A long-time colleague of mine recently lamented about how start-up companies always seem to ignore sales. He commented that start-up businesses have a 4x better chance of surviving when they are founded by sales people instead of the people who invented the product. I can’t agree more…
As an entrepreneur, I frequently network with colleagues and friends who are interested in what start-ups should do with Sales. I’m fortunate to have a few colleagues who are true “Connectors”, as defined in Malcolm Gladwell’s book, The Tipping Point.
I’m not talking about LinkedIn LIONs, although I seen nothing wrong with that concept. However, just because you are highly connected in LinkedIn, doesn’t mean you are a “Connector”. The people I am talking about are seemingly connected to everyone important to your business. They can generate all sorts of sales opportunities and have the personal relationships to enable the right pipeline.
Many start-ups I have worked with (or their Venture Capital investors) believe they need a “Connector” or need to be one themselves. Very short sited…. At best, there may be 500 to 1,000 of these people IN THE ENTIRE U.S. – they are far more rare than you think. Why?
Trick Question: How many CEO’s are there of Fortune 500 companies?
Do I need to tell you the answer?
Many Start-Up founders are egotistical enough to believe their personal connections are going to carry the day to generate significant revenue. Let’s examine your connections more closely.
Let’s say you are running “Start-Up, Inc.” and you have 20 great contacts. You think, “I’ll create my business with my 20 contacts and then my momentum will bring in other deals.” Perhaps you believe that if you “build it, they will come”.
Let’s also concede that you will actually get business from some of your contacts – a good closing ratio would be 20% – 4 contacts. Now let’s say your product sells for $15,000. How long is $60K going to sustain your business burning cash at, say, $30K a month….
Start-Ups beware! Don’t fall into this trap!
I don’t mean to offend anyone, but if people were so well connected, why do we have a multi-billion dollar industry of books and self-help consultants teaching people about “Connecting”?
No matter what connections you have, you have to plan for sales.
This is going to sound like “Sales 101”, but there is some simple blocking and tackling every Start-Up should do when you create your business. Here’s four key tips:
Tip #1: Who is going to buy your product?
Yes, this seems really obvious, but I have met founders that have never identified their target customer. They assume that the customer is someone “just like them”; that is, a business that used to be their client as a consultant or the company they worked for – not enough. Can you produce a list of 500 companies that would buy and use your product? If you can’t you may not be thinking big enough to generate “huge revenue”. Go big or go home!
Tip #2: Create a sales budget and put a real sales process in place.
How are you going to contact your 500 top prospects? Hint – it’s not by spending $35K at a trade show! (More on trade shows in a future post…). Once you contact them, what is the sales cycle like? How long does the sales cycle take? What are the steps? How do you know the customer is “qualified” to buy your product? When and how do you expect to close the deal? Do you have enough deals to be profitable?
If you don’t know anything about sales process, start out by reading one of the many best-selling books on the topic, such as Spin Selling, Strategic Selling, Solution Selling or CustomerCentric Selling. Or better yet, bring in someone who knows how to set up this kind of sales infrastructure….
Tip #3: If you (the founder) are not a sales person by background, hire a real Sales Person.
Pay them a salary plus commission – don’t make them “earn” their income by paying with equity or 100% commissions. Pay them a market-based salary. If you can’t afford this, then you ought to reconsider starting a company. A professional sales person who knows about sales process and is willing to go out and aggressively help you generate revenue is worth every penny!
Tip #4: As much as you love your product, focus 80% of your attention on revenue generation…
That means instead of spending all your time planning for the next set of product features and benefits:
Pick up the phone and call the CEO of your potential customers!
You would be surprised to find out how many of them would at least take a call to discuss what you are doing. If you can’t get in touch with the CEO, call other customer management team members. You can’t sell anyone anything unless you are in contact with potential customers. If you can’t or won’t do this, it proves the point that you really need sales help!
Of course, I know these tips an over-simplification of what needs to be done to enable a strong start-up business. I am not minimizing the fact that you have to have a good product or service in the first place, that you need to be clever in organizing and planning your business, and that you probably need to have or (more likely) raise investment capital.
But all the organization and product benefits in the world do not replace a sales plan.
Focus on revenue.