The

Entrepreneurial

Code

Lessons from an

Ivy League Entrepreneur

Chapter Eighteen

As graduation approached, Johnny, Maverock, and Abe had the opportunity to bid with CMC to provide services at two major universities.  Maverock and Johnny even flew across the country to visit the campuses, so they could customize their RFP response sections.  It didn’t matter if the trips were in the middle of final exams week.  Maverock and Johnny took turns driving from the airport to the campus, so the other person could study in the passenger’s seat. 

Working through the RFP process did a lot to improve their understanding of the market, because it gave them insight into the concerns of the university customers.  Each RFP contained a list of questions that schools needed answered before mandates could be awarded.  At the same time, it allowed them to see how their services could be differentiated from those of other vendors. 

Basically, they were the only company willing to staff people in a local office and manage the off-campus programs for the schools.  Everyone else was just selling equipment or banking services.  Further, they weren’t charging the schools for their services, but got paid a percentage of the merchant fees they negotiated.  Therefore, they thought their involvement should be a no-brainer for the schools.  It was essentially free. 

There were approximately 4,100 colleges and universities that were potential clients.  Less than a handful had already expanded the functionality of their student ID cards to include off-campus purchases.  Initially, Johnny and his partners wanted to narrow their focus to the largest schools, because they thought they were the most lucrative customers.  Ironically, they were the worst initial targets, because larger schools tended to be more conservative, and less likely to work with new companies.   

The smart move could have been to approach smaller colleges and build their credentials slowly.  By ignoring the big campuses and marketing to smaller schools, they could have had more immediate success, a cash flow stream, and established a dominant position in a niche market.  This could have given them the gradual credibility to capture larger campuses over time.  They needed to capture an easy market, dominate it, and then gradually move up the food chain until they had the credibility to expand into bigger segments. 

The problem was that Johnny and his partners had trouble setting their sights so low.  Johnny wanted to capture a major school immediately.  He craved the big kill, not some pipsqueak junior college that no one ever heard of.  Besides, pitching local colleges seemed like it would take too long for the company to gather sufficient momentum.  Therefore, it never “felt” like the right move to Johnny, because it didn’t fit his timeline.  He wanted the business to be successful quickly, not in 10 years. 

Instead, Johnny and his partners decided a more timely strategy would be to keep expanding their partnerships with vendors beyond CMC.  If they partnered with other suppliers and pitched for business together, they might be able to “sneak” into a few deals.  After all, universities bid on whole packages of products and services.  If they liked the overall package, they might not object to University Service Inc.’s involvement.  Once they had a recognizable customer base to speak of, Johnny and his partners hoped to expand more quickly. 

Every day, Maverock was on the phone talking with potential partners that could get them involved in more RFPs.  He didn’t limit University Services Inc. to any one alliance, but tried to position them to work with everyone – phone service providers, banks, and manufacturers.  He also continued cold-calling campus administrators to introduce the company to them.  University Services Inc. became a member of the various industry trade organizations, NACCU, NACAS, and NACUBO, and Maverock did his best to get quoted in the industry magazines whenever possible. He even maneuvered himself into a position on the corporate advisory board for one of the major industry conferences.  Maverock did anything he could to increase the company’s brand awareness in the marketplace.

It was a harsh reality, but the growth of the company was not going to come in an orderly fashion.  It created an emotional roller coaster, as things seemed to heat up and then lose momentum.  While the company struggled to grow, it was increasingly bothersome to Johnny and his partners that their company had no relationship with their own University.  It was somewhat of an embarrassment to pursue business relationships with other schools if their own hated them so much.  Somehow, they needed to try and fix it. 

The question was how best to combine the existing Bullfrog Card program with the new U-Card.  After much deliberation, the partners had an answer.  They decided to donate the Bullfrog Card program to the school for free.  They would even volunteer to help the school run the new program.  The catch was that the University had to become an enthusiastic reference for them in their bid to win business at other schools. 

Johnny and his partners thought it was a good solution for everyone.  The school got control over their off-campus market and Johnny and his partners moved on to their new business model, which had them working in partnership with other schools and expanding to new campuses across the country.  If the University would be reasonable about working together, they would close up the Bullfrog Card business, transfer their cardholders to the school, and advocate the new account on the U-Card.  All Johnny and his partners wanted was the credibility of a partnership with the University.

Unfortunately, the RFPs the company submitted would not be awarded for many months or even years. The only possibility they had to capture a university client before graduation was to negotiate a deal with their own school.  Doing so would reduce much of the uncertainty their company faced.  With graduation around the corner, they believed they needed to approach the University quickly. 

Copyright  2005 by Chris Cononico
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