Our journey from a “clever consulting framework” firm to fully automating business coaching
A year ago, investors didn’t want to even consider my startup Panda Training. Peers I was meeting in the founder club LaunchClub were telling me that the biggest problem was our business model. Indeed, our revenue was skyrocketing on some months only to dry up only completely on some other months in an unpredictable fashion.
We used to be selling projects as a consulting firm would. We switched to being a product company.
We turned our business model around and became a SaaS company. The subscription business model is the holy grail of startups. It stabilizes revenue and attracts investors. Today I will tell you about our transformation and how you can get to the promised land too.
Step 1. Consulting
This is probably where you currently are. And if you are not, let me tell you that it is a good place to start. Even though no one wants to be a consultant (at least startups don’t), going through this step allowed us to understand our customers and learn how to solve their problems.
I believe there are two stages to building any startup:
Understand the customer and their problem, build a solution that satisfies them.
Scale your solution.
Consulting allows you to tackle this first very important stage. It is even better if you are already creating a semi-standardized framework, or if your consulting is based on some way of doing things differently.
The reason is simple. Learning by doing and contact with reality trump everything in terms of understanding your users. It is not enough to just do interviews and google-led market research. You have to get your hands dirty and work directly with the first customers to understand their needs.
Here is a quote from Paul Graham that captures this idea beautifully:
The need to do something unscalably laborious to get started is so nearly universal that it might be a good idea to stop thinking of startup ideas as scalars. Instead, we should try thinking of them as pairs of what you’re going to build, plus the unscalable thing(s) you’re going to do initially to get the company going.
In our case, we started with understanding the problem. All corporates struggle with change management and making thousands of employees aligned with their Powerpoint strategy. Traditionally, they mostly used training to enforce the learning of their employees. The challenge is that learning doesn’t happen over the weekend. There is research that shows that effectiveness of training increases 4x if you follow up with coaching. Too bad that coaching is way too expensive.
We set out to make coaching cheaper. We didn’t start with full automation, but instead some incremental innovation. We did coaching via chat, while still retaining the human expert on the other end. This tired the coach less, and thus they could handle more people and we could sell the service cheaper. It wasn’t scalable, but it had the seed and was already innovative.
It was hard for me to believe at the time that coaching could be automated. But I kept it in the back of my mind like a crazy idea.
Step 2. Find a way to reduce the price
A subscription makes buying easier for the client. It makes your product available at any time. The downside, of course, is the fact that if it goes unused, they wasted their money. That is why a subscription has to feel cheap. It should be something you can pay for and forget as you don’t have much to lose.
Automation is the easiest way to make your service cheaper. After doing coaching via chat the next obvious step for us was chatbot coaching. We approached building the product in a clever way by using AI for a recommendation, not creation. The content was written by coaching and AI acted as a recommendation engine.
One insight is that you don’t have to go full automation right away. Before taking such a seemingly crazy step we started with a hybrid approach. Half the sessions were still done by a human coach, while the other half was done with the bot. The results shocked us as some people told us the bot was amazing and some people even preferred it over talking to a human coach. We realized that our assumption that business coaching can’t be automated was completely false. We gathered the courage and eventually switched to a full Chatbot Coach.
Beware that automation doesn’t have to be the only way. You can be creative. Negotiations with suppliers and centralization of operations a-la Walmart or simply disrupting an overpriced market a-la Dollar Shave Club are some of the examples.
Step 3. Sell at scale
The final step is crucial. For all this to make commercial sense, you have to sell at scale as your prices just fell drastically. This means there should be high demand. This is one of the reasons for going through step 1 and validating the demand. In our case, we are proud to name companies like Universal Pictures, SAP, and KONE as our clients. They have thousands of employees and scaling is definitely of interest to them. If we consider our potential in the B2C market (selling coaching directly to people via a free trial), while there could potentially be demand we are not aware of which channels we could use.
The lessons I shared above were inspired by the conversations I had on LaunchClub. It is a platform that connects SaaS startup founders who just launched in weekly 1-on-1 video calls. I helped to build this exclusive community to support the founders in acquiring their first users.