The most challenging test faced by a startup is finding and securing those first customers willing to bet on the company when no one has heard of the firm and when the product has yet to be battle-tested.
At this stage, trust is your number one product feature and that will carry the deal. Trust is forged separate from the product and created during the sales process. And it’s the human part of the sales equation. When you’re trying to capture those first customers, it’s important to realize that any action that negatively affects the trust created can derail the sale.
In a startup, everyone is highly anxious about getting these early deals signed for many reasons. To the person working the account it can feel like everyone from the CEO on down wants in on the sale to make sure that it gets closed. If a company is not careful, this all-in, pile-on effort by the CEO and others can blow up a deal by damaging the trust built up between the prospect and salesperson.
At a startup, the more prospects you speak with and the more you try to close, the quicker you learn what markets need and what customers desire. And whether you have what it takes to build a great company.
In other words, the faster you learn, the quicker you get to a rinse and repeat sales model that drives predictable revenue. And an accelerant to this learning is urgency. An urgent problem moves the prospect to act. Without it, selling gets harder - meetings do not happen, deals drag out, or they do not get done at all.
In a startup, anything that speeds up the sales cycle speeds up learning and helps a company zero in sooner on their ideal customer, helps them understand how buyers make decisions and how to attract them, and what the company’s real product superpower is.
Startup Sales Due Diligence Basics: understand the two-mode Sales Model - Developmental and Systemic Sales
A startup is a race and a journey. It is a race to get to a repeatable sales model before running out of cash. And it is a journey of understanding and development of a sales model that can sustain the company. However, many startup founders lack the experience and acumen to build a sales process from scratch, which will seriously hinder their ability to complete the startup race.
At the Exponential Boot Camp for Startup Sales, to help founders better understand and navigate the sales journey they are on or have ahead of them, we introduce and train them on our two-mode sales model. The model highlights the different selling and hiring efforts and activities they must undertake at various stages along their journey. We have named these two sales modes, Developmental and Systemic Sales.
The selling and hiring activities in these two modes are vastly different. Understanding these differences helps entrepreneurs plan their journey with more foresight, better manage their cash resources, engage more effectively with prospects, and hire more astutely. In short, it helps them make sales decisions with more clarity and purpose.
If you are an angel or early-stage investor, looking at deals through the two-mode sales model's lens helps you understand how well your founders appreciate the task ahead of them.
It’s a mistake I see made over and over again. A first-time entrepreneur assumes that selling at a startup is like selling at an established company. Many angel investors and mentors from established companies make this mistake too.
If you have never been in a startup before or been the founder of one and run the startup sales gauntlet, you will likely make this mistake. And it is not a trivial one to make. Many first-time founders have sunk their companies because they did not approach startup sales correctly. Others that made this mistake just cost themselves and their investors a ton of money and wasted more time then they had to spend running a sales process that was ill-equipped from the outset.
You approach customers and close deals in a startup very differently than you do at a going concern. Selling at an established firm usually means executing on a well-tested plan to sell a product with a track record of meeting the needs of customers willing to pay. Essentially, you follow a map down a well-traveled road. Whereas at a startup, you are on the opposite end of that spectrum. At the beginning, usually, it is just the founder, some ideas, and grit.
But there is a process and a rhythm and a methodology to startup sales. Done right, it allows a startup to move forward in a productive and results-oriented manner.
I was in Montana last week on vacation and was lucky to be able to fly fish for a few days. Of course, while out fishing on the Gallatin river, I had my son take pictures of me so I could post them on Facebook and Instagram and let my friends know what I was up to.
As you can see from the picture, the photo shows me standing in tall grass, smiling, and holding my fly rod. Of course, later in the day, when I posted this image and wrote, “Lucas and I, caught zero fish,” I got some snide comments back from friends. They said, “water is required” and “find water.” Implying that my inability to catch any fish stemmed from the fact that I was not near the river.
And later that evening, while reviewing these comments, I got thinking about what a good analogy fishing is to startup sales and especially early efforts. The point being, you cannot generate sales or learn what customers want until you engage. Or, in this case, find the water and toss your line into it.
A young salesperson today asked if he should drive out of his way to visit a potentially sizeable account. When he asked the question, his plans already had him on the road, traveling for three days, visiting numerous prospects while driving over 1200 miles in total. And now he would need to put in another day away from home and drive an additional 200 miles to visit this account.
By all measures, he had already planned a great sales trip. His itinerary had him visiting many high-quality prospects. In other words, he was engaging in the right sales activities that would have him on the road for most of the week. However, now a prospect, a potentially significant account, was saying that she could meet with him, but he would have to extend his trip, and travel that much further. One more day on the road; one more meeting.
This situation goes to the heart of generating business and creating sales, and the effort required to get a startup off the ground. Let us be clear: You always take the meeting! No matter how tired; how far away from home you are, If the prospect says they can meet and you are within striking distance or even if you are not, strike! You may not get the opportunity again, grab it. Grab it while you can.
In the future, I can guarantee you that this young person, if he wants to become a great salesperson will never have to ask me again if he should put in the effort and go out of his way to meet with a good prospect! No matter how tired he is.
Written by Tim Bates
Click here, to learn more about the Exponential Boot Camp for Startup Sales,
The startup sales process is challenging. Many founders are not salespeople by trade, so we at the Exponential Group, working with input from other startup CEOs and sales professionals, developed the "Selling Framework for Startup Founders". It is a simple set of actionable ideas that entrepreneurs can refer to when selling that will make them more effective. This podcast digs into this framework.
Click here, to learn more about the Exponential Boot Camp for Startup Sales,
Selling is what makes business happen
By Tim Bates
The company founder plays many roles, the most important is Chief Salesperson. In this role, they're responsible for attracting, enticing, cajoling, strong-arming, badgering, or essentially doing whatever it takes to produce those first company defining deals that launches their firm. If they play this part well, they will move their company forward. Done badly, it is likely their company never gets off the ground.
Now some say that a great product sells itself, so if you have one of these magical gadgets, count yourself extremely lucky. For the other 99.9999 percent of you founders, put your selling hats on and head to the door, because selling your offering is what will turn your little idea into a company.
Moreover, because many founders are not salespeople by trade, the Exponential Group and MESA, working with input from other startup CEO’s and sales professionals, developed the "Selling Framework for Startup Founders”. It is a simple set of actionable ideas that entrepreneurs can refer to when selling that will make them more effective and increase their odds of signing cornerstone deals that will in turn help propel their company to that next rung on the sales growth ladder.
Tim Bates, Dan Kinsella,
Jim Moar & Kent Lillemoe
for the MESA Organisation
A Call to Arms about Cash Management
For many companies, time is money. For early-stage companies, money is time. This framework underscores this brutal reality.
You need loyal customers and super-duper products for startup success. However, they're rendered useless if you don't respect the fact that cash will always be king, and you need it to survive.
A simple truth, cash-flow surprises kill many startups. One out of three startups dies from a cash crisis. Therefore, as an entrepreneur, you need to understand and, more importantly, master cash management basics before mismanagement bites you in the ass or, worse, puts you out of business.
In its simplest form, proper cash management means controlling your inflows and outflows of cash, so you never run out!
Here, we outline seven fundamental concepts of cash management that every startup founder must adhere to to minimize cash-flow crises or an all-out business implosion.
The Gap Stage: Between Market Fit and Scaling or The Blood, Sweat & Tears of Selling Your Ass Off to Get to Sustainable Growth
The Gap Stage
The first significant group of customers you sell your product or service to is special. They set you on your way to sustainable growth. I’m not talking about signing up an early adopter or two. I am talking about that first sizable group that you work your ass off trying to and then selling. They become your company’s foundation for growth. They create the forward momentum needed to move your business to the next level. As an entrepreneur, signing up your first 50 customers who pay $2000 per year or the 20 that pay $20,000 is a distinctive stage in the evolution of a startup. I label it the Gap Stage. It’s the stage after you determining market fit, but before you press the gas pedal down in order to scale the business. It’s the messy stage. It’s a hard but transformative stage. It is here that you birth your business.
In the next 90 days, if you must put money on the table to prove to your investors that your product concept is the real deal, are you in a Demand Harvesting (DH) or Demand Creation (DC) mode? For those that answered, DH go to the head of the line. For those that said DC, grab your ass and kiss it goodbye.
Demand Harvesting is about finding and selling to companies or people that are already in the market, NOW, looking for solutions for a specific problem. Anything else is Demand Creation.
An entrepreneur should never confuse the two. Many do. It is one of the reasons many startups struggle early on.
The other day, while out on a long roller blade, I happened to be listening to a podcast by Tim Farris. (You need a long outing on the blades to consume one of his recordings.) He was referencing pricing, startups, and a statement that Marc Andressen’s made. Marc indicated that the No. 1 theme that their investment companies have when they are really struggling is that they are not charging enough for their product. And this reminded me of a key startup rule of thumb. If your customers have not complained, every now and then, that your prices are too high, then you have not priced your product or service high enough.
Price objections are part of the sales game. But if you are dialed in to your target customer, their needs, etc. and are making some sales, and if you have never gotten push back on price, it is highly likely that you are leaving money on the table. Lots of it.