How to mitigate pitfalls of early sales by startups
In my Big 5 consulting years, I had worked with many large enterprises. My clients had ranged from Fujitsu, Agilent, Cisco, Freescale Semiconductors, Epson, Microsoft, Expedia and others. As a junior I was responsible for strategy, design, implementation and got to learn a lot about how the machines of enterprises grind (slowly sometimes). I had a first hand view of their decision making processes, the politics, the motivations. As I got promoted, I was also involved in selling consulting services and was involved in many deal closing presentations.
When I joined a startup in 2009 as an employee #2, my first job was to find early customers. I had never done sales directly. I persisted because I was too excited to be in the startup. I had done consulting sales, so this would be easy.
I was so wrong. I soon came to the realization that selling to enterprises as a fledgling startup is a different beast. After several sales opportunities, I discovered some patterns which any B2B startup should consider. Below, I discuss some ugly truths about B2B Saas sales and what you can do to mitigate, if at all.
- Sales cycle will be long
Selling to enterprises can take a long time. There is no getting around it. There is no way you can speed it up. Even if you are a product led growth company, sales is usually involved to close the big deals.
How long are the sales cycles? It varies by industry and type of software. It can range from 1 month to 6 months, sometimes more. Longer if you are trying an OEM play.
How long are the sales cycles? It varies by industry and type of software. It can range from 1 month to 6 months, sometimes more. Longer if you are trying an OEM play.
One of the big mistakes is that we get fixated on a large enterprise hoping that if they close, then you will start seeing revenue. You could get lucky. But don’t make luck a strategy.
In my startup, we were once chasing Bank of America as a customer. After many meetings and a visit to N Carolina we were told NO. What a waste.
How to mitigate? 1. Make sure that the enterprises that you are working with are qualified and legit ICP. Don’t waste time on one off customers who don’t fit your profile. Bank of America was not our ideal customer. We were just too excited to entertain them. It was a good thing they said no, or we could have got sucked in to meeting their myriad requirements. 2. Keep a tight sales process. Make sure you are dealing with the right people, you have clear criteria of winning from them, qualify them and follow up diligently. Act like a mature company. 3. Expand your sales funnel. Make sure you have sufficient opportunities to work on. A rule of thumb, multiply the deal size by 0.1, use that for your pipeline amount. 4. Be ready to kill the deal early on. I know you will get excited with a large brand name as a customer. If they show signs of wavering or you think it will take a long time, cut loose and focus on other deals. Is this easy? Absolutely not. This is the part where you get tested for your hustle. Keep building the momentum.
- More than one buyer
In almost all cases, you will need to persuade and sell to more than one person. You will start with the user, then their bosses, then procurement, maybe legal and finance. Higher the ACV, the larger the number of touch points needed. And selling to each stakeholder is a bit different. You may sell the product value via the features to the users, but you need to sell the ROI to the buyer. You will have to give the same demo more than once.
How to mitigate?
Be prepared to create different pitches bases on the audience. Figure out who the buying committee will include, what is the motivation for each buyer type. Make a buyer map. It will be similar across companies. Ensure you speak to everyone on the map and they hear what’s important to them. I once had to present in front of legal department, so I made a pitch specific to legal that talked about data privacy and other legal concerns.
On that point, having a sponsor from the prospect is critical. The sponsors are your champs. They will back you and guide you through the process. You might even need 2-3 sponsors at the same time.
Being single threaded is very risky. Try to get relationships with more people in the company so that you can hedge your bets if one leaves.
- Not a priority
Customer has validated that they have a significant pain point and your product is much needed. But there are other pressing needs that need their bandwidth.
Enterprises do not have one pain point. They have multiple and they can only work on a few at a time. One good sign for you might be that they are looking for a solution like yours. If the customer is not actively looking for a solution, then it becomes harder to sell. First you have to sell them on the need and then sell your solution.
How to mitigate?
In your initial sales call with the prospect, confirm that the pain point that you are trying to solve exists and it is a top 3 priority for the current year or quarter. Confirm they have a budget for this. If they need to carve out a budget, then it becomes tough and you will need to work hard on the value proposition. This is an important aspect for startups to remember. Just having a pain point is not enough. It needs to be a top pain point.
- The RFP game
RFP stands for request for proposal. RFP is a formal document that is prepared by the procurement department in Enterprises, which is then sent to more than one vendor. They create a competitive situation and select the best vendor. RFP typically consists of the buying criteria, with 100s of bullet points and they will ask the vendors to respond by either checking them or providing detailed responses. Then the responses are compared.
Winning an RFP is really tough for a fledgling startup. You will not be able to check all the boxes compared to other established incumbents. My suggestion is to stay away from deals that require an RFP. Unless you have a solid sponsor inside.
How to mitigate?
If you do want to participate, then respond to the RFP as best as you can. Do not make claims about the product you are not ready for. It’s OK to say what is in the roadmap.
You have a reasonable shot if you were invited for this RFP because they think you have a good chance and they like your product really well. Many times, these are enterprise formalities to ensure they followed a fair process.
(Selling to government is an extremely formal affair, and beyond the scope of this article.)
- Getting blindsided by outside factors
You will get blindside by changes beyond your factors overnight.
A bad quarter and all budgets are canceled or reduced. Your key sponsor resigned and now you have no one to back you. A new executive joins who likes another vendor they used in the previous company. A 100 different reasons like these happen in enterprises.
Unfortunately, this is a reality of enterprises. My only suggestion is to keep a tight lid on your sponsors and the sales process. Even if you lose the sale now, it may come back next quarter or next year. Stay close to the prospect and keep adding value to them.
- You will get ghosted
For months. I have been ghosted even during POC stages. Sure they will apologize and be nice to you later.
How to mitigate?
Try to get commitments upfront for meetings, next steps, and decisions. Work with their rhythm. Make sure you have multiple sponsors.
Move on after you have tried a few times.
- Overselling will bite you back
You might get impatient and try to keep asking for next steps. Especially, if they are ghosting. But if you push too hard, they will push back and claim fatigue. Once a prospect told me to ease on my salesy-ness.
Keep a balance. In the early days of sales, frequent communication is good. Slow down if they are not closing. Respect their space. Different sales people have different techniques. I’ll just leave it that that.
- They are looking for trusted partner
Enterprises are extremely risk-averse. They want to work with companies that can deliver them value and they are trusted partners.
How to mitigate?
Act like a mature company. Be responsive. Be professional in your communications and presentations. Have a deep understanding of their context and show your value proposition accordingly.
Don’t give any excuse for them to lose that trust.
- They want a solution, not product.
They really really do not care about your product. They just want to know if you can solve their problems:
Effectively, with least friction, at a reasonable price, and you will continue to be around for a long time.
They have no qualms of going with an established player EVEN if they are poor quality or expensive. Enterprises will almost never buy important software just for low price.
How to mitigate?
Create a solution mindset. Convince them you understand their challenges and provide them a future state vision. Don’t make your product the center piece.
- Edge cases will show up at unexpected times
Edge cases will keep coming up and show up at unexpected times. Expect them.
How to mitigate?
Having a good and experienced PM, technical architects and designers really helps in building for the enterprise as they have gone through this before.
- Product scope will keep widening
Two similar sized companies in the same business will likely have different business processes. You will have two slightly different set of requirements, which you will need to find a way to accommodate.
It’s the battle between the varying nature of business vs physics of software.
And this will continue through the products’ life. Enterprise products never really get done. Only exceptions I have seen are productivity tools like MS Office or Google sheets which have not changed in a long time. But go upstream into ERP, CRM, Supply chain, marketing automation, they are constantly evolving to new use cases.
In addition, you will get bombarded with security and compliance requirements. You will need to deal with them tactfully even if you don’t meet all of them.
How to mitigate?
Stay true to your north star. If the scope change is relevant to your current product strategy, then find a way to accommodate it. Otherwise put in backlog.
I wrote a whole article on this.
- They expect white glove service.
Give it to them. Regardless of ACV or cost. When you are a startup you need these customers to be successful at all costs. They are your social proof.
How to mitigate?
If you have to do things that go beyond your product, do it – data cleansing, migration, training. Go above and beyond and provide a great end to end experience.
Discouraged? Don’t be.
There are many enterprises who tend to be early adopters. Make a deal with them first.
When you talk to prospects, you will likely a get a sense if are an early adopter. Ask them what other startup software they have purchased. If they have bought other startups, that is a good sign.
Another trick, think of other startups similar to you but not in your area that enterprises buy. For example, you are selling a new calendar scheduling tool, then check the web site of a recent document e-Signing software. These are early adopter customers. Find testimonials and case studies on their web site. Now reach out to these companies.
Ask other founders which companies have they found early adopters in. Investors should know too.
You will find them. It just takes time and patience.
Be aware of these pitfalls. Learn from each deal and keep getting better.
