David Cummings on Startups

Category: Entrepreneurship

  • Startups Should Develop a Sales Playbook

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    After a startup achieves product/market fit one of the most important next steps is to develop a sales and marketing machine. The sales team should be working towards a reproducible, and profitable, sales process. As part of that iteration, a sales playbook should be at the top of the sales manager or entrepreneurs list of items. A sales playbook is the how-to manual for a sales rep. The goal is to document and categorize as much sales related information as possible in a digestible format.

    Here are some items for a sales playbook:

    • Corporate information
    • Sales pitch
    • Elevator pitch
    • Market space
    • Recent trends
    • Target customer
    • Types of buyers
    • Features and benefits
    • List of references
    • Sales process
    • CRM process
    • Competitors and differentiators
    • Objection handling
    • Glossary

    As you can tell, the sales playbook is very detailed covering upwards of 50+ pages. A key aspect is that it should be a living, breathing document that is constantly updated (e.g. a shared Google Doc). Startups should develop a sales playbook.

    What else? What other items do you include in your sales playbook?

  • Bottom-Up or Top-Down Financial Projections

    Continuing the post from earlier in the week titled Startup Financial Models after Product/Market Fit, I wanted to talk a bit more about financial projections. Too often an entrepreneur asks for feedback on their executive summary, slide deck, and financial model only to have the financial model show a top-down projection. A bottom-up projection is a much better way to do it. Let’s look at a few details:

    • A top-down projection is often something like “we’ll sell $500k the first year, $3 million the second year, and $10 million the third year” without detailing what it takes to actually achieve those results
    • A bottom-up projection details the tactical items like number of sales reps, sales rep quota, hiring plan, percent of sales reps that won’t work out, ramp up times for sales reps, ad spend per rep or per new client, etc
    • A bottom-up projection more accurately outlines the assumptions and thought process of the entrepreneur, which then allows advisors or investors to offer more valuable feedback
    • A bottom-up projection helps the entrepreneur better budget for the startup and it often shows it’s more expensive than expected to reach the goals

    My recommendation is to do bottom-up financial projections to better understand the business and what it takes to be successful.

    What else? What other ideas do you have about financial projections?

  • Send Sales Proposals Within 48 Hours

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    Lately I’ve been talking to a number of service providers as we continue to expand — everything from office space to marketing firms to recruiting agencies and I’m amazed at how long it takes to get proposals from people. Optimistically, I like to think it’s a good thing — their business is doing well and they’re busy. In reality, I’m guessing they aren’t being prioritized like they should.

    Take note: proposals should be sent to the prospect within 48 hours.

    Yes, some business proposals are more custom and complicated but the majority are boiler plate requiring less than 30 minutes of customization. For our own sales team — yes it is a product and not a service — we strive to get proposals over to prospects the same day they ask for them. Of the 10+ proposals I’ve received over the past 45 days, the majority took over 48 hours to get back to me and the content didn’t appear to be customized beyond 10-30 minutes of work. Service providers need to sign up customers when they are ready to buy.

    What else? What have you seen with proposal response times?

  • Four Years on Average for Startup Success

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    There’s a variety of opinions online about how long it takes to start a company from scratch and have it be successful (depends on your success definition but for me it is $1 million+ gross margin (not revenue), growing, profitable, and not dependent on a single key person). I’ve talked to entrepreneurs that were able to do it in 18 months and I’ve talked to entrepreneurs where it took 10 years (most fail).

    After being in the technology startup community for 10 years I’ve come to believe it takes four years, on average to be successful, if the company is ever going to be successful. That’s four long, hard years to be successful. I’ve also found it takes two years, on average, to know if the business is viable and on the right track. It’s a marathon, not a sprint.

    What else? What timelines have you seen to know if a startup is viable and if a business is a success?

  • Startup “Help” to Avoid

    When starting a company one of the best things you can do is to talk to as many people about the idea and get their feedback and introductions. A successful startup is 20% idea and 80% execution. With that said, there is some “help” that should be avoided whereby people take advantage of first-time entrepreneurs.

    Here are some tactics to stay away from:

    • Fees charged to get an introduction or to pitch angel investors or VCs
    • Offers to write a business plan in exchange for thousands of dollars (I’m against writing business plans as testing business models is the way to go, and if you do need a business plan for something like a bank, you need to be able to do it yourself to understand your own business)
    • People who pose as angel investors only to try and sell you consulting services requiring big fees and stock options to work with you first to see if they might invest later
    • People who pose as angel investors that really want to do business development deals for you in exchange for a percentage of revenue with no desire to actually invest

    My recommendation is to talk with people that genuinely want to help and have a clear motive of helping the community or offering a standard service (legal, accounting, commercial real estate, banking, etc).

    Thanks to my friend Wayt King who inspired this post with his tweet:

    http://twitter.com/#!/wayt/status/34781249474134016

    What else? What are some other examples of startup “help” to avoid?

     

  • Startup Financial Models after Product/Market Fit

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    The last thing many technology entrepreneurs want to do is to become spreadsheet jockeys but once product/market fit has been achieved one of the next things to do is to develop a comprehensive financial model. Yes, before product/market fit you need to have a good idea if the business is potentially viable, and some spreadsheet work is necessary to understand the business economics, but this should be a simple exercise. Post product/market fit the financial model should be much more detailed.

    Here are some resources to help build and think through a financial model:

    Ideally there would be example financial models online that could be easily customized but the nature of most startups is that there are company-specific nuances requiring heavy customization. My recommendation is to familiarize yourself with as much as you can related to financial modeling while enlisting help when possible.

    What else? Do you have any tips or examples for startup financial models?

  • Startups Don’t Require Perfect Decisions

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    When talking to people that want to be entrepreneurs but haven’t made the leap, the most common reason cited for not starting something is lack of a great idea. Yes, a great idea is nice but successful companies usually have a good idea, great timing, and great execution. Related to the idea for the business, startups don’t require perfect decisions. Making changeable decisions quickly and  learning from them is critically important. There is no such thing as the perfect decision.

    Here are some examples where a perfect decision isn’t required:

    • Logo – make sure it is professional but don’t dwell on it in search of the perfect decision (once you’re successful you can invest more in it)
    • Marketing strategies – there are so many mediums and venues to try that it is more important to develop  a culture of analysis and testing that will naturally figure out what does and doesn’t work
    • Product messaging – it takes a number of iterations to find the right tone, voice, and message for your target customer profiles (this is one of the tougher things startups must do)

    The idea isn’t to start with bad decisions but rather to debate internally, take the best decision at the time, execute it, and learn as much as you can as quickly as you can. Startups don’t require perfect decisions.

    What else? What are some other examples you see where people try to make the perfect decision?

  • Market Research for Inquiry Response Time

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    Lately I’ve been using contact us forms on websites for companies that I would have normally called in order to test the effectiveness and response time for their follow-up emails and calls. The results aren’t pretty. Companies must not a) have a process for their online form inquiries, b) get very many leads online, or c) only have the form because the web design firm went ahead and included it.

    Here’s my simple research:

    • Local tire store – responded eight days later with the quote I requested
    • Local dentist – no response at all
    • Child swim coach – one hour response
    • Marketing vendor – responded 24 hours later and never responded to my email response (has been eight days)

    Now, I’m not saying small businesses should drop everything when an email comes in but they should prioritize these prospect inquiry requests, as with inbound marketing, these are usually the most serious leads. A couple ideas for the issue include having alerts for these sent to a special email address that multiple people receive as well as using software to have the phone ring when a form is completed.

    What else? What’s your experience been like using contact us forms online?

  • Details of a Cool Startup Office – Cloud Sherpas

    Earlier today I had the opportunity to visit with some of the team members at the fast-growing Atlanta startup Cloud Sherpas (Google Apps consultants). Cloud Sherpas did a custom build-out that took two months over at Piedmont Center in Buckhead. Here are some details of their new space:

    • Orange paint throughout to emphasize their corporate branding
    • Conference rooms named after famous mountains (playing off the “sherpa” part of their name)
    • Concrete floors and exposed duct-work in the reception area to create a loft feel even though they are on the seventh floor of a mid-rise
    • Huge breakroom with two full-size refrigerators, giant LCD TV, several sofas, and large whiteboards on the wall
    • Great work areas with numerous workstations using half-height dividers to give some privacy while being primarily open
    • And, most importantly, genuinely happy people walking the halls

    The new Cloud Sherpas office is great and really sets the tone for a cool technology startup office.

  • Co-Founders are Keepers of the Culture

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    One of the biggest things I underestimated when I started my company over 10 years ago was the importance of corporate culture. In fact, underestimated is the wrong word — I didn’t even recognize it as something to consider. Corporate culture is now the most important part of the company. Why so important? It’s our only sustainable competitive advantage where we have complete control.

    Co-founders are keepers of the culture and need to guard it however they can. Here are a few ways to develop and maintain a strong culture:

    • Define the culture and attributes you look for in a person (ours are positive, self-starting, and supportive)
    • Develop a rhythm where the culture is talked about on a regular basis (e.g. weekly team meetings, quarterly reviews/check-ins, etc)
    • Empower other team members to own the culture (e.g. require unanimous decision for new hires, have a culture book that documents why things are the way they are, etc)

    The corporate culture is critical to long-term success and the co-founders need to guard it. Co-founders are keepers of the culture.

    What else? What other tips do you have to develop and maintain a strong culture?