15 Million Sold

The other night my wife and I watched the movie The Founder.  It’s the story of McDonald’s and Ray Kroc.  There are multiple lessons to be learned watching it.  After the movie, my wife and I talked about the different ways to view it.  To generalize broadly:

  • If you went into the movie with a bias against McDonald’s and a bias against big corporations you thought the McDonald’s brothers were stripped clean by Kroc and he was a fraud.
  • If you appreciated what it takes to execute on a startup and the qualities great founders have you saw that in Kroc.

There are plenty of other things to glean out of the movie as well.

One of them is having a spanking brand new whiz-bang product and your approach to customers.  People are mostly risk-averse.  Check out Ray Kroc’s initial flyer and advertisement for the first McDonald’s or the ninth McDonald’s depending on how you count them.  It’s totally designed to answer all potential customer objections.
Notice the bottom? That’s there to defray the risk of trying something brand new.  Seth Godin mentions this in his blogpost.  The notion of persistent stability is also the notion of getting rid of risk.  Seth says, “Before there are any conversations at all about ROI, decision-makers need to feel safe, safe enough to believe that there will a future that matches their expectations.”

I did a calculation.  In 1955 if you took a family of four and bought 4 burgers, fries and shakes it would cost you $1.80.  In today’s dollars that is equal to $16.57 (cumulative inflation rate of 820.4%).  The US median family income was just under $5000/yr before taxes in 1955.  McDonald’s wasn’t “cheap”, but it wasn’t really expensive either.  Most of all, it was fast.  Kroc was selling good food at a decent price and it was super convenient. His customers didn’t balk at the price.

One problem I have seen with early-stage startups is their lack of ability to sell to big customers.  It’s hard to get them to move off the schneid.  It’s really important for startups to figure out how to derisk their offering.  Some of it is the Kroc method of showing how many millions are eating hamburgers.  The way I see a lot of startups do it is an introductory price.  However, that hurts margins and it’s always hard to raise the price.  If you compete on price there is a risk that you will become a commodity business.

In your selling process, it’s very critical that you ask a lot of questions and make sure you actually hear what the customer is saying.  Listen hard and requestion to make sure you get it right.  This is especially true when you are uncovering what their expectations will be when they use the product.  If expectations don’t match up to reality, you won’t get a repeat sale.  Ideally, you are in a position where you can underpromise and over deliver.  Then, no one cares about the price.

  • awaldstein

    I knew nothing about him nor the company before i saw this.

    It amazes me that you are lauding this as the epitome of entrepreneurial roadmap and spunk.

    He was a real piece of shit, lying and not making good on his promises, screwing whomever got in his way.

    You surprise me on this one.

    • As I said, two ways to interpret the movie. The McDonald Bros couldn’t execute on their vision. Kroc did. He saw the vision and built it. Do you think the Google guys are any different? Gates? Jobs?

      • awaldstein

        I’m no cub scout.

        I learned to do business from Jack Tramiel (‘business is war), Sim Wong Hu and Umang Gupta. Trust me.

        The questions is do you lionize the scum of the pack or don’t you?

        I don’t.

        • The post is about how Kroc used 15M sold to de-risk a new offering.

          Did I like everything about Kroc? Certainly not. Not honoring the handshake deal was pretty shitty.

          I think you can take lessons from people though and apply them while maintaining your sense of personal honor. Steve Jobs was horrible when it came to money, equity etc and did things that were totally dishonorable. Yet, he is lionized as well and there are things we can learn from the way he did business.

          Not everyone is going to like or agree with the boss-especially when you are game changing. Andy Grove wrote the book on how to do it with decency.