Category: Sales and Marketing

One of the techniques I like to employ for sales demo is to create an example customer, complete with dummy site, domain name, and persona to use for sales demos. The idea is to paint a picture of the typical app customer such that the prospect that’s watching can visualize himself or herself using the software. Telling a story is much more powerful than showing features (don’t show up and throw up).

Here are some tips when developing an example customer story for demos:

• Have several scenarios available so that the story can be tailored to the prospect
• Look for hooks and memorable anecdotes that you can intertwine in the story
• Be confident about the example customer story while also being straightforward that is only an example
• Develop an example site (e.g. use WordPress with a professional Woo Theme), custom domain name, and anything else to make the example customer convincing
• Finish the customer story with a clear summary and desired next steps

Great example customer stories for sales demos can really differentiate one company from another. My recommendation is to focus on story telling with strong supporting resources when doing sales demos.

What else? What other tips do you have for developing an example customer story for demos?

Startups often put up a cool website as quickly as possible and focus the vast majority of their efforts on the app. It some cases the app is also the website but often it is a separate endeavor that gets neglected. The website needs to be treated like a product and given serious attention. What good does it do to build an amazing product only to have a website that doesn’t attract visitors, doesn’t convert visitors into prospects, and doesn’t have focus?

Here are some ideas for treating the website like a product:

• Clearly assign the website responsibilities to one person in the startup
• Schedule engineering time to work on the website on a regular basis
• Don’t set it and forget it – consider assigning a product manager to it
• Incorporate analytics like new qualified leads (if B2B) and unique visitors (if B2C) into your core KPIs
• Use inbound marketing and marketing automation to maximize site value

Treating the website like a product is tough with all the other demands of a startup. Building a sales and marketing machine is even tougher and the website is a critical part of the equation. My recommendation is to treat the website like a product and spend more time on it than you initially thought.

What else? What other ideas do you have for treating the website like a product?

Continuing the sales pipeline theme from yesterday, I wanted to take the pipeline concept once step further and talk about a weighted sales pipeline. A weighted sales pipeline is a much more detailed pipeline where each prospect opportunity is given a specific value based on where they are in the buying process. So, instead of saying that we have 20 prospects, you might say we have 20 opportunities at 50% or greater likelihood of closing with a weighted pipeline value of $100,000.

Here’s how the values of a weighted pipeline might look with the percentage being the chance of closing the deal:

• 10% Prospecting/Qualification
• 20% Needs Analysis/Value Proposition
• 30% Proposal Sent
• 50% Identifying Additional Decision Makers
• 60% Second Demo (Post Proposal)
• 70% Negotiation / Review
• 75% Acceptance Sent
• 90% Acceptance Reviewed
• 90% Proof of Concept
• 100% Closed Won
• 0% Closed Lost or Deal Dead

Developing a weighted pipeline gives you a much better proactive view into the future health of the business. I recommend weighted pipelines for all entrepreneurs.

What else? What are your thoughts on weighted sales pipelines?

When I talk to seed stage entrepreneurs and co-founders one of the things they love to tell me about is how many “customers” they have in their pipeline. I love startups that have customers! At that point I like to pause for a second and ask how many of these customers have signed a contract. It gets quiet. Well, these are actually prospects. I ask if they’ve identified the BANT (Budget, Authority, Need, Timeline) sales requirements for these prospects. Hmm, they don’t have that so they are actually suspects.

There’s nothing wrong with getting them confused but I think it’s important for entrepreneurs to understand the difference. Here’s a quick recap of the three categories:

• Suspect – a contact that you’ve had an initial discussion about your product or service
• Prospect – a contact that has budget to buy your product, authority to make a decision, need for what you’re offering, and a timeline to get a deal done (never forget BANT)
• Customer – a contact that has signed a legal agreement in which you’ve been paid or will be paid money for your product or service

My recommendation is to use this terminology when discussing your startup’s sales pipeline.

What else? Have you seen entrepreneurs mis-use the words suspect, prospect, and customer?

Most entrepreneurs, especially ones who aren’t technical, believe the technology and product development is the most difficult part of a startup. They’re wrong. Easily the most difficult part of a startup is customer acquisition. That’s right, the thing that is seemingly so obvious and critical to the success of the business is also the most over looked when evaluating business ideas. The number one reason businesses close down is that they run out of cash. Making customers happy and getting them to pay a fair amount for your service is the best way to build a company.

Here are a few thoughts around customer acquisition:

• Ask potential prospects how much they would pay for the service before you build it (try not to lead the witness when asking these questions, if possible)
• Remember the 3:1 sales and marketing expense to product development expense ratio
• Product on-boarding costs should be inline with monthly fees
• The first five customers are the hardest to sign
• Focus groups aren’t the way to go

Customer acquisition truly is the most difficult part of a startup. Yes, startups require great markets, strong management teams, and good timing but if you can’t acquire customers you won’t be in business.

What else? Do you agree that customer acquisition is the most difficult part of a startup?

Earlier today I was talking to one of my star sales reps and he was telling me about a new tactic that he was using to help close business: a strategy session. The idea makes perfect sense. After engaging with a prospect, doing web demoes, and helping them feel comfortable with the process, you ask for them to purchase your goods or services, but they are still on the fence. In lieu of going straight ahead and asking for their business, certain prospects need a painted picture of success, which is where a strategy session comes in.

Here’s how the strategy session might work:

• Ask the prospect for one hour of their time to do a strategy session
• Provide three common best practice plans for your goods or services and have them choose one
• Take them through a series of questions around the chosen best practice they want to execute (e.g. increase PPC ROI through specialized landing pages with auto-responders)
• After you finish the phone call, send them a completed worksheet with all the information and execution plans
• Ask for their business and the opportunity to make them successful with the output of the strategy session

Strategy sessions are a great way to dig deeper during the consultative sales process, build trust, and ensure alignment of prospect goals.

What else? What are your thoughts on using a strategy session to close the deal?

There’s a need in the market for a technology-enabled business services startup that specializes in calling inbound leads and qualifying them immediately in a pay-per-action manner. Most companies do a poor job of getting back to prospects that raise their hand for the first time in a timely manner. Think about this: when you fill out an online form, how long does it take for you to hear back from someone? In my experience, I expect to talk to someone within 24 hours of filling out a form, would prefer to talk to someone within an hour, and usually hear back in 2-3 days, if I’m lucky.

It isn’t that companies don’t want to follow-up on their new prospects instantly, it is that it is too costly to staff a dedicated person to do it and existing sales and marketing teams already have competing priorities. Studies have shown that the sooner you get an inbound lead on the phone after they request information, the higher the chance of closing the deal. That’s right — let a lead linger and every hour you wait the chance of them buying from someone else goes up.

Here are some ideas on how the business might work:

• Pay a fixed cost per lead called and qualified (e.g. $50) as well as a bonus for the desired outcome (e.g. an additional $25 if a web demo is scheduled on the phone)
• Allow for hot-swapping the call from the person qualifying the lead to a sales rep
• Provide a set of standard questions to qualify the lead as well as simple next steps.
• Use an extremely friendly, well-paid onshore call center
• Interface with leading marketing automation, inbound marketing, and CRM products to process leads
• Partner with marketing agencies, appointment setting firms, and marketing technology products as the indirect channel
• Sell directly to marketing managers and sales managers espousing the benefits of timely follow-up

There’s a marketing opportunity for a technology-enabled business services company to fulfill this need and provide more timely call-backs to new prospects. Everyone wins: sales and marketing close more deals and leads get to talk to a company representative faster.
What else? What do you think of the business idea?

This morning I met with a startup in town that recently closed their Series A round and was getting ready to ramp up their sales and marketing. We talked about a number of different aspects of building a SaaS company focused on the small-to-medium sized business market.

Here are few takeaways from the conversation:

• Once you charge more than $100/month an inside sales team becomes necessary as people are much less likely to do a self-service credit card checkout process.
• Pricing a product between $100/month and $500/month is usually no-mans land unless you have a really short sales cycle because prospects will require the same amount of sales engagement whether they are spending $200/month or $500/month.
• Pricing should follow Occam’s Razor where the all things being equal, the simplest solution is best.
• A two-tiered sales process with sales development reps and junior/senior inside sales reps works well to develop a farm system of sales reps and specialties.
• Having more $30k base/$80k on target earning sales reps than the comparable expense with $75k base/$150k on target earning reps is better due to sheer number of activities involved to close a deal over the phone.
• Writing skills are critical for today’s email-heavy selling environment and a written essay as part of the hiring process goes a long ways.

The inside sales process requires a completely different approach when compared to the traditional enterprise software sales model. My recommendation is to follow these best practices as part of the sales strategy for SMB SaaS startups.
What else? What are some other components of the sales strategy for SMB SaaS startups?

First-time technology entrepreneurs repeatedly make a common mistake: they don’t budget enough for customer acquisition relative to software development/engineering costs. Over the past five years I’ve talked to plenty of entrepreneurs that raised angel money ($100k – $1m), spent 90% of the money building the product of their dreams, and realized too late that it costs serious money to acquire customers. Unfortunately, they weren’t able to show enough traction to raise more money and shut down the startup. It happens more than you think.

There’s a distinct 3:1 ratio for customer acquisition (sales salaries, sales commissions, marketing salaries, and marketing expense) costs relative to engineering (software development, architecture, quality assurance, etc) costs. A typically software company budget might look like the following:

• 60% – customer acquisition (sales and marketing)
• 20% – software development/engineering
• 20% – general and administrative

Yes, some rare products have a self-service model resulting in the percent of budget to customer acquisition swapping with engineering but the majority of B2B software companies follow the 3:1 customer acquisition to engineering ratio. My recommendation is for entrepreneurs to pay close attention to these ratios when planning and building their company.
What else? How you seen this 3:1 customer acquisition to engineering ratio in your experience?