10 Questions You Should Be Asking Software Companies – But Aren’t

Erik_blue_with_suit_lowresBy Erik Cofield, CGA

 Software companies want you to focus primarily on the software itself, no matter what industry you are in. Many builders also focus on the software system and the features and benefits. But one of the most important features is the company itself. Imagine buying a house without even asking who the builder is, or perhaps, was, as in past tense.

Don’t do that. The correct software system ‘buy’ has to include what or who the company is.

There are many questions companies are not going to just answer easily and more that would be totally inappropriate to even be asked. Just like any builder wants to retain some information if possible, and will only answer some questions when asked, software companies are the same way. But you can get an even better idea of whether your investment of time and money is well positioned if you ask a few more strategic questions!

Here are 10 sensitive ones that will tell you a lot.

1) What is your MONTHLY churn rate?
Talk about sensitive. How many customers do you lose, is a big deal and a very touchy question. While it is true that companies could easily lie, at least you will know what the likely truthful response is so, if you don’t get that, you might want to change your expectations about getting honest answers to other questions. If you are buying software and do not realize that companies come and go for all types of reasons, you are being naïve. The software company’s corporate customers (you..the builder) come and go for totally understandable reasons, such as going out of business or they got acquired or they changed their core competencies. They can also leave for some really bad reasons, such as the system didn’t really work, or something was misrepresented. You won’t find that level of detail, but here is the secret:

The average MONTHLY churn rate (customers leaving) for cloud based software is 2 to 4%. That means some percentage of that 2-4% is not even within the company’s control….BUT, some of it is! Yes, they can lie, but you can at least ask and it is more of a gauge of how open their communication is and of course if there are annual agreements where customers are locked in, that changes things. If they come back with 5% or more, something is not right. If they answer with less than 2%, that should probably be considered as completely false too. SO> Now you know!

2) Have you been involved with lawsuits?
Trap Question. It isn’t just what the answer is, but how they answer it. Also, if you are talking to a few companies most of them will quickly just say no, but there might just be one that stutters over it and boom, you pretty much got the answer.
Sub Question: Have you ever filed a lawsuit against a builder?

Ouch. Nobody likes to talk about their lawsuits and lawyers, at least not in this context. Yes, companies’ sales teams can lie to you, but they need to be careful and they know it. This is information you could actually find out independently. When you get the answer, you will either believe it or not, but at least you will get the chance to decide.
Sub Question: Have you ever had a lawsuit filed against you by a builder?

Yep. That’s also touchy. Even if the sales team lies to you, again, you could find this out on your own. Plus, it is not just the answer you are looking for, but how they respond. You get to decide if you believe or not, but it is all part of a package of data (not necessarily tangible) you should be collecting.

3) When I call technical support, who will I talk to?
It’s actually a big deal. One common answer is a ‘dedicated support rep’ or an ‘assigned manager’, which may sound good, unless you have a lot of experience. Those are the wrong answers because everyone is out a day here and there or goes on vacation, then what? You get a stand in? Or do you have to not only leave voice mail, but count on one single person, waiting for hours, for a simple question? A better answer would be a team. Software systems for this industry shouldn’t be so difficult that only one person knows your set up, or could help you.

4) What is your Support Satisfaction Rate?
Trick Question. Every company, just like your own, wants happy customers. Some companies work very hard to get and keep those happy customers. If you didn’t even ask the question, you are letting crucial information slip through your decision making hands. Like reviews for products, restaurants and all sorts of products and services, the percentage should be pretty high. Since we all know keeping customers is less expensive than getting new ones, a satisfaction rate of 90% is not really all that good. 95% is more reasonable and probably a minimum level of expectation. Perfection isn’t attainable either. A rate of 97-98% is excellent.
For this question, you might also ask them if they have something they can show you to substantiate it. Many companies do have something they can show you. If you don’t ask, you won’t get any answer. The ‘answer’ is not just the tangible answer, but the intangible data of how they answered. If they don’t know, don’t answer quickly, seem like they are making it up, they probably are and that is more problematic because it shows they don’t really care about customer service, or their rate is very low or they are not a very polished company, all of which are red flags to you the end user. That has a connection with other areas such as quality of product, likelihood of price hikes and more. If you struggle with intuition, as many men do, ask a woman to be part of your decision making or questioning and data gathering team. NEVER underestimate a woman’s intuition!

5) How many hours per month (or year) is your system down?
There is some psychology behind this. Anyone buying software thinking the system won’t be down, ever, is just not very aware of how things work. However, the software should not be down very much. The average is one hour per year! So, how they answer is important. If they don’t know, they are either not well trained or not honest. If they do answer in vague terms such as, “Oh, like not much” or “A couple hours or something” means they are either an amateur, actually dishonest or just don’t know and in either case, they may not be a very worthwhile choice for you. Because, trust me, you are NOT the first that has ever asked them. If they sound like they are making up this answer, they are likely making up other answers…you know…you can paint a zebra, but it is not exactly a horse.

At the very least, if you are dealing with an inexperienced person, he or she should be able to say, “I don’t know, but I can find out for you”. The bottom line is it better not be much more than an hour per year. Asking them per month allows you, to allow them, to easily slip in to telling you a number that seems small, like one hour a month, but is really a giant red flag! If they are not stable, you won’t be either!

A related issue and more normal question to ask is can the data be downloaded and backed up at any time? Keep in mind you should never lower your standards so that a workaround for poor performance suddenly becomes a feature to you.

If you want more technical details such as on hot swap drives, redundant back up or disaster power run time, just contact me and I will give you more questions to ask that are highly technical.

6) What are your 2 primary user personas?
Every company has and knows who their target market is. They don’t want to tell you BEFORE you tell them who and what you are. But ask! If they tell you broad terms such as, “for builders”, this is amateurish. Even terms such as Remodelers and Custom Builders are broad and are just who their target market is, not their primary user personas. If they cannot narrow it down or they are adamant that their system is ‘for everyone’, they are either an amateur or possibly not honest and just trying to throw you in a large funnel to see what sticks. The primary personas are more specific than terms such as custom builders and remodelers. The personas are who the system was designed to serve. It can be accurate for a company to tell you who their target market is, but that’s not really enough. Here is what is right and wrong with the following examples:

a) “Companies that do any type of residential construction”

Weak – you can’t be everything to everyone and be great at it

b) “General Contractors”

Weak – That could be anyone doing anything

c) “Home Builders”

Weak – We all know the workflow for custom builders is very different than for pure play production builders.

d) “Small Volume Remodelers” or “Luxury Custom Builders”

Good – If that is you, then there may be a match

e) “Single person owners whose spouse helps out”

Great – Because it tells you more specifics about workflow, usability

f) “Field Superintendents”

Depends – Are you a Superintendent? Typically software systems that onlywork for specific positions in the company are not the strongest choice, and longevity is risky because they are not going to appeal to the whole company. However, if what you think you want is a point solution, specific to something or someone narrow, this may be okay.

You get the picture. You are trying to get the real answer on if the system was designed with you as a user or if it is just broadly a match.

7) Do you turn down, or not accept, customers, and if so, why?

Well of course you might think nobody wants to admit they turn down customers. But that is not true. They do. They should, and you should too, at least for the right reasons. Golf is cheaper than a money losing job. If the software company says no, you probably need to end the conversation. If they say yes, then they are honest. If they tell you who, what type or why, you can more accurately determine if there is a match for you or not and continue the conversation or not. It is a way to get from them the true answer without them determining if you are a right fit. That’s for you to decide and this question helps.

8) What is your ratio of sales people to support people?
There is some very clear common sense math here, but if you have done both the consulting for builders I have done, bought software as a builder and sold software or worked for software companies, and if you asked this question enough, the answers would surprise you. Because, when you catch an amateur sales person off guard, they will probably tell you what they think you want to hear.

For example, what sounds better, initially?
What is your ratio of sales people to support? “Oh a lot. You will never wait for a support person.”
What is your ratio of sales people to support? “Oh about 5 to 1 I would say. There are plenty”
What is your ratio of sales people to support? “1 to 1. We have 4 sales people and 4 in support”

You can even trick them by asking something like, “Do you have at least one tech support person for 100 companies? The amateur sales person will just walk in to your trap and respond with something like, “Oh yeah, at least”. That’s where I laugh. That would be way too high.

They are trying to suggest that it is good to have lots of support people, but it is NOT. Why do they need so many support people? Because they are answering a lot of support questions. Why? Are they charging for support? Probably because they are not very well structured, organized or have an easy way to find answers or worse, it is not an intelligently designed software system in the first place. In this case, you are going to pay with YOUR time for the lack of their investment in THEIR time and intelligent design. A ratio of 1 to 1 is great, even 1 to 2 is okay, but if it is 1 to 3 or worse, that is probably not acceptable. You would not be in business long if you had 2 sales people and 8 people that just did warranty, right? Maybe. Here is the art. The company might tell you that their sales people are so good and they sell so many accounts, they need a lot of people in support. If you believe that, then make sure you understand you are going to be one of those people calling support a lot.

9) Will You Price Match Your Competition?
Will you? You shouldn’t. But you should be able to validate and defend your pricing. If someone asks you how much a home costs, per square foot, you really just want to walk away without answering. If they asked you if you would match their $1million dollar budget Bob the Builder is doing for them, there needs to be a more in-depth conversation, right? You are not like a Mercedes dealership across town that is selling the same exact unit. You can match at $x for an appliance package but then the end product is up to the customer. In the case of software, there is no such thing as exact apples to apples. If your software company is racing to the bottom, is that a company you want to trust your world to? I don’t think so.

If you as a builder cannot adequately defend your price, you have some serious issues. So do software companies. If the sales person is an amateur, they will say “Yes”. If they are more experienced, but still not very good, they will say, “I will find out”. Only if they know they do not have to match their competition and they know (and they should know) they are providing more value than their competition, can they honestly and with integrity answer you, “No, we don’t price match our competition, but there are some very good reasons for that. May I elaborate?” That is the company you want to deal with, providing they are not new to the market and not just stupid about what is the right price; you want to work with a company that has no need to lower their integrity to get one customer, you. Software companies should NOT BE like trades or insurance companies or airlines or the stock market because if they are, you will never have gotten the best deal and if they are racing to the bottom, that’s not a ride you want to be on. You would have to wonder if they are low on cash, trying to capture customers to sell their company or is their churn rate so high that every day it is just a race to get more customers than they lose.

Of course you want to get a good deal, but the psychology of price matching competition is not really in your interest. Ask them what their best deal is. Many software companies have affiliation pricing, show specials, or something to discuss.

10) How often do you roll out new features?
Again with the reverse psychology, the amateur sales person, or poorly run company, responds, “All the time”. Well, ‘All the time’ is the exact wrong answer. If they have so many things they have or need to have come out, they must certainly be new or not have designed the software intelligently in the first place. If they are coming out with a release every few months, that is an okay answer. Further, you should ask them, “What are the next two things coming out?” They know. Trust me, they know or they are a high risk choice. If they say they don’t know, you better run. There are 20 questions you could ask if they say no, but there is only one question you need to ask. “How fast can I disconnect the call?” They had better know. They should know what is coming out and WANT to talk about it. Because of the nature of software development, they won’t be able to tell you all the details of the functionality until close to the time after development AND after testing phase is done. They can guess on the timeframe, but they should want to tell you the features. The only exception is if they tell you their system does everything and you truly believe that. In that case, business is art and you are the artist.

I hope this helps. My intent is to help builders run a better business and raise the bar for professionalism in our industry. Use these questions to make better informed decisions.

Remember, if you have no system of record, you will have a record of no system.

Here is to your success.

Erik Cofield
Builder Tech Consulting LLC
P.O. Box 663
Spring, TX 77383

Listen to the BuilderRadio Interview with Erik Cofield here.