cracking start-ups (the first of a two part article on selling strategies in an early-stage tech...

22 | Winning Edge

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he UK economy will be heavily reliant on the private sector for job creation in the coming years. A recent study by Ernst & Young found that entrepreneurs supplied 67% of jobs created in the EU last year. Also,

given that the UK now has the world’s most Internet-dependent economy, it figures that technology start-ups will play a crucial part in the recovery.

In this article, I will consider the sales strategies and tactics appropriate to tech start-ups that are now looking beyond their initial foundation stage, and how they need to differ from the methods applied when selling solutions that are provided by mature-market brands.

COMPANY DEVELOPMENT STAGESWhen a completely new technology company (or indeed any business) starts up, it is typically born out of the vision of an individual or small group of entrepreneurs who are passionate about fulfilling the needs of a market in a better way. Often the founder(s) will line-up their first client during the concept stage, usually through existing relationships. This client (or should I say partner and, in many instances, friend) is fundamental in shaping the initial offering and delivery approach. The product will be guided, shaped and modified during these early engagements, often with a number of functional gaps being identified and quickly resolved, and the value add will increase, as will the applicability to other businesses facing similar challenges. As regular revenue streams are established, a small team is built up of development, product and operational staff.

I’ve been involved with several start-ups during the past 20 years that followed this blueprint, and in every case the founder was the organisation’s first (and at this stage) only ‘salesperson’. As a wearer of many hats, including product design, general management and sales, this person is usually a multi-talented, highly skilled and driven individual.

This phase is a step in any company’s evolution, but in order for a business to grow, sales are essential and unless a sales capability can be effectively scaled, this will never happen. Also, the founder’s selling style used to acquire initial clients is often very technically oriented, preparation-resource intensive (eg. doing speculative development work) and reliant on existing, warm business contacts. By definition, this has inherent scalability limitations and a finite prospect reach.

At the other end of the sales landscape you have the big-name global brands with thousands of employees. Their products and services tackle well-defined issues and are considered by the marketplace to be the ‘gold standard’. These sales operations

In the fi rst of a two-part article, MIKE SMEE looks at the sales strategies and tactics needed to grow new technology businesses

T

EARLY-STAGE SELLING FEATURE

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CRACKING START-UPS


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In my new company things were very different. I remember following up on a marketing mailshot to publishers and membership organisations in parallel with my telemarketing guy. We were spouting about how this was the most cost-effective and quickest time-to-market for implementing interactive, collaborative and monetisable web communities around a publication, event or professional pursuit, ie. trying to bridge a gap, where a void between what they were doing and what else was possible had not yet been identified. Moreover, we were completely unknown, unable to leverage existing client relationships and brand cachet as a door-opener. Note: this was the year 2000 (before even the term ‘Web 2.0’ let alone ‘social networking’ had been invented).

As time went on, we began to realise the sheer ineffectiveness of the approach and how far we really were from closing the fast big-ticket sales that the business plan demanded. Unfortunately, in 2001 the tech

market collapsed, reducing wider market confidence and, most importantly, drying up sales. I parted company with emptier pockets and a new realisation about the world of early-stage technology selling.

In the intervening years, I have been involved in setting up sales functions within several

other start-ups, launching brand-new propositions and also spent some years as part of a global, publicly-listed technology vendor, experiencing both sides of the coin. I’m pleased to say subsequent start-up involvement met with a much higher degree of success.

THE DIFFERENCES IN EARLY!STAGE SELLINGAll clients go through a purchase decision cycle (PDC) and, depending on which recognised model you choose to illustrate this (I have used Robin Fielder’s here), the steps will broadly conform to:1��Recognising a gap between what they are doing and

what they could be doing to push the business forward2�Deciding if there is sufficient pressure forcing action3��Creating a list of needs and wants and allotting a

budget4��Evaluating the options available and the various

suppliers5�Reconciling any concerns they have6�Negotiating with the supplier for the best deal7�Implementing the solution.

As in the story earlier, the key thing is to avoid what I call attempting ‘blunt-instrument’ account penetration. This is attempting to sell a proposition aimed at fulfilling a need before a need has been recognised by the client, or trying to find clients at steps 3 or 4 above using classic budget/authority/need/timescale qualification methods (BANT). These are wholly inappropriate when, in reality, as far as your company and proposition is concerned, the vast majority of the market will not have even reached step 1.

To use a metaphor, it is fine to plug a wedge-shaped gap with wedge. But using a wedge to try and fill an unmeasured void that is hidden from view beneath the floorboards is not going to be very effective. What is required is a much more ‘surgical’ approach.

FEATURE EARLY-STAGE SELLING

are very heavily process-driven, employing multinational, formally structured account management.

Before a company reaches this scale, a host of complex factors and investments need to come into play (typically, a series of acquisitions, mergers, IPOs etc.). But what of a company taking its first steps away from selling by the founder alone, establishing a sales operation and approaching the wider market?

A COMMON MISTAKEIt is a mistake I often witness, and have previously fallen foul of, to apply established player-type strategies and tactics while trying to make headway with a new proposition provided by an ‘unbranded’ vendor. However compelling you believe your ROI story is, however unique in the market you think you are and however many markets your offering is apparently applicable to, if you are (a) unknown as a brand, and (b) trying to solve a valid problem but in a new way that maybe requires a little market education, initially it will always be tough.

In 2000, I was working for a well-known provider of IT infrastructure, but was tempted away by the prospect of share options to join a VC-funded tech venture as national sales manager. The company had built what was essentially a social networking platform, before social networking had come of age. As far as we could see, it made sense on every level. It was highly cost-effective compared to building in-house, quick to implement, had extensive functionality, low training overhead for staff and many other strengths. However, I had been used to selling products and services that addressed explicit needs for a nationally recognised B2B brand, where I had to do little to uncover ‘pain’ before talking solutions. This was essentially selling fulfillment on explicit needs and we often jumped straight to just talking solutions and costs. The challenge was ensuring that customers bought from us rather than one of the other two similarly accredited companies in the UK. Therefore, by default, the chances were that I would win one deal in every three.

‘It is a mistake to apply established player-type tactics while trying to make headway

with a new proposition’

COMPANY DEVELOPMENT AND SALES FUNCTION STAGES

START!UP STAGEO�Founder sellingO��Leverage personal

contactsO�Product developmentO��All sales (usually)

direct

GROWTH STAGEO��Dedicated sales

manager/directorO��Evangelical sales

approachO��Consultancy lead-in

to product salesO��Product re! nementO��Initial key partners/

resellers appointed

LATER STAGEO��Dedicated sales

director and full sales team

O��Process-driven sales operation

O��Products address well de! ned problems

O��Channels to market expanded

PHASE TRANSITION

PHASE TRANSITION


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FOCUS ON KEY VERTICALS AND LEVERAGE YOUR ‘REFERENCEABILITY’The first step in taking the surgical approach as a start-up is to establish what your key vertical markets are. This is easy if your technology has been pre-engineered as vertical-specific. However, if you have a horizontal proposition then adopting the ‘anyone’s a prospect’ mindset is a dead-end. An unknown company selling a new proposition with limited resources and marketing budget must focus its efforts on key verticals or niches. It’s not only that all the good marketing texts will tell you this, but also I know from deep first-hand experience that it is very easy to waste a large number of marketing pounds and valuable salesperson hours by casting the net too wide.

I have always found it easier to land new clients by confining prospecting activity to a specific vertical or niche where there is some ‘referenceability’ (eg. through working with early-stage clients). You need to have a basic understanding of how the markets work and get to know the communities associated with that market. Remember, similar businesses will be encountering similar issues and will require similar solutions. People talk, word spreads, decision-makers move jobs. This may be obvious, but you would be surprised how often this is ignored in pursuit of markets perceived to be more lucrative. You shouldn’t go after markets that are in deep decline or where there is no opportunity. However, breaking a new market from scratch takes time and start-ups rarely have this luxury.

Expansion into other verticals/niches that have synergies will be explored in the next article.

DON’T LEAD WITH A ‘BIG TICKET’ PROPOSITIONAt this stage your flagship solution is wholly usable, but not fully formed and may not directly address what prospects see as their explicit needs. You need to engage a client in the education process I mentioned earlier, which is often lengthy (especially if your proposition is a high value one) and requires close client access over a period of months while they work their way through the stages of the purchase decision cycle.

A lower risk (lower-cost) yet compelling proposition that will naturally lead the prospect through the early stages of the process is required. They need to somehow understand how you can increase sales, reduce costs, and improve efficiency within their business.

SELL SMALL CONSULTING ENGAGEMENTSThe best way I have found of making an initial sale within a high-potential account under these circumstances is through consultancy. This initial offering would typically consist of around five to ten days of professional services work delivered by a well-qualified subject matter expert from within your business. The proposition should be engineered with these three objectives in mind:O�To offer genuine business value even as a standalone

piece of workO�To act as a credibility-builder during the time you work

together and give you the opportunity to educate further about your bigger-picture value proposition

O�To act as a pre-qualifier. If a client pays for your professional services (as opposed to you doing

Contributor Mike Smee is director of sales at Eysys, a fast-growing technology company using ‘machine learning’ and ‘big data’ to help clients sell more, spend less and reach more customers online. A fellow of the ISMM, he has over 20 years’ business development experience in the software, e-commerce and technology-services sectors, with over a decade in senior management, primarily in early-stage technology vendors. Visit www.eysys.com

speculative work free of charge) they are much more likely to give it the importance it deserves, take the engagement seriously, and then consider allocating further budget to address points raised as the output from this engagement.

A by-product of working this way is that you start to recognise some revenue early on in your relationship, which helps to meet the cost of sale in pursuit of landing a big-ticket deal. It also determines the applicability of your flagship solution to the client’s scenario. The box above provides an example of a consultancy engagement.

OFFER EARLY ADOPTER INCENTIVESOffer incentives in order to win some good ‘showcase’ customers. This will need to be more of a partnership initially. This early adopter programme should set out to:O�Prove that your solution will deliver significant uplift

in business performanceO�Gain client feedback in the system delivery processO�Gain client feedback on additional or new product

developmentO�Create a reference site.

In recognition of the client’s support, the incentives offered could include providing reduced commercial licensing terms for a specified period of time, or undertaking specific client software development at a reduced day rate.

IT’S A LONG GAMEBuilding a sales operation and growing a company organically from the post-foundation stage to the point of ripeness for acquisition is typically at least a five-year journey. Your business model, account planning, retention and management programme should always look to the long term. When solving client problems I would never advocate going for the fast buck to the detriment of long-term aims. Recurring revenue should be the reward of continually solving your client’s challenges.

In the next Winning Edge I will focus on how to apply appropriate account management techniques/structures, enter new verticals and scale through indirect channels.

EXAMPLE OF A CONSULTANCY ENGAGEMENT

INITIAL PROPOSITION

Five days’ professional services work covering analysis of:

• Product proposition• Customer base• PPC spend• SEO/SEM pro! les• Cost-e" ectiveness of online

marketing• Options to remove

unnecessary/non-performing costs

NEXT STEP

A. ROI of # agship solution may be justi! ed at this stage and client may proceed to step 3 in PDC

B. Further professional services engagements may arise, increasing client exposure window and o" ering further opportunity

COMPLEX FLAGSHIP SOLUTION

Application of ‘machine learning’ and ‘big data’ to mass-harvest online competitor pricing/product promotion information and automatically check the viability of marketing campaigns against those of the competition; make real-time recommendations on adjustments or exclusions to ensure competitive advantage


cracking start-ups (the first of a two part article on selling strategies in an early-stage tech...

Technology