The Entrepreneurial Selling Process

Bill Collins

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Exercise

Elevator Pitch

Selling Process Phases

Phase I – “Education Phase” Set your success pattern

“Invent” your customer Establish “Lead” customers

Phase II – Volume Sales Repeat your success pattern

“Mass produce” your customer Establish predictable sales funnel

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Selling Process Phases

Phase I – “Education Phase” Set your success pattern

“Invent” your customer Establish “Lead” customers

Phase II – Volume Sales Repeat your success pattern

“Mass produce” your customer Establish predictable sales funnel

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Quiz: Why do Fish School?

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Adoption Challenge

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Potential Customers

You

You are faced with a host of valid initial customers – how do you proceed?

Neutrogena

Darigold

Foster Farms

KrogerTexaco

Chevron

Exxon

Kelloggs

Pepsi

Nestle

Merck

Amgen

General Mills

Vigilistics

Phase I Overview

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Education

Potential Customers

You

In Phase I, you pick out a few reference-able customers of the same type to win

•Education intensive – both directions

•Make “alterations” to fit

•Allows “characterization” of sale

Phase I Overview

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Education

Potential Customers

In Phase I, you pick out a few reference-able customers of the same type to win

•Education intensive – both directions

•Make “alterations” to fit

•Allows “characterization” of sale

KrogerFoster Farms

Darigold

Vigilistics

Portfolio ExamplesCompany Solution Mkt Options Choice/Lead Cust

Vigilistics Mfg SW Dairy, Food, Pharma, Oil/Gas

Dairy/Kroger, Foster, Darigold

iRise Int’net SW Finance, Health, Retail, Gov’t

Finance/Schwab, VISA, First Am Title, Wells

Case Stack Outs Logist Consumer Pkg, Food, Furniture, Electronics

Consumer pkg goods/Lea & Perrins, Hansens, Celestial

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Phase II Overview

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Education

Recognition

In Phase II, you the leverage lead customers to help similar ones recognize the value, rapidly adopt

•Establish repeatable process

•Make revenue predictable

UDASwiss Valley

Nestle

Dean Foods

Momentum

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Education

Recognition

Additional types then require less education and have faster recognition based on initial success

Nestle Neutrogena

Alternate Approach

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Education….

Recognition

Addressing multiple types at the beginning

•May feel faster, but is actually slower

•Education spread too thin

•Longer for specific types to recognize

•Recognition still tends to be by one type at a time

Education….

Process Benefits Phase I enables market recognition

Enable market analysts to position you Enable target company interest in you Enable funding community to put a value on you

Phase II enables predictability Financial risk reduced

Return on assets can be projected Operational investments scale an established model

Solidify your value to funding community, acquirers Equity, debt, purchase

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When Should I Start Selling My Solution and Who Should

Sell It?

The Short Answers….. Now and You!

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Lead Customer Pre-Requisites1. Reference-ability to rest of target market2. Location allowing intensive interaction3. Looking for competitive advantage4. Have both pain that can’t be solved by

others and a specific compelling project or event necessitating solution

5. Sponsorship from customer manager(s) that control priorities and budgets

6. Willingness to engage a start-up company (this is by definition a small percentage)

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Ways To Reach Initial Customer

Most success comes through relationships

In order of effectiveness……1. Customer helps found company/is early investor2. Founder/CEO/CXO has relationship already3. Engage established partner(s) with privileged access4. Engage established sales person with privileged

access5. Leverage referral from close mutual associate6. Leverage referral from distant mutual associate7. Cold call

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When is Phase I Complete?

When you have a credible answer to:

“What have you done successfully for someone just like me?”

Complete ~ 5 sales. Make ~ 5 installations, demonstrate value. Know why they bought it. Get at least 2 to be references for value. Be ready to deliver in production form.

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Phase II Establish, characterize sales funnel

Stages of sale, Cycle-time, Attrition, Resources required, Selling costs

Use funnel to establish revenue plan Assign quota by resource building blocks Assume productivity & price changes, lead-times

Measure and drive key metrics Tailored to your business

Get a professional to run this Different from a Phase I activity

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Example Funnel/Pipeline

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Targ

et/P

rosp

ect

Lea

d

Qua

lified

Lea

d

Pr

esen

t

Pro

pose

Close

100

4 weeks

25 15 10

4

Susp

ects

50

4 weeks

2 weeks 3 weeks

2 weeks 13 weeks total

Funnel Definitions

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Item DefinitionSuspect All possible customers who could use solution

Target/Prospect Actively addressing to find potential pain, project & fit

Lead Established, identified potential project & fit, working to identify opportunity: intent to buy, budget, decision maker, timing, competition

Qualified Lead Opportunity confirmed, working to get invitation to present solution to decision maker

Present Presentation made, working to get an invitation to formally quote/propose

Propose Formal quote/proposal submitted, working to close

Close You’ve got the business!

Example MetricsChoose the ones most important to your

situation, such as: Number of opportunities in each stage Hot list of accounts at proposal stage Close ratio Time to qualify leads Performance to quota Actual ASP of deals closed

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Channels

“Channels are NOT customers, they help you reach your customer”

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Why Are There Channels?

“Channels enable quality sales time with the customer”

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Channel Comparison

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CHANNEL REACH REQUIRED

CAN SUPPORT FIXED COST

EDUCATION NEEDED

BEST FIT

Direct Sales:

Push L H HBig ticket items, heavy support, concentrated base

VAR’s: Push L L HMid-sized sales, heavy support, concentrated base

Agents/reps:Push M L M

Mid-sized sales, heavy support, mid-dispersed base

Distributors / brokers:Push M L M

Mid/small sales, mid-support, dispersed base

Telesales: Push M M L

Small-sized sales, light support, dispersed base

Consumer retail / dealer: Pull

H L LSmall-sized sales, light support, dispersed base

TV / mail: Pull H H LSmall-sized sales, no support, dispersed base

Internet: Pull H L LSmall-sized sales, light/no support, dispersed base, for customers who target you

Using Multiple Channels# O

f Cu

stom

ers

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Gp A

Customer Group C

Group B

Ch C

Ch B

Channel A

$ P

er C

ust

omer

You will typically end up using multiple channels “One size” usually does not fit all

Sales Plan “Building Blocks”

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Quotas Q1 Q2 Q3 Q4 Y1 Y2

Ch. 1 “Direct” 2 2 4 4 12 20

Price $200K $200K $300K $300K $275K $300K

Channel #1 Sales $400K $400K $1.2M $1.2M $2.9M $6M

Ch. 2 “Reseller” 4 4 6 6 20 40

Price $150K $150K $200K $200K $175K $200K

Channel #2 Sales $600K $600K $1.2M $1.2M $3.6M $8M

Total $ Sales $1M $1M $2.4M $2.4M $6M $14M

Attracting & Motivating Sales Forces

Great salespeople / channel companies are looking for two things: A great solution to sale High variable compensation

Sales people / channel companies are highly motivated by contests

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Top Sales People

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SalesmanAct.jpg

Hiring Top Sales People Top Sales people have common traits:

Have professional & personal relationships with your specific target customers

Each market has a “club” – they are in the club Consistent high achievers to quota

Consistently number one or close to it Consistently highly paid

Hire these people - pay a premium if required Particularly for your early sales team They are well worth the money!!

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Summary Your business model must be:

Acceptable to your customers Able to provide recurring sales. Able to deliver more for less while generating profitable

growth.

Your pricing must: Have a credible reconciliation to value Get early validation from lead customers. Create excitement for both your customers and investors.

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Q&A

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Business Models

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Business Model as defined here is your structure for receiving compensation.

Your choice of business model is a critical consideration for your company.

It is also a critical point of review by prospective financiers.

Business Models

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1. How will you charge for your solution?

2. What makes your customers excited about your price/structure now? Differences?

3. How will you generate recurring sales from your customers (printers versus ink)?

4. How will you deliver continuously increasing value over time?

5. How can you extend your model to enable continuous cash flow, profits growth?

Biz Models – Basic Questions

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Set A Value Roadmap You must plan to increase your value each year Cost-performance improvement curve is inexorable Stems from human expectations model – continuously

expect more for less. Each industry has it’s norms. Productivity improvements enable price reductions Additional features enable stable or higher prices

Slower = margin loss

Faster = margin gain

Expectation

Cost versus performance

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Whether your model is selling “cell phones” or “minutes” you need a roadmap. Cell phones: Started out expensive, got cheap,

then were given away to get the minutes, now need to be combined with cameras and PDA’s to have value……

Minutes: Started out expensive per unit, got cheaper, went to lump sum, then needed lots of additions just to keep the lump sum, eventually are basically free….

Industry Case

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Portfolio ExamplesCompany Solution Biz Model Extensions

Cloud Cover Music

Streaming music & ads for retail

Subscription by month, plus a one-time ad set up fee

Call waiting, additional custom ads, premium music mix, related retail services

Luxim Lamp Charge per unit Increase lumens, lumens per watt/cost

Case Stack Outsourced Logistics

Charge by transaction, sw free

Increase functionality, continuously decrease transp & wareh costs

Zero Gravity

Weightless Flight

Charge by flight Add to experience, eventually into space

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1. What gross margin can you generate?1. Primary indicator of value2. Needs to support your overhead3. Needs to allow room for partners/customers

to make money.

2. How do you generate positive cash flow?1. Payment terms with suppliers and

customers – bias these in your favor2. Working capital needs - minimize3. Understand who is paying the cost of money

Models – Vertical/Horizontal

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Pricing

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Always price to value Approaches:

Price to payback Rule of thumb – 6 months to 1 year

Price to displace existing solutions on cost basis Rule of thumb – 30% net savings or more

Price to displace existing solutions on performance basis

Rule of thumb – hard to get customers to pay more Price to protect against indirect competition

Rule of thumb – highest price that allows end solution to stay attractive versus alternative approaches

Pricing Fundamentals

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Know your value What is the current solution? What money do you save/increase versus this? How easy/hard to change: time, cost, behavior, risk? Do customers agree with your assessment?

Know your cost What can you provide it for? Now and over time? What does it cost to implement?

Be confident in your value It WILL sell If credible/consistent with rules of thumb

Value Pricing

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Portfolio ExamplesCompany Solution Priced

PerJustification

Vigilistics Ent’prise SW Month Payback – productivity

Luxim Lamp Lamp Displace based on perf

Case Stack Outs Logistics Transaction

Displace based on cost

Zero G Weightless Flt Flight Attr vs indirect comp

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PricePerformanceQualityLead-time **RISK/PRESTIGE PERCEPTION**

Value Factors

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CRITICAL validators of value, ROI, price Set future “success pattern” Lower risk/increase prestige of solution Eventually you want to become a “safe bet.”

Lead customers must pay for solution Not credible otherwise – others WILL ask Can receive a favorable deal, not too much Best to pay full price, get other benefits

Make sure they’re willing to brag about it!!

Lead Customer Pricing

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Does your pricing excite both your customers and investors

at the same time?

The Pricing Acid Test

Summary The two-phase selling process drives a

successful business Set the pattern, repeat the pattern It all starts by choosing similar customers

The key factors are education & recognition Phase I enables recognition, Phase II predictability

Phase II is for “mass producing” customers Top Sales people:

Want superior solution, high variable comp Know your customers, have the track record Pay them the money – they’re worth it!

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Q&A