Introduction: This comprehensive blog post is a step-by-step playbook for launching (new and untested) products – whether it be a start-up co-founder or an existing company.
It describes a philosophy of “entrepreneurial selling” and step-by-step process to put this philosophy into practice.
Purpose: Ultimately this guide is trying to answer the question – how should entrepreneurs sell their way to success – the single most important activity for their survival?
Remember, startup is a temporary organization built to search for the solution to a problem, and in the process find a repeatable, scalable, and profitable business model. The key activities of a startup is of experimentation – to learn and adapt before it’s too late.
Inspiration: This guide is a result of four years of on the field experience with launching five validated and un-validated products. These included online communities (platform), phone trading and unlocking (passive income), and three SaaS products – Hirebench, eCarpool, and SharpScholar.
Inevitably, many of the lessons were learned the hard way – first wrote the test and then learned the theory. Furthermore, it containts nuggets of advice from mentors and advisors I have had over the past four years.
Words of Wisdom: This post contains the theoretical framework to apply for entrepreneurial selling – not the inspiration to go out and apply this. For the inspiration and work-ethic to do that, check out my other articles.
Remember, as an entrepreneur your unique talent is to go and DO things that most people don’t have the courage or motivation to do so – use this as your guide for that quest.
Overview – Guide to Entrepreneurial Selling
Here is a brief overview of what this guide entails;
- Introduction to Entrepreneurial Selling – Why and Critical Mistake Entrepreneurs Make
- Entrepreneurial Selling vs. Professional Selling – The Difference that is the Difference
- Entrepreneur as the Salesperson – Why You Are the Best Salesperson for the Company
- Entrepreneurial Selling Process – Covers the stages of executing the process
- The End Game of Sales Learning Curve – Provides tips and guidance for startups to transition to product-market-fit and eventually to scalability.
Introduction to Entrepreneurial Selling – The make or break Deal
The most common mistake I see entrepreneurs make (and have myself been guilty of) is managing early sales of the startup. This is the critical “valley of death” gap given that customers are company’s best proof of concept, market test, and significant risk reducer.
Now, getting early customers is not enough – getting the right early customers and managing the whole process is what will take the startup (temporary organization) closer to product-market fit – where the focus shifts from experimentation to scaling the organization.
The good news for the entrepreneur is that if he can manage to get the company to the scaling stage, there are many external resources (books, VC firms, etc) to help the startup scale.
The bad news for the entrepreneur is that entrepreneurial selling will be LONELY. Hopefully this guide and I can make this journey a tiny bit easier for you.
Here are some fatal mistakes “sales” mistakes that startups make;
- Mistake 1: The founders do not believe or want to be “sales people”
- Mistake 2: The founders seek help from professional sales people
- Mistake 3: The founders view and conduct selling and product development in isolation
- Mistake 4: The founders follow “professional sales tips / books” which do not tailor to challenges unique to entrepreneurs
- Mistake 5: The founders undervalue their passion and commitment as inputs into their sales process
Importance of Getting it Right
Entrepreneurs who fail to master the sales process (or make the above mistakes) put their startup ventures at fatal sustainability risk. This is because;
- Financial Performance – depends on understanding the sales process
- Human Validation – customers are the proof that there is a real business solving a real need
- Poor Learning Process – improperly conducting the entrepreneurial sales damages the potential of collaboration between founders and often makes the team focus on the wrong priorities.
Entrepreneurial Selling vs Professionals Selling
Let’s start with the most critical mistake and confusion between entrepreneurs – difference between entrepreneurial and professional selling. Many of the books available online assume that a company has an established product, clear customer segment, proven ROI, and messaging. It is no surprise that these books had left me and bunch of other entrepreneurs frustrated.
Entrepreneurial selling is distinctly different from the sales team of a large company. In a large established company, the salesperson happily sits on top of a powerful structure of resources – supporting him along the way (See Figure 1). These include product managers, marketing gurus, customer service, and design team. All of these equip the salesperson with brochures, demos, and most importantly case studies and success stories. Better yet, the sales person’s role is further broken down into prospector, account executive etc (See Figure 2).
This is far from true for an entrepreneur. For him or her the situation is pretty much flipped on its head (Figure 3). She has no one to rely on to support her selling – from prospecting to closing. She is a salesperson, customer service, marketing, product visionary, and most importantly has the courage and discipline to learn from mistakes and customer rejections. On any given day, he or she is running back and forth to balance all of these requirements. This is the first fundamental challenge of entrepreneurial selling – balancing and juggling priorities while staying focused on bringing in business.
Entrepreneur as the Salesperson
With the differences in professional and entrepreneurial selling established, let’s squash some a common bias that entrepreneurs begin with.
Eliminating the Myth – Build a Better Mousetrap
Namely, “Sales and marketing will take care of itself if we build a better product” (Inspired by Ralph Waldo Emerson).
This myth alone is one of the leading contributors to the death of most businesses today. The truth is that no product or service sells itself and many people who built a “better mousetrap” died on the inventor’s shelf because a lessor product with better sales and marketing (understanding of customers) beat them to it.
Want to see it for yourself? Go to any hardware store and check out the mouse traps section, the most basic one is still the best seller. Think of Shamwow, it’s just a cleaning rug. Tommy Hilfiger just “sold” its way to success by advertising alongside CK, Ralph Lauren etc.
Bottom line: In the early stages of a startup nothing can be replaced as a substitute of entrepreneurial selling – not even a technological breakthrough or better product. If they could, almost all new inventions and better products would succeed yet they have the same failure rate as a startup.
Now, with the biases eliminated, let’s talk about what advantages does the entrepreneur truly have as the sales person.
Passion and Commitment – The Entrepreneur’s Advantage
Why does the founder have to be the first-sales person? Well, if professional or external sales people could get your company up and running then everyone with an idea would be a billionaire. KFC tried selling it a 100 times before he found the customer, uber, airbnb, and many other companies fall under the same category. What do they have in common?
- Answer: Passion and Commitment
Note: Professional people are not compensated for dealing with hassles and Q&A. They are used to making proven sales as shown in Figure 2 above.
Passion gets the founder to believe in the product and she is unwilling to walk away from an objection. Furthermore, it is like their child they can defend for it instead of walking away from an adopted child (professional salesperson).
Furthermore, passion is infectious. Professional salesperson emphasize economic value proposition. But more than the economic value proposition, people buy from people. Entrepreneur can communication the future vision with a clarity and energy that can make the potential customer willing to take risk of doing business with a startup.
Commitment gets the founder to work on the host of issues that emerge. Initially, the entrepreneur needs customer input, use cases, psychological responses, and problem identification – all forms of critical feedback.
This critical feedback (coupled with passion and commitment) allows the entrepreneur to iterate and build the company – stage were many entrepreneurs get lost.
Entrepreneurial Selling Process
It is important to note that the “professional sales process” typically begins after marketing leaves off.
Assumptions made by professional organizations
- Marketing Department defines the correct market
- Generate Good Leads
- Support the Sale with Clear Positioning and Strong Brand
- Provides Human Resources (managers) to Manage the Process
- Generate Good Leads
However, for entrepreneurial sales process reaches back into marketing and all the way into customer service.
It demands much more of the entrepreneur’s personal factors (skills, patience, grit, & passion), is much unpredictable, and is driven by big key decisions.
The stages are – selecting the target, engaging the prospect, making the match, doing the deal.
Stage 1: Selecting the Target
Overview: Most entrepreneurs begin with assuming that the “whole world needs this!”
Challenge: Identify Niche and Low-Hanging Fruits / Early Adopters
Defining any market is about determining what problems, characteristics, buying habits, needs and budgets a group of customers really have in common.
The best way to get to your target is by;
- State the Problem Being Solved
- Select the Entire Possible Market of People (aka “whole world needs this!”)
- Apply one of the following filters;
- Filter – Industry Vertical
- Filter – Size of Company
- Filter – Emphasis on Particular Activities
- Filter – Geography
- Goal: Speed of contact, ability to use business cases, references, and stories to get into the door and have meaningful conversations
- Apply one of the following filters;
Criteria for Good Filters and Initial Target Market
- Deliver real value quickly (time)? Urgency. Maximum pain point.
- Gain access to multiple customers? Having a single customer is not sufficient. Engage a small group of initial customers to ensure that the offering is broadly applicable.
- Connect to analogous industries? When making case that problem solved for customers in the first market is comparable and relevant to buyers in the next target segment is important.
Stage 2: Engaging the Prospect
Overview: Lead generation is easy for existing organization as they have a proven product to offer. However, for entrepreneurs the challenge requires the use of their passion and “people skills” to generate conversations with prospects.
Challenge: Entrepreneurs must get creative and try harder to initiate conversations – many times it may take as many as 5-10 attempts to get a response or notice. For established companies, they have internal sales teams dedicated to lead and meeting generation.
Critical Steps: Lead Generation and Qualification
Lead Generation – Process of Finding the names and contact information for individual buyers in the target market and reaching out to them
There are only two places that entrepreneurs go to generate leads (see figure below).
- Hot Prospect – Personal Network, Introductions, Referrals
- Cold Prospect – Cold Calls, Emails, Creative Reaching Out
Entrepreneur must reach out to both sources for systematic lead generation. Use hot prospects (people who know you) to get initial feedback, listen, and even put money where their mouth is. Always cross-validate this with cold prospects. After all, getting business from Uncle Tom (even if he fits target profile) is not a SALE (it’s a donation).
Before you start selling, you need to qualify the prospect so you sell to someone who is genuinely interested.
Qualification – lets the entrepreneur know if this individual buyer is a good fit for the company
Entrepreneurial selling is about assessing a prospect against the target filters and qualify as soon as possible, NOT fully engage every prospect out there. Why?
- They require too much customization – burning precious resources
- Some will grind on price – make you lose money
- Budget – Not existent and may drag process endlessly
Entrepreneurs must learn to walk away from bad business – it sucks time and money. This takes a much disciplined approach – as entrepreneur is hungry for success.
Qualification does not end until the deal is closed. It’s like a ladder you climb. Food for thought: Would you fall off earlier where the fall is short or higher after you have invested time and resources making the fall harder?
Stage 3: Making the Match
Overview: Don’t get too pragmatic, selling is a fluid conversation. Not a monologue.
Don’t get into the pitch mode – sell features and benefits of the product or service – something they love to do. Therefore, listen (easier said than done) and get buyer to articulate needs, budget, timeframe and desired outcomes. Note that this is much more difficult than pitching.
Challenge: Lacking knowledge, expertise, and “being in their shoes”, well-testing offering, track record, the entrepreneur must spend a significant amount of time in this phase building credibility and overcoming the liability of newness. Make sure you do your homework before entering the conversation to become as knowledgeable about the prospect’s industry and business issues to add VALUE.
Critical Steps: Determining the Fit and Proposing
Determining Fit – Understanding the potential customer’s requirements, goals, concerns, and constraints – and aligning your value proposition as closely as possible to them.
This is the heart of the selling process – where both parties agree that it’s worth having a conversation.
This conversation does not just bounce along the surface but dives deeper to determine whether or not this deal makes sense for both parties.
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Entrepreneurs get so excited that they promise the moon without realizing their competitive advantage, resources, and sustainability.
Proposing – Taking determining fit and qualifying into the specifics of how an engagement would work between the parties
Key is to use customer’s own language, emphasize priorities, reviewing specific requirements to make customer feel heard and unique. Furthermore, a price that has already been discussed and agreed upon.
Most entrepreneurs rush to write fancy 10-page proposals with unnecessary complexity and jargon. (PS: I once received a proposal that had conditions for what would happen if the founders died.)
Stage 4: Doing the Deal
Overview: Entrepreneurs assume once they find a gap and the position their value proposition, out comes the contract and the wallet! Beware the greedy sale. The buyers need more convincing and the entrepreneur needs to assure that this is what they want and can do. Also, beware the entrepreneurial challenge stated below.
Challenge: Entrepreneur’s overconfidence and desire to win – can lead to contracts that small firm is challenged to deliver on, get into “company building” when they are still a start-up, redirect valuable time and money towards winning the wrong clients.
Critical Steps: Closing and Resetting
Closing – actually ask for the business
Rule of thumb it should be as easy and obvious as from moving from engaged to getting married. The answer should be hell YES!
That’s it. No “trial close”, “give it a try”, “take away close” or any other closing techniques that formal sales training programs have. Save these for later when your company has the luxury to do so.
If it is not a hell yes (marry me!) from both sides, go back and continue qualifying and understanding the customer (Stage 1-4).
Re-setting – expectations to ensure buyer and seller are on the same page
Once you have a “closed” deal, ensure that the start-up is not set out to over deliver, the customer is ideal and matches with a broad base of future customers.
The deal is favorable when the start-up can over deliver without the extra costs. Now, you can sit back and enjoy while you update financials and dream the money coming in.
The End Game – The Sales Learning Curve
Luckily, an entrepreneur’s job is not done after getting initial customers on board. You should not just ramp up sales operations. The company’s ability to scale depends on the entrepreneur’s ability to continuously improve the sales cycle, reduce cost of acquisition, creating a repeatable sales process, and recruiting the right early customers.
Before the company can sell the product efficiently, the entire organization needs to learn how customers will acquire and use it, a process known as the sales learning curve.
Start-ups or existing companies launching new products follow a sales learning curve that is similar to the manufacturing curve – it happens via give-and-take between the company and its customers. As customers adopt and use it, give feedback, the organization modifies both the offering and processes associated with making and selling it. Most Kickstarter campaigns do this.
Goal: Startup should organize itself so it can learn from customers and respond to them. They must view sales function as a learning process instead of “scaling” and bringing in customers.
The sales learning curve involves all customer-facing parts of the startup: marketing, sales, product support, and product development.
Gaining knowledge in each of the above parts happens slowly – something that is hard for a “hungry” entrepreneur. It develops slowly as the company makes initial assumptions, which are modified as feedback comes in from early customers. The learning customers only accelerates once more and more customers resonate and give similar feedback – honing the product, messaging, and the sales effort. This cannot be all done by selling to a large customer base all at once as many problems are discovered sequentially – revealing themselves only after some preceding issue has been discovered and addressed.
How Steep – The Sales Learning Curve
Just like the manufacturing learning curve where by tracking cost per unit – the more the manufacturing learns about the process the more efficient it becomes. Likewise, the progress along the sales learning curve is measure in an analogous way: the more a company learns about its product, market, and sales, the more efficient it becomes at selling, and the higher the sales yield.
Sales Yield – is the average annual sales revenue per full-time (fully trained and effective) sales representative. Typically it starts out slow, accelerates for a while, and them flattens out as the product matures, in a class S-Shape curve.
The steepness of the curve depends on the industry, sales cycle’s length etc. For many new product launches, the sales yield never reaches expected levels or break-even point resulting in cash shortfalls and premature death for promising products.
Setting expectations appropriately, therefore, can make the difference between pioneering a new market and aborting it too soon.
Sales Learning Curve – Launch Phases
The go to market strategy for a new product should unfold in three parts – initiation, transition, and execution phase.
The staffing (skills) and financial resources need in the first stage, before the product is profitable, are very different from those need in the later stages when the product is being refined and different again from those need after most issues have been resolved and sales have reached a sustainable, predictable level.
The Initiation Phase
Focus: Learning from the Sales Team and Collaboration
Staffing: Renaissance Representatives (High Communication Skills) must facilitate communicating with many parts of the organization, a tolerance of ambiguity, deep interest in product, and a talent for bring customers together for the team. 3-4 max sales people (must be key hires and NOT bad ones)
The Transition Phase
Start Trigger: Sales Yield = Expense per Sales rep
End Trigger: Sales Yield = 2 x Expense per Sales rep
Focus: Develop repeatable sales model, refining market positioning, and adding sales capacity at a rate commensurate with the rise in the slope of the curve:
Staffing: Enlightened Reps – comfortable contribution to still-evolving sales model but do not need to have analytical and communication skills of the renaissance reps.
The Execution Phase
Staffing: Traditional Salespeople – Coin Operated Reps who require nothing more than a territory, a sales plan, a price book, and marketing materials to bring in orders
Focus: Build out the sales team to print money faster