David Cummings on Startups

Category: Entrepreneurship

  • Knock Three Annual Goals Out of the Park

    Ernst & Young Entrepreneur of the Year award
    Image via Wikipedia

    Recently I was talking to an entrepreneur about 2011 goal planning. A few minutes into the conversation she told me that one of the more successful approaches she’s encountered is to set three SMART goals at the beginning of the year and do whatever it takes to knock them out of the park. Too often people set too many goals, or no goals, and then aren’t able to adequately measure their progress. Some tips for the three goals:

    • Make the goals specific, measurable, achievable, relevant, and include a timeline (SMART)
    • Ask advisors, friends, and family to hold you accountable on just these three goals (any more makes it difficult to focus and for others to remember)
    • Put the goals on a post-it note on your bathroom mirror so that you see it every morning
    • Set a recurring event in your calendar for the first day of every month to email you to review your progress against the goals
    • Knock the goals out of the park and start thinking of your next set of goals

    What else? How do you like to do annual goals?

  • The Cease and Desist Letter

    Scenic Railway at Luna Park (Melbourne, Austra...
    Image via Wikipedia

    Often times in the startup world there is what many refer to as the roller coaster of emotions that vary not only day to day but sometimes even hour to hour. One of the most unpleasant events, because it is potentially a waste of time, money, and energy if fought, is the cease and desist letter. The cease and desist has a few tell tale signs including arriving in a FedEx overnight envelope from a unrecognized law firm with a good bit of legalese. We’ve received several of these over the years for reasons like the following:

    • Product names that were too close to a competitor’s name (2x)
    • Price comparison page that ranked first in Google for the competitor’s name followed by “pricing”, which rankled the competitor
    • Passing on information to prospects that was given to use by an employee of a competitor that was looking for a job with us, and volunteered it in her intro email

    On a simple level it’s good to push the limits as it is almost always easier to ask for forgiveness than it is to ask for permission. When it comes to cease and desiste letters, nine times out of 10 it is better to make the adjustment and move on.

  • B2B Sales Tools That Didn’t Exist a Decade Ago

    Caller ID box (inside)
    Image by SystemF92 via Flickr

    Yesterday I was spending time with one of our reseller partners talking through our best practices and strategies for selling our software. Towards the end of the conversation, with it clear that our partners were impressed by some of our techniques, one exclaimed how many of the B2B sales and marketing tools we use didn’t even exist a decade ago.

    Here are some of those new tools and techniques:

    • LinkedIn to find the appropriate contact based on company and job title
    • Jigsaw.com to understand the email naming convention for a company as well as the direct dial number for a potential prospect
    • Twitter to monitor your industry name and competitors in order to find potential prospects
    • Caller ID for your website to understand which companies have been browsing around
    • Drip marketing and other prospect nurturing programs to stay top-of-mind

    Of course, no amount of new technology can substitute for good old fashioned hard work, including picking up the phone and talking to people. My recommendation is to experiment with a variety of B2B sales and marketing tools and incorporate the ones that are most beneficial.

    What else? What are some other B2B sales and marketing tools that didn’t exist a decade ago?

  • Sell to Customers Before You Build

    What message does this sign send?
    Image by jm3 via Flickr

    This week I’ve had the opportunity to talk with three different idea-stage entrepreneurs. Two of them are on the right track talking to prospects in advance of the building the product. Unfortunately, I could tell from their answers to my questions that the picture they painted for their prospects was much too vague for their proposed solutions.

    Selling to customers in advance of building a product is critical. Here are some tips:

    • Mock up a few screens in a wireframing application
    • Ask general questions but make sure they aren’t leading questions (entrepreneurs love leading questions!)
    • Explain how the system will work
    • Ask for a commitment for them to use the system once it is ready
    • Get at least three commitments in advance of development
    • Work with the committed parties during the development (it’s much better to make it too simple rather than too complicated)

    My recommendation is for entrepreneurs to better clarify their product’s functionality with potential prospects before building the actual system.

    What else? What other tips do you have during customer discovery?

  • Two Ears and One Mouth for Sales Reps

    P1020393.jpg
    Image by firehole via Flickr

    Earlier today I sat in on a product demo with one of our top sales reps. By the end of the demo, I was reminded of the old adage: we have two ears and one mouth and we should listen twice as much as we talk. As a sales rep the beginner inclination is to excitedly talk about all the amazing bells and whistles, both to show how great the product is as well as to show off your knowledge. Successful sales reps know that asking the right questions and listening is more important than doing all the talking.

    Our successful sales reps did the following today at the second product demo for a prospect:

    • Explained his understanding of the top five pain points for the prospect
    • Articulated what areas would be covered during the demo
    • Gave a two minute background on the company (no slides ever)
    • Presented a story of a user performing common actions
    • Showed the results of those actions and our system
    • Paused and asked if there were any questions at every step in the demo
    • Respected the prospect’s time and ended promptly after 25 minutes
    • Received an affirmative response at the end signaling the prospect is likely to move forward

    Again, two ears and one mouth for a reason. Listening is one of the most important traits for sales reps.

    What else? What listening tips do you have?

  • Where’s the Value Created

    New York Stock Exchange
    Image by Randy Lemoine via Flickr

    A few weeks ago I mentioned something similar but I think it is important to understand that value in a startup and established companies isn’t always obvious. There are many different ways to create value and the public perception of how money is made by a certain company can often be good to obfuscate the real value being created. Let’s look at a few examples:

    • Someone once told me the market capitalization of airlines is equal to their frequent flier points. Meaning, one significant way airlines make money is by selling frequent flier miles to other companies like credit card issuers.
    • There’s an Internet company that recently received a good deal of bad press about their selling social media data. One of the strongest ways they make money is by acting as a credit score of sorts for email addresses, even though you’d never know from their main website.
    • In Atlanta there are several retail store fronts in expensive areas for a company that helps people find apartments. Of course, they pitch the service as free and make money by referral fees from the apartments. This one is a bit more obvious but it shows that there are non-obvious ways to build a business.

    What else? What are some other examples of non-obvious ways companies create value?

  • Explain What Your Startup Isn’t

    A Startup Company's Server Room
    Image by kawanet via Flickr

    Startup founders love to explain their vision, strategy, and rattle off all the product features. I’m a fan of offline analogies as well as creating mindshare hooks. Startups also fall prey trying to be all things to all people, but with such little resources it is best to do one thing and do it extremely well. One of the things I’d like to see more founders do is think through what their startup isn’t. Here are some examples:

    • We don’t target companies with more than 300 employees
    • We don’t target B2C companies
    • We don’t sell with field sales reps

    Yes, the opposite could be articulated but it’s easy to say “we focus on B2B companies” while also seeking out B2C companies. The key with explaining what the startup isn’t is that it makes it more clear where you stand, helping enrich your core focus.

    My recommendation is to make a list of what your startup isn’t.

    What else? What are some other benefits of explaining what your startup isn’t?

  • 9 out of 10 Entrepreneurs Have a Sales Challenge

    Decorative
    Image by smashz via Flickr

    One of the things I enjoy doing is talking to entrepreneurs about their business. I’ve talked to hundreds of entrepreneurs over the years and 30+ entrepreneurs just last month. My conclusion recently is that nine out of 10 entrepreneurs have a sales challenge. By sales challenge I mean that increasing sales is their number one goal, focus, and priority. Unfortunately, for many of them, they aren’t making the desired progress.

    Here are the recurring themes I see:

    • Not enough time to devote to sales, but they are the only person selling
    • Don’t like to sell and the recently hired sales rep isn’t working out
    • Trying to sell over the web (e.g. self-service) with no luck
    • Wanting recurring revenue but still doing one-off projects
    • Performing sales-like activities with co-founders but deals aren’t materializing

    Now, I don’t have a silver bullet solution to these challenges. My recommendation for entrepreneurs is to think through customer acquisition as one of the most core aspects of their business and realize it is going to be the hardest.

  • The Unacknowledged Legacy of MSA on Atlanta

    Flag of the city of Atlanta, Georgia
    Image via Wikipedia

    Management Science America (MSA) was the largest software company in the world a few decades ago and headquartered right here in Atlanta. It’s legacy profoundly impacted the Atlanta technology community through alumni of the company that started some of the most successful startups, invested millions of dollars as angels and VCs, and helped in the management and executive ranks of numerous companies.

    The impact of MSA on Atlanta has been well documented but there’s an area that is rarely talked about: the MSA legacy of a hyper sales-focused culture. In my experience, B2B software companies that are the most successful are ones with excellent engineering and amazing sales teams. If you look at some of the billion dollar Atlanta successes that had MSA-alumni involved, like Internet Security Systems and Witness Systems, as well as current success stories like Vocalocity that are well on their way to being a big company, they all had sales as a main strength.

    My recommendation is to focus on building a sales-centered culture and the next time MSA is brought up in a conversation, acknowledge that their sales-focused culture was a major driver of success.

  • #1 Thing the VC Industry Can Do To Save Itself (but can’t)

    An assortment of United States coins, includin...
    Image via Wikipedia

    The VC industry is great catalyst of job and GDP growth in the U.S. Only, it has a major problem on its hands: it is going to shrink considerably over the next few years. The challenge is that investors like pension funds, college endowments, and wealthy families allocate a certain percentage of their money to the VC industry (e.g. 3%).

    Now 3% of investments in 2008, before the stock market, real estate, and other categories crashed was a larger number than 3% of investments today. Unlike publicly traded equities, VC investments are very illiquid so what was 3% in 2008, with portfolios lower overall, might represent 5% of the portfolio today. Thousands of investors needs to shrink their VC allocation down from 5% to 3%, and that’s going to result in many VCs going out of business.

    Here’s the number one thing the VC industry would like to do to save itself:

    The VC industry should make an across-the-board cut of 30% to all internal company valuations.

    Internal company valuations are required to report back to the investors but in reality represent a guess at the company value since the companies are private and the valuation is but a range. After cutting the valuations internally and reporting the new values back to the investors (that’s not a tenable conversation or legal) the investors’ portfolio allocation would back inline.

    Since the portfolio allocation would be back inline investors can put new dollars into VC as the rest of the portfolio grows. As it stands now with a significant overallocation to VC, investors are going to allocate even fewer new dollars (or none!) to VC for a period of time until the existing dollars plus new dollars equals the desired percentage of the portfolio.

    This strategy won’t happen but would be the number one thing the VC industry as a collective could do to save most of the size of the industry.

    What else? What do think of this idea on how the VC industry could help itself?