David Cummings on Startups

Category: Sales and Marketing

  • International Partnership Considerations

    When a new product shows signs of taking off, inevitably companies and entrepreneurs in other countries will take note and reach out to form a distribution partnership. Having a distributor can really help startups generate revenue without significant capital outlays. Let’s look at a few considerations for international partnerships:

    • Geographic Exclusivity – this is a big one, and needs to be taken very seriously. Ideally, it would be tied to performance metrics.
    • Revenue Split – Variables like who supports the customer, who delivers sales demos, and kickers to accelerate the revenue share should be considered.
    • Training – web-based training programs like GoToMeeting make this an easy consideration. Annual face-to-face training should be evaluated as well.
    • Branding – considerations like usage of the brand and content vs a true independent distributor should be analyzed.

    Partnerships generally fall under the 80/20 rule whereby 80% of the partnerships produce 20% of the results and 20% of the partnerships produce 80% of the results. Regardless, partnerships, and international ones, are great growth opportunities for startups and should be fully evaluated.

  • Sales Focused Cultures

    I just finished reading the book Jungle Rules by John Imlay and really enjoyed learning about the origins of the technology community in Atlanta. What the book really did was drive home the importance of having a sales focused corporate culture. Here are a few anecdotes that emphasize the type of sales focus of a few companies:

    • MSA, the largest software company in the world at one point in the 1970s, brought in exotic animals, especially tigers, at their annual sales kick-offs, among other events
    • The CEO of Omniture, a company recently acquired by Adobe for $1.8B, had “QBSR” as his car license plate – Quota Bearing Sales Rep
    • Salesforce.com, the largest SaaS company in the world, has approximately 3,000 employees, of which 1,500 are in sales

    I recommend analyzing ways to make sales more top of mind in startup cultures.

  • Startups Should Practice Direct Marketing

    I was talking to a successful entrepreneur this afternoon and he made a statement that I agree with: most startups should emulate direct marketers and focus on customer acquisition costs from the out set. Companies like Capital One and American Express set the bar for being extremely effective direct marketers. So, why direct marketing for startups?

    Direct marketing, as different from generic marketing, is centered around advertising with specific calls to action, like calling a phone number or filling out a form, and measuring the effectiveness. Most entrepreneurs get caught up in building a great product, which is critical, but there are more stories of inferior products with better sales and marketing teams beating out superior products. Building the direct marketer mindset into the DNA of the company from the beginning helps ingrain the importance of a metrics-driven approach to acquiring customers.

    The product is the marketing. Sales are the lifeblood. Every entrepreneur needs to be a direct marketer.

  • Walk, Jog, Run Approach to Partnerships

    Recently, a colleague of mine introduced me to the walk, jog, run approach to partnerships. The general idea is that many partnerships between companies don’t result in the desired level of success. Generally, this is due to a lack of properly set expectations as well as jumping in too deep, too fast — something I see much too often.

    The concept is pretty simple:

    • Walk – something simple that allows both sides work together in the easiest fashion possible, to prove the value
    • Jog – a more tighter integration and cross-selling relationship with more skin in the game from the companies
    • Run – very tight integration with significant product development

    I recommend this approach whenever possible.

  • SaaS With No Contracts, Oh My!

    When I tell people we don’t have a contract with our software as a service (SaaS) product, they are often surprised. So many companies require a one or two year contract (much like a cell phone), that it is almost expected for mid-to-high end business software. Here’s why we don’t have a contract:

    • Tightly aligns our interests with our customers since they can leave at will
    • Requires us to get customers up and running quickly providing value within the first week
    • Helps reduce our sales cycle and establish a nice cadence with our sales team

    I recommend evaluating ways to achieve to these types of catalytic mechanisms.

  • Determining a Sales Quota

    One of the strategies we employ to determine a sales quota is to decide on the appropriate on target earnings (OTE) for the type of sales rep that makes sense for the product and market. OTE is the base salary plus commission for hitting quota in a calendar year. Here are some example OTEs:

    • Sales rep that handles mostly in-bound leads for a product that isn’t too complex: $30k base + $20k commissions = $50k OTE
    • Sales rep that cold calls and works in-bound leads with a semi-complex product: $30k base + $50k commissions = $80k OTE
    • Sales rep that sells a complex product face-to-face with extensive travel: $100k base + $100k commissions = $200k OTE

    Once you’ve determined the type of rep, sale, and desired OTE, backing out the quota based on commissions should be a simple math exercise. My advice is to get OTE right and make commissions fair with no cap on earnings.

  • Salesforce.com’s Dreamforce Tradeshow

    I’ve just finished up my second day of the Salesforce.com Dreamforce tradeshow and must say that I continue to be impressed with the quality of the event. Salesforce.com’s budget is rumored to be $10 million for this one week conference, and it really shows. With keynote speakers like Colin Powell, bands like the Black Crowes, and 19,000 attendees, there’s sure to be something for everyone.

    My advice for entrepreneurs still stands that tradeshows should be used as business development events whereby you schedule as many meetings as possible with partners, customers, press, and analysts. The chance to meet up with people face-to-face should not but wasted and tradeshows still have a big role, even in our internet-enabled world.

  • Startup CEOs Should Sell Deals

    Continuing the sales rep theme from yesterday, one of the topics we debated earlier this week at the EO Accelerator group was that of the startup CEO selling to prospects. Startup CEOs wear many hats, and sales should be one of the top priorities. This is particularly applicable in consulting companies where it is more of a partner-type sale requiring extensive domain expertise in addition to building trust and rapport.

    One of the sentiments at the meeting was how difficult it is to both sell new deals and continue to manage the day-to-day operations. When the topic of hiring sales people came up, everyone lamented about how they’ve never had success bringing on a business development person. My advice to entrepreneurs in this position is simple: hire an appointment setter and relationship coordinator to enable greater economies of scale with the partner-level selling. Expecting someone to come in and be as effective as the CEO at selling isn’t a reasonable expectation, but setting up processes and people to make the CEO more successful at selling until the business reaches a point where the CEO is no longer needed for that role is a strategy I recommend.

  • Sales Reps, Sales Reps, Sales Reps

    I’ve been hearing a good bit of discussion lately from entrepreneurs that are looking to find talented sales people to help take their businesses to the next level. Finding good sales reps is hard. Finding good sales reps is even harder in this economy. Why? The best sales reps are confident in their ability to sell, love nurturing relationships with people, and are almost never out of work.

    Entrepreneurs, myself included, have a tendency to think that just hiring more sales reps is the easiest lever to pull to accelerate growth or profitability. My gut says there are many more short term, readily identifiable ways to grow sales or profitability, and these should be exercised before hiring sales reps. Here are some quick ones:

    • Increase prices
    • Fire unprofitable clients
    • Collect payments faster
    • Ask suppliers for a discount
    • Ask vendors for longer payment terms

    Look for ways to grow sales and margins in current processes, and then expand sales and marketing.

  • SEO Tips

    I had the chance to talk about search engine optimization (SEO) with an expert in town this afternoon. Of course, I had to brag that we have a PageRank of 8 on one site and a PageRank of 7 on another — no small feat for a small technology company. Here are his SEO tips:

    • Do the basics like use the keywords in the title, main heading (h1), URL, and page content
    • Arrange the site hierarchy with the most relevant pages at the top and less important pages in sub-folders
    • Be selective about what gets linked to from the homepage as that’s the most important page on the site
    • Work hard at earning inbound links from other sites to your site
    • Write for humans and not search engines

    These tips are pretty straightforward, but it is amazing how many sites don’t do the basics. With these tips in mind, the most important thing is to publish high quality, fresh content on a regular basis.