David Cummings on Startups

Category: Sales and Marketing

  • Competitive Differentiation

    One of the more exciting, and challenging, aspects of being an entrepreneur in a new, fast-growth market is the constant stream of changing competitors. New markets are very different from established markets in that they typically innovate faster and have lower barriers to entry (the technology doesn’t have to be as fully baked to be competitive). My advice is to pick a competitive strategy and don’t try to be all things to all people — a recipe for failure (trust me, I’ve tried it!). Of course, the strategy should be fluid and adaptable, but it is better to have a solidified one down on paper rather than none at all. Here are some competitive differentiation categories to consider:

    • Target company sizes
    • Target company verticals
    • Product price points
    • Product functionality (be opinionated!)
    • Geographic targets
    • Support policies (phone, email, 24/7, etc)
    • Sales tactics (aggressive, nice guy, etc)

    Again, I recommend putting a competitive differentiation plan together, aligning the team, and using it to make decisions quickly.

  • Consider Lead Gen from the Beginning

    Today, I had the chance to meet with an entrepreneur working on a new business idea. After hearing the pitch and asking questions I realized he hadn’t spent much time on one of the most crucial aspects of a business: understanding how leads are going to be generated. That’s right, lead generation is one of the most important concepts that is paid little attention.

    Building a product, thinking through all the business plan questions, etc is so much more exciting and fun when compared to addressing how much it costs to acquire a customer, ramp the customer up, and the lifetime value of the customer. My advice to entrepreneurs is simple: consider lead generation to be one of the most important parts of the business.

  • Sales Rep as Consultant

    One of the core values for our sales approach is to follow a consultative model (solution selling) whereby we work to understand the needs of our prospect in a non-pushy fashion. Unfortunately, we have a couple competitors that follow the pushy approach and spread FUD (fear, uncertainty, and doubt) about our product and company. Naturally, the immediate reaction is to belittle the competitor and talk about their inferiorities. Instead of taking a fight-negative-with-negative approach we strive to address any incorrect assertions as well as to emphasize what we do well and why we’re a good fit.

    I recommend making an explicit decision as to your approach to the market, brand value, and what your company will do when situations like this arise. It is important to maintain a consistent position, whichever direction you choose.

  • Search Engine Optimization Recommendations

    At the time of this writing, Pardot ranks on the first page of natural search results for our industry term marketing automation. I’ve been asked for recommendations and best practices on how to rank well with search engines (search engine optimization or SEO). Here’s my advice:

    • Write for humans and not computers (computers, known as bots, crawl websites indexing the content for the search engines and people sometimes try to cheat)
    • Make the most important search term the first words in the title of the homepage
    • Keep the title and largest heading (h1) present and consistent on the all pages other than the homepage
    • Publish two new blog posts per week on the site, in addition to constantly adding other content
    • Include a sitemap that links to all the relevant pages
    • Ensure the pages are well-formed and standards compliant so as to demonstrate to search engines that you care about the quality of your HTML
    • Publish a separate, industry-specific blog that is company agnostic on a domain that incorporates the most important search term (see ours at marketingautomation.net) and link back to your site
    • Participate professionally in Twitter, Facebook, LinkedIn, etc with links to your site and others in the industry, on a daily basis
    • Use a content management system that is search engine friendly (good HTML and human-friendly URLs with keywords)
    • Ask partners and resellers to link back to your site with the appropriate keywords

    At the end of the day, the most important thing is to publish new, high quality content on a weekly, if not daily, basis. Good luck!

  • Pitching Your Startup

    Today I had the chance to help a friend that is working with a startup from Tennessee that is trying to raise money. The team behind the startup has a fair amount of technology services experience and is building their first enterprise software company. Of course, even with experience, their pitch left several areas for improvement. Here are some ideas when pitching your startup:

    • Find out how long you have to pitch and make the presentation for half the alloted time so that you can make it a conversation and have sufficient time for questions
    • Follow Guy Kawasaki’s 10/20/30 Rule of PowerPoint
    • Determine in advance if the audience is more the visionary type or more of a spreadsheet jockey type, and tailor the presentation appropriately
    • Pick a theme (e.g. recurring revenue, market size, gross margins, etc) and focus on it throughout the presentation so that the investors have a takeaway
    • Remember that the goal of the pitch isn’t to get the investors to write a check on the spot, rather, it is to get another meeting

    Pitching your startup should be fun and a great chance to get feedback from a variety of people. Use these techniques to improve the experience and increase your chance of success.

  • Publish an Industry Specific Book

    A year ago I received an interesting piece of advice: every entrepreneur should publish an industry specific book under their name. Of course, not everyone enjoys writing a 100+ page book, and thus hiring a ghost writer is a good alternative. Whether you like the idea of not, let’s look at some benefits of an entrepreneur publishing an industry specific book:

    • Positions the company and entrepreneur as a thought leader
    • Provides a great sales tool to hand out at tradeshows, send to prospects, etc
    • Enables the content to be turned into a series of white papers
    • Works as a training tool for employees and partners

    I recommend that entrepreneurs and startups consider writing an industry specific book and self publishing it.

  • Seed Stage Startup #1 Challenge

    For seed stage startups, the #1 challenge is figuring out how to profitably acquire customers. In fact, this is closely aligned with what I believe is the biggest challenge for all entrepreneurs. In today’s world, the technology piece of the equation is much less difficult compared to 10 years ago, overall infrastructure costs are much less, and low cost outsourcing or crowdsourcing is readily available. Here’s what seed stage startups should focus on:

    • Cost of customer acquisition
    • Cost of customer on-boarding and ramp up
    • Lifetime value of the customer
    • Customer churn/attrition

    My advice: focus on customers.

  • The Seed Stage Entrepreneur’s Sales Assistant

    I’ve talked with many seed stage entrepreneurs, generally with revenues of $50k – $500k, that say sales is their biggest challenge — not raising money, not product development, but rather, selling their stuff. Of course, I like to drill in and find out how they currently sell their product or service. Inevitably, it is from word-of-mouth referrals or a partner that brings in business. It is almost never from outbound marketing and lead generation.

    When I probe deeper to find out how they meet people, the response is usually trade organizations, chambers of commerce, or general business networking events. My recommendation for these entrepreneurs: hire a sales assistant to set up and manage sales appointments. No, the sales assistant isn’t the subject matter expert that is pushing the product. His or her only responsibility is setting up appointments, in-person or conference call, for the entrepreneur. Entrepreneurs have a fear, rightfully so, that if anyone other than them tries to sell on their behalf, they’ll misrepresent the business and potentially embarrass the entrepreneur. It is unfounded. With the right value proposition, and demeanor, a good sales assistant can set up relevant appointments and help start the process of taking the business to the next level.

    Many entrepreneurs fear hiring sales people. The idea that someone likes to sell means they can sell themselves well, so sales people come across as someone who will be successful, and the entrepreneur can’t tell which ones will actually succeed. Most sales people fail. A simple solution is to hire an intern for $10/hour to set up appointments and then pay some performance compensation of $50 to $100 for every completed appointment with a prospect that fit the ideal customer profile. If this works, great, hire someone full-time and invest in it. If it doesn’t work, read The Ultimate Sales Machine and try some different ideas.

    My advice: hire a sales assistant to set and manage appointments to facilitate growth during the seed stage.

  • Layering SaaS Revenue

    One of the common themes I’ve heard from software entrepreneurs over the years is that their company hit a revenue ceiling and they were never able to break through it. By software company, I’m referring to installed software vendors, which have the challenge, like most businesses, of having to sell a number of new deals annually to maintain their revenue size. Generally, installed software vendors have a certain percentage of recurring revenue via maintenance and support contracts (invented by MSA of Atlanta in the 1970s) so they don’t have to resell the entire revenue base, but the percent of revenue that is recurring is generally less than half.

    With Software as a Service (SaaS) vendors, assuming a high renewal rate (90% is considered very good), new customers represent additional recurring revenue that is layered onto the existing revenue base. One of the benefits of SaaS, besides the obvious things like more predictable cash flow, growth, etc is that there’s no limit on revenue growth as long as new customers are signed up faster than customers leave (churn). This presents an opportunity for SaaS companies to grow indefinitely — something that was historically much more difficult for installed software companies.

  • Sales and Marketing Execution

    This afternoon, I talked with a friend of mine about his web-based startup idea. He has five years of experience running a labor-intensive small business and he’s ready for a change. Naturally, building a web application and using his expertise to improve the industry with his domain experience makes the most sense. We got to talking about the idea, only to realize he had no idea how difficult it is to acquire customers.

    I’m beginning to believe more and more startups are really sales and marketing plays. What I mean is that the winners will be the ones that execute the best with regards to customer acquisition. Yes, the product, support, and capitalization are critical, but if customers can’t be signed up and serviced profitably, there isn’t a business (assuming it isn’t a winner-take-all business).

    My recommendation is to focus on sales and marketing, especially customer acquisition costs, when determining the viability of a business.