Cranky Customers, More Meaningful Engagement And Other Simple Tips For Your Ramadan As A Business

This is our fourth Ramadan since we launched in mid-2014. Ramadan for Melltoo is a month of work, reflection, preparation and execution. We continuously learn how to accommodate the needs of our customers and partners as well as develop better engagement campaigns that result in improved customer experiences and higher retention

If this is your first Ramadan as a business in the region, we would like to share with you our experience of the past three years.

Invest in Your Core Users

Retailing in the UAE

Peer-to-peer retailing in the UAE is typically slower in the summer since a significant portion of the population (mostly families) travel outside the UAE when school is out. Thus, we, at Melltoo, take this opportunity to focus on our core users. We do not typically launch any new acquisition campaigns during the summer. We prefer to reward and invest our money in customer experience (e.g. discounted products, better-vetted listings, a faster delivery time).

Engagement

Ramadan in the Muslim world has been traditionally a month for hyper consumerism that benefit some industries such as traditional brick-and-mortar retail, food and beverage, beauty services, etc. As retail and other services ramp up, businesses use this opportunity to connect with their customers and offer them deals they can’t refuse. As discretionary income increases during the month, businesses compete to get their share.

Typical engagement campaigns in the Muslim world concentrate on charity and giving back to one’s community since Ramadan is the month of benevolence and philanthropy in the Muslim calendar.

‘Flash sale’

In the last Ramadan, we ran one of our feature discount campaigns called “flash sales.” The basics of the flash sale campaign rest in the name. They’re flash i.e. they only last one to few hours, and they’re primarily sales campaigns. Flash sale campaigns run per category each time. We may run one campaign at a time or a few on the same day. During each campaign, we reward each buyer with 50% credit-back on the value of their purchase. Sellers benefit with a larger flux of engaged buyers who are present in-app to buy.

The primary goal of each campaign was to boost transactions per category. Secondary goals are to push the users to explore the app, scroll down the feed, use the many features of the app such as search, liking and commenting, looking into ratings on seller profiles and ultimately create a more dynamic marketplace. We have run this campaign and other forms of this campaign successfully since launch.

At a time of carefully managed growth, we increased our daily transactions by 50% for the overall month of Ramadan.  

The main distribution channel for the campaign was in-app messaging (automated live campaigns via intercom.io) and social media.

Since last Ramadan, we introduced new changes to the app’s UI. We changed two things. We now run marketing campaign visuals on the app’s  main browse feed. We also outsourced crediting rewards to users. Our staff does not add back credits to users. The users use coupons on the app and add money to their wallets themselves. Thus far, our coupons have been redeemed 1500 times since the first week of Ramadan 2017.

You can read more about Ramadan 2017 reward campaign and earn money on Melltoo right here!!

Understanding Customer Needs

User behavior typically shifts during the month of Ramadan even when the users themselves are not observing the religious duty, they are influenced by trends around them.

In a peer-to-peer classifieds, great customer experience is a combination of efforts from the sellers’ side who provide their pre-loved items for sale, logistics companies who ship the items and the buyers who may accept these items or choose to return them; and of course our operations team’s ability to manage user participation and expectations.

During Ramadan, working hours are shortened. This sometimes results in sellers being unavailable to ship their items on time and logistics companies having fewer hours in the day to complete deliveries. Our team’s responsibility is to maintain a positive user experience despite the inevitable logistical challenges. We take extra care to manage expectations and to be on top of sellers and logistics companies throughout the month. Customers are very reasonable people as long as they provided with timely and accurate information about their order. We let them know if a delay is anticipated, we revise our CS timings to accomodate the fasting schedule, we work with logistics companies to manage the flow of orders to prevent bottlenecks. Authenticity and honesty are key in our approach to customer service. We treat our customers as our partners and regularly update them on the status of their case.

Special Hours And Flexibility

In the UAE and many other Muslim countries, working hours are reduced. While legal hours may not always correspond to your operating hours, in order to strike a balance between both, you have to know your customers and reach out to your partners.

For most e-commerce businesses, you will deal with two important time slots: Working in the day will be crucial to make sure your sold items are shipped. Working the night shift is important because this is when your fasting customers will feel at ease to share their concerns and queries.

Flexibility is important too. We, at Melltoo, operate a location-independent business which means we don’t have core hours people need to clock in and out. We focus on getting things done, right. As a result, our hours are easily flexed to accomodate the needs of the month.

In the words of our customer service manager, Mostafa Gamal, who deals primarily with customers and manages customer-communications, “if you work in a healthy work environment and with a proper mindset, fasting won’t affect your productivity at all. Keeping yourself busy helps passing some time so might as well keep yourself busy with something productive.”

Sharene Lee is our co-founder and COO. She is a person whom I admire a lot for her focus, self-discipline and work ethic. Sharene is a mother of six. She manages several people with several functions. I often wonder how she does it.

“Not having to eat during the day actually makes me more productive because I don’t have to stop midday and figure out what to eat and get everyone else sorted. I like Ramadan coz It gives me uninterrupted time to do more ‘brain-intensive’ things like financial modeling and working on product roadmap and strategy,” she wrote me.

How you can lead the path forward?

Ramadan is a month of blessings for Muslims around the world. It can be time for activity, testing and training depending on your business. The key factor is to know your customers well, to reach out to them and keep them interested in your brand even if they’re not buying. Reach out to partners, find synergies and find out how you can ride the Ramadan wave and stay relevant. Focus on CSR campaigns. If you manage a diverse workforce, it is important to invest in cultural sensitivity trainings to avoid tension in the workplace. If you intend to jack up your growth this month, lay the foundation to measure this growth and speak with your customers as much as you can.

Building a Non-Stop Machine: How Melltoo, The No-Meetup Classifieds, Built A Location-Independent Business

At Melltoo, we work as a distributed team. It was not the plan, but we started out this way and kept growing from a team of 2 to 25. And in this time, we have not felt like we are disadvantaged, in fact, we have executed and grown much more rapidly then our peers.

We are not a team by virtue of sharing office space, but rather by a strong belief in our mission and by working toward common goals. For many of us, Melltoo is a unique opportunity to work within a rapidly growing market while not physically being in Dubai. It is also a great way to make an impact from wherever we are in the world, by contributing to the sharing economy and helping make resale and resuse part of the product lifecycle and in turn build a more sustainable future. Every single of one us finds meaning in our work.

Most people don’t fully understand what working remotely is about. Great ideas don’t always happen in closed spaces. We live in a world with excellent communication technologies (slack, hangouts, appear.in, jit.si Meet, etc.). Idea generation takes place when there is communication, it really doesn’t matter if it’s spoken, written, in person or asynchronous.

Achieving work-life balance in the 21st century

After all, working from the same place every day can be really depressing. With Melltoo, I have had the opportunity to travel to several destinations around the globe while launching major feature updates, such Melltoo Pay&Ship in October 2015. I still remember this experience as one of the most fulfilling work-personal experiences in the past three years. Perhaps, it is the change of routine that helps me schedule both work and “me” time evenly. One thing for certain, I did not feel overwhelmed by either work or travel, as compared to other times where I woke up every day and did the same exact thing over and over. Being able to work-travel also opened my eyes to new things and experiences that I’ve been able to import into my work.

When given the chance, many office employees welcome the option to work remotely. There is even a new “workation” trend, where you are able to fulfill your passions outside of work, while still successfully fulfill your job duties without being limited by physical space. These trends along with digital nomadism is responsible for a new work philosophy among Millennial workers and Gen X-ers. Southeast Asia and cheaper European and Latin American cities are filled with transient digital nomads who hop from city to city looking to feed both their soul and portfolios.

Parents also prefer working at home when available to them. Santosh Binwal, Melltoo’s quality assurance manager, works from home due to family reasons.

“I needed to work from home due to some family conditions. Melltoo gives me this chance. There is no hard timing and pressure. All members in our team are like family. Everybody helps one another. Top management are transparent with all team members and everyone knows what is going on. No hidden things,” Santosh wrote me when asked to contribute to this article.

For the uninitiated, here are three myths about the nature of distributed teams that need debunking.

Myth #3: Working remotely is freelancing

Working remotely is not akin to freelancing. We’re bound by KPI’s, tasks and objectives. Our commitment to the company is very real. In fact, everyone on our team, except several new hires, have been with us for at least a year. It’s all about organization and setting clear, achievable goals. Working remotely does not negate the development of company culture. In fact, I would argue that working remotely has shaped our company culture into one that emphasizes results and execution over office politics.

Many of our customer service agents have been working remotely with Melltoo for over a year. In fact, many are polyvalent and perform several tasks within our broad CS-Operations team. They have witnessed many changes to our processes from the way we verify and book orders to how we treat claims and cancellations.

Timing is especially crucial for a company like ours which prides itself for great customer experience we offer to our users. We schedule our working hours within peak hours of customer interactions. Typically these peak hours fall within people’s resting schedules. Our team is experienced enough to anticipate peak days and hours before they occur in synch with our marketing campaigns schedule.

Our CS team has been through different growth stages. They helped shape CS processes and performances in the past year resulting in a decrease in our CS reply time from hours to 10 minute per query. Everyone continues to learn on the job while also supporting themselves in a handful of small cities in Egypt plagued with a higher-than-average unemployment rate. Fortunately, our team’s professionalism and fondness for team work has kept them in their jobs year after year.

Myth #2: Working remotely is isolating

While this may be true at times, it is still preferable to working in an open office which tends to be awfully distracting with chatty coworkers, background noise, and office politics. According to a Harvard Business Review Research on work satisfaction in open-floor work spaces, the results are not great. The main complaints are noise, lack of cleanliness and constant interruption. In fact, the study reports a loss of 86 minutes per workday due to distractions.

From my own experience, as customer experience manager and content writer, I am able to focus better with a silent background while being the only person in the room. I do my work first and then I schedule calls and meetings around it. Hours of optimal productivity also differ from person to person. Allowing people to work asynchronously improves productivity while increasing job satisfaction. So, while working remotely can sometimes be lonely, it actually helps getting the job done, especially in creative tasks that require a lot of concentration, like coding or writing.

At Melltoo, we recognize the need for social interaction. It is something we constantly work towards.

Rahul Choudhary, our technical manager, recently moved to Melbourne, Australia. Just like the rest of the members of our team, he is not restricted by location to do his job. He fashioned his own communication style with his team of 10 people.

“One of my most important roles is to communicate with the tech team and get things done. I usually talk with the team on phone or skype. Text chat is only used to keep records. So, if there is something that needs to be present as reference, then I put it on Slack or email. Voice call makes it easier for everyone to explain & to understand,” he wrote to me on Slack.

Slack is our favorite channel of communication.

Myth #3: Working remotely decreases productivity

Wrong. As I mentioned above, working alone has the benefit of reducing distractions and boosting productivity.

In addition, work productivity is measured by motivation, not location. Remote workers are by default a motivated bunch of self-starters; you won’t survive very long in the remote work environment if you aren’t. There is no one to tell you when to start work and no one to prevent you from stopping. Without self-motivation, you won’t get anything done, which is a one-way ticket out of the job.

In my opinion , there is nothing more exhilarating than taking the lead and achieving the goals you set out for yourself.

Santosh has worked on multiple app iterations including major feature updates and changes. He relishes increased responsibility.

“I am motivated by taking responsibility. In Melltoo, there is a high responsibility on me that the application should be Bug Free and Users can use it without any hassle. One more thing, it gives me a sense of accomplishment and I am proud to say ‘I am working for Melltoo,'” he wrote me when asked about routine and execution in the job.

We, at Melltoo, have worked remotely since day 1 and we’ve been thriving and growing for the last three years. We don’t clock in, we don’t clock out, we travel, we work. In this time, we’ve served hundreds of thousands of buyers and sellers, raised several rounds of funding and continue to grow the business while working cohesively as a team from many places around the world. We haven’t missed a beat.

It has been a routine of mine to experiment with new automation processes along with our operations QA manager, Hesham Mustafa, often at the wee hours of the morning. We’re both night owls and I prefer test sending messages to users outside of rush hours to see what works best. We never found the need to sit together at one place at one time, we just communicated constantly as we worked together on developing a rationale and method of automation.

Hesham, who is a chemistry graduate, took a liking and commitment to learning and customizing codes and API’s from our tech team to fit the needs of our operations team.

No one on the team is really second-guessing their experience at Melltoo. He wrote:

“Everything I do now I have learned on the job, which was made possible because I could choose where and when to work and didn’t have to waste my time and energy going to and back from a certain work place. In addition to that, I was given the space to innovate and apply my ideas which was a huge motivation to do even more. I’ve thought of it as a hobby that I enjoy more than a job that I would have to do just to get paid,” he writes.

In just a few months, we managed to automate a large chunk of our operations at Melltoo. We have about 10+ people who collaborate daily on operations, from the product development team, CS team, Operations and QA. We’re not bound by strict schedule but rather the simple logic to serve our customers in the ways and in the hours they need us the most.

No-Meetup Classifieds, an $8 Billion Market Opportunity in the Middle East and Growing

This is a condensed conversation with the co-founder of Melltoo, Morrad Irsane.

We’re discussing Melltoo’s beginning and ongoing strategy to become the largest “no-meetup classifieds” in the Middle East.

Ahmed Medien is a Marketing Aid and Customer Experience Manager at Melltoo.

The answers have been shortened for flow.

AM: Why mobile-first instead of building a mobile-responsive website?

MI: When we first started working on Melltoo in 2013, mobile-first was the only way to go. People were eager to download any new app and try it out. Today, in 2017, it is a bit tricky. People don’t want to download an app just to try a product. They prefer to try it on the web first and if it makes sense, they move on to the mobile app. If you are just launching a new product today, go with mobile-responsive web first, then launch an app if your product takes off.

Mobile-first, however, has a better user experience. The native mobile app experience is superior to the mobile-responsive web when it comes to realtime geolocation and push notifications which are very important in consumer-facing products. A mobile app keeps the product front-of-mind and allows a product to become part of a user’s daily routine, making habitual use much more attainable. A good mobile experience should make things easier for the user, hence the importance of both UI and UX for our business. Today’s users are pressed for time and impatient. We work hard to make Melltoo intuitive without a steep learning curve. We know people just want to buy and sell without complex signups, payment methods and other UI friction.

Why “social” classifieds?

A product will become a part of a person’s life only if it’s social. Let’s not talk psychology, but social interaction is a fundamental human need. My dream is to contribute to building a more sustainable world by making it easy for people to resell and reuse. To do that, we have to not only make it easy, but to make it fun, rewarding, and engaging as well. And nothing is more fun than interacting with people in a safe environment.

Classifieds is an inherently social experience. However, the traditional classifieds experience is fraught with risk and as much anti-social behavior as there is social behavior. At Melltoo, we set out to facilitate positive social interactions in buying and selling by being the referee and go-to if things break down. In some ways, we are creating a safe social arena where people build relationships on the basis of their roles as buyer and sellers; for lack of a better term, a social network for buying and selling.

There are practical reasons for keeping things social as well, establishing trust. Part of the experience in Melltoo revolves around building an identity and reputation in the community. Knowing who you’re dealing with builds trust, which is important for successful transactions to take place. Ratings and reviews for previous transactions further solidifies credibility, especially in this day and age where fakes and counterfeits have become a global problem.

We want our users to be engaged in our community and to build relationships with one another. Features like comments and chats not only allow users to discuss and exchange product information, it’s also allows them to build relationships, creating stickiness in the marketplace. When you’re using Melltoo, you’re not just an individual behind a screen dealing with another individual behind a screen, you are part of a community. We are often asked whether the private chat is a leak for us, a way for buyers and sellers to take the transaction off-app to avoid paying selling fees. It probably does happen at times, but we believe that the service we are providing is valuable enough that people will prefer to keep things in-app. Not to mention the fact that transacting off-app does not help users build their reputations in the Melltoo community, which is a key element to successful transactions.

Why do you limit yourself to making money off transactions rather than other more available revenue streams such as selling media banners or premium listings to users?

Our model is purely transactional, we take a percentage off successful sales. Melltoo is not interested in selling mellsters’ data and personal information to advertisers for money. Nor are we willing to compromise the user experience with ads in our app. We have different aspirations. We value our privacy and want the same for our users. Paid listings is not something we do either, we want users to pay us only after they have derived value from the service, not before.

On Melltoo, users only pay us if their item is sold through the app. We believe this is the best way to make money for now. In future, we plan on introducing other paid services that bring value to users.

Why the insistence on remaining peer-to-peer?

Peer-to-Peer is the most difficult business model to build and sustain, yet the most rewarding when you succeed. Think any classifieds, airbnb, Uber, eBay (in the early days), etc. There is no peer-to-peer transactional platform in the UAE and the region. We are tackling secondhand items with fulfillment for the first time in the region. What is amazing about the peer-to-peer business model is interchanging user roles: buyers become sellers and sellers become buyers. This is maximally engaging since users can participate on both sides of the marketplace seamlessly. It also means that peer-to-peer businesses are high-impact businesses since participation is afforded to large segments of any given population.

From a strategic perspective, there are many other businesses doing B2C marketplaces, Amazon/Souq.com, eBay (today) and others. We follow Peter Thiel’s school of thought that prefers to avoid competitive industries and instead focus on achieving monopoly status in our space. In terms of user acquisition, a peer-to-peer marketplace is a notch more difficult to establish than B2C or ecommerce. For this reason, competitors are few. And the good news is that once we establish network effects, Melltoo will be highly defensible and enjoy monopoly profits in the region.

From a personal standpoint, my goal is to be an enabler, to enable people to help make the world a more sustainable place through resale and reuse. In this, power lies with the masses and hence the only way to do this is peer-to-peer.

What is the growth potential in the UAE and the region?

The average UAE household has about USD $2000 of unused consumer goods (e.g. an old iPhone, TV, furniture, toys and clothing) in storage in their homes at any given time. These can be resold and will inevitably get replenished as households continue to purchase. The population in the GCC and Levant is about 160 million or about 40 million households. Assuming about 10% of those households sell their stuff, that’s an $8 billion a year opportunity. If we succeed in our mission of making buying/selling second nature, we can increase the participation rate and the market opportunity will grow.

As you know, Amazon recently announced that they will be acquiring Souq.com. While this deal is great for the region in many ways, it is particularly important in validating the market demographics. We’ve had more than one outside VC questioning our market size. Compared to India, China, Brazil, etc, 160 million souls scattered across multiple countries seems small. However, about 40 million of these people are already online consumers and smartphone penetration is among the highest in the world. Currently, ecommerce represents 2% of total retail spend and the region boasts the youngest populations in the world, which means growth potential is huge. Anecdotally, I’ve spoken to founders of large Indian startups who find the region more lucrative than India in certain categories (restaurant, travel etc). While there may be many more Indians, online consumption among Indian consumers is still low. In addition, per capita income in the GCC countries are among the highest in the world.

I have lived in the region for over 12 years. This is my home and I have no plans on leaving. I’m committed to the region and I’m bullish about it’s growth potential. When I first moved to the UAE, the population was 3 million, today, it’s 9 million (tripled in 12 years). Where there were 30 skyscrapers on Sheikh Zayed road when I first arrived, today I’ve lost count, including some of the world’s tallest buildings and 25-star hotels. All signs point to growth.

How have you managed to grow and develop your product, your company and your team over the past 3 years while so many other startups die after barely launching?

Baraka (roughly translate to blessings), hard work and a low burn rate. In this game (startup) the only thing that is not forgivable is to run out of money :). Having said that , we have a great team that works with passion and determination. We all know that we are building something fantastic, something that will make a difference in our world, and that our time will come … We have the right product, in the right place, at the right time. These things are starting to align and we are seeing progress everyday.

It is also incredibly important to be aware of your surroundings and the context we are in. Knowing the users, the socioeconomic context, the funding environment, investor sentiment, other products making waves…these things are important in the decision-making process. A lot of founders just focus on internal data and metrics, that’s really not going to give you enough information to make good decisions. For example, we have the ability to grow very fast. However, considering the current economic and funding environment, growing too fast will mean that we shorten our runway at a time when fundraising is difficult. So these external considerations need to be accounted for when making internal decisions.

What is most important to you right now?

Our users have been and continue to be the most important thing to us. We are continually working to improve the user experience, be it via technology or operations or customer service. To this end, we need to execute fast and to keep ourselves on top of the game. It is all about pleasing the user by building the right features and improve operations to increase new users while retaining old ones.

As the CEO, I don’t do the actual work and all credit goes to my team. However, my job is to build an organization where everyone can achieve their objectives and goals unimpeded. I focus my attention on supporting and building the organization and creating a work environment where talented people can do their thing. Borrowing a page from one of today’s most successful CEOs, Jack Ma, if we take care of the customer and the team, everything else follows.

Why We Built A No-Meetup Classifieds In the Dubizzle Era

When we first launched Melltoo in 2014, we saw ourselves as classifieds on mobile. Everything was moving to mobile, except classifieds. Online classifieds were still just electronic notice boards. We saw the opportunity to bring classifieds into the post-smartphone era and to take advantage of hardware capabilities like geolocalization, instant messaging, and push notifications. The rise of social networks also brought about a paradigm-shift, every product became social, so why not social classifieds?

To be clear, we didn’t pick classifieds from a long list of industries needing disruption after, classifieds has always been in the blood of the founders. Morrad Irsane, co-founder and CEO of Melltoo grew up around buying and selling second-hand. While raising a family of 13 children in France, Morrad’s mother regularly re-used clothes and hand-me-downs were standard. During their annual summer break in Algeria, she had a thriving side business reselling clothing she collected from France.When Morrad invested his savings to launch Melltoo in 2014, he was reviving an old family tradition. Morrad envisioned a mobile app he could take with him anywhere, with a built-in chat so he would never miss a deal.

Finding ourselves

As with all first-time founders, we thought that we would build it and they would come. Launch an app and everyone would use it. We were wrong.

While we grew in our first year, it was a struggle. We had to get creative. We experimented with many different user acquisition models, content marketing, social media, app store optimization, SEO, spamming, even offline events. Name it, we’ve probably done it. In fact, our downloads were healthy with over 500 new users daily with almost no marketing spend.

But, there was no WOW moment. Users came, they tried, they left. Meh. “The app is cool, but…”

While our first iteration was not a huge success, it gave us plenty of opportunity to talk to our users and this is what we discovered.

User Objection 1: “I would like to use your app, but I don’t have anything to sell.”

When someone says this, it isn’t because he doesn’t have something to sell, it’s because he doesn’t want to sell his stuff. Search a bit more and you’ll discover that what he’s really saying is: “I don’t need the money so I don’t want the hassle of selling my stuff.” Yes, selling via traditional classifieds is a hassle. In some cases, it’s downright torture. The main problem is meetups. List something for sale, get a bunch of phone calls from strangers at all times of the day and night, get lowball offers and then take time out to meet with multiple buyers before one finally buys (or not). If you don’t need to, why would you?

User Objection 2: “I don’t trust buying second hand, there are too many scammers.”

Web classifieds are no-man’s land. Anything goes. List something for sale and get an offer from the wife of the ex-president of some unknown country on a continent halfway around the world. People ask you to ship them stuff cash on delivery. You get spammed. Who do you trust, who can you trust?

User Objection 3: “Your app is cool, but nobody is talking to me to buy my stuff.”

Lesson 1: Peruse the startup literature and it is littered with the idea that founders must be “obsessed with the product.” There is no doubt that a great product is important, but a great product that nobody uses is still a flop. It is much more useful to be obsessed with the customer.

Lesson 2: 2-sided marketplaces are among the most difficult businesses to build. You need buyers and sellers, but buyers don’t go where there are no sellers and sellers won’t go where there are no buyers. What do you do?

Armed with this knowledge, we began to realize that classifieds didn’t simply need to be moved from web to mobile and the problem wasn’t one of technology and UI/UX. The problem was that classifieds was broken. People have stopped trusting classifieds and hate the hassle involved. They use it only when necessary, which meant when selling a used car or home and large items that needed to be disposed of, such as furniture. Anything less was simply not worth it. And just like that, we saw an opportunity to re-imagine classifieds, no-meetup classifieds.

If You’re a Startup, Don’t Act Like a Business

This article was originally published on Wamda by Sharene Lee, co-founder of Melltoo.

It seems everybody has a startup these days. I’m the co-founder of www.Melltoo.com, a social network that connects buyers and sellers in the second hand marketplace. It is a startup. Prior to founding Melltoo, I also co-founded and successfully exited two other businesses, a popular café in downtown Los Angeles, and an import-export company trading candies between Southeast Asia and Europe. Even though my co-founder and I built up those businesses from scratch, and exited them quickly and profitably, those businesses were not startups.

Contrary to popular opinion, technology does NOT a startup make. As a startup co-founder, it is important to understand what makes startups different from other businesses. Misunderstanding often leads to flawed business strategy that can be costly in the long-run.

busy_kitchen

More customers means more cooks.

An orientation toward growth and scalability

The major difference between startups and traditional businesses is an orientation toward growth. The reason why most startups are tech-oriented is because technology makes things scalable, which allows for growth. A scalable business can increase revenues without having to increase investment. An e-commerce site doesn’t require more staff to go from processing 10 to a 1,000 orders a day, unlike a restaurant which would have to hire an additional server and cook for every additional 100 orders. An orientation toward scalability and growth underpins all startups, everything else follows from there.

Business objectives: profitability vs. growth

The primary objective of a traditional business is to get to profitability as quickly as possible. At the outset, businesses work on growth, but as growth peaks, businesses turn to cutting expenses and increasing productivity to enlarge the bottom line. With startups, the primary objective is growth, often at the expense of profitability. Uber and Amazon are perfect examples, losing money in order to capture market share and crush competition.

Business metrics: COGS v CAC

In my restaurant and import-export businesses, I was watching my cost of goods sold (COGS) and expenses closely. They were the key metrics of profitability and hence were used to guide decision-making. Coffee supplier raising prices? Switch suppliers. Sugar taxes for a particular region too high, find a different way in. Today, with Melltoo, I’m watching my customer acquisition cost (CAC) and burn rate (amount of money being spent to keep the startup running). My focus is growth, so I need to maximize my resources and reduce my burn rate by finding the user acquisition channel with the lowest CAC and highest ROI (return on investment). While common business sense tells me I shouldn’t spend more on CAC than the LTV (lifetime value) per user, it is okay in the short run if it brings growth.

Capital financing: banks vs. venture capital

I hear endless complaints from startups about funding in the region. They complain about the difficulty in securing investment and general lack of money available for startups here. I definitely sympathize as we are currently raising our first round of external funding. Then, I recall my previous business endeavors. Not so long ago, rather than seeking funding from investors, we were seeking loans from banks. Loans require collateral and payback and a mountain of paperwork. By comparison, busy investors are much more fun to deal with than cranky bankers. While equity costs more in the long run than interest, owning 100% of nothing is still nothing, while owing 10% interest on anything is definitely a bad thing.

Dorothy (Abby Miller), Megan (Jessica Par?), Gigi (uncredited) and Allison (Alexa Alemanni)

In a tradtional business everyone knows their place.

People: team vs. employees

In traditional businesses, job positions are pre-defined roles that people fill. In startups, people create roles that they occupy. In traditional businesses, roles are designed so that they can withstand turnover. Someone quits, someone else is hired. In startups, when someone leaves, that role is largely destroyed to be recreated by someone else. In other words, startups are flexible organizations that change according to the people involved. This is particularly the case in early stages and continues on until the startup grows to a size where corporate structure becomes necessary.

Another fundamental difference: in traditional businesses, employees negotiate for the highest salary possible; in startups, team members are willing to sacrifice salary for equity, because they care as much about the startup as the founders do.

Product: move fast and break things (agile vs. waterfall)

When it comes to product, the differences between traditional businesses and startups is best understood in the comparison between the waterfall and agile model of software development. In the waterfall model (traditional businesses), each phase of development is completed, tested, and perfected before moving on to the next phase. The end-product is usually as good as it gets. In the agile approach, development goes forwards and backwards between phases. Planning phases are quick, but often get revisited mid-development when things don’t work. Features from different phases get developed in tandem and sometimes get thrown out altogether despite the plan. There is no such thing as an end-product, just a “latest” release. The first release tends to be less than perfect, then quickly followed up by subsequent releases that fix bugs and introduce new features.

Zuckerberg said it best: “Move fast and break things”. Because startups are growth-focused, they need to move fast, and in doing so, they break things and change directions. Product follows the “release fast, release often” model in order to stay flexible and truly respond to changing market needs and user feedback.

The speed at which business is changing today is why startups have become the dominant model of entrepreneurship. However, not all businesses are startups, not all businesses are created to grow fast and scale big. If you are running a startup, be sure not to run it like a traditional business or that’s what you’ll end up with.