The Difference Between Having A Problem And Building A Business Around It – With Sean Harper

by Tim Jahn on December 31, 2010

When Sean Harper needed a credit card processor for his first company, he signed up for the first one he saw.  He ended up being swindled into tens of thousands of dollars of charges and paid almost twice the amount they expected to the first year.

That’s when Sean knew there was a problem.  And after some initial research, he realized it was a problem he could build a business around.  So Sean and his co-founder created FeeFighters.com.

I interviewed Sean to learn how he’s working to solve this problem for small businesses and about the recent rebranding his company went through.

Transcript

Sean Harper: I’m Sean Harper and I’m one of the two founders of FeeFighters. FeeFighters is a place where business’ can go to comparison shop their financial services and save money and also time doing something that previously was pretty frustrating.

So I’m one of the founders; I’m the CEO. The other founder is Josh Krall who’s the CTO. And we started the business when we were graduate students at the University of Chicago.

Tim Jahn: Why did you start FeeFighters? Was it from your need, your frustration, or some other reason?

Sean Harper: It was primarily, well I don’t know it’s hard to tell what came first. But I certainly, Josh and I both started a bunch of businesses over our past lives before this and this was certainly a frustration of ours. In particular, the first comparison product that we launched is one where you can comparison shop your payments company.

So if you want to accept credit cards, you know you can either pay a lot for that or you can pay a little for that and the truth is most people have no idea what they’re paying for it and there are good providers and there bad providers. It’s just complicated decisions. So I ran into that myself most significantly in my previous business at TSS Radio, which was an ecommerce company.

And I went through, you know sort of the same hassle that everyone else does when they’re starting up a business; it’s just too much to do. And so we chose the first credit card processor that walked in off the street. Seemed like a nice guy, he offered us what sounded like a pretty good rate and we just didn’t know any better. But it turned out that we were signing up for a contract that held all these hidden fees in it.

And when I looked back a year later we had paid almost twice as much as I had thought we were going to pay. And so they, you know they told us it was going to be two percent or something like that and it turned out there are all these downgrades and extra fees and AVS charges and blah, blah, blah, blah, blah, blah, blah. It turned out that it was like tens of thousands of dollars in that first year.

And it was like you know this is really hard when you’re starting a business and tens of thousands of dollars means a lot to you. You know there’s all kinds of other things you could have done with that like you know pay ourselves or you know buy more inventory or pay rent, I mean eat.

And it was all just getting sucked down the drain into this sleazy payments company until — that was the one experience that really made me think this was a problem. But there’s a difference between having a problem and knowing that you can build a business there. And so the second part of the equation was, you know I was in business school and I was really consciously looking to start another business and doing research around what would be a good business to start.

And I got interested in this whole theme of disintermediation, so you’ve seen half the travel agents, you used to actually talk to people who book your travel, to book a plane ticket.

Tim Jahn: Yeah.

Sean Harper: All right, well we don’t do that anymore, we go to the web and it’s just a lot easier than it used be. It’s a heck of a lot cheaper. You know auto insurance is another good example, it’s just, you used to have to talk to an insurance agent. They all went away, that’s not true, they haven’t all gone away yet, but I buy my insurance online and so do a growing number of people. And I started looking around for other things that were right for disintermediation.

And it turned out that small business financial services is and even more specifically credit card processing payments is heavily intermediated and sort of, there are a lot of, a lot middle men that can be cut out of this. It was sort of those two experiences that made me think this was a good thing to do. Time will tell if I’m right.

Tim Jahn: Well speaking of which, you mentioned that there’s a difference between a problem and building a business around a problem. How did you know that this problem, you could build a business around?

Sean Harper: So first we started with the investment thesis that we wanted to disintermediate something. Then we researched and confirmed that this was a, you know very intermediated business, which you know that sort of got us started. You know we went through all the typical market sites and exercises that someone might do. So if you want to start a business, so first let’s figure out if other people have this pain, right? I have it, are there other people that have it? So you know you can do reading, you can do a survey.

We did some market research surveys. We actually paid money for them. It’s actually a lot cheaper to do that now than it was even two years ago. There are all these online where you can just survey you know almost anyone, subject to a spec and ask them their opinion of your business. So we did that and it turned out that most of the folks we surveyed that were business owners also felt this frustration.

You can go, run, and ask people, sort of try out the idea on them. The thing that’s really important about that is don’t ask your mom because she’ll think it’s a good idea no matter what. Don’t ask your friends and don’t ask your wife and you know they’re all going to tell you it’s a good idea. The other — you need to ask strangers if they think it’s a good idea. And when you have a bunch of strangers telling you it’s a good idea and they would buy it then that’s a start. The other thing I would say is try to find a way so that’s it’s not you asking the question.

Because I think a lot of people, especially entrepreneurs are, when they’re passionate about something they can convince you just about anything. And you know you run into a real danger where ultimately I can’t convince, if FeeFighters is going to grow into a really big business, it’s not going to be me convincing them, every single person, all the thousands of customers, I’m not, it’s, it won’t work, I can’t do it. I’m only one person.

So we’re going to have to rely on the fact that people want it well enough that they can be convinced to use without me explaining it to them and trying to sell them on it. So you know things like surveys, maybe ask someone else to ask people who they know who would fit your customer spec whether they think it’s a product that they would use. These are ways to sort of de-force your passion from the reality of whether or not it’s a good business.

You know you’re really going to want to know, I think in terms of market size, sizing the opportunity, you want to know how many potential customers there are and how much each one of them are worth to you. So we know that there are 5.8 million potential customers for us. We know that at our price point they’re each worth a few thousand dollars over their lifetime. And so that math adds up to a lot. But if you’re in a business where it doesn’t add up to a lot, you know it may not be the best business in the world. Those are good ways to get started thinking about whether or not it’s a good business.

Tim Jahn: That’s a great point about the customers and how much they’re worth. How do you, I guess how do you determine how many customers there out for you? I mean I know there’s industry publications, there’s statistics among various industries. What’s the best way to determine how many customers are available to you before you, you know —

Sean Harper: It’s sort of like, I mean it’s just research and you — like a lot of other things it’s a judgment call. So you need to make sure you’re not deceiving yourself inadvertently. But basically start with the universe of people who could potentially use and then try and think of ways to segment it and cut out the groups that are not applicable to your business.

So for example every business could use FeeFighters, All right well that’s not actually really true because really big businesses like Wal-Mart and Target, they’re never going to use FeeFighters at all, so we have to cut those guys out. You know it might be that you’re in, you’re in a regional area and you need to cut out the regions that you don’t buy into. Now obviously businesses that don’t accept credit cards are not in target markets so we have to cut those out.

So it’s really, it’s sort of iterative customer segmentation thing where you think about ways that the customer group could be divided and then be really brutal about determining, well is this the customer segment that actually wants it or is it a stretch and find the subset actually apply to you.

Tim Jahn: That’s great. I want to talk a little bit about, you guys went through that re-branding recently, you guys were TransFS previously and now you’re FeeFighters. And I know you did an entire overhaul of your brand, your name, your logo, everything. Why, first of all why did you have to do that?

Sean Harper: It was painful, it really was and I, to be honest I was a resister of it for a long time. Then, I mean we haven’t been around that long, but I was a resister of it because I had always thought name doesn’t really matter that much.

You know if you have something really good people will, people are going to talk about it and you can build to your brand around almost anything. And there are actually a lot of good examples of that, companies where their brand doesn’t say a whole lot or where their brand does an abbreviation you know —

Tim Jahn: Yeah.

Sean Harper: — like you know United Airlines, what did that mean before United Airlines was United Airlines? It meant absolutely nothing. United, who cares? It’s generic. Now it means something because they’ve been around forever. But ultimately the reason why we decided to re-brand was TransFS was such a bad name that it did make a difference. First of all, transparent is this really sort of geeky concept that appealed to us as you know business school students.

But you know if you ask a normal person what transparency means they’re not going to talk about full disclosure of financial terms and conditions. They’re going to talk about well, you know like my window is transparent and the cellophane is transparent; it’s just not something that is on their radar screen. It’s like these two levels of abstraction and we really didn’t stand for transparency, we stood for convenience and cost savings. Transparency was just too geeky.

The other thing was the abbreviation of Transparent Financial Services, Transparent Financial Services was way too long to be a name, but TransFS, no one really realized that Trans meant transparent to begin with.

Tim Jahn: Yeah, I had no idea.

Sean Harper: Who, who knows. I mean we had people that thought it meant, we had a lot of people that thought as FS, financial service was actually SF for San Francisco. I don’t know why. There were a lot of people that thought we were like something related to transsexuals or transgender people because that’s a very common you know Trans, right? A lot of people thought it was transaction, transportation; it was just too confusing. And then third, like people actually had a hard time saying it. If you think about TransFS, T-R-A-N-S-F-S, it’s like what was that again? And we got to the point where like my dad actually couldn’t remember it and this is my dad who first of all thinks this is a great idea, second of all loves me, and he can’t remember the name. He kept calling it TransSF. I was like All right, it’s been a year and my dad of all people can’t pronounce the name of my business, there might be a problem here.

Tim Jahn: Well other than your dad, that brings up a good question, other than your dad, after a year of not knowing your name, those three reasons you gave how did you know that people weren’t getting it, or that people were pronouncing it wrong and not understanding? How did they let you know?

Sean Harper: You know for the, probably the most, the — so Stella, you’ve probably met Stella, right? Stella answers, she’s one of our team and she takes the majority of the customer phone calls. And I was sitting next to Stella and over and over and over again I heard her saying on the phone, “No, no, it’s TransFS, T-R-A-N-S F as in Frank, S as in Sam, Trans as, it stands for Transparent Financial Services.” And I was like wow. That was like a, you know a really complicated conversation just to tell the customer what our name was.

Tim Jahn: Sure.

Sean Harper: And so you sit there and you watch that happen ten times a day, fifteen times a day and it’s like well, all right I’m beginning to get it now. The name isn’t very catchy.

Tim Jahn: And how did you — so after that point you’re like okay, something has to be done here. But a complete branding overhaul. I mean even if you’re a smaller company and relatively new, that’s not an easy task. Did you have to wrestle with the decision of is this going to be worth it, you know in terms of time, in terms of cost? How do you even go about that, you know?

Sean Harper: We did, I mean there are some hard costs to a re-branding. You’re going to need a new domain name, which can be quite expensive. You’re going to need new art. New SSL certificates, a new website, you know we’re going to go through all the labor of changing the name in all the old places on a blog and you know all the content on the website, changing all of our graphics.

So you can actually add up, we did this, we added up, you know what are all the costs of all these tangible costs? And it was a lot, I mean for us it was like, I mean for a small company it was like ten thousand dollars for all the hard cost. And then there’s the soft cost of oh yeah by the way this was a process that took us like weeks. A significant portion of our time for weeks as —

Tim Jahn: How many weeks did it take you?

Sean Harper: Well it was about three. And we did it fast, like we were really, really moving fast. There are all these other things that you can do when you’re running a small business and every time, every minute you take away from talking to customers and building the product, it’s a real sacrifice and there’s a soft cost to that as well.

So you know we, we looked at the cost, we did our best to accurately access what the cost would be and then we looked at it and said is it worth it and for us it was. But you know putting a tangible value towards a benefit was, is hard and really we couldn’t come up with a really tangible way to quantify the benefit because okay, well what are the benefits of having a better name?

Well we’ll sound cooler, our customer’s will be able to refer us more easily. What’s the value of that? I think it’s probably pretty big, but I couldn’t tell you for sure in dollar terms.

Tim Jahn: Yeah, that’s probably pretty important.

Sean Harper: We think so. You know we surveyed our customers and we found that 80% of them said that they had referred us to somebody else, but then we watched our customers try and refer us to people and it was so hard for them because of the name that we knew that the certain number of those were just getting lost in translation.

They’re telling their friend it’s TransFS and they were going to TransSF.com or something silly like that. So we set about doing this re-branding and it’s not something that anyone on our team was really good at. You know that’s the hard part about doing this is there’s a lot of new things you have to learn. And we’re both these like, or all of us are sort of these, Stella to a lesser extent, but the other three of us are really geeky engineering types. And it, you know doesn’t come naturally to us to think of a name.

So we set about this through this process of you know brainstorming and identifying names and then calling them and then expanding upon the ones that we didn’t, that we did like and ignoring the ones that we didn’t like. We had this whole rating system that we found online somewhere. We read a blog article by some branding agency and they had this way of rating along certain criteria each of the names, so we did that.

We added up the scores and then we ranked them and you know it was very analytical and we spent hours and hours in rooms with light boards together. We also got a little bit of help from a branding agency here in Chicago called Bamboo, they’re sort of a small one. They helped us out a lot, sort of figuring out the right way to do that process. And then you know it’s really a matter of trying to think of ideas and killing the bad ones and keeping the good ones. Domain name availability is a big deal here so there were few good names that we couldn’t get the domain for.

Tim Jahn: How important was the idea of domain name availability in terms of your decision? Was that a deal breaker? I mean if you came up with the best name in the world but it wasn’t available in .com, you were saying alright, we’re moving on?

Sean Harper: Yeah, absolutely. I mean there are a lot of great names out there, you know it’s amazing what people will ask for a domain name. Like if you think of any single word domain name, if it’s actually a dictionary word, you’re in the hundreds of thousands of dollars.

Seriously, I mean for stupid things too, like one that we really liked was, now I’m not even going to remember, but like we liked one that was Clover.com. We’re like could we get Clover.com, it’s like four leaf clover, it’s lucky —

Tim Jahn: Yeah.

Sean Harper: — it’s green, it’s like money, be easy to remember. I mean not the best name in the world right, but like you know an okay name, something we could brand around. You go out to look for it and it’s like oh yeah, that’s going to be $150,000.

Like come on, give me a break. So, you know up to a point like you can be very budget constraint. You know I think there’s like, there’s a lot of uncertainty around it. You know we ended up paying a few thousand dollars for our domain name which I thought was quite reasonable.

Tim Jahn: Yeah that’s pretty reasonable.

Sean Harper: But you know it’s one of these things where it’s well would I pay $10,000 for a name that I really liked or I would pay $1,000 for name that I like sort of well? Then you get into, I mean it’s actually really hard to tell because, I don’t know. We just sort of fumbled our way through it in the dark with our, you know trying to make as good a decision as we could.

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