What makes a great sales executive in the tech industry?

We have all been approached by sales people at some point or another. Chances are that you’ve probably also worked with them in a professional capacity. Unfortunately, I don’t think you’ll find a single adult on the planet which hasn’t had a bad experience with a sales person. It could have been a hawker trying to sell you a pirated DVD, telemarketers constantly harassing you, a financial consultant debiting your bank account on an insurance product you haven’t even agreed on, or perhaps a sales executive duping you into buying a product that you don’t actually need. Over the years the sales profession has adopted a bad reputation. As such, I have often wondered what differentiates a good sales person versus a bad one.

In order to try make sense of it, we’ll first go through the typical stereotype of a sales person. We’ll then look at why and how they sales people enter the profession. We’ll then break down the most common types of sales people and also look at the qualities of an ideal sales executive. Lastly I’ll give me take on why I think there’s a gap between the typical sales person and the ideal one.

  • Stereotypical sales person: let’s first look at the qualities and flaws that come to mind when most of us think of a stereotypical sales person.
    • Qualities: chances are that many of your friends have been sales people throughout your life. The simplest reason is that they do in fact have a number of alluring qualities. They can be in incredibly charming, funny and the life of the party. They also tend to be eternal optimists which can be uplifting and inspiring when you’re having a bad day. I guess being an optimist is a prerequisite to surviving in a career where you’re getting rejected several times a day. Due to them regularly dealing with people and managing conflicts, some of them tend to be quite philosophical, which can certainly make them interesting individuals. 
    • Flaws: for many people, encounters with sales people can leave a lot to be desired. They can be pushy, refusing to take no for an answer. They can be disrespectful of people’s boundaries and sometimes even downright rude. They can be dishonest about the value of their products and their prices. Worst of all they can be extremely manipulative, playing with our emotions to trick us into signing on the dotted line. They often use the book “How to Win Friends and Influence People” as their bible, which in my opinion would be more accurately titled “How to become a sociopath by being fake and manipulative”. Their massive egos, gung-ho attitude and reckless nature can also serve as a horrible cocktail for creating toxic work environments. As you get older and more mature you start to feel that in order to maintain your sanity you almost have to become a parent to a teenager in every relationship or interaction you have with a sales person i.e. be firm with your personal boundaries, grow eyes at the back of your head and instil structure and discipline. If you’ve had enough of these bad experiences, it’s enough to make you think that they’re the scum of the earth. However, I don’t think it’s as clear cut as that.
  • People that end up in sales jobs: clearly the stereotypical sales person described above is not an ideal one. In order to understand the gap between the stereotypical sales person and an ideal one we need to first understand how they end up in these professions in the first place.
    • Entrepreneurs: these are your typical hustler types who have always enjoyed coming up with creative ideas and making deals. I can honestly say that these types of people are probably the best you can hope for when hiring sales people. How these people initially end up in sales positions is by virtue of their very nature and aptitude. The problem with these types of people is most of them go on to start their own businesses since they are normally are very independent, have a high tolerance for risk and have greater aspirations than working for a salary and/or commission their entire life.
    • Career changers: these types of people end up doing sales by mistake. They typically go and get some tertiary education and begin working in a specific profession. After some time they realise that it’s not for them. This could be for a number of reasons. Maybe they realise that they don’t have the aptitude for it or perhaps they’re not getting paid enough. It could even be that the job or industry they’ve landed in isn’t what they expected. Going back and studying for another few years to change professions isn’t always a viable option. They therefore start looking for alternatives and quickly come to realise that a sales position is one of the few unqualified jobs that actually pays well.
    • Those with useless educations: these types of people are similar to the career changers in that they also completed some tertiary education. The only difference being that they never actually worked in their field of study. The reason being that they probably completed some useless degree or diploma in a subject that nobody is willing to pay for e.g. art history, philosophy, fashion design etc. Not being able to put their studies to good use, they end up coming to the same conclusion as the career changers i.e. the easiest and most lucrative way of make a living is to start selling something.
    • Shortcut people: these are the lazy kind that go throughout life looking for shortcuts and get-rich-quick schemes. These people have no patience, don’t bother learning any new skills or working hard at anything. They’re in the habit of thinking that their next big score is just around the corner. They never realise that anything worth building will take time and effort. These types of people often only care about the money and are hardly interested in the process of how the money is made. Since becoming a sales person presents the smallest barriers to entry, these kinds of people will naturally gravitate towards the sales profession.
  • Types of sales people: there are all kinds of sales people selling all kinds of different products and services. Depending on what they’re selling they will require varying levels of skills. I therefore don’t think it’s fair to put all sales people in the same basket. Here are some common types:
    • Hawkers: there are the entry level guys that sell oranges and sunglasses at every corner. Being friendly, resilient and having an innate ability to disrespect people’s boundaries is pretty much all the skills this person needs.
    • Sales clerks: these are the people helping in you in the stores, providing information about the products and basically just making your shopping experience a pleasurable one. To be quite honest, I wouldn’t even classify them as real sales people since the majority don’t take part in convincing customers do buy from their store as opposed to other stores.
    • Telemarketers: these are the cold calling types that peddle all kinds of insurance products, cell phone contracts and bank loans. They are the worst kinds of sales people with the worst reputations. Due to the very definition of cold calling, these kind of sales people never have customers calling them, but instead they are the ones approaching unsuspecting strangers. For these sales people it’s all a question of probability i.e. the more people they call the higher the chances of convincing someone to buy something. There are several dynamics at play in this telemarketing game. Firstly, 99% percent of the prospects being called are not interested in the products that the sales people are peddling. This could either be because they don’t see any value in the product or perhaps they already have a similar product. The sales people are therefore searching for that 1% of prospects that would be interested. In order to do achieve this, a single telemarketer can make anywhere between ten to a hundred sales calls a day, repeatedly getting rejected. As you may have already experienced yourself, people can receive several of these sales calls a week. After a prolonged period of receiving these calls, most of us reach the end of our straw and unconsciously become rude to these telemarketers. In return, the telemarketers need to grow a thick skin to survive in this gruelling industry and naturally also become rude and obnoxious over time. Even more concerning, is that these telemarketers realise that nobody wants their products and therefore realise that the only method of closing deals is by becoming aggressive and even downright manipulative. They then come up with all sorts of dishonest schemes that either hide information about their products or exaggerate on what the products can actually do. Often times their artificial personas tend to slip into their personal lives, applying the same kind of tactics with their loved ones and colleagues. Is it therefore any wonder that sales people are stereotyped with all the flaws mentioned above?
    • Sales executive: these are supposed to be the white collar professionals working in the corporate world. In most cases these sales executives are hired to sell much needed products and services. The products that they sell are normally a lot more complex than a cell phone contract. In the technology sector these can include both hardware and software. Sometime they will be out-of-the-box products while other times they can include custom solutions to be designed and developed. As you can imagine these sales executives are expected to understand and explain how these complex products work. Selling services for custom solutions requires an even higher level of skills since the sales executive is expected to understand the customers’ business requirements as well as make recommendations. Most importantly the relationships with their customers are not finite. Meaning that unlike with telemarketers the relationship with the customer does not end once the deal is closed. Customers in the corporate world look for more than just specific products; they look for long term partnerships with their suppliers. This means that aggressive behaviour and manipulative tactics on the part of a sales executive might help in closing the first deal but will certainly have an adverse effect in maintaining a long term relationship.
    • Account Managers:
      • Overview of the value chain: in order to understand the job of an Account Manager we have to first clarify how they fit into the value chain.  Large corporations that are suppliers and manufacturers often distribute their products via a channel of partners. Channel distribution is typically used to minimise the costs for manufacturers and helps them expand their territories. For example, depending on complexity of their products as well as the demand and size of the market, a hardware manufacturer known as an OEM (Original Equipment Manufacturer) may not find it viable to conduct direct sales to customers across the world. It would require too many stores, sales executives, engineers, accountants and other admin people to run their business. Instead they tend to offer training and support to certified partners also known as VARs (Value Added Resellers). In the software industry those VARs could also be labelled as ISVs (Independent Software Vendors). These VARs then go out selling and implementing the manufacturer’s products. The VARs are normally the ones that hire the sales executives, find the business opportunities, close the deals and implement solutions using the products provided by the manufacturer. Multinational manufacturers then go on to establish subsidiaries in the countries they plan on selling in. The subsidiary is typically owned by the manufacturer. A subsidiary will be made up of a handful of people who’s job it is to support the VARs in that country. The staff are made up of mostly sales people (Account Managers), a few technical pre-sales engineers and perhaps a few finance and admin people. They may sometimes also require a few technicians if they’re not outsourcing the hardware repairs. The manufacturers may in some instances include one or more third-party Distributors in the value chain. The Distributor’s role is to offer warehousing of the stock being brought into the country as well act as a stock buffer to handle the market demand i.e. customers aren’t normally happy with typical 6-8 week ETAs (Expected Time of Arrival) and therefore having a Distributor keeping stock in the country reduces that ETA. VARs normally purchase the products from the distributors but negotiate the prices with the Account Manager working for the manufacturer. Distributors normally agree with the manufacturer on a fixed markup on the products while VARs can set their markup to whatever they feel is plausible in order to close their deal with the end customer.
      • Job of an Account Manager: the sales people known as Account Managers are essentially the heart and soul of the manufacturer’s subsidiaries. They are responsible for managing the relationships with all the VARs and supporting them with whatever they need in order to sell. In most cases, the Account Managers do not ever perform direct sales to the customers, nor do they go out looking for new business. Instead the Sales Executives working for the VARs do most of that work and the Account Managers just offer advice, pricing and sometimes apply for Price Exceptions (a pretentious term for discounts) on behalf of the VARs. The manufacturers can often run marketing campaigns commissioned by either the head office or subsidiary in which case the Account Managers could end up with leads on their desk i.e. people that are interested in their products. Upon receiving these leads it will be up to the Account Manager to decide which VAR they give the lead to. In theory this decision should be based on merit i.e. the most competent VARs should should be given the most challenging leads to increase the chances of success. However, in the real world there are a lot of politics that go into that decision. It could be based on the personal relationship between the Account Manager and the VAR and host of other dubious practices such as being offered bribes by the VAR, nepotism and efforts to create a monopoly of VARs in order to fix prices and avoiding price wars i.e. the Account Managers typically do not want too many VARs as this can lead to them undercutting each other thereby bringing down the prices in the overall market. The moral of the story is that most Account Managers do very little selling and instead spend most of their time playing politics. 
  • Ideal type of sales professional: having mentioned all the different types of sales people, it’s easy to conclude that there’s no point in hiring a hawker or a telemarketer to work in a professional environment since they typically don’t have the skills and aptitude to conduct themselves in a professional manner. Unless your company is a large multinational there’s probably not going to be a need for an Account Manager either. Therefore a typical company with useful products and services should in fact be looking for Sales Executives and ignore all the other types of sales people. So what are the qualities and skills of an ideal sales executive? Here are some that you should be looking for:
    • Self driven: sales executives are not the kinds of people that should be micromanaged. Instead they should only be given sales targets and expected to take initiative in finding new business. Although training is of course required, having a sales executive that needs to perpetually be told what to do and how do it defeats the object of hiring them in the first place.
    • Giver: most people can be classified as either takers or givers. Too often sales executives are focused only on what they can take from a customer instead of thinking about what they can give. The products being sold to the customers should be resolving their problems and generally improving their customers’ lives. Sales executives that ask themselves what they can do for their customers will enjoy repeat business, while takers will ultimately be shunned.
    • Empathy and emotional intelligence: you need someone that is good in in dealing with people. This does not not include being manipulative or aggressive in order to control people, but rather someone that that can manage their own emotions, know what they are feeling, what their emotions mean and how they’re affecting the people around them. A big part of emotional intelligence is also having enough empathy to put yourself in the customer’s shoes so as to understand their requirements.
    • Ego: although empathy plays an important part in relating to the customer’s needs, sales executive also need an equally strong ego to succeed. A sales executive’s self image should be linked to their success. Since they go through so many rejections, their self image will be chipped away continuously. Their ego needs to be strong enough to counter those feelings of rejection in order to persevere. Their ego needs to be continuously pushing them to chase the next deal to help them restore and boost their self image. However, their ego should not be so big that it inhibits their empathy.  There needs to be a fine balance between their ego and empathy because those two personality traits act as opposing forces. In simple terms their ego should be their driving force to keep them going while empathy should serve as the tool required to complete the job.
    • Good with numbers: in the corporate world it’s all about the numbers. It’s therefore incredibly important for sales executives to be able to conduct ROI (Return On Investment) analyses, negotiate prices, compile quotes, report on revenues etc. Having worked alongside sales executives and account managers I’ve often been amazed at their lack of competence when it comes to even simple things such as putting together quotes. As a technical pre-sales engineer at the time part of my job was to compile the BOMs (Build of Materials) but I didn’t have access to the prices. The sales executives/account managers’ responsibility was to search for the part numbers on the price list, calculate the markups and plug those prices into the quotes. Unfortunately many of them couldn’t even do that, let alone understand what the products on the BOM/quote were for or why the customers needed them. Ironically I know for a fact that most of these sales executives/account managers were getting paid higher salaries than the technical staff not to mention the massive bonuses and commissions they were getting paid. It therefore goes without saying that being good with numbers is an absolute must for any sales executive because if they cannot calculate prices how are they supposed to make money for the company. Senior sales executives should also worry about the profits being made in every sale as opposed to just worrying about the revenue. Ironically however, most companies set sales targets that are based on revenues instead of profits. The only reason that I can think of in terms of why a company would do that is to hide the profit margins from the staff. Personally I find it completely irrational as it creates this false illusion of money being made while in fact they might only be breaking even.
    • Technologically adept: regardless of whether sales executives work in the technology sector or not, they will at the very least need some basic IT skills to get their job done i.e. sending emails, using CRM software, putting together spreadsheets etc. When selling technical solutions, it goes without saying that they would need an understanding of the products and services that they’re offering. I remember having conversation once with a sales executives where he was proudly bragging to me that it doesn’t matter whether he’s selling a tech solution or he’s selling Coca Cola. It was all the same to him because he figured that it’s the technical pre-sales engineer’s job to discuss the technical requirements with the customers and compile the BOM while all he had to do was plugin prices. Obviously this is complete and utter nonsense because part of a sales executive’s job is to convince a customer to purchase the company’s products and one cannot do that unless one understands what the products do. What many sales executives hope for is that the technical pre-sales staff do the job for them while they receive the commissions and bonuses. This obviously defeats the object of hiring sales executives in the first place. It is for this reason that I have never really understood the need for a technical pre-sales role as it seems their only role is to compensate for the incompetence of the sales executives. As far as I’m concerned the sales executive and technical pre-sales should be one and the same job.
    • Communication skills: sales executives need to be well spoken and coherent in their communication. There is noting worse than a sales executive confusing you with illogical, inconsistent and contradictory statements. All this does is create the perception that they have no idea of what they’re talking about.
    • Strategic: sales executives will  be dealing with a multitude of customers and prospects and will therefore have to make an endless number of decisions throughout their day. For example, some customers are more trouble than they’re worth, stealing valuable time that could be used for more lucrative customers. Customers therefore need to be prioritised accordingly, which requires some form of strategy. Among many other aspects that need to be taken into account, some other examples include the life spans of products and whether they will be discontinued. For these reasons, sales executives that are not able to strategise can often find themselves running around like headless chickens.
    • Organised: most products and services that are sold require several steps after the customer has agreed to go ahead with the purchase. Some basic admin/finance tasks include the issuing and processing of purchase orders from the customers, placing orders with the suppliers, invoicing etc. When offering professional services the technical staff need to be briefed on the customer’s requirements. Hardware products and software licenses that are needed for a solution need to ordered ahead of time to ensure that they arrive in time for the go-live of the project. The customer’s expectations need to be managed correctly right from the start of the project when the sales executive is negotiating the deal. Failing to perform these tasks correctly and on time can wreak havoc on the technical staff, the customer and the project as a whole.
  • Irrational criteria used to hire sales people: now that we’ve established what the requirements for an ideal sales person should be, we have to ask ourselves how we end up with so many sales people that do not fit that mould i.e. what causes sales people and more specifically sales executives to be dodgy. Based on my own personal experience, I am convinced that the blame lies solely on the hiring managers putting way too much emphasis on personality when interviewing for sales positions, while completely ignoring all other attributes that would be required in any other job. Here are a few mistakes that are made by hiring managers when they’re recruiting sales people:
    • Mistaking narcissism for sales aptitude: as mentioned previously, sales people are required to have a strong ego in order to handle rejections and stay motivated. Their success needs to also be linked to their self worth prompting them to chase the next deal to restore their self worth. Unfortunately, all of these personality attributes are typical attributes of a narcissistic personality. On the other hand, the single personality trait that most clearly defines a narcissistic personality is a lack of empathy. A lack of empathy can be incredibly destructive in maintaining customer relationships and therefore getting repeat business. It can also be destructive in maintaining relationships with colleagues thereby creating toxic work environments inhibiting productivity. Ego and empathy are therefore opposing personality attributes but equally important to have in order to succeed as a sales executive. Ego is needed in the short term, while empathy is needed in the long term. The mistake that hiring managers make is being shortsighted by putting way too much emphasis on ego and too little on empathy when hiring sales people. This is essentially how we end up with so many narcissistic sales people in the world.
    • Too much emphasis on personality: conversely, throughout my career I have seen numerous sales people that have very few (if any) of the typical characteristics of a sales person but they happen to be phenomenal at their jobs. You might say that those people are the exceptions, but if that were true, then how is it that those individuals can be so good at their jobs despite lacking the personality traits of a typical sales person? You might say that a sales person deals with people a lot more than in any other profession and therefore personality should take priority. However, I think that people who believe that sales is all about personality are clearly undervaluing the products and services that their company is offering because as a customer I’m not looking to purchase a salesman, I’m looking to purchase a product or service i.e. I don’t care how charming and charismatic a sales person is, but I do care about the product I’m buying and the service I receive thereafter. What is the point of having a sales executive that can be charming and charismatic when they cannot explain the products they’re selling or even put together a a simple quote. This theory would therefore explain why telemarketing companies hire for personality since they’re mostly selling useless products that nobody wants. We can then conclude that the value you place on the personality of your sales people should be indirectly proportional to the value of the products the company selling i.e. the higher the value of the products, the less the personality of the sales people should matter and vice versa.
    • Purely focusing on sales track record: given all of the above, i’s quite clear that a sales executive’s skills should extend far beyond just personality and negotiating skills. It therefore boggles my mind as to why so many hiring managers fail to look at non-sales related success stories in their candidates’ track records i.e. whether the sales executive being interviewed has ever accomplished anything outside of sales. To drive this point home, let’s look again the at the types of people that end up in a sales positions and try to determine which would be a best fit for. The entrepreneurial types would be fantastic at the job, but the problem is that you normally won’t be able to hold onto them for long. Shortcut people would make for the dodgiest and laziest of sales executives, so I wouldn’t recommend them at all. Those with a useless education might be okay and could even survive in the industry, but they have no track record of ever achievement anything other than completing their education. Given their choice of getting a useless tertiary education you can also count on them being impractical, which can be disastrous to a career in business. Based on my own personal experience I can honestly say that the best sales executives are those that have decided to leave their past careers behind and try their hands at sales. Every single great sales executive that I have ever met was in a different profession before they got into sales. To give you some examples: one of my first managers studied mechanical engineering, thereafter started coding on the side and went on to launch several software companies. Another fantastic sales lady who was also the Country Manager at an OEM subsidiary was previously a pharmacist and then decided that although she loved the chemistry side of things, working in a pharmacy wasn’t for her. Her predecessor was an electrical engineer turned salesman and her boss who was the global sales director for EMEA was previously a mechanical engineer. Another great sales executive and businessman I work for was preciously a chartered accountant. There are lots of other examples that I could give, but the point is that what all of these people have in a common is a track record of succeeding in some other profession before they became sales people. It undoubtedly shows that a charming and charismatic personality has very little to do with sales compared to the long list of skills required to be successful as a sales person.

A story of scope creep in a software project

Suppose you are a non-technical entrepreneur and you have a brilliant idea for a killer app. How do you now go about getting the app developed and what are some of the pitfalls you should look out for? Conversely, what if you’re one of the developers that gets asked to developed it? Over the years, I have seen the same story being played out over and over again, but just with different characters. Here is how the typical story goes:

  • The app idea: The story begins with the non-technical entrepreneur. Let’s call this character Marry. She has a brilliant idea for a killer app, but she’s not a software developer herself. She is however very business savvy. Marry therefore thinks that all she needs is to find one or more developers to turn her dreams into a reality. She figures that once the app gets developed and they go-live with it, she can tell the developers to step aside and she’ll take it from there.
  • Requirements: Marry puts together a list of basic requirements together. Like most entrepreneurs Marry is very optimistic and sees the app as being very easy to develop. She reckons that it shouldn’t cost too much and the whole process cannot take longer than a few weeks.
  • Corporate quote: she approaches a professional software development company to get a quote. Upon receiving the quote she gets the shock of her life. She thinks to herself that she can get a copy of a popular out-of-the-box software product at her local store for a fraction of that price. Marry then gets comparative quotes from other software companies which come in with similar estimates. Since she can’t understand how these companies come to these conclusions about the cost estimates, she figures that all established companies and corporates are being greedy and are all trying to rip her off.
  • The software geek: one day she meets a software developer called John. He seems like a nice, honest, down to earth guy and above all very intelligent guy. John is a typical geek that is obsessed with coding and technology. Instead of a wearing a suit, his attire on most days includes jeans and t-shirt. Being young and full of energy John has aspirations of starting his own software company one day. Marry immediately gets a light bulb moment and asks John to get her the app developed. She then proceeds to have a casual chat with John about her requirements. John hasn’t had that much experience in building commercial software products nor does he have any experience in project and cost management. However, he sees Marry’s proposal as a huge opportunity to learn a few new technologies and make some extra cash.
    • The agreement: since John hasn’t got that much experience he reckons it shouldn’t take longer than a few weeks. He puts together a basic cost estimate making sure that it’s an offer Marry can’t refuse. Since Marry has a bit of life experience she negotiates with John to bring down the quote. She also asks that they agree for payment to only be made upon completion of the project. Although John is a little reluctant to do so, he agrees, since he reckons that it’s better than nothing. The quote ends up being a fraction of what the professional software company originally estimated. Marry is overcome with joy in finally getting someone to develop her app and knowing that all her dreams will come true in a matter of weeks. Likewise, John is over the moon with getting Marry as his first customer and the opportunity of starting his own software company. This has always been his dream. Just like that two naive but well intentioned and optimistic people enter into a business agreement.
    • Bringing more developers on board: although John is excited about the project, he does feel a little nervous about doing it all by himself. Perhaps it could be due to a lack of confidence from a lack of experience, or perhaps he thinks they will get it done quicker as part of a team. He therefore decides to bring one or more of his developer friends into the project and agrees to split the money with them.
  • Project inception: since John doesn’t have that much experience, he doesn’t bother with an analysis workshop to flesh out the exact requirements for the app. Being filled with excitement, he and his friends pull out their laptops and get to work on coding the app based on their current understanding of the requirements. John gives Marry a status update every few days about how things are going. Marry is content with the feedback, everything sounds like it’s going according to plan.
  • Scope creep: after a few weeks, John announces that the app is finished and ready for go-live. It’s finally time to demo the app to Marry, who at this stage is overwhelmed with excitement she can barely contain herself. They setup a time and date to meet. It’s camera, lights, action! With each second that passes Marry’s excitement begins to fade and disappointment starts to creep in. In John’s defence the app does indeed meet the vague requirements that Marry set out i.e. it has all the buttons, data grids, links etc. Marry begins noting an extensive list of changes that will be required. For example, the UX and styling of the app is all wrong i.e. the colours, images and positioning of the controls. Furthermore, the business logic of the app is not completely correct and in some cases even missing. Although the app is not ready for go-live, being the optimist that Marry is, she says that it’s a good start, but the app will however require a number of “small” changes. Unfortunately for John, Marry doesn’t quite know the exact changes that will be required. For example, she knows that she doesn’t quite like what she sees in the UI but since she’s not a UX designer or graphic designer she can’t quite pin-point what or how it needs to change. She therefore makes more vague requests to John asking him to make the colours lighter and rearrange them a bit to make it “slicker” and more “modern” looking. What defines “slicker” and more “modern” looking to either of them. After seeing the app, Marry also realises that there are a number of business logic requirements that she hasn’t thought of previously. She now mentions those requirements that she can think of off the top of her head. Marry thinks to herself that whatever she can’t think of now, she’ll bring it up later.
  • Going pear-shaped: John realises that this will be more work than he bargained for. To appease the customer he decides to let this one slide by agreeing to complete the list of changes. After completing the changes they go through another demo. Since Marry did not have a complete and clear list of requirements, she once again asks for more changes. By this stage John is starting to become visibly irritated because he realises that the workload keeps increasing but the amount of money they agreed on is fixed. Going forward him and his friends will essentially be working for free. He explains to Marry that if she wants changes going forward she will need to pay more money. The way Marry sees it is that that they already agreed on a price and shook on it. Naturally she feels that she is being extorted for more money i.e. she cannot use the app in its current form while John is requesting for more money to complete it even though they agreed on a fixed price. On the other hand John also feels that he is being extorted for his time i.e. he agreed on a fixed price, but since the app requirements keep changing, him and his team will need to work for free with the possibility that they might never finish the project and thus never get paid for their work.
    • Jumping ship: after a few cycles of this chaotic coding and demo process, one or more of John’s friends decide to cut their losses and quit, leaving John to fend for himself. For John it’s not that easy to quit, either due to a moral or contractual obligation to complete the project. He is now stuck between a rock and a hard place.
    • Recruiting other developers: John explains to Marry that his team members have thrown in the towel and have gone on to greener pastures. He also explains to her that the progress will obviously slow down as a result of reduced man power. By this stage Marry sees his team as unprofessionals and lacking integrity to keep their end of the agreement. She also realises that recruiting more developers to replace John’s team member will require more money since the new developers will obviously not work for free. This isn’t what she bargained for, since she expected a fixed cost for the entire project. Furthermore, Marry believes that it was John’s decision to hire those developers and he should be accountable for that. However, she also realises that she cannot fire John since he is the only one left with the technical knowledge of the design decisions that have been made in the code. Depending on how forgiving Marry is, she may very well forgive John for what she perceives to have been mistakes on his part. Either way, just like John, Marry is now also stuck between a rock and a hard place. Left with no choice, she agrees to start looking for other developers to replace John’s team members. In the long run, throughout various stages of trial and error, Marry will end up paying the full price of getting the app developed i.e. the price that the professional software companies initially quoted her. Alternatively, Marry may also give up on the project if she lacks the funding.
    • Future projects: assuming that Marry ultimately gets her app developed, what are the chances of her getting John to develop another app for her in the future? I will leave you to ponder and decide that for yourself.

Now that we have a backdrop for this very common scenario, let’s a do a post-mortem of what actually went wrong and why it went wrong. In terms of placing blame I believe that neither John nor Marry are solely to blame, but are in fact both equally to blame.

  • What Marry the entrepreneur did wrong: although Marry may know a thing or two about business, she has limited knowledge and experience on what it actually takes to develop software. Ignorance unfortunately is at the heart of this these sad stories. Here’s what Marry didn’t realise until it was too late.
    • Paying for time and expertise vs paying for a finished product: when getting custom software developed you’re not actually paying for the finished product, but rather the time and expertise of the people that will be developing the product i.e. you’re buying development hours. This is comparable to purchasing a finished car out of a shop vs getting a custom car designed, engineered and manufactured to start your own car brand. You won’t need millions but billions to create your own car brand. The same applies to starting a business with software at the core of its operations.
    • Pricing of a product: even when purchasing a finished product, the price of it is not dictated by the value of the product but rather by the demand versus supply for the product. In the grand scheme of things and from a financial perspective, if you invest $100K into the development of an app, its value in terms of the number of features doesn’t really matter that much. What matters is the return on your investment i.e. how much money the app will help you make and/or save in the long run. This determined based on supply and demand of the app.
    • Finite mindset: Marry believed that software development is a finite process i.e. that it has a beginning and an end. She thought that she could pay a fixed amount of money for a fixed amount of development work to get the app that she wanted. Unfortunately that is not the case. For starters, the main reason being that requirements constantly change just like the world is constantly changing. There will always be new features and improvements that will be required. Older software frameworks and programming languages that are consistently being discontinued need to be replaced by new ones. Security mechanisms need to be constantly upgraded.  Not to mention the hardware capacity that needs to be increased in order to scale that application. Let’s look at Facebook as an example: according to them they have 1 engineer per 1 million users. That equates to thousands of engineers working for Facebook all working night and day just to keep a website and mobile app running 24/7. To quote Mark Zuckerberg’s character from the movie The Social Network, “software is like fashion, it’s never finished”.
    • Greed and short-sightedness: had Marry realised that the work required on a software product is never finished, she would have realised that there are only two options for getting her app developed:
      • Deep pockets: Hiring a contractor might have worked in the short term to get MVP (Minimum Viable Product) created. Long term however, the engineers really need to be working for your company in order to have full control of the product on which your entire company would rely on. Either way, Marry would need to have large amounts of money to fund the ongoing development. She either didn’t have the money or was too stingy to spend it.
      • Equity: even if Marry didn’t have the money to fund the development she should still have realised that software development is an ongoing process requiring an endless supply of money and work to keep it going. In which case, she should have offered John equity in the business thereby incentivising him to work for free/less money with the possibility of profiting from the business in the long term,
  • What John the software developer did wrong: John isn’t without fault either. He might be a talented software developer, but he had minimal experience in project management, requirements analysis and customer management in general. He pretty much broke most of the rules in professionalism in the software industry. All of these topics are discussed in upcoming chapters: