Trust is the ultimate path to a defensible business
We’ve met more than 30 VC and institutional investors in London over the past two months. One of the most common questions is “what’s your recurring revenue” or “how do you plan to grow the top line”. For those who haven’t studied accounting, revenue is the top line of any profit and loss statement.
It's fair to see why sales revenue is so important. Revenue tells a simple story of how many clients you have, how much you charge them and how often they buy from you. Many believe revenue is the most important metric for early-stage businesses.
We agree, kind of.
While we accept revenue is the ultimate aim for our business, we believe it isn’t the top line. Customers will only buy from you if they need your service and most importantly — only if they trust you.
For us, trust is the top line. Building trust is the most fundamental piece in any business. Billions of people use Google every day because they trust the search results it gives them. We trust it to handle our email, our maps, our photos and our contacts. Businesses spend hundreds of billions on Google ads because they trust the leads that Google generates. We trust drug companies with our health, food companies with our nutrition. We trust our bank won’t steal our money. We even trust our government, police and military will protect us.
Without trust, we have a breakdown in relationships. Revenue without trust is bound to break and full of deception. Revenue built on trust is robust, long-term and anti-fragile.
The four elements of business trust
We see four important elements of trust at CRIBZ. Each of these four elements works together with the other, hand in hand.
- Founder Trust: This is the trust and bond between the founders of the business. Founders need to trust each other to delegate tasks and focus on what each can achieve with their skill set. My Co-Founder Domenic and I met on a business transaction two years ago. We did a deal worth millions of dollars built on trust and mutual understanding. We didn’t even have a signed contract together when we started negotiating that deal — but we trusted each other. We put into place a contract after several weeks of negotiation, as a matter of formality. Trust was established early on and that lead to us building a business together twelve months later.
- Marketplace Trust: We’re a B2B business selling a service to other real estate professionals. Big industries can have small circles. People speak to each other, they ask about you. They want to know as much about your credibility before they even consider buying from you. Marketplace trust is essential. It’s what your future clients think about you and say about you behind your back. If they don’t trust you today, it will be very difficult to change their mind in the future when you want to convert them from prospects to customers.
- Customer Trust: This is the key driver behind sales revenue. Customers will work with you and reward you if you can help them in the immediate term. But they will stay with you and advocate your brand if you can go further and build a long term relationship based on trust. This helps with every single financial metric — revenue growth, long term customer value, cost of acquisition, churn, return on investment, cost of acquisition etc. Our focus is on earning our customers trust but more importantly, maintaining that trust in the future.
- Investor Trust: Many businesses fallout with their investors at some point. Some have even told us about the hostile relationship they have with those who have backed them. I worked as a stock market analyst for almost a decade and often remember CEOs of top 100 companies telling me how much they despised their shareholders. We want to avoid that at any cost. We understand that our investors (VC or institutional) are custodians themselves, who have been entrusted by other investors to manage their money. They have pressure and bills to pay, just as we do. We’re in this together. As a business, we aspire to build deep and meaningful relationships with our investors, earning their trust so that they may add the best value possible to our business.
Trust is the ultimate defensibility
Another question we’re asked is around defensibility. CRIBZ is a technology business in its essence. But technology is commoditised, can be easily replicated and is constantly changing. Trust, however, takes a long time to build, especially in the B2B market.
We believe that our focus investment in trust will become the ultimate defensibility in our business. Nobody can take away our founder, marketplace, customer and investor trust away from us. They can trust to replicate it, but its a harder than replicating a piece of software.
Monthly recurring trust (MRT)
Most VC backed businesses will pay close attention to their monthly recurring revenue (MRR). We do too, except we also measure monthly recurring trust (MRT). MRR is measured in currency while MRT is measured in actions. Each month, Domenic and I sit down and list the key things we have done to build up our MRT.
We then look at the relationship between MRT and MRR to make sure they are moving in the same direction. Trust should correspond to revenue over time. If it isn’t, there might be a breakdown in our process somewhere to a mismatch with our product fit. MRT is the long game which builds sustainable, robust and anti-fragile MRR.
Interested in knowing more about our journey? Let’s connect on LinkedIn