– Wayne Gretzky
I’m a firm believer that business development activities should be focused and with a stated purpose/objective and expected return. But what most companies do is hire one or more BD reps and send them out in the jungle to see if they can find anything interesting, which I guarantee they will do. The problem is the more BD resources you have the more “interesting” things they will bring back, regardless of whether they are consistent with your company vision/direction or can be supported by available company resources. This often leads to chaos because no benchmark is applied for deciding which interesting things should actually be worked on. So instead, too many things only get minimal attention and suddenly the company’s focus is lost or diluted. Eventually someone screams “stop the madness” and all but a couple of the truly justified BD projects are shut down. But unless the BD staff is shrunk, this same chaotic loop will continue over and over again.
Every company needs giveaway promo items but how much should you spend and on what type of items? It’s a real bummer to order 1,000 of something only to find out it didn’t have the effect you were thinking. Remember, just because you think something is cool or useful doesn’t mean everyone else will. These things are very individualistic and a lot of stuff gets thrown straight into the trash after you walk away. But one good thing about promotional items compared to printed material is they last forever, or I guess until you change your logo or tagline.
Thanks to some contributions from my long-time promo items rep from Standing Ovations, Don Nichols, below is a list of some things to think about when deciding which promo items you should carry.
I recently heard Dr. Robert Wiltbank from Willamette University use this analogy and loved it so much I had to share it with others. Entrepreneurs are, by nature, very optimistic. It’s one of their core survival skills. But this often makes it hard for them to recognize signals of negative feedback. This applies to things like the success of their product and progress towards the business plan targets. But it also relates it to investor feedback while pursuing fundraising, customer feedback while pursuing a sale or vendor feedback while trying to secure a partnership. Experienced sales professionals are trained to listen for negative feedback and use various techniques to assess the real viability of the opportunity. But most co-founders aren’t experienced sales professionals and the techniques I’m referring to aren’t easily learned from a blog post or a book. I’ll explain further.
I guess the corollary to this could be “don’t use a compass when the precision of a GPS is needed”. In fact, the main point is to use the best tool for the job at the time. If you need to move fast and just want to make sure you’re directionally correct, then a compass is perfect. With plus/minus a few degrees of precision, you can quickly set off in the right general direction. In fact, I wrote a blog article on this exact topic titled “An Unfair Advantage All Startups Have Against Big Companies“. Same for things like estimating your TAM/SAM market size (does it matter if it’s $3.2B versus $3.3B?), estimating salaries for new hires over the coming year and the like.
The analogy of using a compass is ideal for times when speed and flexibility are more important than precision. In other words, make sure to use a GPS instead for things like revenue recognition and your investor capitalization table – where precision is mandatory.
I don’t have anything against a traditional SWOT analysis but recently found myself helping a couple of startups figure out how they are progressing against their business plan and vision. They were less concerned with external market forces like competition or market growth and more trying to figure out if they were on track versus off course. I asked them to create 4 lists:
“Cowards die many times before their deaths; the valiant never taste of death but once. Of all the wonders that I yet have heard it seems to me most strange that men should fear; seeing that death, a necessary end, will come when it will come.”
– William Shakespeare
—(from Julius Caesar – Act 2, Scene 2)
Some investors want to be the last one to commit and few want to be the first. It’s mostly a safety and survival technique. Think about it from their perspective. The first investors to write you a check run the risk that you only get half-way to your fundraising target, which means your business is suddenly an even riskier investment than what they originally predicted. Savvy investors that write checks early in the round will intuitively take this into account, which might explain why they are being extra cautious and demanding in their due diligence. These dynamics are behind my related analogy on fundraising (see article here titled “The Domino Effect of Fundraising“).
As it turns out, I’m a big proponent of letting the investors control the pace of the “dance”. But when you’ve got investors on the fence for excessive periods of time and need to close your round, you need to apply some genuine sales closing techniques. In fact, during your initial conversations with each prospective investor, ask what sort of things are important to them when making their investment decisions. Focus on those things during your conversation but also write this information down when you’re done so that later when you find yourself needing to nudge them to a decision you remember which aspects of your opportunity and business plan to accentuate and highlight recent progress or new information.
Fundraising is rarely easy and is usually a far underestimated undertaking by entrepreneurs that haven’t done it before. In the fundraising section of this blog, I describe ways of approaching the exercise (see related article titled “The Domino Effect of Fundraising“) and what to do if you don’t reach your goals (see related article titled “Stuck at 75% of your Fundraising Goal – Now What?”). But if you genuinely feel like your product idea and business model approach is sound, and have gotten validation of this via investor prospects and your Lean Startup validated learning approaches (order book here), you’ve got to turn your attention to other things that might be getting in your way of convincing investors to write a check. Below are a few on my short list to start with:
Too many startups discover they’ve got an acquisition-blocking or acquisition-inhibiting issue after a price tag has already been agreed with the acquirer. It comes out during due diligence and the best outcome could be a reduced acquisition price, significantly increased escrow amount or something else not as palatable. The worst outcome could be a busted deal.
Trying to “set the stage” late in the game is usually very difficult and sometimes impossible. So why not think about it now and set some processes in place to keep things clean from an acquisition readiness standpoint? Here are a few things to consider:
The social media marketing team at CA Technologies put together a series of videos as internal training exercises for the global sales and marketing team. Then they posted it on YouTube for others to benefit from. They are fairly helpful for those trying to figure out how to get started with social media given the explosion of choices and uses.
- The Social Jungle: http://www.youtube.com/watch?v=JxyKMl71ryI (36 min)
- Twitter: http://www.youtube.com/watch?v=NWU0PosizeU (38 min)
- LinkedIn: http://www.youtube.com/watch?v=5JaG5QFL73I (28 min)
Wait, there’s much more!!!
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“Founders Academy is a must! Gordon unlocked new value in concepts I thought I was already familiar with.” (startup founder)
I really enjoyed this blog article from Dharmesh Shah. It’s unbelievable how many startups get into trouble not because their product isn’t having success or their company can’t scale but rather because the co-founders have some “funk” between them that grows to the point that the train goes off the tracks. In a related article I discussed some of the implications of matching up with a co-founder that’s already in the bonus round (see article here titled “Is Your Potential Co-Founder Already in the Bonus Round“). You can read Dharmesh’s post here.
His list includes the following topics:
In the world of mobile apps, as an example, a startup can create a minimum viable product (Lean Startup Methodology – order book here) and put it into the open market via multiple channels for direct consumption by interested parties. In doing so, their primary burden in the beginning is on general awareness of the solution’s availability and hoping the target user will be attracted enough to try/buy the offering. If so, they start getting orders and proceed from there. But many other product ideas and associated business models have a “chicken-and-egg” challenge of requiring two constituent audiences to be convinced before business plan viability is achieved.
The situations usually can be described as having a supply side (often the service provider) and demand side (usually the consumer). Online marketplaces always meet this criteria. The supply side won’t want to commit to any costs unless there is a meaningful demand side already in existence. But the demand side might not perceive any value unless there are any supply side offerings/providers to engage with. So rather than get paralyzed with the situation, let’s explore some possible approaches.
Sales incentive plans are really delicate things. This stems from the fact that the best sales reps/managers intuitively do whatever puts the most money in their pocket. They do so assuming the company has put a lot of thought into how they are incented and, therefore, whatever pays them the most surely is good for the company too. Because of this, don’t expect a sales rep to read your mind.
Never break these rules when setting commission plans for your sales team.
This is one of my five golden rules for setting sales compensation (see related article titled “5 Golden Rules for Setting Sales Compensation Plans“). Within legal and ethical limits, a good sales reps should do whatever puts the most money in their pocket and it’s up to the company to make sure that behavior is consistent with the company strategy. But this is sometimes easier said than done so let’s explore further.
I’ve written about how prospects take themselves through 60% of the sales journey (see related article titled “Prospects Take Themselves Through 60% of the Sales Journey“) and have challenged readers to make sure their website is enabling sales (see related article titled “Is Your Website Enabling Sales?”). For either of these concepts to be successful, the quality of your marketing content is key. Violating one or more fundamental quality rules could easily cause the prospect to disqualify you from their consideration list without you ever knowing why or having a chance to talk to them.
It happens over and over and over again. A company has a successful growth spurt and is ready to ratchet up to the next level. They are sitting around a table trying to decide whether to add more offerings, enter adjacent markets, raise their prices, etc, etc, etc. Very quickly they realize it would be ideal if they had analytics and metrics on A, B and C to help make the best informed decision. But they don’t have A, B and C because they didn’t capture the data during the earlier days and now it’s too late.
This dilemma happens at all stages of company evolution. So why not instrument everything for data collection from the start? Seriously, data storage is unbelievably cheap so that’s not the inhibitor. The hardest part is deciding what information/metrics to keep. My answer is EVERYTHING. Now you just have to figure out what “everything” means. Let’s explore further.
I know, I know – your idea is hot, your business plan is solid and you got an awesome reception from the recent demo day you participated in. You’ve got simultaneous dialog going with 10 different potential investors and have closed a couple of them in just the first three weeks of fundraising. But please don’t ratchet up your expenses to a level that assumes you’ll reach 100% of your fundraising goal. What happens if you don’t reach that goal?
Here’s the scenario. After finding your first investor and then having a flurry of activity over a month or two (see related blog article titled “The Domino Effect of Fundraising”) that gets you to something like 75% of your fundraising target, you hit a brick wall. You still have a handful of interested investors but none seem to be making a decision. Because the fundraising process is taking much longer than you thought, you dialed down the fundraising activities to about 20% of your workload so that you could spend 80% focused on the company. Now what?
I just sent the exact message below to the startups I’m currently invested in. I realize (and you should too) that Lean Startup principles (order book here) should be used repeatedly for refinements and extensions of your product/offering. But a key point I’m trying to make is that Lean applies to various aspects of your business model that require validation in order to be viable and then eventually successful.
You’ll hear phrases like inbound marketing, digital marketing and Internet marketing used somewhat interchangeably. What is all this newfangled stuff? Prospects commonly take themselves through 60% or more of the sales journey (see related article titled “Prospects Take Themselves Through 60% of the Sales Journey“) and this “newfangled stuff” is what helps them find you and learn as much as needed about you.
Check out my other blog posts related to marketing here.
Customers of all types have an unbelievable amount of information with which to use to decide if they want to buy your product – and all without ever having to talk to your sales staff. In fact, their typical disdain for interacting with sales people is part of what drives this behavior. The other parts are efficiency (at least they assume it will be more efficient) and the opportunity to get more educated before making a decision. So what can you do about this phenomenon? Let’s explore.
Certain startups can only guess what type of sales model they will end up with once their ready-for-primetime product is released. We are now conditioned to use the Lean Startup (order book here) concept of a minimum viable product (MVP) when it comes to our offering. But why not extend this to the sales model as well? Lean Startup principles extend to all aspect of your business model but few use it beyond the product. The last thing you want to do in the early days of your company is overshoot your sales model with expensive hiring, tools and travel. Of course, companies with mobile apps or other offerings that clearly leverage an e-commerce model don’t need to worry about this unless they later identify extensions of their offering that carry a more traditional sales requirement.
I’ll use a crawl-walk-run analogy to demonstrate a Lean approach to refining your sales model. All steps along the way assume you are doing as much as efficiently possible to drive interested prospects to your website and making sure your site is properly enabling sales. Let’s explore further.
Regardless of your sales model, your website should be the #1 asset when it comes to enabling sales. It is commonly reported that prospects these days take themselves through 60% or more of the sales journey on their own (see related article titled “Prospects Take Themselves Through 60% of the Sales Journey“). And this is for moderately complex offerings that require interaction with a sales person at some point. E-commerce offerings obviously allow prospects to go completely through the sales and fulfillment cycle on their own. But in either case, your website plays a critical role in optimizing sales.
Sales reps are fairly expensive resources on average and field sales reps are very expensive. If your website doesn’t give prospects the information they need to determine if your offering is a fit for their needs, they will either bail out and search elsewhere or if you’re lucky they will proactively reach out to you with questions. But that requires involvement from your expensive sales resources. Instead, make sure your website has the appropriate content, navigation and functionality to get these same prospects all the information they need for their investigation so they can naturally engage you in the next step of the process. This might mean requesting contact from a sales person but depending on your business model it could also mean clicking to download a free trial or buying via e-commerce.
Many years ago, a large American shoe manufacturer sent two sales reps out to different parts of the Australian outback to see if they could drum up some business among the aborigines. Some time later, the company received telegrams from both sales reps. The first one said, “No business here…natives don’t wear shoes.” The second one said, “Great opportunity here…none of the natives have shoes!”
Fundraising can seem like herding cats. You get some initial momentum, potentially from a pitching event, and have a bunch of conversations but can’t seem to get the funding commitments to roll in. I heard one person use the analogy that nobody likes to be the first one on the dance floor but as soon as one couple finally starts dancing, the floor fills with many others. Well, many investors don’t want to be the first one to write a check. Worse yet, most would prefer to be the last check written. Think about it from their perspective. If they write your first check and you don’t get anything else (or only get to 25% of your target), their investment is suddenly a lot more risky than the investor that writes the last check knowing exactly how much you’ve already raised and what you can do with it. Let’s explore further.
I don’t know who came up with this analogy but I’d love to thank him/her because it’s a perfect way to think about your offering and its value proposition. Is it a vitamin? In other words, does it create an opportunity for some improvement? Or is it an aspirin? In other words, does it solve a problem?
Both might sound like beneficial offerings, and they are. But there’s actually a big difference when it comes to buyer behaviors. Imagine you have $2 to spend and, for some reason, you need to spend it today. Someone presents you with a vitamin and an aspirin and they each cost, you guessed it, $2. Which do you choose? Well, if you don’t have a headache or other body pain, then you’ll probably go for the vitamin because of its preventative health benefits. But if you have even a slight headache you’ll take the aspirin without even thinking about it. I know, you could substitute a cancer prevention pill for the vitamin and even someone with a headache might go for preventative medicine. But are you offering a cancer prevention pill?
If you find yourself in the position of considering a sale of the company, the significance of the distinction between selling your company and someone buying your company is HUGE. Sometimes the situation is clear. If you’re struggling financially and hired a banker to seek a sale for the company, there’s almost no way to pretend otherwise. Similarly, if a powerhouse player in your industry (called a “strategic” in M&A parlance) pays you a visit to talk about acquisition, then it’s pretty clear they have interest in buying the company. But there are various situations that you might find yourself in that should cause you to remind yourself of this significant distinction. Let’s explore further.
For years I’ve helped friends and former business colleagues with their job search. If I find out they are thinking about working for a startup or early stage company, I usually talk to them about the various attributes of a bonus round CEO in case they come across a company that has one. What’s a bonus round CEO? It’s simply a CEO that’s already made his/her retirement money on a previous venture. And the more they made the more into the bonus round they are. Sometimes, but not always, bonus round CEOs are willing to take much more risk. After all, if the venture doesn’t work out, they’re already set for retirement.
So what about having a bonus round co-founder? It could be great given the extra been-round-the-block experience. The main thing is to understand the following things:
The textbook definition of Half Life is “the time required for something to fall to half of its initial value. The term is mostly commonly associated with the behavior of atoms in a radioactive substance and how radioactive the substance is over periods of time. But I’d like to use it in connection with today’s social media marketing channel Twitter.
When you tweet about something, the message is sent at the speed of light to your list of followers wherever they are. If they happen to be logged into their Twitter account or some other Twitter reader, you have a decent chance they will see your tweet right away. But if they aren’t, then the more time that goes by and the larger the list of others they follow on Twitter, the lower the odds they will ever see your tweet. So this can leave you with a very short half-life on your tweets – maybe just minutes and commonly just hours. Keep that in mind when deciding which marketing channel(s) to use for your various news updates and campaigns. In fact, most marketing activities utilize multiple channels anyway (website, PR, Facebook page, blog, etc) – each with different half-life characteristics.
Some things that can enhance the half-life of your tweets:
It’s totally understandable that you will have some duplicated content on both your main website and your Facebook page. But please don’t have your Facebook page simply become a second website. Your Facebook page is for recruiting and developing a community of interested followers. It’s an opportunity for you to connect with them directly and for your followers to connect with each other. So make that its primary purpose both in layout, content and administered use. And cherish the relief from not having to always replicate your various website edits and content updates/additions onto your Facebook page.
Wait, there’s much more!!!
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“The way you convey the material is great and the examples you give makes things clear.” (startup founder)
I have a lot of pet peeves with business development, having run the function for multiple companies. This one in particular relates to how, too often, a PR-related effort is disguised as business development (BD). An example might be a company that uses the BD team to get a mostly-meaningless MOU with another company just for the purpose of creating a press release that can be posted on the website. Or maybe your BD team got you into some meaningless partner program that cost $5K to play but you have no real intention of doing much with it. It’s not that the resulting press release has no value. But the effort should be recognized as a marketing effort or something you’re doing to facilitate fund raising. It’s just that your BD rep is the best one to deploy in order to secure the relationship compared to someone responsible for marketing. Let’s explore further.
I use this rule all the time when advising startups and early stage companies. Actually, it has application in any sort of sales pitch, regardless of your company’s stage. I call it the “So What” rule because it’s an easy way to think about it during a conversation or presentation. It’s a fundamental element of all sorts of sales and presentation methodologies that are just called something different and with a longer explanation. Here’s the simple approach.
Remember that investors are skeptical to start with, and rightfully so. Most investments by angels and VC’s either fail completely or return less than what they invested. They count on something like 1 out of 5 investments to give some minor or decent form of return and 1 out of 25 to do really well. So many executive summaries and business plans come across their desk claiming to completely change the world that they basically get numb to superlative claims. Same for customer prospects you’re selling to.
I just came from a startup pitching event with about 100 angel investors and VC’s in the audience. The startups only had the typical 5 minutes to give their pitch, which meant they had to dramatically streamline their full story into something more akin to an elevator pitch in a really tall skyscraper.
I knew one of the startups because I have already verbally committed an investment to the founder. I talked to him at the mixer afterwards and asked about the feedback he got from the audience members. He responded that too many of the investors he talked to immediately afterwards said they didn’t quite get it. As I thought about it later, I realized that he might be suffering from the “and then magic happens” dilemma. Without knowingly doing so, his streamlined story caused his pitch to come across like this:
Wow, what a plethora of trends, projections and factoids from Business Intelligence. Great material for startups looking to add market sizing and trending data into their pitch.
http://read.bi/PodFcu (click link labeled “State of the Internet” at the bottom of the blog article to see the slide show)
The immediate response is obvious: to facilitate the fundraising process. But what other benefits can you expect to gain from participating in a pitching event? How about these for starters:
Your 3-5 Minute Story
Before your first formal pitching event you probably had only two modes of responding to interested parties: the 30 sec elevator pitch (see related article titled “Your Elevator Pitch Only Needs to Accomplish One Thing“) and the 30-45 minute interrogation by an interested investor (mostly Q&A format). Preparing for a pitching event forces you to tell the most important elements of your story in 3-5 minutes. And you get to do it without interruption, which also means you are forced to connect your points in logical fashion.
The latest version of this article has to moved to a new site. You can find it here.
As you’re getting started with your new company, possibly the last thing on your mind will be defining the principles you want to run your company by. You don’t even know if your product will work or if customers will pay money for it. So why waste time on company principles? The answer is because the moment you start hiring your first few employees, the culture of your company will start to get defined. Many people think a culture is something that just naturally develops from the collection of personalities and actions taken by the employees. And for sure there is a lot of truth to that. But what can you do as a founder to set a foundation upon which the culture develops? The answer lies in founding company principles. These are things you declare and are almost never willing to deviate from. They serve as the litmus test for critical decisions. And they serve as the mantras employees will voice later and the bar they will try to always reach for personal recognition.
I’ve had the privilege to work for a company and to advise another company that are pure demonstrations of this. One company had a half-dozen or so core principles that were set in the very early days and became so ingrained in the company that they were the culture. If you asked any employee what the company stood for, they could all recite at least three or four of the founding principles. These included the following mantras that were my favorites and the ones most remembered by employees:
“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things we have done. Innovation is saying no to 1,000 things.”
— Steve Jobs (Apple WW Developer’s Conference, 1997)
Welcome to my blog. I have a lot to talk about and a lot to share. I have “zigged and zagged” throughout my carrer, spending time as an individual contributor and or manager/executive over just about every company function there is. I’ve worked for very large companies as well as startups. These companies spanned the spectrum of hardware, traditional software, SaaS and even semiconductors. I’ve also traveled the world on business, from China to Brazil, from Israel to Ireland, from Singapore to Mexico, and almost everywhere in between. I truly hope you enjoy the content on this site and welcome your feedback and commentary.
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