A company founder has no choice but to secure the first sales of their newly-created product and the first strategic partnership. That’s because they can’t afford to hire a sales or business development professional. But even with demonstrated success, they probably aren’t near as good at sales or business development as they think and this misconception can create some challenges later. Let’s explore this phenomenon a little further.
Setting the Stage
Startups with self-service business models don’t actually engage in traditional sales activities. But as mentioned already, founders of many startups have no choice but to find and secure their first customers. And many times these first customers come as a result of the early discovery process the founder engages in to figure out if the business idea should even be pursued. In fact, it’s called “customer discovery” because the best conversations and interviews are conducted with those that match the hypothesis of an ideal customer.
Since most founders don’t have professional sales experience, how is it that they are able to close those first deals? I have a theory.
Founders might not realize it but they actually have some superpowers that come into play when securing their first customers.
Passion – Nobody has more passion about the problem that’s being solved and the solution to solve it than a company founder. Someone told me a long time ago that “sales is essentially a transfer of enthusiasm from one person to another”. With infinite passion, the founder is able to transfer that mentioned enthusiasm without hardly trying.
Knowledge – A founder spends all of their waking hours and even some of their sleeping hours thinking about and researching the problem they are solving and the way they plan to solve it.
Honoring Special Requests – During the discovery process, one prospective customer might be willing to buy the product but only with some requested change (size, shape, color, missing feature, etc). Since the founder is in ultimate control of all company resources, all they have to do is say “yes” to these requests and deals magically get done.
Side Note – This superpower is actually a double-edged sword that can be very dangerous. It’s true that the earliest customers help a startup figure out what product they actually should build. But changing the size to win one customer, changing the shape to win another, changing the color for yet another and adding a feature for yet another will leave you with no focus or strategy to propel the company forward. The key is to discover the change(s) needed to define a single product that you can sell over and over and over again?
Price Concessions – Any savvy customer knows to negotiate the price. A founder has ultimate authority to agree to a lower price right on the spot.
Changes with Evolution
With initial success, the startup is either generating enough income or raised enough funding to hire an experienced and professional sales person. It’s a very exciting time and I’ve been quoted as saying “One measure of a startup’s evolution is when a founder is no longer the highest performing sales person”.
See related article titled “Hiring your first sales professional“
What’s interesting is how often the first sales person doesn’t initially match the success of the founder. But you might already see where I’m going with this. The sales person doesn’t possess the founder’s superpowers as stated above. They aren’t inherently as passionate and that means they don’t “transfer as much enthusiasm” to the prospect. They don’t have as much knowledge as the founder. They don’t have the authority to honor special requests and they can’t make pricing concessions on the spot.
You will actually learn a TON from the first sales professional(s) you hire. Without founder superpowers, they will be required to sell the product solely based on its own merits (the value it delivers compared to the price you’ve decided). So don’t miss out on opportunities to learn from the deals they don’t win. The sooner you figure out your product or pricing needs changes, the better.
Side Note – My friend and Capital Factory colleague Mikey Trafton has a practice of hiring two or more sales reps instead of just one. That is seemingly more expensive but maybe not in the long run. If you only hire one sales rep in the beginning and they aren’t successful at all, is it their fault (ie – they aren’t a very good sales person) or is it something about the product or pricing? If you hire three sales reps and two of them are doing well but the third is failing miserably, you have your answer. If all three are failing, you also have your answer.
To my way of thinking, a company’s sales methodology shouldn’t rely on or allow for giving excessive discounts or promising future product features/changes in order to close a deal. Said a different way, sell what you’ve got in your bag because that’s what you’re getting paid for. In fact, it’s typical that successful sales reps are compensated near or above the highest other paid employees in the company. If they regularly have to use price concessions and future promises to close their deals, are they really earning all that money?
To help this point sink in, I’ll tell a story of “true sales” that actually happened during my time at NetQoS (acquired by CA Technologies for $200M in 2009). NetQoS had a very disciplined B2B, enterprise sales process and methodology that was highly ingrained throughout the organization. This story was told by a sales rep during a annual sales kickoff meeting and used as a shining example of the mentioned discipline. It almost brought tears of joy to my eyes as it was told.
See related article titled “Intro to Enterprise Sales“
Before getting to the story, you need to understand that the NetQoS sales methodology involved extensive interviews with several different constituents within a target enterprise, cutting across functions and levels. The interviews focused on understanding pains, roles and goals. This allowed the resulting proposal and pilot test to be hyper-focused.
Now for the story. A sales rep stood up to describe a $1.8M deal he won at a very large insurance company. The size of the deal was certainly impressive but what made my jaw drop was when he said the customer paid list price (ie – no discount).
The customer’s purchasing department actually pushed back extremely hard and even said something like “We are a multi-billion dollar company and we never pay list price for anything!” The sales rep responded by describing how the pilot test exceeded all of the customer’s goals and a price even higher than list price would still show a significant return on investment. When the purchasing agent said something like “read my lips, we need a 20% discount or we aren’t doing the deal”, the end result was the sales rep formally, but diplomatically, withdrawing the proposal.
He let the project champion know there must have been a misunderstanding because he and other members of the NetQoS team spent a lot of time and energy to closely learn their pains and goals while also later demonstrating that the product far exceeded those goals and delivered a huge ROI. The project champion used their power and influence to override the purchasing department and a purchase order was sent for $1.8M at list price!
That’s true sales! And I hope you see why I told the story because it’s dramatically different than a founder using their magic wand and superpowers to close a deal.