Everyone dreams of a situation where, rather than pound the pavement and press the flesh, customers just show up at your doorstep and demand to give you money in return for whatever you’re offering. These situations do happen in companies that have hit the tornado and are experiencing rapid growth. Unfortunately, many startup founders I meet and work with have the belief that their offering will be of that nature, too.
The idea that creating a lot of noise on social media and expecting to see a slew of customers knocking on your door, desperate to buy what you’re selling, is a complete and utter illusion for early-stage startups. As a nice anecdote, the head of sales at one of the startups I worked with built up a complete toolchain for inbound sales with tons of automation to involve sales staff as late in the process as possible, when all that was left was to close the deal. When revenue was disappointing and we evaluated where it was coming from, it turned out that all deals were closed by the sole traditional, cold-calling salesperson we had in the company.
Especially in the early days of a startup, sales is incredibly important as it’s the key feedback mechanism the company has to understand what works and doesn’t work for customers. As we discussed in lesson #3, what customers say is far less important than what they do. And customers parting with their money to get access to your offering is one of the most important signals that you’re on the right path.
In my experience, until you have a valuation exceeding a billion or more, and probably then as well, the best way to generate sales, especially in B2B contexts, is to simply scout for potential customers, fill the pipeline, start taking prospects through the funnel and get them to sign on the dotted line. This sounds really boring and cliché, but remember that clichés exist because they work. Despite having started my life as an engineer, I can’t stress enough how hard sales is and how much work it is to work the funnel and close deals.
There are at least three challenges I see companies struggle with. First, several founders I work with initially consider sales to be a bit of a dirty job. Rather than directly selling to customers, they prefer to build products and do marketing with the hope that customers find them instead of having to go out and ‘peddle their product.’ Part of this is that until they start to sell to potential customers, they can stay in the comfortable cushions of all their beliefs about the market rather than having their beliefs be brutally slaughtered when the rubber meets the road. It hurts when people tell you your baby is ugly and it often takes many nos until you get to your first yes.
Second, once a startup has managed to sign up its first customers, it’s important to shift the focus from only closing new customers to balancing acquiring new customers, keeping your existing customers and expanding sales to existing customers through cross and up-sell arrangements. Failing to do so will easily result in very high levels of churn as customers don’t get the support they need to realize the full benefits of your offering. Acquiring a new customer is always more expensive than keeping an existing one, so focusing on decreasing and minimizing churn is very important.
Third, many startups have great difficulty defining who their ideal customer is and target an overly wide customer population. This leads to at least two major challenges. First, you waste sales effort on potential customers you’ll never close and hence incur an opportunity cost. Second, if you manage to close customers that don’t really fit your profile, they often demand significant effort from you to shoehorn your solution into their needs. This causes you to stray from your initial mission and absorbs resources that should be spent elsewhere. Of course, it’s often hard to formulate your ideal customer profile from day 1, but developing a solid set of hypotheses on the ideal customer profile, systematically testing these and honing in on the best match is critically important.
Many founders believe that their offering is such a radical improvement for customers that it’s easy to believe that there’s no need for traditional sales. Instead, simply making the customer population aware of the offering will be sufficient to start the stampede to your front door. In my experience, nothing could be further from the truth and founders need to understand that traditional sales where you identify prospects, take them through the sales funnel and close deals is as important as the product you’re building. Remember, for a startup, sales cures all ails!