Speed of App Development vs Size of Customer Base

The Department of Justice building in Washingt...

Image via Wikipedia

Many times I’ve heard an entrepreneur say they can’t compete with a larger, well funded competitor due to the number of software developers in their startup vs the competition. Immediately, I like to remind them that the speed of application development is correlated with the size of the customer base for most companies. That is, as the number of customers on a platform grows the pace of new feature development and expansion slows for several reasons:

  • More process and QA is introduced
  • More time is spent on scaling the app’s infrastructure
  • More bugs and edge cases are found
  • More people are involved in the product management decision making

Startups often win by moving faster than the competition, staying closer to the customer, and timing the market. Startups are better off going deeper in a specific area and using that as differentiation rather than trying to be as broad as another company with many times the resources.

What else? What other thoughts do you have on speed of app development vs size of customer base?

Keep a List of People You Want to Hire

Orion (right) flies in space while docked with...

Image via Wikipedia

When building a startup you often come across a variety of people, some of which you think would be great for your team but you can’t afford or don’t need just yet. As your startup takes off and gains traction, more and more people will come out of the woodwork and express interest in working for you. People want to be part of a successful organization, especially one that has the potential to be a rocket ship.

Entrepreneurs should keep a list of people they want to hire.

Much like recruiters and sports agents work hard at networking and developing relationship with potential clients, you need to do the same with talented people you want on your team. Developing relationships and a pipeline of talent in advance of needing it is much more preferable to doing it while things are going so well that you don’t have time for it. Of course, this is a high class problem to have. Regardless, you need to keep a list of people you want to hire.

What else? What should be kept in mind when developing a list of people you want to hire?

Success by Brute Force Hanging Around

Buckhead Triangle, Buckhead, Atlanta GA.jpg

Image via Wikipedia

Today I met with two different entrepreneurs that have bootstrapped multi-million dollar revenue SaaS companies in Buckhead. Neither one raised money and neither one had a sales/lead gen strategy that accelerated their success. How would I characterize their success? They were successful because of brute force hanging around long enough to build a sustainable business. One started his company in 1999 and the other started his in 2000. That’s right, each has been in business well over 10 years. It took them 10 years to be an overnight success.

Neither had a scalable lead generation tactic leading to explosive growth but here are the customer acquisition methods they employ:

  • Cold calling (one used ConnectAndSell with a senior rep and the other has four full-time in-house cold callers)
  • Pay-per-click ads on Google (both cited declining value from their PPC spend due to rising costs)
  • Word-of-mouth referrals from happy customers

That’s it. Each identified the same three things and said direct mail, tradeshows, and other lead gen attempts didn’t have an ROI. Their mix of those three approaches generated a small but steady supply of leads and over the course of 10+ years they built nice companies.

What else? Have you see others be successful by brute force hanging around?

Lead Generation Drives SaaS Startups

One of the current tenants on the 1st floor is...

Image via Wikipedia

Continuing with the sales and lead gen theme from the previous two days (here and here), I came across a blog post today from Bruce Cleveland titled SaaS: Lead Generation – Not Sales Capacity – Drives the Model courtesy of an analyst friend. The general idea is that SaaS companies, compared to traditional enterprise software companies, are driven more by the ability to generate leads than the the number of trained sales reps. SaaS companies, compared to regular software companies, typically have much lower up-front fees and are essentially leasing the software, and thus need to be more capital efficient at acquiring customers.

Think about it this way: if the market bears you charging $250k for an enterprise software package and you give sales reps $2M annual quotas, they can go beat down doors and deliver eight deals per year. With SaaS, and much lower average customer revenues spread out over several years, that same rep delivering $2M in sales and earning $200k in comp wouldn’t be able to deliver several times more deals to equal the same cash flow for the business. Thus marketing, sales, partners, and customer referrals, all of which contribute to lead generation, drive the growth of the business because the cost of customer acquisition has to be commensurately lower than installed software due to the economics of the SaaS model.

Lead generation drives SaaS startups. Too many SaaS startups don’t understand this and fail, not because of a bad product, but because of a lack of leads.

What else? What other ways does lead generation drive SaaS startups?

Early Startup Customers and Scalable Lead Generation Strategies

Entry hall of Concourse A-B expansion at Balti...

Image via Wikipedia

Once the minimum viable product (or minimum respectable product if you don’t subscribe to the “you should be embarrassed with your first release” approach) is in place there’s typically a parallel strategy that takes place: acquire the first 10 paying customers through whatever means possible and search for a scalable lead generation strategy. After achieving the start of a scalable lead generation strategy the next step is to profitably acquire customers in a repeatable manner. Of course, the words “profitably” and “repeatable” are critically important and are the death knell for most startups.

Some thoughts are taking this two pronged approach of earning 10 paying customers and finding a scalable lead generation strategy:

  • The first 10 paying customers are often found through friends, family, and other forms of brute force marketing. For these 10, the should pay some money so they have a vested interest but even more importantly they need to be a channel for feedback as well as references for future customers.
  • Set expectations with these first customers that the system won’t be perfect but that the goal is to continually improve it and to get their input while doing so.
  • The scalable lead generation strategy is often found through significant trial and error. Plan on trying dozens of tactics before finding it, if it even exists. Some items that have worked include targeted cold calling, niche community sponsorships, PPC ads, and long-tail ad networks (see yesterday’s post).
  • Different lead generation tactics can be experimented in a parallel or serial approach depending on time and budget constraints. The most important thing is to learn from each experiment and look for new clues.

Herb Keller of Southwest Airlines has a great quote:

We have a ‘strategic plan.’ It’s called doing things.

Now, don’t equate actions with results but the more tests you run, and the more failures you have, the closer you’ll be to finding what works.

What else? What other ideas do you have about getting early customers while looking for a scalable lead generation strategy at the same time?

Example Startup Sales Strategies that Resulted in Success

Looking northeast across 9th Ave and 15th Stre...

Image via Wikipedia

After talking with hundreds of entrepreneurs over the years I like to reflect on patterns and trends. One trend that has emerged, to no surprise, is that sales strategies resulting in serious success are all over the place. The interesting thing is that many startups that have achieved my definition of success can pin point one specific strategy that really catapulted them to the next level.

Here are real world startup sales strategies that led to success:

  • Enterprise software company that won a couple RFPs in a vertical and then proceeded to cold call the 4,000 organizations in the vertical and share the success stories
  • Software-as-a-service company that developed an expertise in using Google AdWords for lead generation and now spends seven figures a year on PPC and generates eight figures a year in revenue
  • Software-as-a-service company that sponsored small, specialized communities with thought leadership for lead generation
  • Software-as-a-service company that used small ad networks in niche communities to generate free trials and grow significantly faster than the competition
  • Software-as-a-service company that provided a free site that scored a variety of things and then offered more data in exchange for an email address for lead generation

Please send me an email or tweet if you’d like to know the companies behind each of these examples as well as more information. There’s no silver bullet for all companies but there are unexpected techniques that had profound results for many startups.

What else? What are some other example sales strategies that resulted in serious success?

Most Entrepreneurs Have a Sales Challenge


Image by digitizedchaos via Flickr

Most entrepreneurs I talk to are focused on growth. They believe that if they grow the business to X things will be better and easier. Once I hear that I then like to ask what their goals are for growth, revenue, and number of employees. I then share with them what I view as a successful business for me personally (growing, profitable, enough scale that the business doesn’t require me, etc).

As growing the business is a function of revenue, we then talk about sales. Most entrepreneurs have a sales challenge. That is, building the product or delivering the service comes naturally — it’s increasing sales that is the most challenging. Some of the most successful entrepreneurs I’ve met are also the most gifted at sales or they figured out a way to build a sales and marketing machine.

Building a sales and marketing machine is incredibly difficult — almost always more difficult than building the product or delivering the service. The next time you go about improving your product or refining your service ask yourself if the time is better spent building a sales and marketing machine. It isn’t easy, and probably not as fun, but I find that entrepreneurs need to spend to spend more time building a sales and marketing machine than they think.

What else? Do you think most entrepreneurs have a sales challenge?