How to hire the A Team enterprise sales guys May 2, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales.Tags: enterprise sales, hiring
1 comment so far
This is # 8 in a serialized book called Enterprise Sales for the Digital Age, delivered here as 11 blog posts. You can get value from each in isolation, but if you really need to understand enterprise sales, reading the whole series is worthwhile. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
Note: a version of this post has already been published on ReadWrite.
This is a guide for tech founders of enterprise software startups looking for outside sales guys who will generate $millions annually. This is not for big old vendors or inside sales.
Here are 9 things to look for to find the A Team sales guys:
1. Track record. This is easy with sales guys, you can see how much they sold in past years, but don’t make the mistake of being too metrics driven. Selling a hot product for a big brand in a booming market is relatively easy compared to breaking into a new market for an unknown startup. More importantly, being too metrics driven can blind you to the other attributes. Would you hire a developer simply on how many lines of code they deliver?
2. Passion. Call it conviction if you prefer, but I like the word passion in this context because entrepreneurs talk about the need for passion (for good reason, passion is what sustains you through the tough times). Yet too many entrepreneurs think, when it comes to sales, that they should hire cynical mercenaries who can “sell ice-cream to eskimos”. That may work for big old vendors, but it fails in startups where smart, innovative customers smell the BS and where the team building between developers and sales, based on mutual trust and shared interests, is key to success.
3. Integrity. Here is a bit of timeless wisdom from Warren Buffet. He advises that, when hiring, look for brains, energy, and integrity; but if the people you find don’t have integrity, the other two qualities will kill you. Sorry, there is no magic trick for spotting intgrity. Sure, do background checks, but also be human, trust your instincts.
4. Intelligence. Enterprise sales using disruptive technology is complex, it needs intelligence to understand the nuances of the enterprise needs and how they relate to a rapidly evolving technology.
5. Empathy. The ability to relate to other people at a human level is essential to sales. This is not a technique, it is a human quality that is probably a mix of genetics and early childhood learning.
6. Great questions. The great sales guys are not looking for a job, they are looking for great products to sell. Do their questions to you reveal an understanding of the dynamics of your market? Are they prepared, have they done their research? Are the questions boilerplate or specific to what you do? What they ask in an interview will indicate what they will ask on a sales call; which segues to point # 7.
7. Listening. Great sales people have two ears and one mouth. If you listen well (really attentively with great questions) the prospect will reveal the key driver for the sale; the rest is easy.
8. Energy. The road is long and hard, you need physical energy. Hire sportsmen who know how to endure pain to win and know that discipline (eg in diet) matters.
9. Ambition. Call it drive if you like. Mix with passion. What is it that makes you bounce out the next day after a crushing defeat?
That’s your checklist. How do you make sure you get these A Team players?
1. Invest your time. Hiring is your most important job. Take the time to interview a lot of candidates; cast a wide net. As a side benefit, interviewing a lot of smart people is a great way to learn more about your market. Spend a lot of face-to-face time with the candidates on your short list. Meet with references (note, meet, not email or phone). Meet with family and friends.
2. Don’t compromise to “fill a slot”. It may allow you to check that box, but it will create 10 more boxes to check if you get it wrong. Don’t be afraid to delay until you get the best possible person.
3. Use the three months onboarding wisely. All that talk about taking your time can lead to analysis paralysis and speed is of the essence in a startup. Most headunters will give you a three month money back guaranty and a three month probation period in an offer is quite normal. You don’t want to make a hiring mistake, but you have three months to spot if you have made a mistake and then course correct without too high a cost.
4. Focus hard on building a win/win compensation plan. That is, a win for the company and a win for the employee. This is hard to do right. Even good compensation plans get gamed, which is why Buffet’s advice about integrity is so critical. Be generous… but also demanding.
Negotiation Ninja Says: in the end game closing, forget your chess skills and play poker May 2, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales.Tags: closers, closing, enterprise sales, negotiation
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This is post # 7 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
I have used the analogy that enterprise sales is like chess with a beginning (get leads), middle (prove fit to requirements) and end (close the contract). In the closing phase, the game becomes more like poker where, as James Bond says in Casino Royale, “you don’t play your cards, you play the person sitting opposite you”.
“Closers” are rightly prized. Weak closers “snatch defeat from the jaws of victory”. They give up a great technical/functional advantage to let a strong closer from a competitor snatch the deal.
There are so many books, courses, seminars and theories about negotiation. Much of it “does not stick”, because in the heat of the moment you need to make instant decisions. This is where experience and an aptitude for negotiating count. However one way for negotiation tips to stick in the mind is to relate them as stories, particularly stories where somebody screwed up really badly or did something clever to gain advantage in a difficult situation. These are the Negotiation Ninja Says tales.
#1: Negotiation Ninja Says “don’t throw away the cards that have no value to you”.
As a sales rookie I was reviewing the key issues before a major contract negotiation. With my boss, I made a list of a) showstopper issues and b) “not a big issue for us” clauses.
During the meeting one of the “not a big issue for us” items came up. My boss said;
“Hmm, that is difficult. Do you mind if my colleague and I step out of the meeting to discuss this?”.
I walked out thinking WTF; why make so much fuss about a clause that did not matter to us? When we were alone my boss said:
“So what do you think will happen in the cricket today?”
We spent 10 minutes talking about cricket. The idea was simply to make them sweat about a point we were willing to concede so that we could trade it for something we wanted.
# 2: Negotiation Ninja Says “test how nervous they are with something silly”.
A few days before signing a deal, we were deep in the legal weeds. We were a tiny startup being acquired by a behemoth. We had a lot at stake, so we were nervous.
There was a ridiculous amount of legal Due Diligence stuff. One question was “have you told your spouses about this deal and are they in agreement?” This must have come from some earlier deal where a spouse had created a post-acquisition legal problem. In our case, our spouses just wanted us to close the deal so that we could pay bills and take a holiday.
My partner said:
“Actually we might have a problem there. I have not told my wife about this deal”.
He was not trying to be clever, he was just tired and cranky and wanted some fun.
Even though this was on a conference call, the tension on their side was obvious. The message was clear – the buyer was just as tense as we were, they wanted this deal to close as badly as we did.
In hindsight, we should have done this testing of their nerves a bit earlier. Not too much earlier when everybody is calm (because less is at stake at that stage) but early enough that it could be used to gain some negotiating leverage. The frayed nerves, the raised voices, the table-thumping, these are all signs that a deal is closing. You know that you are stressed. Find low risk ways to test how much they are stressed, to see how much leverage you have.
# 3. Negotiation Ninja Says after high or lowballing, use the blind pig stare and offer a mint
I had given the prospective buyer our price. I was highballing, had set a high price. He just looked at me. Did not say anything. Gave me no reaction at all. Just kept on looking at me. I call this the “blind pig stare”. This made me nervous. The inner “monkey mind” was saying “OMG, I blew it, set the price too high”. The temptation to fill the silence was intense. The temptation was to say something like “it’s all negotiable of course”. I was not a rookie at that stage. I took a deep breath. I took out a mint and offered him one. Normal politeness made him say “thanks”. The tension was broken, we started talking, found common ground and closed a deal.
# 4. Negotiation Ninja Says “on the signing day, don’t blow it by talking about anything more substantive than the weather.
It was signing day, scheduled for 9am. There was nothing more to do, just go there and sign. The two bound documents were in front of us. I said something that prompted the buyer to ask me a question. I did not have an immediate response, needed to check with somebody. He said “let’s reschedule signing to 9am tomorrow”. Later that day something happened that was totally “out of left field”, beyond any of our control. The deal was not signed the next day. In fact, it never got signed. The moral – on signing day never talk about anything more substantive than the weather.
# 5. Find somebody to be the bad guy or volunteer for the job.
Deals can fall apart on price. Despite all the kumbaya win/win negotation talk, price is still one thing where the buyer wants low and the seller wants high. Sometimes you just have to dig in your heels and say no, to walk away from the negotiation. That bruises the relationship. Somebody on the team has to be the bad guy. That usually falls down to a VP Sales type person. You want the sales executive to maintain a warm relationship and you want the CEO/Founder to do the same. You are all agreed on the strategy and the risks of losing the deal, the only question is who will be the bad guy? This is tougher for young startups with a flat management structure. Make sure that any VP Sales you hire understands that occasionally being that bad guy is part of the job description.
# 6. Once you start a bluff, any sign of weakness blows the whole deal
The company was one week away from not making payroll. There was one mega deal in negotiation. We had set a high price. In negotiations, the Founder/CEO refused to budge one inch. I knew what was at stake and knew that giving say a 20% discount (on license fees which were 100% gross margin) would have enabled the company to survive. When he was asked why he refused to budge he responded “If I had shown the slightest sign of weakness the deal would not have closed. They had to see us as the best, most powerful vendor in the market or they would have got nervous about our ability to survive”. The deal closed and the company went on to great fame and fortune.
This is poker in its purest form.
Once after that, with similarly high stakes, I have had to take the same stance. It worked. It does not always work; but what definitely does not work, the sign of a weak poker player, is starting off betting high, acting super confident, then later in the same hand pulling back and “going all wobbly”.
Always Be Qualifying – listen for the screams May 1, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales.1 comment so far
This is # 6 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
The old sales adage is “always be closing”. It confuses rookie sales people because they think of closing as something you only do at the end. Another way to think about this is “always be qualifying”. The things you close before the final close are really ways to qualify.
Traditional sales methodologies treat qualification as a one time event. Budget, tick. Need, tick. Decision-maker, tick. That implies a linear process like an assembly line in a factory. Of course the real world is not like that, so you have to re-qualify all the time. This is even more true in the Digital Age, when buyers self-educate online and appear fully qualified at the bottom of what we used to call a funnel and when the “innovator with clout” is that dude with a ponytail and sandals in the coffee shop.
As a sales leader, I love learning from the winners on my team. What is that consistent target-crusher doing right and can I teach this to other guys? For a while I was confused by one of my best performers. He was by most visible metrics, the worst salesman. His presentations were rambling and verging on incoherent. His writing style would have given my English teacher apoplexy. He was consistently abrupt almost rude to all concerned. He came in late, left early and had long, expensive lunches.
I was really interested to find out what he did well. I do not believe in luck being a contributor on any consistent basis. So he must have been doing something really, really well because he was doing everything that was visible very badly.
I discovered that what he was doing very well was qualifying his prospects with great care and discipline. We all know that is what we should do, but very, very few sales people do it at all well. We think that sales is all about hard work, persistence, determination and all those other good Protestant work ethics. So we drive relentlessly on, calling that prospect for the umpteenth time.
This guy waited until he could see that the customer’s need was very real and urgent. He waited ‘till he could hear the screams. He then looked for something to indicate that we had an edge in the deal, some unfair advantage.
His laziness was a bit of an act. In reality he was a tireless networker. That is what all those long, expensive lunches were about. However he worked to create a sense of equality and respect with his customers. Sales people are usually too used to getting on their knees to that all-powerful buyer with the big budget. So the buyer does not respect the salesman and will ignore five of his calls in the certain knowledge that he will get another one.
Yes, it is a bit of a power game. This power game is easy if you work for the dominant player in the game. The power game is hardest to play when you are an unknown start-up, when times are tough and you are behind in your revenue targets.
We were in that position when a small Hedge Fund came on the horizon as a prospect for our real time trading support system. This was 1991 and Hedge Funds were not on our target list at that time, few people even knew what they were. The customer certainly seemed smaller than we were used to selling to. So the salesman told the prospect that we were not interested in their business. This put the prospect in a position of selling to us. “Sure we are small now, but we are growing fast and we need this system urgently and we have plenty of money for IT”. The screams were loud and clear and we closed the deal in record time and they became a good customer (and the Hedge Fund became one of the stars in this industry).
One way of checking for urgency is how much effort the prospect puts into the relationship. You need to see some equality of effort. If you call five times before the prospect returns your call that is not equality. If you send reams of information and give multiple presentations but the prospect won’t fill in a detailed requirements questionnaire, then that is not equality of effort. With every call you want the prospect to DO something. If this does not happen then the screams are not loud enough and you should move onto your next opportunity.
You have to cast a very wide net in order to qualify your prospects properly. Otherwise you will catch a couple of tiny fish in your net and mistake them for tuna! If you cast your net wide enough you will find deals where the customer’s need is urgent and your company has some specific edge in the deal.
The way to make sure you have a live one is to wait for the screams. Get your prospect doing some work before you get too excited.
What really kills weak sales people is when a deal is going great but circumstances change and it is now dead in the water. They did everything right but the deal is dead.
Weak sales people don’t want to see this, it is too painful. That is when management has to make a painful decision to pull the plug on that sale.
Great sales people expect other members of the team (sales support and/or product management) to do most of the work during the proving phase. They are in oversight role, keeping an eye on what is happening to the customer, preparing for the close and filling the funnel with new prospects.
Great sales people will also not be reluctant to say something like “we set this whole POC up the wrong way, we have to start all over again”. If they see that the POC is not addressing the one thing that the CXO will mention in the Press Conference, they will be right. This makes them hugely unpopular internally, but it is better than losing the sale. The great sales people have the credibility from their sales track record to pull this off.
Great sales people are always visualizing that press conference and thinking about the “key ones” (one decision-maker, one business-driver and one selection-driver) and if it is not crystal clear today they will pull the plug even if it was crystal clear yesterday.
Deep in the complexity of the middle game, keep focus by imagining the Press Conference and concentrating on the “power of one”. April 29, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales.Tags: enterprise sales, positive thinking, visualization
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This is # 5 in a serialized book called Enterprise Sales for the Digital Age, delivered here as 10 blog posts. You can get value from each in isolation, but if you really need to understand enterprise sales, reading the whole series is worthwhile. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
Deep in the complexity of the middle game, keep focus by imagining the Press Conference and concentrating on the “power of one”.
Maybe you think that daydreaming sounds rather self-indulgent. Perhaps this is some new variant of the old “think positive” stuff?
Actually this is a very practical strategic selling tool. It is also a powerful visualization tool, similar to what great athletes use.
Enterprise sales are complex and it is often really hard to see the wood for the trees; it is like the middle game in chess. Deep in the middle of the sales cycle, you are probably juggling internal politics, resource constraints, demo and proof of concept technical issues, pressure from partners, competitive moves and customer politics – and that’s all before lunch!
You need something to keep you focused on what really matters. You need to know what is the one overriding motivation for your decision-maker. This is the story that your decision-maker will be announcing when the deal is done. She will present why her great initiative will have a big effect on one of the company’s key strategic objectives and why she was smart enough to select the one vendor that was ideal for the project.
Unless you know what this story is, you are shooting in the dark.
Even big, complex enterprise sales come down to the personal motivation of the ultimate decision-maker on your project. Customer politics can get in the way when the personal motivations of different managers are pulling in different directions. However if you know the personal motivation of the big boss (and if you are reasonably confident the big boss will stay in power long enough to get the deal signed) you cannot go far wrong. You can then focus on helping the boss align the pesky, politics-playing managers to the big objective.
To cut your way through the complexity of enterprise sales, you need to simplify. Select one person who is the key decision-maker. Understand what is important to that decision-maker. Select the one big reason why he/she wants to do this project. Select the one reason why he/she will announce your company as the right vendor.
There is tremendous power in keeping the focus to one. Find one decision-maker, one business-driver and one vendor selection-driver. When you see multiple answers, keep drilling and imagine that press conference. The CXO will only have one minute to describe the vendor and why he/she chose you, so there cannot be lots of reasons.
Imagine yourself in the buying shoes. Remember when you have had to make an important decision and how you finally made up your mind. What you will usually find is that it was one simple reason and everything else was incidental. It was probably not a feature that hooked you; the anti-lock brakes on the BMW are good, but is that why you want to buy a BMW?
Even more powerful is the realization that there is often one precise moment when you win or lose a deal, even if the whole sales cycle is 6 months or more. My first job out of college was selling encyclopedias and you could see the moment you won or lost a deal in their eyes; it took me a while to understand that the same is true also in complex big ticket deals. Everything before that is preparation to sell and everything after that is managing the process to closure. Think about decisions you have made and how you made them. There might have been lots of research to get you to a certain point and then a key point when in your mind you think “this is it”. Then you may still spend lots of checking to make sure you are doing the right thing, but you want the answer to be positive. You are looking for verification not problems.
Selling is a people game where intuition is valuable. You will know when somebody is convinced. It is less about what they say, but how they say it, the expression in their eyes, their tone of voice, their body language. No, that will not fit into a CRM system but that is a criticism of CRM systems, not a criticism of the value of intuition.
In some sales, you may not be there when that key moment happens. This is not ideal, but it is the reality in many enterprise sales. At the crucial moment of decision, your decision-maker is probably sitting with the one manager he/she holds accountable for this decision (the “recommendation-manager”). Again, there is one key recommendation-manager, although lots of other managers may be involved in the research and diligence stages.
Although you may not be there at that critical moment, you must have a very close relationship with the manager who is doing the briefing and you and he/she must have total alignment on the key objectives.
In long sales cycles, take time to imagine the press conference. Use this to get clarity on the “key ones” – one decision-maker, one business driver and one vendor selection driver. When it all gets mind-numbingly complex – KISS and focus on those “key ones”.
Athletes do this kind of visualization. You can see downhill ski racers with their eyes shut before leaping out of the starting gate, their hands tracing the path they will take, their mind going over every bump and corner to the finishing line. It is hard to understand theoretically how this kind of visualization works, but the empirical evidence from athletes is clear.
It is also great practical reality check. Great sales people know that qualification is a process, you do it every day not once at some point prescribed in a sales methodology handbook. Great sales people do this because they understand that sunk cost means nothing. It does not matter if you have sunk 6 months and lots of company resources into a sale; that has no bearing on whether or not it will close. Circumstances can change. Or you may have misjudged it earlier. If you cannot visualize that Press Conference, if you don’t have a firm handle on the key ones”, it may be time to pull the plug.
Once you are through the door, forget the sales process and focus on the buy process April 28, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales, SAAS.2 comments
This is post # 4 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
When you get through that door, your job is testing your theory. You created a theory about why this specific customer should be a good prospect. That is what I described in the last post, the proactive lead generation process. You now want to find out if that theory works in practice. You are trying to find out if your product is a fit to your customer’s need. Your prospective customer is also trying to figure this out. This is a cooperative process between buyer and seller; neither of you wants to waste time if the fit is not good.
Product fit to market is the key step in the entrepreneurial journey. Product fit to customer is the key step in the sales journey. It may sound strange to think of a single customer like a market, but enterprise means really, really large customers. Selling to an enterprise as big as Google, Citibank or Pfizer is as much of an opportunity as selling to tens or even hundreds of small firms.
Your goal is to become an enterprise-wide approved vendor. That is a ticket to 8 figures (tens of millions of $) per enterprise per year. Clearly, that takes time and is done in steps but, if you are in the enterprise game, that is your mission.
Once you have your foot in the door, you have to prove that your product is the right fit for that customer’s need. This is the complex, lengthy middle game where your CAC (Customer Acquisition Cost) metrics can get so damaged that investors conclude that you have “a great product, but a lousy business”.
The enterprise sale is notoriously long and expensive (high CAC), but there is far too much emphasis on sales cycles and sales processes. As a vendor you should be focused on the buy cycle and the buy process and how to gently nudge it in your direction. That is the only way to get your CAC to a level where your venture can scale its profits.
The buy process typically has four steps:
1. Senior management recognition that there is a problem to be solved. This recognition usually evolves slowly through conversations between multiple stakeholders. “Wait ’till you hear the screams” before you engage seriously; you must know that the pain is acute, that this is a heart transplant kind of problem, not a problem that an aspirin can solve. Start-ups have to get involved at this stage, even though on normal sales qualification criteria you should wait until there is a budget for an approved project. Incumbents can afford to wait, they will always get invited to bid. Start-ups cannot afford that luxury. You have to be involved now, not only to get on a list of vendors which is relatively simple. What you have to do now is influence the requirements. This is where great sales people can make a difference at this stage. Great sales people have a deep understanding of three things a) the customer pain point b) your technical advantage c) your incumbent competitor’s weakness. At the intersection of that venn diagram is the key to the sale. You have to find the “innovator with clout” (see earlier post on leads) who has the background to understand it when you say “the only way you can fix xxx (customer pain point) is with yyy (your technical advantage)”. The innovator with clout can then carry that message to stakeholders. If you manage to insert your technical advantage as a requirement and make sure that enough stakeholders are aware how important it is, then you will be able to block the counter attack from the incumbent when they wake up to the fact that you are a threat. Note that all this critical selling is done well before the customer would be recognized as a “prospect” or even “suspect” in most sales methodologies. The key to doing this well is to cast your net very wide and qualify ruthlessly, a subject that we cover in the next post on having the courage, patience and smarts to “wait until you hear the screams”. Think of this stage as planting seeds. It should not take too long, most seeds won’t make it but you certainly cannot hope to reap later if you don’t seed at this stage. Note also that this is the time when you can build senior management relationships; as soon as you at the next step, you will be managed by more junior managers whose job it is to manage vendors and “keep them in their place”; incumbents always win this game.
2. Somebody is given the job of defining a solution. This includes coming up with a list of potential vendors and a budget. This is where most “leads” come from and this is why experienced sales people are wary of these leads. Often the vendor list just needs a couple more names. Maybe they already have Incumbent Vendor A and Innovator Start-up B. They want to see what else is out there. They just need a list with say 3 or 5 vendors, because that’s what their buying process requires. You can jump in at this stage and win but the odds are against you. This is before a budget is allocated. It can take a long time for a budget to get allocated. That may never happen for many reasons – the problem just goes away, they find a non-technical way to solve it, an incumbent vendor may show a just good enough solution based on an incremental module or version upgrade. This is where rookie salesmen are buried. The person that the rookie is talking to may be sincere or may be just getting some “suckers to the table” to fill out a list and make the buying process look good. Even if the person who is tasked with contacting the vendors is sincere, he or she may simply not know that the deal has already been tied up by another vendor. It is possible to “come from behind” and win in these situations, but the odds are stacked against you; so be cautious of leads that come from this stage of the buyer’s process.
3. Vendor evaluation & selection. By this stage you are down to a short-list, typically with 2 to 3 vendors. This is when you have to prove what you have claimed. This is a three part process for the seller:
A. Demo to formally insert your secret sauce into the recipe. Informally you have done this far earlier, at the first step of the buy process as described above. This can be a generic demo, there is no cost to customize at this stage. The good news is that all the “buyer self education tools” such as Freemium make this less expensive. Using online demos, Freemium and free trials, customers can self-educate before sales and sales support have to put in time. The buyer is investing time. The seller has the option of investing resources to use a human to give the demo. This is a qualification decision. Technical founders and technically driven sales people mix a demo with a training course, feeling the need to show every feature. This is where you need a great sales person working with a great sales support person. Remember what your mission here and KISS. You have to create a enough stakeholders who tell their peers “I just saw xxx, we would be crazy to opt for a solution without xxx, its the only way we can fix yyy (pain-point)”.
B. State what you have. Now is when you describe that secret sauce. If you have done your work earlier, the requirement your competitors have to respond to will be precise and only you can meet those requirements; this is why the customer will take a risk on an unknown start-up. You have to do this in such way that the incumbents cannot easily “put a tick in the box” with a BS response. So don’t just say “real time approval process” but be as precise as “approval process in less than 1 second on data from three external sources”. This will typically be in a proposal. It maybe in response to an RFP. This may become an addendum to the contract, so it must be accurate. Technical or product management folks must do this, sales people have too much motivation to exaggerate and many sales people are brilliant at communicating face to face but terrible at written communication.
C. Prove that you have what you say you have. There are two ways to do this. One is the Proof Of Concept (POC). This is a customized demo that you leave with them for some time. It is usually free. It is like a free trial, but you put in the effort to customize your product to their needs. This costs money, so make sure the prospect is properly qualified before you invest this time. You must know budget, timescale, decision team, competitors before investing in a POC.
The other way to do this is via a Paid Pilot. This gets used for real and the buyer pays – unlike a POC. This is a real sale, but it is a small investment by the buyer. As the vendor, you look at this as the first Land in a Land & Expand strategy. Tactically you may choose a Paid Pilot instead of a POC or do POC and then Paid Pilot. The decision is complex and situation-dependent and is covered at the end of this series under FAQ.
The prove phase is where you can leverage technology to reduce CAC. Tools that make auto discovery of requirements and facilitate quick customization can help lower CAC.
4. Negotiation & close. This is the subject of a future post in this series.
The buying process can take a long time, a minimum of 6 months and often longer than 12. When you are deep in the middle game of chess, it gets horribly complex. It is the same when you are trying to prove product fit to an enterprise’s requirements, there are too many variables to manage. The next post gives you a way to focus and KISS.
How to get enterprise leads that generate the right Customer Acquisition Cost (CAC). April 27, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales.Tags: cac, customer acquisition cost, enterprise sales, lead generation
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This is post # 3 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
Winning sales is not enough, you need to win them efficiently so that your CAC (Customer Acquisition Cost) is low enough. The right lead generation is key to this. In ye olden days, most B2B leads came from outbound telemarketing or inbound via advertising or readers surrendering an email address when they downloaded a White Paper. Nowadays we have SEM, SEO and Social Media, but the lead to sales process for enterprise sales is still fundamentally broken. Most enterprise sales people tell you that the leads generated by marketing are no good. This is an age-old debate (often acrimonious) between sales and marketing. Marketing say; “You never follow up properly on our leads”. Sales respond: “If I spend all my time on your rubbish leads, I won’t have time to sell”. Bad leads cost money. Many lead vendors and B2B publishers sell on a cost per lead basis and many marketing departments are measured on this metric; so there is an incentive towards quantity rather than quality. Quantity in this case costs twice over – bad leads cost money to acquire and even more for sales people to “follow up” on. The traditional marketing led leads funnel works reasonably well in traditional red ocean markets where the buyers are shopping for something specific. This is very different in blue ocean markets where the solutions have not yet formed into products that sit within a defined market space. Hearing the screams of pain does indicate that a market will form around any vendor who can fix that pain; but don’t confuse that scream of pain with intent to purchase (which is what lead vendors sell), it is much earlier in the funnel. In blue ocean markets, it is better to hire thought leadership sales people who proactively hunt for the few people in the few companies that will generate big results. The proactive process goes something like this: 1. Pain analysis. This is your long list of potential target accounts. This is your bottom up TAM (Total Addressable Market). Good enterprise sales people are entrepreneurs who look for great products in big fast growing markets. You may give the sales guy a vertical or geographic limitation, so they will do their own TAM within those limits. You need thought leaders who understand the trends in their vertical and geographic market, who know what is driving the CXO agenda in the big target accounts. Is it likely that the pain you aim to solve is keeping your prospects awake at night? That is your Pain Analysis. 2. Competitor Lock-In. You don’t want to obsess about competition, but you must rule out the targets where the competition have a lock on the account. For example, big old vendors will usually have something in their feature set which competes with your product, at least on paper. If you see a company that always buys from Vendor X, even their most shabby products, delete them from your list. It does not matter that you have convincing evidence that your product is in a different league, if it is clear that the target company won’t pay any serious attention to this evidence. Your aim is to win business with the right CAC, not to be a dead hero. 3. Leverage analysis. This makes it into shorter list. You are looking for unfair advantage that you can leverage in this specific customer. This must have something to do with your technical secret sauce. Don’t think that a Board level relationship is an unfair advantage, it is only table stakes. The sales skill is connecting the dots between a) the generic pain point that all customers have and b) your technical secret sauce and c) the specific example of the generic pain point in the target enterprise account. 4. Who are the “innovators with clout” in these accounts? You need innovators who will pay attention to a startup pitch. Most people won’t pay attention, they are too deeply in the legacy box. However you can waste a lot of time with innovators who will moan to you about how stuck in the mud their employer is. That is worse than useless, it is a start-up killing time sink. You need innovators with clout. Usually this means they have delivered business value through innovation before, so the powers that be will pay attention when they come up with another innovation (the one based on your company). Some of this you can do as online research. Thanks to social media, we can do a lot more research like this than we used to. Not only is the buyer much more prepared before they meet the seller, the smart seller is also far more prepared than used to be the case. However, no matter how much research you do “no theory withstands contact with the customer”. Your aim when you get through the door is to validate or discard your theory about that customer. That is what we cover in the next post. Within the context of that proactive, intelligent lead generation approach, it is easier to see that the chances of a lead landing on your desk that happens to fit those criteria is vanishingly small. A good sales person will ignore all the leads that don’t fit those criteria. Within that context, question the wisdom of using an inside sales team as a lead generation engine. Imagine a junior script-following inside sales persons getting that “unicorn” (an innovator with clout in exactly the right target account) on the phone; yep you just blew it with that unicorn. How do you get through the door to those people? It’s simple. Network like crazy, ask for referrals, talk to lots and lots of people. You have to cast a very wide net, while being laser focussed on the few special fish that you want to land. The other critical piece of getting the right CAC, is what you say when you get through the door, what are your first words? When I say “first words”, these could be in an email, on a phone call or in a meeting. This is like your Elevator Pitch to investors; but don’t just copy that Investor pitch. Investors want the macro picture, customers want the micro picture. Its all about “what can you do for me right now?” The opening moves between experienced buyers and sellers is where each is trying to figure out: “Should I invest any more time with this person?”. These opening moves now follow a social media dance along these lines:
- Ping on a social network, initiated by buyer or seller. The ping follows whatever protocol is appropriate to the social network in question (writing on Wall, liking, retweeting, connection request etc).
- You check each other out online. This is the first “should I spend any time on this person” decision. For example you get a ping from a CRM vendor and don’t respond because you are already committed to vendor X. Or it might be a new tool that complements vendor X for a problem that is relevant, so you do a bit of research.
- Some socially appropriate persistence by the seller. This can include old-fashioned more intrusive methods such as email and telephone (now that time has shifted from phone to email, it is surprising easy to reach influentials by phone, they welcome a relief from email). Most sales people impose limits on how many times they will follow-up, it becomes counter-productive quite quickly.
The next post describes what you do when you get through that door, how to focus on the buy process to get the right CAC. Next post in series.
Introducing Enterprise Sales for the Digital Age April 25, 2014
Posted by Bernard Lunn in Deal-making, Enterprise Sales, SAAS, start-ups.Tags: crm, enterprise sales
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This is # 1 in a series of 12 blog posts. You can get value from each in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
This series is written for technically-oriented founders of enterprise software ventures who need to hire & manage sales people and to hire & manage the people who manage those sales people. If you sell enterprise software for a living, you may also get value from thinking about how the game of sales has changed since you went on those early sales training courses; the Internet changes everything, including sales.
The techniques for enterprise sales were created in the years when companies like IBM and Oracle were rising to prominence. These techniques worked very well. They were encoded into books, CRM systems, training courses, methodologies and the daily work of countless sales executives and sales managers. If you wanted to close complex, big ticket enterprise sales you used these techniques.
Then something happened. That something is called the Digital Age, the convergence of mobile, social, real time and big data. This resulted in techniques such as SaaS, Freemium, Marketing Automation, Growth Hacking and Viral Marketing. It seems like it is time to throw out the old and bring in the new.
Not so fast.
Ignoring the new techniques of the Digital Age is not smart. Nor is it smart to use those techniques alone and ignore the wisdom of the past that created the enterprises that dominate our landscape today.
My aim with this book is to marry the best of the old with the best of the new. There are other people thinking about this, the entrepreneurs who are creating the Salestech ventures that I profiled in a series of posts on ReadWrite.
I have created this book as a series of blog posts, a serialized book in the tradition of Victorian novelists like Dickens who originally published each chapter in monthly magazines. (I did this before with the Startup 101 book that lives at ReadWrite). The content will always live here online thanks to WordPress. If you want the convenience of a PDF copy that you can print, please send me an email.
There are six reasons why many entrepreneurs need this guide now:
- There is a Renaissance in Enterprise Software. Or as the VCs would say, “this space is hot”. Or to put it another way, Google, Facebook and Twitter sucked the air out of the indirect/ad-driven model for debt-burdened consumers, so lets get direct revenue from where the cash hoards are overflowing in big companies.
- It is different this time. Consumerization, SAAS, Freemium, social networking – none of these were around when the early enterprise sales guys were learning their game. Big enterprises are facing existential crises related to the twin challenges of digitization and globalization. That’s good news, there are plenty of problems to solve with tech. The bad news is, don’t expect to get attention/budgets selling the “same old, same old”. The Big Old Vendors have got same old, same old sewn up. Don’t extract a sales team from those Big Old Vendors and expect them to meet today’s challenges with today’s tools for your startup.
- Most entrepreneur’s sales skills atrophied during enterprise software’s decade in a coma. I call the last decade a “coma” in enterprise technology, because there was very little innovation, just big old vendors selling the same old stuff to the same big old enterprises in the same old way. Most founders in the last decade were developers who did not want anything to do with sales; who wanted anything that looked like Glengarry Glenn Ross? Although it is different this time, there are still some old-fashioned sales skills that few entrepreneurs can ignore. Not quite everything is different. This series adapts the timeless verities of sales to the modern world.
- Developer entrepreneurs need to be at least be Consciously Incompentent in Sales. Developer entrepreneurs are mostly Consciously Competent in development (good and always figuring out how to get better), but need just enough to be Consciously Incompentent in Sales (know what you don’t know so that you can hire well). That is why I keep each chapter to the length of a blog post; you don’t have time for a PHD dissertation on sales and our attention spans have become shorter thanks to the Internet. The aim of this series is to save you from being Unconsciously Incompent (the one fatal quadrant).
- Your product will not sell itself. Even if you opt for a sales-lite (try it online) model, you may need to sell to channel partners and you may need to sell the first few customers yourself (“do things that don’t scale”). Even if a consumerized Freemium model is your foot in the enterprise door, you may later need to meet the folks who control the big budgets in order to scale that.
- Despite all the great marketing technology, the bottom of the funnel needs attention. Despite the revolution in consumer marketing that we see from inbound marketing and the scientific processing of leads through Marketing Automation, the impact on B2B has been light and the impact on the enterprise end of B2B has been virtually non-existant. The attention today is on the bottom of that funnel where leads become sales – or don’t.
I am not the only person observing the increased focus on sales. This is from Businessweek:
“In the past few years the number of sales programs at colleges and universities in the U.S. has exploded, according to the “Sales Education Program Landscape Study” done by the Center for Sales Leadership, run out of DePaul University’s College of Commerce. In 2007, courses in sales were offered at 44 U.S. schools, a number that jumped to 101 schools in 2011. Now 32 schools offer a major, minor, or concentration in sales, up from nine just four years ago, the study found. Even MBA programs are starting to get into the game, with 15 now including sales courses as part of their graduate programs in 2011 and six offering an MBA with a sales concentration.”
The first four posts describe the key stages of the sales cycle. These posts follow the enterprise sales process, which is like a game of chess
Beginning: how you get leads, your opening moves.
Middle: proving product fit to that enterprise’s need
End: closing, getting signature and cash.
As a tech entrepreneur you may have to do some of this yourself. You will certainly have hire people to do this. It is useful to understand what the people who you are hiring will be doing.
The key management concept is CAC – Customer Acquisition Cost. You aim is not just to sell but to sell with a low enough CAC. If your CAC is too high, investors will conclude that “it may be a good product, but it is not a good business”.
We start at the beginning, like the opening moves in a chess game. How do you get leads? More importantly how do you do this cost effectively:
How do you get Enterprise leads that generate the right Customer Acquisition Cost (CAC)?
Then we focus on what you do once you have made contact and you are in the sales process.
Once you are through the door, focus on the buy process to reduce your Customer Acquisition Cost (CAC)
When you are deep in the middle game of chess, it gets horribly complex. It is the same when you are trying to prove product fit to an enterprise’s requirements, there are too many variables to manage. This post gives you a way to focus and KISS.
Deep in the complexity of the middle game, keep focus by imagining the press conference and concentrating on the “power of one”.
Finally, nothing happens until you negotiate and close. There are so many books, courses, seminars and theories about negotiation. Much of it “does not stick”, because in the heat of the moment you need to make instant decisions. One way for negotiation tips to stick in the mind is to relate them as stories, particularly stories where somebody screwed up really badly or did something clever to gain advantage in a difficult situation. These are the the subject of:
Negotiation Ninja Says: Tips on Closing from those with scars on their back
We then move onto management subjects. The first in the management series tackles the toughest question:
How to hire the A Team sales guys
The next post describes how to manage these rain-makers. How do you manage enough to meet company objectives without “crimping their style”:
How to manage a sales team in the era of bring your own everything
Is forecasting a science or a black art? It is certainly something that keeps CEOs of startups up at night, a lot of resource allocation (what a CEO does) depends on forecasting. Yet most forecasting systems are “garbage in, garbage out”. This post recommends a different way of thinking about forecasting.
Forecasting: Keep all stakeholders on the same page by rewarding accuracy
Before starting at the beginning of the sales process, the first post asks a clarifying strategic question:
Is your strategy really enterprise-first and is your market red ocean or blue ocean?
Negotiation Ninja says “don’t throw away the cards that have no value to you”. November 6, 2013
Posted by Bernard Lunn in Deal-making, Enterprise Sales, start-ups.Tags: enterprise software, negotiation, sales
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As a sales rookie I was reviewing the key issues before a major contract negotiation with my boss. We made a list of a) showstopper issues and b) “not a big issue for us” clauses.
During the meeting one of the “not a big issue for us” items came up. My boss said;
“Hmm, that is difficult. Do you mind if my colleague and I step out of the meeting to discuss this?”.
I walked out thinking WTF; why make so much fuss about a clause that did not matter to us? When we were alone my boss said:
“So what do you think will happen in the cricket today?”
We spent 10 minutes talking about cricket. The idea was simply to make them sweat about a point we were willing to concede so that we could trade it for something we wanted.
Crossing The Chasm through the Bowling Alley to: rapidly entering niche markets. October 15, 2013
Posted by Bernard Lunn in Deal-making, Enterprise Sales, start-ups.Tags: adjacent markets, bowling alley, crossing the chasm, enterprise software, marketing, niche markets, sales, whole product
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For years Crossing the Chasm was the closest that Silicon Valley startups had to an operating manual. It fell out of favor when the focus was on digital consumer ventures, but people are dusting off their copies as we are now in an enterprise software renaissance.
The way to Cross the Chasm to the mainstream is through the Bowling Alley:
“Market momentum picks back up in the Bowling Alley phase, as early pragmatists in certain
customer segments overcome their reluctance toward discontinuity and adopt the new
technology to solve niche-specific problems. By their nature, pragmatists are reluctant to
adopt new technology and prefer to follow the herd. Early pragmatists are forced out of
their comfort zone to find solutions for broken, mission-critical business processes.The Bowling Alley phase takes its name from the market strategy that is appropriate. The
key to success is to provide a complete solution for one segment while identifying closely
aligned segments that could benefit from a similar solution. When the momentum from
successfully capturing market share in the first segment (the lead bowling pin) is felt,
this momentum is leveraged into adjacent segments. By dominating several segments, your
company may start to emerge as a sector leader.”
That describes the strategic mission – that is the easy bit. Actually winning those deals and delivering those move-the-needle projects is a lot tougher, particularly today after “enterprise software’s decade in a coma” has left many of those skills rather rusty from lack of use.
Each niche is like a foreign market. Literally, niches like this have their own lingo, the jargon that feels like listening to a foreign language. You can translate the jargon, study the subject, but you will still feel like a foreigner mangling French in a Parisian cafe getting supercilious stares from the waiter. The people in these niches all know each other
well, these are dense networks which spit out antibodies to reject outsiders.
You can break through into these niches but it requires creative selling techniques that have been forgotten in the last decade. Consumer start-ups don’t need to sell, they market online using their product. Consumerized SaaS startups believe that this is also the way to win the enterprise. It may be the way to get your foot in the door of the enterprise, but to really win the big tickets you have to solve really big pain points.
These creative selling techniques usually start with some variant of asking “what keeps you up at night?” You are looking for the kind of pain that is so acute that the customer will overlook the fact that you are a startup with radically new technology.
It is good to first read the guide books to this foreign land and talk to people who have lived there. You need some familiarity with the lingo of this niche market, understand “what makes it tick” and some theory of where the pain might lie that you can fix. Even open ended questions need a focus. But remember, “no theory survives first contact with a customer”, keep an open mind and stay light on your skis. Opportunity often lurks in the parentheses, the seemingly unimportant throwaway comment that shows you the real hot buttons.
You need more than a 10x proposition based on a technological breakthrough. You need that to be able to deliver the solution, but that alone only works if your 10x proposition is purely a cost-cutting proposition. That tends to be a tough sell in most enterprises because it involves rip and replace and that is too big a risk to take on a start-up. You can sell a 10x rip and replace cost-cutting proposition if your technology is down the bottom layers of the tech stack and you sell to data centers. For example if you have a way to 10x cut the electricity consumption by servers, Amazon, Google and Facebook will all listen intently even if you are a bunch of techies in a garage and sell one of them and you are off to the races….
However if your proposition is further up the stack, for example at the middleware layer or the application layer, well as they say in Brooklyn….fuggedaboutit. That’s when you have to find a business problem to solve that fits these three criteria:
1. A “big, bad problem” something that really, really matters, that gets the attention of the CXO level guys, that keeps them awake at night. Don’t worry, the Global 200 are going through wrenching changes thanks to the triple tsunami of globalization, digitization and the debt crisis, so there is no shortage of big, bad problems.
2. A problem that is ideally suited to your unique technology, that none of the incumbents can easily solve. There is no point in discovering a big, bad problem that can be easily solved by Oracle, IBM, SAP, etc. All that will happen is you spend a lot of time getting the proposal up the chain of command until a salesman from an incumbent spots it and closes the deal.
3. An internal “sponsor”. We used to call them angels, but has a different meaning now. This is your inside person, who keeps the message going after you have left the room. I think of him/her as an innovator with clout. They have to be innovators because you are an upstart with new technology, so they have to think outside the box and be ready to challenge orthodoxy and incumbency. You will easily find many like this and have lots of conversations where they bemoan how stupid their company is, how politics gets in the way of innovation, blah, blah. These conversations go nowhere. You need an innovator with clout, somebody who is trusted and respected by those with the power to close a deal.
So you have to cast your net really wide to find the few that sit at the intersection of this three-way venn diagram. Cast a wide net and then qualify like hell. Lots and lots of conversations, lots of active listening, lots of “see ya later” when you don’t hear the screams of pain that indicate these guys really, really need you. This has to be more like a guy who has had a
heart attack needing a surgeon than somebody with a headache needing an aspirin.
Once you have found the problem, the hard work starts. This is what I think of as the middle of the chess game. You have opened well, now it gets complex with lots of options and moving parts. Now you have to assemble a solution. It is an assembly job, great for Lego fans. You need these pieces:
1. Your technology at the heart. You will need easy interfaces to all the other bits as you are the newcomer and therefore the one who is most motivated.
2. The other components that deliver a total solution. This could be as simple as the hardware and networking if you are running behind the firewall (yes, that is technically simple but the incumbency innovation antibodies lurk here) or include software components up and down the stack. Remember, you are solving a problem, not selling technology. If you don’t do this hard work, the incumbency innovation antibodies will attack you; an existing vendor will show a “just good enough alternative”.
3. A team that can pull it all together, the system integrator. Your view has to be pragmatic; use your own people, or one of their approved integration vendors or an internal team. This is a key area where your Sponsor needs to guide you.
If you get through this part you are positioned for the end game, you are in the closing zone. That is the subject for other posts.
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