Reliance on “friends and family” contacts
Salespeople not fit for purpose
The allure of tenders
Many tech start-ups make mistakes that cost them valuable time and resources and, when left uncorrected, can sink the entire enterprise.
Although easy to avoid, these particular traps have a gravitational pull. They feel like the “right” thing to do, and the initial feedback from prospects is seductively encouraging... but the results don’t materialise.
Results from these miscalculations can take time to transpire. Cash burn in a technology start-up can be astronomical, and delays in revenue generation can be devastating. It’s also not unusual to see all three mistakes made back to back.
How does it start?
You’ve developed a great new technology mousetrap. The product is excellent. It’s groundbreaking. It solves real world problems. It’s based on years of hard won experience in a marketplace you know well, and the price is justified.
Perhaps you have secured funding, and the product is (pretty well) ready for market. Now you need a sales plan, and like most folk, you’ll need to proof of concept by onboarding some reference sites to gain momentum. So.. What's the plan?
Where do you start?
Friends and family’ selling.
Obviously they’re not actually friends and family. They are senior level contacts of yours and your management team. Maybe they’re people from your own industry who have similar experiences and faced the same problems as you - which prompted the development of your technology. This feels perfect as your prior relationship mixed with your personal credibility affords you relatively easy access and a meeting to ’see what you’ve come up with’.
If you’re being honest with yourself, the first few presentations are pretty poor. They consisted of a walk-through of the technology with lots of feature/function demonstrations and explaining of capabilities. Hopefully, you’ll quickly realise that this is a weak selling practice and quickly fix it by learning how to construct a value based proposition.
Despite your less-than-slick presentation, your contact seems enthused and makes some splendidly encouraging noises. You leave on a high and agree to come back with a proposal.
You craft a detailed proposal (perhaps for a POC). Then it starts to go wrong. Actually, more accurately, nothing happens. Your contact has said he’ll discuss it internally, which always takes time. Naturally (without wanting to appear pushy), you chase progress, but it seems to be falling into a black hole where direct answers are hard to get. Eventually, and often months later, you get the rejection, usually dressed as a collective, regretful decision not to progress.
What happened? Simple. You confused courtesy, even enthusiasm, with commitment. Your contact was not in the market for such a solution, but didn’t want to be discouraging, especially after learning your team had all quit their jobs to get the company off the ground.
Compounding this, for tech start ups, where the pre-sales preparation component is significant, there may be a limit on the number of engagements that can be handled concurrently and each rejection can be time-costly and hard to replace.
Hire a professional sales person
If ‘Friends and Family’ isn’t effective, or you need greater scale, then hiring a salesperson to beat the bushes, get into the market, and present your offering to anyone who’ll listen, makes sense. A good thing to do? Possibly.
You know you don’t have the time to manage a sales person tightly, and, like many founders of technology companies, you may not have a vast sales management background. So, you retain a headhunter to find your new lead seller/s. Even if you decide to make your first hire an experienced sales manager (thinking ahead to rapid scaling), they’ll still need to get in the trenches and make personal sales. But where do you find this great talent?
The first place most look is a leading competitor in a similar field. After all, they have some product knowledge or at least an understanding of the function of where your technology fits. You may even consider an equity play to attract the right talent once you realise how much these sales professionals expect to be paid!
This can fail for a few reasons:
"The bigger the brand, the worse the salesperson"
Firstly, selling a well-known brand is completely different to selling a start-up. Neil Stiles, ex MD of Reed Business Information, coined it perfectly when he said; “the bigger the brand, the worse the salesperson”. All too often, it’s the brand, not the seller, that is making the sale. The risk factor of buying from a start-up is off the charts by comparison, and the salesperson needs to be able to deal with it. If they come from selling a leading brand, they may not have the necessary experience.
Hunters or Farmers?
The second issue is the well known but often overlooked. Many who have a good track record in sales are actually good account managers. They develop strong and long term relationships with clients, acting as a bridge between their respective organisations. Maybe you believe they can leverage these great relationships and sell to their clients.. maybe. But bear in mind two factors; the first is the ‘Friends and Family’ warning, especially if they are introducing a new product to solve a new problem. Secondly, if your product is a direct competitor and you are hoping for a ‘swap-sale' to remove the incumbent, the chances of being successful are slim.
Perhaps in their formative years, your sales people were great hunters, but is that what they’ve been doing in recent times? Even if your new hire can leverage old contacts, they will be exhausted quickly, and you will need a new business winner.
The Technology sales ‘professional’
Finally, a sad reflection on my profession is that many successful salespeople in buoyant markets aren’t very good. They often look the part; they're smooth and polished, but lack strong business case building skills.
Here’s the dichotomy: if they’re well tenured, they are probably farming more than hunting. If they have bounced around the tech space, have they actually many any sales? Technology sales people often switch jobs every 1-2 years. The sales cycle for high ticket technology is usually quite protracted. Have they genuinely sold very much? Naturally, they’ll have a compelling cover story to explain their many job changes. It is devastating to see how many start-ups have fallen into the trap of hiring salespeople on the technology merry-go-round.
Realising that you’ve hired the wrong sales people also takes time. The pipeline may appear relatively full of prospects at various stages of engagement, but slowly and surely, they fade away.
So, if you’ve reached this point, you’ll probably conclude that, although you’ve been pitching to the right people in the right companies (hopefully), it’s actually a question of timing and requirement. If prospects do not have a burning platform issue they need to address - even if they see the point of your offering - they are simply not in the market.
In the B2B space, it’s imperative to understand how buyers assign value: If a solution doesn’t solve a problem that is causing a great deal of pain OR help them achieve an objective they care about, they won’t make an investment of significant time, disruption or price.
Therefore, the logical next step is to find people who ALREADY KNOW that they need a product like yours.
Responding to tenders
It’s certainly compelling. Find organisations that have already decided they need to purchase a solution and taken the time to craft a tender document. They have a buying team in place to evaluate solutions precisely like yours. This must be the answer, right?
Wrong!
Or at least, usually wrong.
There is a pecking order for who wins tenders. A start-up will occupy a relatively lowly position. Topping the list is the incumbent supplier (better the devil you know). Next cab off the rank is the ‘Big Brand’. They're well known, safe, have a track record, and multiple reference sites. If the prospect is looking for ‘cheap’, and you are a budget player, you could slip into third place, but a lack of references might trip you at the last hurdle when the CFO (who was absent from all the presentations) kiboshes the deal on the basis of risk.
Preparing for the many rounds of a complex tender can soak up significant amounts of expensive presales time. There are ways to edge tenders in your favour, but the reality is that by the time you’ve got an invite to the party, it’s probably too late.
Is there a solution?
The answer lies in effective pre-qualification of opportunities. You must find the right people in the right companies at the right time. Obviously, it sounds easy, but it depends on your product and the problem it solves, which can be devilishly difficult.
If there is no predefined ‘job titled’ buyer for your product, you need to find the individual in the organisation who cares sufficiently and who has enough authority to make things happen. Even if the buying job title is well defined, they still have to have an active requirement, and be in the right buying phase.
When a requirement represents a ‘burning platform issue’ or is already an active requirement, buyers rely most heavily on credible, knowledgeable solution providers that can help them define what ‘good’ would look like. This is your sweet spot.
The two critical factors that start-ups need to focus on are ‘access’ and an ‘qualification’ process. If you want specific advice on how to build your sales capability.
Comments