This is part of my ongoing series Startup Advice. Many entrepreneurs who start technology companies are product people, technologists or savvy business people who worked previously for a larger company. Most start-up entrepreneurs have little or no sales experience. I know I didn’t. But through nearly a decade of startups I learned that sales comes down to three essential elements:
1. Why Buy Anything? This is the easiest one for most entrepreneurs. If you sell a product direct to a customer – in person or on the phone – you need to understand what their pain points are and position your product benefits against those pain points. I’ll do a full post on this another day. But most good entrepreneurs do this naturally.
Even businesses that attempt to sign up customers directly on a website need to answer this question for people albeit programmatically and through good website copy. Many, many tech companies I meet start with a set of “awesome features” and present them to me (and I suspect also to customers). They end up building what is called a FNAC (feature, not a company) as most people won’t pay for them. I first heard this term from the guys at First Round Capital.
2. Why Buy Mine? This one is a little harder but still quite straightforward. Not only do I need to understand a customer pain point that my solution solves but I also need to convince them that my product does it better or most cost effectively than others on the market.
Many entrepreneurs think naively that it’s not good to have competitors. To the contrary. Customers seldom like to buy unless they perceive they have options. They like to feel like they compared your solution to something else on the market. If nobody else does what you do then maybe it isn’t really such a big market after all. (Incidentally, VC’s hate when they hear companies pitching who say, “I don’t have real competitors” as I outlined point three in the linked post).
I’ll cover “Why Buy Mine” in a later post, but my quick answer is that referenceability is the most critical tool to solving this problem. By having reputable people from reputable businesses listed in case studies, on the website with quotes and/or willing to take phone calls makes all the difference in the purchasing decision.
3. Why Buy Now? The real test of sales and the topic of my post is “why buy now.” It’s what kills most sales cycles including raising venture capital.
Great sales leaders know that you can only sell effectively when your sales cycle matches the customers buying cycle. That is why they qualify customers really hard and ask the sort of questions that would make us non-sales-trained people squeamish. Asking customers directly whether they have budget this quarter for a program like your company offers takes nerve. Great sales people are also direct about asking whether the individual that they’re speaking with controls the budget.
When you qualify a customer, if the customer has shown interest in your product but isn’t ready to buy then they get sent over to marketing. Great sales companies manage this very effectively and have sales prospects put into 3 buckets: those ready to buy this quarter (A), those ready to buy soon (B) and those not likely to buy in the next 12 months but still interested (C).
Most companies are not good at managing integrated sales & marketing departments – particularly startups. My old employer, Salesforce.com (they bought my company Koral), were masters at this. They generated an enormous amount of inbound leads through PR, email blasts and heavy efforts with analysts such as Gartner Group, IDC, Aberdeen Group, etc.
Initially the leads need to be qualified. If you’re not ready to buy then you go into an email database. Their goal is to get you to appear in person at city roadshows that they run or to come to their annual Dreamforce conference. Here they surround you with sales professionals, product people and, of course, lots of referenceable customers! If you appear then they’ve increased the probability that you’re closer to becoming an A or a B buyer.
In products designed to sell directly on the web the process is no different. Your goal as a website is to elicit my email address out of me with as little else required as possible. With this email address you can continue to market to me even if I don’t buy today. That’s why websites offer newsletters.
Websites are also getting much more sophisticated using techniques such as re-marketing to find a way to drive you back to their website. If you spent time at a site you might not be aware but they’ve possibly dropped a cookie on your computer and use pixel tracking to follow you around the web. If you were at a ladies online retail store don’t be surprised if you start seeing advertisements for that same store next time you’re reading the Washington Post or on Yahoo!. Companies such as Undertone Networks or SeeWhy (run by my friend Charles Nicolls who’s a BI expert formerly from Business Objects) offer these products to websites. If I didn’t get you to buy when you came to my site I know you were at least interested. I just need to get your back and find a more compelling reason for you to BUY NOW!
Note that the “why buy now” problem exists with VCs also even though nobody will ever tell you this. If you meet a partner who really seems to like you buy he/she is in the process of closing another deal it may be a good 2-3 months until he’s ready to look seriously at another deal. I like to say that if a partner has recently done a deal he is often in the penalty box for a while. Not always, but it’s your job to politely find out. You need to qualify VCs the same way you qualify sales leads.
So is there nothing you can do to accelerate sales? Actually within a certain margin you can bring sales forward slightly. In sales we do this by creating a “compelling event” or as some people call it “a burning platform” (in case the reference isn’t obvious, when you’re on a oil platform that’s burning you have no choice but to jump.
It’s the reason that vendors create limited time period sales or exclusive offers only available until they run out.
If you work in enterprise sales you need to be able to not only identify the pain of “why buy anything” but why buying now is going to be a significant economic benefit. As an example, if you’re a network monitoring tool such as Gomez and you can demonstrate that your customers performance is slow and for every second of latency they’re losing 8% of sales to abandonment resulting in $20,000 / day – you’ve got a burning platform.
There are many techniques but all involve proving that the customer will have more benefit by acting now (lose weight before Summer!), will have more pain if they don’t act (your customers are abandoning your shopping cart) or that they’re behind the competitor.
Can you express your proposition to customers in terms of a compelling event? If so, I suspect your sales will grow more quickly.