"Sales Strategies for Startups Selected Topics"
Sales Strategies for Startups: Selected Topics December 1, 2006 First Flight Venture Center Rick Simpson Mark Carr Alan Hart Selected Topics • The Dream of Distribution • Selecting the 1st Five Customers • Selling the 1st 20 Customers • Distribution Model – Which is best? • The CEO as Salesperson • Honesty in the Funnel • How much process, and when? • And other topics… • Generating Leads, Demonstrating Value • The Role of Geography and Cost • Hiring models: junior vs. senior? Sales skills vs. industry knowledge? • Compensation • Etc. CMG Partners Confidential page 2 The Illusive Dream of Distribution Many start-ups look early on to establish distribution: • Reach many customers • Credibility • Lower “fixed cost” of selling and marketing In order to be successful distributors require: • Training -- Not just technical, but sales • Marketing materials • Sales materials • Dollars for the above • A jointly developed plan • Help with targeting • Help with tactics • Constant care and feeding -- staying top of mind is difficult …and it turns out that it is difficult to provide these without having already sold the product successfully CMG Partners Confidential page 3 VARs analyze the provider and product, and how it fits into their business Example for Software company Current business Qualities of provider • How the product fits into • Reputable their current business • Experienced track record model and product suite Current business Experience & • Longevity • Meets needs of & customer needs support of • Support & training prospective customers (preferably local) • Demand exists from end- provider • Existing customers to users to support cost of reference in sales efforts adding an additional • Marketing support provider (including trade press, lead generation and seminars) Price, margins and features of product Examples for software company • Scaleable VARs look at the • Modular Price, margin & features “whole package;” • Customizable of product many start-ups • Free updates provided as necessary lack these • Attractive price & margin (including no qualifications minimum sales requirements) • Product platform fits business model (ASP vs. client server) CMG Partners Confidential page 4 VARs need to see new products in context of future growth Example for Software company Software development Increasing sales Client acquisition from current solutions Growth mechanisms Improving margins Expanding service through service offerings model Increasing revenue from current accounts Because adding new products requires investment in training & resources, they need a strong business case for reselling CMG Partners Confidential page 5 Distributors require support and investment for success Customer support Technical support “We wanted a company with a local presence, someone in “[We partnered with DocuWare because] they offer great the U.S. to train our employees.” support and product updates for free.” -Eagle Systems -DOS Imaging “DocuWare provides technical support to both our company and the end users.” -Coeco Marketing support “From a small reseller perspective, we wanted to partner with a company that has a well-developed channel program. We wanted them to help with marketing, trade press, lead generation, seminars, etc. because we’re too small to do all of that ourselves.” -Document Control Systems “Learning about document management solutions is really an educational process for most companies, as they’re usually not familiar with the options out there.” -Coeco “Smaller companies need to be educated first on the importance of process, document management solutions are just the vehicles/tools to manage and organize process.” -Octopus Networking Example for Software company Currently, most start-ups lack the support desired by VARs CMG Partners Confidential page 6 Selecting the 1st Five Customers Criteria for the 1st five customers • A perfect match between their needs and your value proposition • Innovative -- Willing to try new things • Respected – a recognized leader • Will accept reference calls and speak for you • You have some personal knowledge of the principals and their integrity • Could invest in your company CMG Partners Confidential page 7 Big companies are better, right? Pros Cons • Big budgets • Few are early adopters • Big names • Organizational & career risk for the buyer: • Can put us on the what happens to me if this doesn’t work? map • High support needs, unreasonable pricing • Less price sensitive? demands, internal competitors Despite CONs always have at least two big targets. A series of little customers (or retailers, or distributors, etc.) won’t put you on the map. CMG Partners Confidential page 8 Selling the 1st Twenty Customers • Pick your two or three strategic strengths, and try to narrow to one • Innovative value? Breakthrough in productivity, etc.? • Price? Discounts? • Service? • Etc. • But listen very hard to what’s important to your prospect • Understand the personal and corporate risk profiles of your targets • Get in synch with your marketing positioning – you don’t want to create confusion • Assume success: are you ready to give outstanding customer support and care? • How to find the risk takers within large companies? • Understand who NOT to call on, no matter how great it would be to have GM… You’ll waste your time educating corporate toadies • And don’t start with distributors – do the selling yourself! You have two ears and one mouth. Use them in that proportion. CMG Partners Confidential page 9 Distribution Model – what to choose? • High ASP = direct sales • Middle ASP = confusion • Low ASP = VARs, etc. • Consumer = distributors to retail, Web, and other (e.g., Home Shopping Network, viral marketing, affinity organizations, etc.) But remember – don’t even think about channels until you’ve learned everything you can by selling direct Remember the 5th P of Marketing: Process. How does the customer like to buy? CMG Partners Confidential page 10 Channel Effectiveness: Not all Distribution Channels are Created Equal System Distributor/ Service Direct Sales Partnership Integrator/ Reseller Bureaus VAR Type of End-User Reached Time to Market (e.g. time to establish and utilize channel) Potential Sales Volumes per Channel Partner Anticipated Level of Effort to Secure Channel Partner Estimated Channel Size Required to Reach Sales Volume Challenge: Identifying the optimal channel approach to market segments CMG Partners Confidential page 11 The CEO as Salesperson Pros Cons • They generally have great passion, • Can they listen? energy, and knowledge • Do they have the sales skills? • They can react to the sales situation • Have they been formally trained? and change product/price/support • Do they know that selling is a policy on the fly profession? • Prospects really appreciate dealing • Do they believe “If we build it they will come?” directly with the CEO • Do they get defensive when objections • They give organizational uplift to arise? prospects in middle management – • Do they have discipline around their “Hey, cool, I’m meeting with the actual own personal sales process? CEO!” • Do they give their staff the freedom to be creative? Make a pact with others in your firm: you will do a call plan before every important sales call, and you will honestly evaluate the call afterwards – everyone’s skills will improve! CMG Partners Confidential page 12 Honesty in the Funnel • Do you even have a funnel, or understand your sales cycle? • Do you have criteria for realistically assessing where you are in the sales cycle? • Some tests: • How many months in a row have you said “We’re going to close this sale this month?” • Does the prospect have a budget for your products or services? • Do the people you are calling on – even if they are enthusiastic – have the institutional power to buy? • Does this prospect have a known history of being an innovator? • Constantly ask the question: are we wasting our time with this prospect? Startup managers are notoriously optimistic – a great trait for an entrepreneur. But it can lead to a poor allocation of resources in the sales process. CMG Partners Confidential page 13 How much Process, and when? What chaos! How come we Process? Waste of time – that’s vs. manage product development, big company stuff, and we don’t and financial control, and even have time to fill out reports or marketing with real discipline, but sales tracking software… sales is just a big adhocracy? • Both opinions are true – so the trick is, how and when do we add process as we grow? Ideas include: • Tracking: when you’ve got more prospects than you can remember in your head and write on a piece of paper • Start with a spreadsheet – and share the document • When to get a sales automation system, such as salesforce.com? When you have > 100 prospects, 5 people selling, and have trouble sharing information with all who need it Startups are loose, fast, fully enabled to make decisions, etc. - all wonderful characteristics. But when coupled with a lack of professional sales discipline, it can easily lead to missed goals. CMG Partners Confidential page 14 And other topics… • Generating Leads, Demonstrating Value • Don’t confuse selling with marketing. Closing sales is tactical, nitty-gritty stuff – somebody’s got to drive to the close! • Geography and Cost • Tempted to sell near home because of costs? Put that low on the list… • Hiring models • Junior vs. Senior? • Sales skills vs. industry knowledge? • Compensation • Etc. CMG Partners Confidential page 15 Contact Us e-mail us at: email@example.com firstname.lastname@example.org email@example.com Or call us at: (919) 688-1803 CMG Partners LLC 324 Blackwell Street, Suite 540 Durham, NC 27701 www.cmgpartners.com CMG Partners Confidential page 16