Editor’s note: Joe Procopio is the Chief Product Officer at Get Spiffy and the founder of teachingstartup.com. Joe has a long entrepreneurial history in the Triangle that includes Automated Insights, ExitEvent, and Intrepid Media. His columns are published on Tuesdays.
RESEARCH TRIANGLE PARK – Let’s talk about taking a startup from small sales to big sales.
I had coffee this morning with a friend of a friend who is a sales guru, for lack of a better term. After a ton of success selling software, she got the itch to do her own thing. She went looking for a startup that was not just a lifestyle business, but had the potential to become a billion-dollar company. Long story short, after some time, she found what she was looking for. Let’s call her Rose.
Without getting into a ton of detail, the startup Rose bought does indeed have billion-dollar potential in a very hot space. It had raised a pre-seed round and is at the point where the tech is solid and there are a few customers, but only a few.
Joe Procopio
This is where my software-selling friend could make a huge difference in the odds of the startup’s survival and ultimate success. Rose had recently led sales at the executive level for a similar company in the same space, resulting in a billion dollar valuation. But her entry point at that company was when the startup was already well out of the gate. This new venture was basically starting from scratch.
As we walked through her scenario and reviewed her issues, there were both good and bad signs that I’ve seen dozens of times before.
The Right Product
Her product definitely works and provides value. This is a good sign because this is where I usually see the first seeds of failure.
When I see a working product not selling, it’s usually because the value premise was off from the beginning. Maybe the product didn’t do everything it was intended to do, or it had no engagement, but what it almost always comes down to is:
Does the product have a traceable direct value for the customer?
With business to business (B2B) software, such as Rose’s, value is usually easy to measure — usage of the product leads to engagement with the customer leads to a higher conversion rate than without the product. This was happening for her and she had proof.
The Right Market
The next obvious sign of struggling sales is that the startup has indeed released a killer product that generates revenue for its customers but is entrenched in the wrong market.
Before Rose bought her startup, it had origins in a niche market, an industry that was hyper-competitive and withering, not to mention fragmented and ill-defined, but easy to enter.
I see this all the time, especially with young entrepreneurs. College entrepreneurs tend to build products for students. Tech entrepreneurs want to create developer aids. Educators like edtech. And so on. There’s nothing wrong with this strategy, per se, but those markets are usually flooded and it’s hard to stand out, let alone get traction.
Rose’s startup had already started to move away from its original market into a new, larger, and healthier market when Rose acquired it, and she quickly completed that transition. In fact, I advised that at this point it was probably a better idea to abandon the original market altogether and focus strictly on the new market.
Customers Are Happy
The few paying customers that the startup has have seen substantial results with the software. Conversion rates are 10x what they were without the software. That 10x is a big, important number because it knocks out another problem I see a lot.
A startup will usually only see the benefits of their product in a vacuum. If our product does something good for the customer, they should want it, because it does something good.
In other words, if we can increase your revenue by 2%, and we only take 10% of that, then our customer gets a “free” 1.8% increase in revenue. That’s what we’re selling because that would make anyone happy, right?
Yes. It would. And as I said before, it’s mandatory that we be able to prove that to our customer. The problem is they won’t care.
Rose’s background in sales means she’s very familiar with customer indifference and we agreed it boils down to two problems.
- Everyone with a software product and a smile is going to promise an increase in revenue. Our customers are getting spam, cold calls, invites to webinars and seminars, and offers for luxurious 3-day cruises.
- Even when we’re legit, no one has time to jump through the hoops and understand the workings of a software product for an incremental increase in revenue.
So… She Can’t Get In the Door
This is the death of the vast majority of startups, and the deafening silence on the other end of the sales line is so daunting that many founders eventually give up.
Rose has a great working product that is effective, economically sound, can scale, and even has a track record. But those two customer indifference issues we laid out, let alone the dozens of other issues that can send even interested prospects into radio silence, have created a black hole that is sucking all the energy out of the company.
Of course, there’s no magic prescription to grow early startup sales. If I had a plan to be able to do that every time, I’d be a billionaire. Either that or instead of reading me you’d be listening to me in the ballroom of some Ramada off the airport.
But there are some things that I know work.
The Moon Shot: One Killer Use Case
I’m calling this a moon shot because while it’s almost guaranteed to increase sales by an order of magnitude, it’s really hard to pull off.
Here’s an example. At my previous startup, Automated Insights, we created machine-written content from data. We started as a sports data company, and the MVP we built was a collection of over 800 individual websites for each of the college and pro sports teams. We populated those websites with automated content up to five times a week — game recaps, previews, players of the week, etc.
There was no better way to show off the technology. Anyone who saw it and realized there were no writers creating these articles was blown away. But no one could understand why they’d need something like that. Technologists cared greatly, customers were completely indifferent.
Thankfully, that MVP landed us Yahoo Fantasy Football, and within the first week, when our content created tens of millions of fantasy matchup recaps for Yahoo’s players, everyone got it. We were creating content where content was impossible to create, with high reach and through-the-roof engagement, for fractions of pennies.
Furthermore, every customer prospect we talked to played fantasy or knew someone who was die-hard about fantasy, whether they played on Yahoo or not. That one use case reduced our explanation time from hours to seconds, and the learning curve to near zero.
So while Rose is cold calling, she’s also going to develop and sell her one killer use case, for free if she has to.
The Quick Fix: Turn Indifferent Customers into Fearful Customers
I’m using the word “fear” here sorta tongue-in-cheek. My point is our customers have to come to the conclusion that our product isn’t just a nice-to-have, but that they can’t live without it.
Happy customers are great. But what Rose needs are not-indifferent customers and prospects. I’m not talking about psychology. I’m talking about value. Rose is going to have to make a few guesses about the future, and she’ll need data, lots of it, to back up her assumptions.
Rose is going to rebrand her product from a secret weapon to a soon-to-be-standard way of doing business. Then she’s going to own that standard.
The Long Term Plan: The Must-Have Revenue Tool Story
Along with that rebrand, Rose is going to review how her company thinks about their product and how they sell. Maybe it’s no longer an engagement tool, maybe it’s a revenue tool.
She has an engagement calculator on the company’s website that shows off that 10x return very well, but she’s thinking of swapping that out for a revenue calculator, now that she has the data from those few customers to be able to back up a revenue story.
We’re seeing the end of one digital era and the dawn of another. The Internet age began with eyeballs on websites and pay-per-click and has evolved with terms like stickiness and personalization. In other words, we’re coming to the end of the Era of Engagement.
These days, with digital products, we have to start promoting and proving revenue, with little headache and in a short amount of time. We can’t wait months or years to monetize customers and we need to learn how quickly that conversion will take place. In other words, we’re already well into the Era of Revenue.
So to summarize, we need to tell our customers the revenue story and back it up with data, we need to reposition our product from a nice-to-have to a must-have, and then we need to find at least one use case that makes our must-have revenue tool story simple to understand.
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