One day I was taking my daughter for a walk near home, in Chandigarh, and I noticed a person on the other side of road, as soon as I recognized him my mind was flooded with unpleasant memories. I looked away to avoid eye contact. I didn’t even want to acknowledge him. My memories of this guy & his family go back 20 yrs, when I was a 13-14 yr old kid. They ran a small grocery store near my house. They lives in a corner house which had a small playground next to it. The shop was in the backyard and its gate opened into the playground. Although their shop was within 150 meters of our house, we would always walk 500 meters to other shops even to buy small stuff. These guys were not nice to the customers. They always picked arguments with customers on small things like non-availability of change or exchange of goods. The only customers who bought from them were people who were either new to the shop or had credit accounts with them. Even though the business was not doing well, these guys never learnt the lesson.

I strongly disliked them because they really mistreated the group of children who played at the ground near the shop. This group included me, my brother and around 10 other kids. Their contention was children playing near thee shop effects the business in a negative manner. Everyday they shouted at us / confesicated the cricket ball or other play things etc. They went to the extent of loudly arguging with 5 yrs old kids & I used to get into many heated arguments with them.

After some time these guys raised debt & moved their business to a big shop in a nearby commercial area. They made it a point to tell us mutiple times that now that the shop is moving away from the playground their business would do really well, as there will be no kids interrupting business. But as can guess, they never learnt to be nice to their customers & soon went bankrupt due to the heavy debt and high costs of the big shop. They closed the new shop, left the house in our locality & went underground.

As my thoughts settled down, I saw an important lesson in this story. If you are not nice to your customers your business will fail. It doesn’t matter who you are / which angel or VC has invested in your business / how much money you have raised / what your idea is – it’s all immaterial. Being nice to the customers has to be the number one thing on the agenda of founders / promoters / management, not only at the startup stage but during all stages of the business. Even though it sounds like an obvious thing for a business to do, almost 90% of them don’t get it.

The question I am trying to answer is why does this happen?

Starting with wrong mindset

Many businesses are started by promoters / founders who do not have the mindset of being nice to customers. They identify a seemingly attractive market / create or get a product that they believe can fulfill the customer needs and assume customers will come to them.

a) Curse of capital

If the wrong mindset is accompanied by the business getting access to a lot of capital too early in its life, (via venture funding or via a parent company / group) the capital become a curse. The money plays role of a shock absorber between customers & founders. The business can continue to pay salaries & rent for months even if it they are loosing money in the name of growth. They don’t feel the need for loyal customers who would regularly buy from them and be happy enough to refer other customers.  In most cases (specially in case of VC funded companies) this doesnt last forever. Eventually either the money runs out or the investors wake up & pull the plug.

b) Blessing of bootstrapping

If the same founders don’t get access to capital and have to bootstrap the business, there is high probability they will change their mindset early on. Simply because the only way for the business to survive is by becoming cash flow positive before running out of money. The only potential source of capital is customers, they need to become a customer funded business. This brings a sharp focus on the customers / their needs & wants and leads to a customer centric culture. You first start by becoming nice to potential customers, which encourages them  to try your product / service. You make sure they get the highest quality product with mind blowing service. This makes the customer come back to buy more & say nice things about the brand to their friends, some of them also start buying. This leads to a postive feedback loop and in time you would have more customers than you can handle.

Starting with the right mindset

There are some founders / promoters (less in number) who know it right at the start that the only way to surive, grow & eventually build a large business is by being nice to the customers. They always keep customers at the center of all decisions & they inclucate the same love for the customers in all people who work for them.

a) The success trap

Whenever I see a good business which had been doing the right things, stray from the path of quality and being nice to customers, it bothers me. If only I can do something about it. Basically people start with the right mindset, as underdogs they take the right path / do all the hard work / build the right culture / get the intial fan club of loyal customers in place. All this leads them to be successful, they are no longer the underdogs but one of the leaders.

Precisely at this juncture the probability of falling into the success trap is the highest. They tend to forget the original mindset & hardwork that made everything possible, and begin straying from the path. As underdogs they worked extremely hard/ cared about quality / paid attention to detail and built things brick by brick. Once they reach a certain level they forget the same principals & start thinking of themselves as a brand under which they can sell what they want, they don’t focus on quality anymore. But as we all know, customers are the smartest breed, the moment they notice drop in quality they start leaving the business. Some of the really loyal ones may come up with feedback but if things don’t change – eventually they move on as well. Once customers start leaving and the company still pretty much the same cost structures, it results in a negative cash flow situation & eventually business runs out of cash. Few years back Statbucks fell into the success trap & they are still struggling to find their way out, hopefully they will. Some of the household names in US, like Blockbuster / Barnes & Nobles have gone bankrupt . Google is struggling as we speak.

b) Staying successful

Accomplishing this is extremely tough and takes continued dedication. Companies or people who stay succesful in the long-term are the ones who did not fall into the succes trap or if at they fell they were able claw their way out. They continued to care about customers & to obssess with quality. McDonalds, Amazon, Apple are examples of such companies. They continue to create value for their customers and their shareholders. Interestingly many of these companies have founders still at the center of the action / making or influencing key decisions.

Final word

• You need to start your business with a focus on being nice to your customers
• This is the most important aspect that will decide if your venture would fail or succeed
• Even if you achieve success by following this principal at no point you can move away from it
• The day you move away, you fall into the success trap, the decline of your business starts

Thanks to Nandini for reviewing the post and providing inputs