name is Kacy Lane.  I am in Mrs. Farrow’s 5th grade class.  I am writing to you because of a certain day of the school year. Pajama Day.  It has come to my attention, that both elementary schools, and middle schools have a pajama day, but Village does not.  For the middle schools, pajama day is during spirit week.  For the elementary schools, the date for pajama day depends on the school.  A lot of kids love pajama day.  They feel it is a day when they can wear comfortable, casual clothes.  Some kids just like to wear those Village pants that are sold at the ice cream social and a loose t-shirt.  Some kids don’t want to wear pajamas.  Some kids do.  It doesn’t matter though.  I for one, love pajama day. I was very disappointed when we didn’t have it in 4th grade.  I would understand why we wouldn’t have pajama day, if the middle schools didn’t have it.  We would be old enough.  But the middle school does have it.  If you really think about it, it’s kind of confusing.  I have prepared reasons why we should have pajama day at our school.

1. Kids in both 4th and 5th grade, like to have a pajama day during the school year to wear their favorite pajamas/comfortable clothes.

2. There is no point whatsoever to why we should not have a pajama day, smack in the middle of two schools who do. Upper elementary should have pajama day. I am not aware if Millstone River has a pajama day.  I would not be surprised if they did not.

3. I would think teachers would enjoy to see their students having fun, and learning in comfortable acceptable clothes.

4. If you decide to make a Pajama day for Village School, the dress code will certainly be followed.  I’m sure whoever is in charge, will somehow make sure all students know that the pajamas they wear will have to follow the dress code.

Please consider adding a Pajama Day to the spirit day of the year.  I thank you for considering my suggestion.

Sincerely,
Kacy Lane
Mrs. Farrow’s 5th Grade Class

Well guess what, tomorrow Kacy and all of her classmates will be wearing pajamas to school.  I couldn't be more proud.

Would You Rather Be Right or get the Right Answer?

Last November, I posted some Words To Live By that I often use throughout my business dealings to help guide myself and our management team at Billtrust.

There is another phrase that keeps coming up that I find myself quoting a lot:

Would You Rather Be Right or get the Right Answer?

We all suffer from this occasionally - in business and in life.  We come up with a new idea that we want to implement.  We present it to others in our organization.  A debate ensues, and we find ourselves arguing fervently for the new idea.  Not necessarily because it's a good idea, but because it's our idea.  At some point in any discussion of a new idea, preferably immediately, you should be debating based on the merit of the idea, not who owns the idea.

Put another way - I'd rather be wrong and get the right answer, then be right and get the wrong answer.  Seems obvious when put this way, but I think we all could use a little reminder now and then.

This came up on Sunday when I was lucky enough to bring my daughter to see LeBron James and the Cleveland Cavaliers play a basketball against the New Jersey Nets.  (BTW, you want to see a classic case of a great employee, LeBron James is it.  He works hard, he jokes around with fans and has fun, he performs under pressure, keeps his team involved, etc.  The kid is 24 years old).

Anyway, at one point in the game, a ball went out of bounds and it was difficult to determine who last touched it.  The ref closest to the play immediately called it off the Cavs and gave the ball to the Nets.  Another ref, who had a better angle, even though he was farther away, immediately went over the first ref and asked him how sure he was of his call because he was pretty sure he saw it the other way. They wound up reversing the call, got a bunch of boos from the home crowd, but got to the right call.  The refs had been trained that it's best to try and get the right call at all times.

This hasn't always been the case in professional sports.  It used to be that it was way more important for a ref/umpire to stick with their original calls, otherwise players would be questioning every call.  In the last few years this has changed.  You now frequently see referees and umpires huddling together to try and get the right answer.  This is the way it should work, even though one person has to admit that they were wrong.

Are you the kind of person that is willing to admit you're wrong to get to the right answer?

The Value of Middlemen

Seth Godin has a great post about how all sorts of middlemen are disappearing or are in the process of disappearing from the market - travel agents, stock brokers, real estate agents.

In order to survive, middlemen can't just be an extra layer between the supplier and the buyer, they must either provide significant value or they will be removed by buyers.  The reason is quite simple, the internet.  Buyers can now research suppliers themselves.  If I want to know the best price for an airplane ticket, I could probably call a travel agent, but it's far simpler to pop over to Expedia or Kayak.

I call this the Margin on Margin problem.  Profit Margin is what businesses make each time they sell a good or service.  If an airline company sells a plane ticket directly to me, maybe their margin is 5% of the ticket price.  (Probably a bad example because I'm not sure airlines ever make money).  If the travel agent sells me the ticket, they need to make a margin as well.  That margin can either come out of the airlines margin or out of my pocket. The airlines used to split their margin with the agent but no longer.  Therefore, travel agents have all but disappeared.  The ones that survived, provide a different kind of value, perhaps setting up a complicated vacation with flights, hotel, sightseeing, etc.

In the outsourced billing industry which Billtrust is part of, the middleman role is often called a print broker.  Print brokers work with billers to find a print/mail company to process their bills.  I would guess that print brokers that simply act as middlemen are in big trouble.  Those print brokers that provide billing expertise and perhaps a fuller solution will survive, the rest are going to be in trouble.  Buyers are just too smart these days and the internet allows them to shop efficiently for the best price.

Who's your industry middleman?  Are you one of them?  If so, you might want to think about your value proposition.

Should You Compete on Price?

Billtrust competes in a number of different markets with dozens of different competitors.  We like to think that we've built a feature rich solution for a reasonable price that allow companies to reduce their total billing costs over time as we help them migrate more of their customers to electronic billing and payment.

In every business you need to decide on your market positioning for your goods or services. If you were to open a "brain surgery" business, you would likely market yourself based on how experienced you are in the delicate art of brain surgery.  If you wanted to open a business selling garbage cans, my guess is you would probably go to market with the lowest cost garbage cans in town since a garbage can is a garbage can.  Being the cheapest brain surgeon in town would probably not get you too much business.

The basic rule of thumb is that the closer your product is to a commodity, i.e. difficult to differentiate from others, the more it becomes a matter of who can do it cheapest.

In this Becoming Essential blog post, Ted discusses why competing on just price is dangerous.  He separates businesses into either commodity or premier business and does a great job of describing the perils of being the cheapest vendor.

We have some competitors that have massive print and mail centers throughout the country with little or no electronic billing capabilities.  Understandably, they compete effectively by stressing how the world is still 90% paper and stressing all the wonderful paper billing features they have.

Some of our competitors have a great roster of Utility companies that they do business with and therefore stress what an expert they are in the field of Utility billing.

Each of these are good strategies, you go with what you've got.

However, we've got one competitor in one industry that has chosen to compete solely on price.  They'll send out your bills cheaper than anybody.  In fact, they'll even lose money on every bill for a period of time just to win your business. If I'm a buyer, this sounds attractive since I want to save as much money as possible and billing is billing, right?

Fortunately for us, billing isn't a commodity which we can emphasize with a very simple exercise:

Please cross off which of the following things is not important to you:

1. A disaster recovery strategy so that my bills will always be sent out in a timely fashion

2. Getting bills to my customers fast so that they can pay me promptly

3. Making sure my bills get sent out accurately each time

4. Giving my customers the option to pay me any way they choose

5. Making sure my billing vendor isn't using my private customer data to sell other services

We have about two dozen of these points that we make when we're up against this competitor.  So far so good. 

We're certainly cognizant of the fact that people want to maximize their cost savings.  But at the end of the day, if you're competing solely on price, you've got little chance of being successful in a non-commodity business.

If Nate can do this, what's holding you back?

Nate Robinson of the New York Knicks won the NBA slam dunk contest this weekend for the second time.  Nate's been my favorite player since he entered the league.  He plays on my favorite team, is one of the quickest guards in the league, and he's 5' 9".  That's right - 5 foot, 9 inches - and that's probably generous.  There are only a handful of players in the NBA that are under 6 foot and Nate's winning the slam dunk contest with some vicious throw downs like the one shown here

Nate's been told his whole life that he's too small for high school ball, too small for college ball, too small for the NBA, too small for the dunk contest.  Apparently not!

I have two catch phrases that I like to use at work and at home.

For those that haven't been reading along on my blogging adventure, I run an outsourced billing company that specializes in helping companies migrate to electronic billing.  We've grown rapidly to be one of the leading billing service providers in the US.  One of the big reasons for our success has been that we've developed almost all of our technology solution in house.  It was hard, it took longer than buying off the shelf components, but it's paid off for one huge reason.

Co-workers often will ask me some question about what our technology can and cannot do.  My answer is almost always "We're Billtrust, we can do anything."  This is usually followed by the standard roll of the eyes when people think I'm not looking :]  However, I honestly mean it.  Not that we will do anything. But since we're a technology company at heart, we can make our software do anything we choose.  This is a powerful competitive weapon.

At home, my kids will sometimes tell me how they can't do something, or their homework is too hard, or they can't hit a reverse layup.  I'm obviously not big of "I can't".  So the routine at home is, I ask them their name and they have to answer  "My name is Tyler Lane, I can do anything I set my mind to".  They fight it sometimes when their being stubborn, but the point is made and almost always they accomplish what minutes earlier they said "I can't" to.

If Nate can win the slam dunk contest, if some geek from NJ can run a successful billing business (that would be me), if an African American can be President of the US, you really truly can do anything you set your mind to.

PS - My middle daughter Kacy was hoping that Hillary wouldn't win the Presidential race so she still can have a shot of being the first female president.  I love it.