Founders are responsible for the first sales a startup will make. For many founders, this is one of their very first experiences of sales and mistakes are often made. Here are some of the most common mistakes founders make during the early sales process and how to avoid them:
1. Weak Outreach
Mistake: Low quality outreach to potential customers by using automated services or sending cold messages via channels such as LinkedIn. These strategies usually result in very low response rates and may even give potential customers a negative first impression.
Solution: Embrace the grind and accept that lead generation involves a significant amount of monotonous work. If you cannot find warm introductions to potential customers, then creating a customer advisory board can work extremely well. Similarly, don’t spend all your time focused on 1 or 2 marquee customers, as they often require extended sales cycles.
2. Low Prices
Mistake: Setting a low price for your product in the hopes of closing a customer. This is a flawed approach as many customers prefer premium products and will not be tempted by low prices over quality. In addition, low prices reduce your margins, so you need more customers to grow, which in turn increases customer acquisition and support costs.
Solution: “Raise Prices” is investor Marc Andreessen’s advice for startups. You can use the Wince Test to set an artificially high price, expecting to be negotiated down. If you must agree to a discounted price, ensure it’s not tied to a long term contract; this allows you to negotiate later, once the customer is reliant on your service.
3. Incorrect Customer Profile
Mistake: Targeting a much smaller business than your ideal customer. Founders often do this when faced with a potentially long first sales cycle in order to close them faster. While smaller customers can test if your product works end-to-end; they have very different needs across support, pricing, security, etc.; so the amount you can learn from them is limited. In the other direction, chasing large businesses when your ideal customer is small, is just as bad strategically but less common.
Solution: Invest the time to find the correct customer profile. Accept that the sales cycle might be long initially, however, you can reduce time through customer interviews and a customer advisory board to ensure you understand your customer’s needs. Iterate rapidly on feedback to find the sharpest pain point for your customer profile, then: sell, sell, sell.
4. Hiring Salespeople too Early
Mistake: Handing off the role of sales to a sales team too early. As a founder you need to be able to hold your sales team accountable, even if you don’t like sales. You can only do this if you’ve closed the early sales and know what works. If you hire a sales team too early, they can easily blame your product for their lack of progress.
Solution: Wait until you have enough experience to build a sales playbook; some rough guidelines: Consumer: 100 sales, SMB: 30 sales, Mid-market: 15, Enterprise: 5. Don’t hand off sales entirely, direct your first sales hire to work on a section of the sales funnel that needs to scale, e.g. lead generation, allowing you to focus on a more important task — usually closing sales and deployments.
5. Assuming “Yes” means Payment
Mistake: Believing when a customer says “Yes”, they will immediately want to buy the product. Small business customers will usually expect a trial period of at least 2 weeks before handing over payment details. Large business customers often need you to complete a legal and security/IT review before agreeing to be invoiced.
Solution: Do not stop working on the sale once you have a customer’s “Yes”. If you’re starting with a trial, check in with your contact regularly and track daily usage to ensure they remain engaged. If you need legal or security/IT clearance first, be sure to give those point-people the same attention as your original contact. They will not get this high quality treatment from many vendors, so are more likely to help you succeed.
If you’re a founder who struggles with sales, you can take these steps to avoid the most common errors and adopt more effective tactics. You will be making a tough job easier and giving yourself the best chance of growth.
This article is part of a series on Startup Sales1. How to get your First Potential Customers2. How to Convert your First Leads to Customers3. How to Get Pilot Customers to Pay4. The Basics of Customer Success_5. 5 Common Sales Mistakes by Founders_
If you’re a B2B company at the seed stage looking for help, you can reach me at ash@ashrust.com.
Thanks to Kaego Rust, Dan Greenbaum, Kevin Ramani and David Smooke for their help on this article.
Photo by Xiaolong Wong