It is amazing how time flies. It is the most valuable commodity we have, in many ways. January is about to end, and the entrepreneurs I’ve sat down with in these first three weeks of the year have in their sights making it one in which they invest their time to gain traction. We all hear about it, traction. We hear it from entrepreneurs, investors, and people who present at panels in networking events. Sometimes it seems like the exact definition depends on the interlocutor. I’ve seen the term used in many ways for the past 5 years, I recall some of these examples.
Back in 2013, I was helping an entrepreneur that solved a problem that a certain type of brick and mortar medical rehabilitation provider customer base faced with their clients. The founder had invested seed funds to develop the solution, which involved special ways to authorize and process credit card payments from patients. It was a problem that plagued the industry, and the founder of this company was able to develop relationships with industry associations and companies that owned dozens of these providers, and had conducted a beta test with one of these large providers on a relatively small scale. The test validated the efficacy of his solution, but now he needed to pitch his idea to investors and raise funds to roll the solution out. He had a viable model, but no clients, no revenue. My job then was to help him polish his pitch to investors. He was able to get a number of letters from a large group of providers in the space, who indicated that once the solution was ready to roll out in scale they would try it as clients, based on the results of the beta test, which he had presented to them. This was our way of showing traction in his business. Eventually, I learned that he got some offers of investment, after which I sort of lost track of him. About a year ago, I ran into him at an event in Boca Raton. I was happy to learn that he had grown the company to the point where it made sense to sell it when a large competitor offered to buy it, and he was on to the next thing. He got traction alright! Today, he is part of a fast growing South Florida company in the payments space providing great value to its customers. Traction was proven via a proxy (purchase intentions based on beta test results), which attracted capital, which delivered on the proxy as real revenue.
Earlier this year, I had a late lunch with a friend that I also advise, as she tries to continue to ramp up her 3 year old startup. I have helped her with parts of her business plan and pitch over the past 2 years. She has a thoroughly validated online B2B solution for her clients with a 90%+ retention rate, although for a short history. A consummate sales person, she was able to singlehandedly deliver 30% compounded annual growth in revenue which, for a bootstrapped start up, is pretty good traction. Not the ones to get complacent about good traction, last year we identified opportunities to make her solution more “sticky” – meaning that once clients reached the end of their 1 year subscription, they would renew. We saw upon analysis that within her client organizations, there was sometimes a “disconnect” between the person receiving the value of her solution and the person making the purchase decision. The specter of this “disconnect” was significant enough for me, and the time she has been in business not long enough, to raise the concern that either we solve this problem or face the possibility of future attrition. We would require some level of funding to achieve this by adding features to her software, and made some introductions back then to attract the attention of funders, although none are secured yet.
During our first re-grouping of the year, I found out she had lost a couple of clients for the first time. We lost traction alright! The positive thing we noticed, if you can call it that, is that the clients lost were all of the same segment within her market, and the loss is more of a policy decision of these types of clients. We made the decision to focus on the segments she’s been able to retain, and to continue to work to solve the “disconnect” that haunts us. Traction for her has been proven in the form of recurring revenue via subscriptions and subsequent renewals on a particular segment of her market. We need to focus on this segment, and until we get the funding, will have to find ways to manually – with people – deliver the customer retention features we would like the software to deliver.
This Friday, I had lunch with another entrepreneur I’ve been working with at the Innovation Hub for a long time. His traction, like everyone else’s, hinges on his capacity to sell. His product is good and in demand. His sales process is replicable and scalable, and he has a large pipeline of leads, but not enough people in his sales team to ramp up as fast as he could. We identified finding, hiring and training the right people as the problem that needs to be solved first to get the traction he needs. He has gone through attrition of a different kind – employees – because of competition in the market from more established players. You could have the best knowledge and experience in your market, and the best skills to train your people, but trying to break through as a fledgling startup in a sea of sharks begs the question that he poses the people he tries to keep in his team: “are you going to stay with me and help me fly this plane to big heights or are you going to be sitting on it in the back with your parachute on waiting to see what happens?”. You can only get three types of responses to this question: resistance, compliance or commitment. Traction, in this case, will correlate with his ability to provide inspirational leadership and attract more commitment. We will concentrate our efforts this year on looking for the right character employees with the right incentive needs profile – not as easy as casting a wide net. I think that it is a matter of little time before he gets the traction we all hope he does. I’ve come to know and like this entrepreneur well, he will get traction alright!
So if you are looking to gain traction, look into your bag of skills, and whether the one needed is a hard one – like pounding the road or making calls soliciting reviews, testimonials, intents or orders themselves – or a soft one – like reaching out to your network and having conversations that lead to recommendations on people you could hire; or performing deep analysis of your market in search of the reasons why you are not getting the traction you should, do it, tempus fugit!