Entrepreneur Agrees to Do Sales

Dr. Shridhar Lolla CVMark Consulting lolla@cvmark.com

Version 1.0, Needs Editing Based on transformation of the promoter of a software product and solution company, from product centric mindset to sales leadership. Key words: entrepreneur, startups, entrepreneurship, sales, sales process, business rules, business fundamentals, built to last, capacity building, entrepreneurial behavior, first generation entrepreneur, techie, technology entrepreneurs, product development, valley of death, neu-entrepreneurs, promoters, business growth This is a sequel to following caselets: 1. The Saga of Startups 2. Sales is the prime responsibility of entrepreneurs 2. When sales Staff quit, Clients switch over 3. Not Succumbing to Pricing Pressure A must read for neu-entrepreneurs. This real life caselet, presents a complex situation that a large number of entrepreneurs falls into. This is about a typical product biased entrepreneur, who continues to cocoon into product development activities, while his business waits for disaster. Actually, the resistance to participate in sales process is appalling. The Authors provoking, problem solving and handholding initiative bursts the inhibition of the entrepreneur, forcing him to do sales and brings up the startup company from the brink of oblivion. It showcases a scenario into which a majority of startups are and provides a direction on how they can come out of the crisis, really fast and with minimum risk and expenses. ________________________________________________________________________ Bangalore, Nov,2009 It has been now about 2 months, when Sujit brought Prasad to me. Prasad owns a software product company. He built a high quality all feature inclusive product for health care industry. It has been now 5 years. He had spent over 10 CrINR (>~2 million USD), however, his cumulative revenue has been less than 1 Cr (<~300 k USD). Currently, his burn rate is almost 1Cr INR per year. During these years, he has developed multiple version of products and his development team (& he himself) has been busy in migrating their products into a new technology platform.

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Prasad said, We have, by far, the best product in the market but no body is ready to pay the price. The industry sales cycle is long and painful. Further, the implementation and customization period is unending. There are low quality competitors, who are offering products way below our price, but I could not dare offer that price. He further told, I had a couple of salesmen, but then, they left the organization(rather, I had to kick them out, since they did not perform despite my best efforts to train them.) Obviously, he lost the appetite to invest any more in sales teams, and frustrated he was, has been looking out to sell his company at around 10Cr INR. Thats painful. Since, Prasad claimed that he had been busy all these days in developing products and that he had a very good development team, he perhaps had a constraint outside his operations i.e. in the market. He did not have enough orders, he was not able to capitalize on his good product and his team was running with poor utilization (utilization on customer projects). An analysis of the current reality brought out the fact that the owner by habit had neglected establishing sales process. Actually, Prasad told that he was not interested in and does not like to, sell himself. He did not feel that either he or his colleagues had in them any thing to sell. His opinion was, If somebody can bring orders or leads, it would be ok for me to run the business (although it has not happened so till now). He believed that only professional sales people needed to do sales and he would better put his efforts on product development. In fact, he was proud of his product and he would like to maintain the edge (and continue to enhance its features). (this is a classical case of techie entrepreneur hating sales, & my inbox is stuffed with request from entrepreneurs to help them with sales orders through third party. ) Even the little selling that was being done was like a product selling while in actual, offerings of his company was in solution selling domain.

As usual, I had to start from the basics and take through basic objective and goal of the business and how important is sales. In such a situation, I always tell that the team has enough technology background may be for another decade and it is wiser for them to first sell this huge asset that they have. Then, I tell them that only if sales happen, the company gets money; and for today as well as for tomorrow for the company to survive and grow, its sales must grow faster than growth in operating expenses. And it is the prime responsibility of the promoter/leader to ensure this. i.e. sales is the prime responsibility of the promoter, at least in the beginning, such that the sales process is established.
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The hypothesis is that if Prasad has built the product, he knows why he built the product, for whom and for which need. He is also the person who knows more than any body else about the product, not only its features but its fitness to the market, its pros and cons. He knows better than anybody, what benefits customer can get and why a customer should buy his product. What is needed then is, to verbalize these into buy in pitch and a frank translation into customers language. I also tell to my clients that almost every client without exception hates meeting sales people, however, they are always excited to meet technical teams or owners (there is a reason behind that). Further, Hiring a sales man will not allow the salesman to come anywhere closer to the buy-in an entrepreneur can bring in. Bringing a salesman at this stage, without the company having a sales process, will only mean that the salesman will have to follow his own process and since, there is no standard process to induct him (which is normal in a startup company), the sales he does, will be based on ones own contact and style, that may not harmonize with requirements of the promoter and the state of the company. When a startup company hires salesmen without setting an experienced based sales process, it faces situations that Prasad faced with the two sales men. They had their own understanding of the product, they had very little understanding of the companys capabilities, they hardly knew how to customize product for clients and least about consultative selling (since the offering is a solution and not a product). In short they did not own the product. Actually, it was good that Prasad let them go, because it was tipping to the level that they were dumping unnecessary noise from the market onto the development team and skewing the market feedback rather than selling what the organization has already built. This was placing a lot of pressure on the development team. And since the organization did not have a sales process and the revenues were totally dependent on such salesmen , it had to pay dearly for its lack of competency in sales. This is true, since for a small organization, the owner is the main salesman, which was the case with Prasads organization. Prasad realized that for him, the cause and effect of organizations debacle made sense. And he left that day requesting for a help in building the sales process.

Dec, 2010 & Jan 2010 After this, we met a couple of times and that continued to unearth the fragile state the company was. I also got the message that recently, he invested 80LINR in his office upgradation. Ooofff! Height of luxury ! Anyway, I asked him to send details of his organization to me, a sample of offers made to clients and details of products.

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I checked back quickly and realized that he had actually built a mammoth product that was almost an ERP, definitely it would have taken 5 years to build it for his team of 35+. It looked excellent and was worth far more than the price he has was selling for. So one gap (product capacity gap) was that his expected pricing was far lower than what he could command. And the second was that he was selling it at far lower price than his expected price but well above the competitors price. This was horrific. By the way, why entrepreneurs succumb to such pricing pressure? Then, realizing that different clients have different paying capacity or perception of product, he had brought out 5 versions of his product ! Micro, Lite, Standard, Main and Enterprise. Above this there were 2 variations based on operating system and another two based on web and client-server architecture. All in all 16 variant. Actually, all with same footprint but differently enabled features. Upon deeper enquiry, I learnt that the product version is primarily from the point of view of having more price layers than customer segmentation. Since there was no customer segmentation, the usual sales process was to first pitch for Enterprise or Main, and then if the client asks for lower price then lower down the offer to Standard, then Lite and then to Micro. To me this was just the reverse of what common sense would guide. But thats how Prasad and his team saw from product point of view; and not from clients need point of view.

Last time, I met him in the fist week of Jan and by then, my team had analyzed the situation well and was wanting to push him with sales process. He listened me again with patience and said, We need to do something about sales process. I told him the following. At the moment, cash flow is the prime need of the company. We must not only move ahead in sales but also in quick sales. Now luckily, since it has Micro & Lite versions, that are on the lower end of the price tag and there are over 400 clients in his city itself, it made sense to start a campaign to sell these version. These versions, though are at lower price points and the market is price sensitive, if one focuses well, it will be possible to make quick sales and improve cash flow. It is then not only cash flow, but also the sales cycle would be shorter, and each sale would allow him and his team to understand the market and sales process better. This will give them a crash course experience in understanding the clients need better. Even if mistakes are made in the sales process, it will get corrected quickly, with least risk and losses. Further, since the product variants are really Lite, it would not have a complex and lengthy sales process preparation or baggage, it would not require a specialized sales skillset and most of his team could do the sales by following, doing by learning. Actually, if Micro and Lite were sold well, he could realize that he and his team had enough skills and capacity to sell. And while focusing on Micro and Lite, they would always have an answer in terms of other versions, should anybody want them. And if that happens, they actually, do not have to do any additional sales, since the clients would have automatically expressed the need for bigger footprint product. So, if everything goes well, the organization will be on a self learning curve that would simultaneously give
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growth and stability. However, once the sales process is set, he would have the option to recruit sales people and ask them to follow the proven sales process and thus, expand rapidly. Prasad agreed to the basic argument. BUT before we could close the meeting, he dropped the bomb shell. He said that the has got an investor, and he was inclined in having the investment. I started doubting if he was really serious about doing business. I also doubted if the money at stake is his. For me there was no reason to go for funding when cash could be generated by focusing on the constraint, which is sales. Never the less, I quickly worked out the math on investment and it showed that he was awfully devaluing his company. Of course, he could not be in a bargaining position, when he has not completed his job (which is not just creating value i.e. product but also delivering i.e. sales and capturing value). But I had to succumb to his pleas that he would not like to do sales and would like this investment to come in and then spend his time in the technology development. What he said was that for the next 4 years, the investor has agreed to bear the cost of the organization and that he would also bring in known management and client network. It was not what I thought Prasad to be, I thought that he is cool and matured. But this was a volte-face. I actually, then gave him an alternative plan to get best deal from the investor and asked him to ask his accountant and legal folks to do a few checks. Prasad also told me that the investor asked him to prepare a business plan. I was shocked when Prasad told that, he did not know how a business plan looked like and more importantly, he did not want to get his hands on preparing business plan. This was appalling that he was so much focused on technology that he could not get time to plan his business. This was an extreme situation of unplanned business I ever faced, in my decade of working with promoters of startups. But this also opened up the fact that he had never intended to build a company for selling to anybody or making a money out of company sale, but for the situation he fell into. That was heartening, and he definitely needed help. Before I bid good bye on that day, I re-emphasized the importance of sales and the hidden opportunity to improve cash flow through focused sales process. I told him that which ever way he wants to go, he has to immediately have a business plan that will take a month (and I would hand hold him on that); and while that is being prepared, we should build a sales process and take couple of leads ahead without any worry so that his valuation is intact. He agreed to that. And I left. 2nd week Jan 2010 Prasad called me to his office at 7:00pm. I reached early and he was not there. He ultimately, turned up at 8:00pm. I was on the couch that he always reserved for me, sharing thoughts with his development manager and his secretary. He entered the room and took a deep breath and announced we got 3 orders, for Lite today. And there was smile on his face. He dumped himself onto his executive chair. Today, he had left early in the morning and held a series of interactions with clients. In most of the cases, he had to wait at clients offices. He did not loose his cool, just waited.
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All his discussions started abysmally, but he kept his cool and got opportunity to enter into discussions. He was surprised how he turned the table and made those who were not giving entry earlier, agreed to listen first, and then offered him the orders then and there. In one case he said, he went without a visiting card and did neither have laptop nor brochures; but he was able to get a sales order. He told me that our last discussion made him restless and he wanted to try his best. And that gave him a confidence of an order of magnitude. He was very happy. He had validated the hypothesis that sales is the prime responsibility of an entrepreneur and also that an entrepreneur has all the chance to do successful sales. He did not have to learn sales from any body, he did not do any rehearsal, he did not improve his language; he just did it, without worrying about any show or presentation, except for himself and his belief that he had something to offer to his customer. That was great ! Then, we went across all that we had discussed earlier. And he was happy that it worked. That week he had sold 7 Micro and Lite. He called his colleagues, shared the validation. And so we placed the following plan. The market within the city was big enough. And the company must first exhaust this market before it could go outside the city. This would help in many ways. 1. In building the sales process. 2. Understanding the clients better. 3. Lowering risk. 4. Providing full support 5. Experimenting various offerings. By doing so it would validate and innovate its business model. Once the city was exhausted, the company would know how to roll out the product outside. By any measure, the market locally was big enough, a client base of minimum 400, with a penetration of less than 20%. Second, they must start an all out focused campaign to sell Micro and Lite. Other versions will be offered only if the client would ask for (remember that the sales cycle for the other larger versions was complex and long, and the team still needed to build the relevant sales capabilities). So we made a prime rule for next 3 months: Sell only Micro and Lite, only if a clients asks for higher version, it will be offered; BUT the higher versions will not be pitched in the normal sales process. The target was set to flood the company with Micro and Lite orders by March. Prasad committed to this and agreed that his focus would solely be sales and he asked a part of his development team also to support in sales activities. He gave his personal example, exhorting his team not to seek any external sales people. And that they must do their own sales. He said that it is not difficult and if they could build such a complex product, they have enough logic to sell their product. But then to test themselves, they must start with Micro and Lite. They believed that they had a capacity of installing 10 Micro/Lite per month. Which I agreed to start with. But I said that we needed to flood the company with orders. The point was that the capacity of 10 is an apparent capacity. Once they would reach 10, their
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work as managers would start then. That is, the next target would be to do 15 with the same team. That will call for standardization of the process and improving productivity, which is the main role of the managers. So the direction and target were clear. He showed me the brochure that he was sending for promotion. I asked him, to make the benefits to clients upfront and then highlight the choice available to pickup from other versions. He readily agreed and instructed his designers, accordingly. In the current markets, it is becoming increasingly important that While the list of features are important to mention, they should never be at the top of the brochure. Then I told him that in order to run through 400 clients in the city, we need a campaign to make the process efficient. And the campaign must start with awareness. We needed a media to reach the clients, so that at least 50 people know us before we reach them. He told about the fee he had already paid to sponsor a medical conference and I told him that we must make its full use. And he agreed that we would make a presentation there, with a demo. I also told him that as a part of campaign, we need to make a focused announcement e.g. Lite footprint, great price and; up & running in 1 week. And we must use this pitch consistently, in each of our campaign. He asked me to prepare part of the presentation that talks about benefits to the clients, and I agreed. We needed to meet in the week starting 18thJan. We met and he added a few more sales order. Now a days, when I call him, mostly he would be rushing to meet clients. As he found his hidden capabilities to sell, he became more confident of his value proposition. Since then, he forgot to talk about the investment. He met his yearly target just within 3months. In the meanwhile, my visit to the development office revealed the flood of orders that the team was wrestling with. And it seemed to be a better situation, although, we must do something about it, before it would be too late !

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Disclaimer:
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