Finding the Right Sales Model for Your Business
Start talking to your future customers as early as possible. Even before you have a company, even before you have a product … go to the field. See what people are talking about. See what people care about.
—Sagi Brink-Danan, Perfuzia Medical
There are plenty of business books, many of them excellent, with tips on how to woo clients, sell a product, run a company, and motivate staff. That said, there is a shortage of information out there on sales models for entrepreneurs creating a new business.
Inadequacies in Existing Sales Models for New Venture Creation
A typical sales cycle consists of eight phases: pre-prospect; qualify; prospect; engage, explore, and present options; handle objections; close; deliver; and, finally, follow-up/customer relations management. However, while these methods, which are depicted in Figure 3.1, may be tried and true for established companies, they can be ineffective and even damaging to nascent ventures.
Pre-prospect: Conduct background research and develop a list of individuals or organizations, or both, that may need the product. This is also referred to as lead generation.
Qualify: Assess whether the opportunity to fulfill a need is real, worth pursuing, and winnable. This stage often results in a shorter, more streamlined list of prospects.
Figure 3.1 Summary of existing models
Prospect: Make calls/send e-mails to set appointments with relevant contacts or decision makers.
Engage, explore, and present options: Connect with decision makers; have conversations and ask questions to facilitate a better understanding of their situation (current and desired), needs, and goals with the aim of exploring potential remedies.
Handle objections: Listen to and resolve concerns raised by prospects.
Close: If the deal is right for both parties, ask—directly or indirectly—for the purchase order or contract.
Deliver: Supply the product or service as agreed.
Follow-up/Customer relationship management: Ascertain that the value promised is being realized satisfactorily by the client; obtain feedback; make courtesy calls; maintain or build upon the relationship; seek client’s help with leads.
The issue with the aforementioned model is that it is premised upon having a fully developed product or service to sell. It encourages entrepreneurs to form an organization and start selling. But what about those entrepreneurs who have an idea that could potentially give rise to a product? In some cases, the entrepreneur does not even have a registered company yet; they should be spending their time and resources on identifying and engaging their target markets. This model may push them toward a significant investment in a premature product launch. The last thing an entrepreneur wants to hear after making this investment is, “This product doesn’t meet our needs” or “Our system is not configured to accommodate your product.” This leaves them in the unenviable position of looking for markets that fit their products rather than seeking to create products that satisfy market needs, or at least seeking market feedback that could shape product ideas.
Joe Gustafson of Brainshark learned firsthand how important it is to thoroughly understand one’s target market.
One of the biggest mistakes that I [wasn’t aware of] back then was that we had a vision but we were way ahead of the curve—people didn’t realize then that they had a problem. I mean, I had a problem because when I was at my prior company I knew how expensive and time-consuming it was to build content and I wanted to build a way to solve that.
The “Qualify” stage is yet another example of how the traditional sales model is not suitable for new ventures. At this stage, sales people should be developing a small set of leads that are real, worth pursuing, and winnable—a great suggestion if there is a track record or experience to inform qualification criteria. Many entrepreneurs do not yet have such criteria because their ideas are still undefined or in flux. Thus, lead qualification at this stage might be premature and the risk of eliminating good prospects is high.
Another issue is that many new ventures do not have the supply chains, policies and procedures, or staff to handle unexpected demands (i.e., a larger-than-normal order). There is need for entrepreneurial sales models that are flexible enough to anticipate and deal with such surprises.
The Entrepreneur-Friendly Sales Model
Our proposed sales model consists of just two phases: idea generation and idea execution (Figure 3.2). In the idea generation phase, entrepreneurs run their idea by a select group of prospects for feedback only.
Serial entrepreneur Tom Alexander employs this technique.
We find a company that has a VP of Engineering and a VP of Finance but no VP of Sales and Marketing. I tell them, “I’ll come and spend two or three hours every day helping out as VP of Sales and Marketing.” I have done this for many companies and sometimes there is no need for [my services]. This is very good for me because then I find out right away, Oops, there is no market here. I close the company and say goodbye.
Figure 3.2 An entrepreneur-friendly sales model
Source: Onyemah, Rivera-Pesquera, and Ali (2013).
Joe Gustafson uses prototypes to spark discussions about the efficacy of Brainshark’s product.
I think if you’re planning on having face-to-face or voice conversations with your prospect—and once you have a good enough working prototype—I would advise people to test [it]. I really believe in finding that small group of people that you know that you can go out and talk to, and they might make introductions to go test the idea. Test the pain point, test the value proposition, walk through what your suggested solution to that is, maybe show it—but it really is all about understanding what the pain point is in the marketplace and the best way to do that is with customers and to just talk about it and validate, validate, validate. And then the proof is really kind of showing the product; and then you can always ask questions about pricing and “Does this work for you?,” “How else would you do it?,” “You’ve heard of other things?”
If the idea does not currently engender a strong and broad appeal but can be improved upon, that feedback can be used to refine the idea and present it to the group for another assessment. If the idea does not elicit a strong appeal and is not improvable, entrepreneurs can decide to abandon the idea altogether. If on the other hand the idea is well received by prospects, entrepreneurs can move on to the second phase, idea execution. This is when the entrepreneur can develop and test prototypes with prospects, obtain conditional purchase commitments, and create and test the final product. If all goes well, they can then reach out to a larger pool of prospects with the purpose of generating leads. This process reveals the group of prospects that should be approached to begin conversations aimed at understanding the circumstances, goals, and needs of prospects. The insights gained will further inform intelligent positioning of the new product with respect to helping prospects fulfill their goals. If entrepreneurs successfully address prospects’ concerns and objections, then the road is clear to close the deal (i.e., sign the contract or purchase agreement). A successful delivery of the value promised and follow-up visits to validate prospects’ realization of the value achieved offers numerous opportunities for product improvement, extension, and lead generation.
Who Should Be Selling?
It is hard to sell something one does not understand or believe in—that’s why we don’t typically advise outsourcing the task of selling at the beginning of a venture. As the idea originator and the one most passionate about it, the entrepreneur is therefore best positioned to engage prospects productively. In addition, most buyers prefer to be approached by the business owner rather than by a member of the staff, as they feel they will get faster and more efficient responses to their questions and concerns. Finally, being approached/addressed directly by the boss makes prospects feel important.
Christine Mosholder, owner of Boston architectural firm Fort Point, had this to say about giving clients that personal touch:
At that point we’re assuring them that we were committed, that they had these two senior people, owners of the company that were going to take care of them, because even today people don’t necessarily believe that when you go into an interview as an owner that you’re actually going to be involved in the project.
Other entrepreneurs have discovered the benefits of consistently bringing that extra commitment to the table. This was certainly the case with Seun Olatunji of S.B. Olatunji Global, a mining and export company in Lagos, Nigeria.
Our appointment was at ten o’clock but we were there at like nine-thirty. This impressed the owner, who was also present at the meeting. I didn’t know any of this. We later learned that in the Japanese culture, if the client or a potential client comes very late, it means the client doesn’t want to do business with you. The interpreter also told me that [punctuality] was one of the criteria they used to judge companies. So, they believed that I could deliver from the first day.
In the light of the foregoing, it is critical for entrepreneurs to be good at selling, as they are their firms’ chief salesperson. Indeed, he or she may be the only salesperson, as most small organizations cannot afford to have an in-house sales force. If a company considers engaging third parties, such as independent sales reps or distributors, entrepreneurs should be ready to sell alongside them, especially if the new product is very different from others in the third party’s portfolio. The other challenge is to ensure that third-party sales people devote adequate attention to building demand for the new product.
This is a principle embraced by Mark Casali, cofounder of Synapse.
We were first and foremost sales people, really. To give you just a very quick background on our operations model, Paul and I do not do any of the hands-on work. [We] outsource all the work once we get it. [But] we devise all the strategies. We handle all the client communication. The actual completion of the work is done by a freelance network, which allows us to not be bogged down with the day-to-day stuff and actually go out there and sell. So, yes, from day one, seventy-five percent of our time was spent on trying to obtain customers.
When Should I Start Selling?
“Just start selling,” says Peter Russo of New Approach Development, “Sell it to whoever will buy from you … Even if you have to give it away the first time, the point is you have to start the positive momentum.”
The quest for that first sale should begin at the “light bulb moment”—when the idea is born. This is the time to start identifying the potential beneficiaries of your idea and the best way to do this is to ask such questions such as:
Who might see value in the idea?
Why would they see value in the idea?
How important is this value to the target audience?
Is there a pressing need to solve the problem the idea addresses?
What factors might accentuate or diminish the value derivable from the idea?
Notice that questions such as how can this idea be made into a product, what resources or materials would be needed to bring the idea to fruition, and what would it cost to transform this idea into a product are missing from the preceding list. This is because they are secondary questions and are inappropriate at the light bulb moment; in fact, they could mislead the entrepreneur into investing time and other resources in an ill-conceived idea. Such questions delay entrepreneurs’ engagement with the market, thereby diminishing the chances that a novel idea will be embraced by it. By addressing end-user-centered questions, entrepreneurs will essentially be creating a market for an idea rather than searching for markets for a created product. Not only is the first approach more controllable, but it is also far less costly than the second.
Start early, right at the light bulb moment. Air your idea to prospects and see if it stands up to objective scrutiny.
Sometimes you have a product but it is not quite ready for the marketplace. Whether or not you show or demonstrate it to prospective clients depends on the particular circumstances; in other words, you must balance the risk of showing a less-than-perfect product or demo with the possible reward of engaging an eager client.
This was John Goscha’s experience:
Our very first sale was a company in Boston. The name of the company in Boston was the Cambridge Innovation Center. Tim Roe, the head of Innovation Center, had heard about our product so he called us up and said he wanted to try it. I told him we weren’t yet, that there was a little bit of work to do in the lab, but as soon as it was ready I would give him a call. But he didn’t care what form it was in, he wanted it now. And so we reluctantly went over to his office and painted his wall with the product we had. And he loved it. Their first order was paint—about thirty to forty office, and about ten to twenty conference rooms.
Who Should I Sell To?
Most entrepreneurial types tend to have a healthy amount of selfconviction. This is both necessary and commendable. However, selling is a powerful process to reinforce confidence, confirm or disconfirm assumptions, and gain more knowledge.
No idea, product, or service sells itself. The burden is on entrepreneurs to obtain the commitment of resources in support of their idea or product.
While it is imperative for entrepreneurs to obtain “resources” from relevant parties (i.e., financial institutions, investors, and board members: Figure 3.3), none are as important as those obtained from engaging with end users and intermediaries (e.g., channels) that service those end users. Regardless of the stage of an entrepreneurial initiative (ideation, startup, scale up), engagement with end users (prospects and customers) should take priority over engagement with other parties because conversations with potential end users (and the marketing channels currently serving them) tend to have the most far-reaching impact on business model decisions. Besides, the rest of the resourceful parties often pose many questions about the outcome of entrepreneur–end user conversations.
As stated by Kim Walsh of Boston Web Horizons:
My advice would be to build out a vision or structure on who your target customer is, how you’re going to get them, and a qualification process so that you’re not wasting a lot of time (and you’re speaking with someone who is either ready to purchase or further along in the buying process) … Preparation and execution, I would say.
As explained by Tope Ajayi of Posture Consulting, these clients also offer valuable insight.
I remember Mr. Wale Tinubu, the Group MD of OANDO. He told us that what will set us apart and also open doors for us will be the quality of our services. That we must not compromise quality and we must never have a dissatisfied customer. Things can go wrong [but] if a customer is not happy with your product or service, make sure you do anything humanly possible to make that customer happy, even if you have to redo the job at your own expense. This has been a policy that we employ and it has really worked for us. So we remember that day, before we finished with [Mr. Tinubu], he called one of his Corporate Affairs guys to give us a job. He said, “Guys, I like these young people, whatever you have they can do, go and try them out.” They called us to pitch; they called some big agencies to pitch for the design and print production of their newsletter. We came out with our own concept and we won. It also shows us that given the opportunity, people can do something.
Figure 3.3 Who should entrepreneurs be selling to?: The list of resourceful parties
Who Should I Not Sell To?
(Hint: relatives, friends, and colleagues)
While it is tempting to treat those closest to you as potential prospects and advisers, we must advise against it. Oftentimes, the reactions you get from these groups or individuals are skewed—either they are overly critical and sap your motivation, or they sugarcoat things and paint an unrealistically rosy picture.
Joe Gustafson had this to say about finding the best audience:
“When you start up a company like this,” said Joe Gustafson of Brainshark, “you fully expect that everything will just be wonderful and happen fast, and in reality things always take much, much longer than you expect. Our first few deals happened very fast because we had friend and we had [access] to the right people, and people got it. They got very excited about it. But again, we were talking to visionaries. Once we tried to find other companies that were not visionaries, which most people are not, then everything started to slow down.”
On the other hand, reaching out to family members, friends, and colleagues can be beneficial if the goal is to have dress rehearsals and build some confidence before facing outside prospects. Entrepreneurs should realize the outcome of such engagements is only a first approximation of reality. More objective insights should be sought by having arms-length conversations with outside prospects. This presents a major obstacle for entrepreneurs who fear going outside their comfort zone, but practicing their pitch (in front of a familiar audience) until it is perfect can assuage some of the anxiety. Also, entrepreneurs can leverage the network of their family and friends at the early stage of the venture.
When it is time to take their pitch to actual prospects, it is important to target the actual decision-makers. This means keeping abreast of trends and developments in their field.
This point was illustrated by Sagi Brink-Danan of Perfuzia Medical, a company in Providence, Rhode Island, that designs and manufactures medical devices.
When you look at medical devices fifteen years ago, the key decision-maker was the physician. If the doctor said I want this, the hospital would buy it. Today, it’s very different; the doctors’ opinions have very little weight in the decision-making process, unless they are a star in that hospital. The people who make decision, the purchasing people, the financial committees—they work at the bottom line. The only thing they care about is whether it is going to make money. I’m not a salesperson. I’ve never been a salesperson. But I can tell you from indirect experience, from [salespeople’s] stories, that it’s become increasingly difficult. [Hospitals] want to see hard financial data, usually from centers similar to theirs. They will say, I’m a 168-bed hospital. I’m a community hospital. Show me an example from two or three other hospitals like me, and how they made money.
Brink-Danan went on to say that,
Maybe I am just good at drafting products [but] we don’t go to just any small, local community hospital. We go to research hospitals that have a vested interest in doing research and publishing the results, in trying new technology and evaluating new technologies and being on the cutting edge. And I think maybe that’s the key—approaching the right people.
As is so often the case in business, it all comes down to attitude. When seeking feedback, whether it be from your best friend or from an outside prospect, it might be helpful to adopt the following mindset:
“I want to learn how I can improve my idea and make it more valuable and appealing.”
“Every feedback, positive or negative, is a gift.”
“Two candid eyes see more than four friendly eyes.”
“I’m too close to my idea that I might be missing some useful perspectives.”
“Ideas that are properly aired will receive the sunlight necessary for growth.”
“Ideas that have no outlets wither and die.”
Another common fear is that someone will steal their idea and “run with it.” If the idea is that easy to conceive or understand and execute, you are better off finding out sooner rather than later. If it’s sooner, you may decide that your business plan isn’t viable and avoid making an unnecessary and wasteful investment in an easy-to-copy idea. If you find later, after you’ve executed the idea, that your idea is not unique, then one of two things could happen: the market accepts the idea, then it gets copied and “me-too” products flood the market (and result in intense price competition), or the market rejects the idea because the resulting product does not deliver enough value. By this time, you would have lost your investment (and hopefully gained some experience for future venture adventures). All things considered, the risk of idea theft is less costly than the risk of going to market with a fully developed idea with little or no feedback from potential prospects.
Entrepreneurs should take every opportunity to see, as quickly as possible, their blind spots or obstacles that need to be overcome before their ideas can be considered valuable and with broad appeal. Entrepreneurs need to put their egos aside; otherwise, these egos could cloud their view of reality and filter the potentially invaluable feedback.
What Should I Be Selling?
Entrepreneurs should always be selling themselves, their ideas, their vision, mission, conviction, and ultimately their product or service. This requires a mindset and process that should not be taken for granted. The target audience of a talent, idea, vision, mission, change, product, or service has options (alternatives) and limited resources (cognitive, emotional, attention, financial, physical). They have the freedom to decide when and on what to spend their finite resources. Entrepreneurs should never assume they or their ideas are the more beautiful or brilliant—they constantly need to be asking themselves: “Why me/my idea and not others/other people’s ideas? What value am I proposing and what makes it unique and better than alternatives?” It is important to understand the answers to these questions in order to approach entrepreneurship with a strong foundation and realistic expectations. It will also help them be aware of opportunities and be able to leverage them appropriately.
“The perfect product will never exist,” said Rodrigo Graf, of COSOL, a construction company based in Mexico City, “You must sell the one you have. It is imperfect, and will receive positive and negative feedback from customers but you have to sell it. You should not wait.”