Entrepreneur agrees to do sales
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Entrepreneur agrees to do sales

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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 ...

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 Author’s 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.

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Entrepreneur agrees to do sales Entrepreneur agrees to do sales Document Transcript

  • Entrepreneur Agrees to Do Sales Dr. Shridhar Lolla CVMark Consulting lolla@cvmark.comVersion 1.0,Needs EditingBased 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, businessfundamentals, built to last, capacity building, entrepreneurial behavior, first generation entrepreneur,techie, technology entrepreneurs, product development, valley of death, neu-entrepreneurs, promoters,business growthThis is a sequel to following caselets:1. The Saga of Startups2. Sales is the prime responsibility of entrepreneurs2. When sales Staff quit, Clients switch over3. Not Succumbing to Pricing PressureA must read for neu-entrepreneurs. This real life caselet, presents a complex situationthat a large number of entrepreneurs falls into. This is about a typical product biasedentrepreneur, who continues to cocoon into product development activities, while hisbusiness waits for disaster. Actually, the resistance to participate in sales process isappalling. The Author’s provoking, problem solving and handholding initiative burststhe inhibition of the entrepreneur, forcing him to do sales and brings up the startupcompany from the brink of oblivion. It showcases a scenario into which a majority ofstartups are and provides a direction on how they can come out of the crisis, really fastand with minimum risk and expenses.________________________________________________________________________Bangalore, Nov,2009It has been now about 2 months, when Sujit brought Prasad to me. Prasad owns asoftware product company. He built a high quality –all feature inclusive product forhealth care industry. It has been now 5 years. He had spent over 10 CrINR (>~2 millionUSD), however, his cumulative revenue has been less than 1½ Cr (<~300 k USD).Currently, his burn rate is almost 1Cr INR per year. During these years, he has developedmultiple version of products and his development team (& he himself) has been busy inmigrating their products into a new technology platform. 1Copyrights ©2010, CVMark Consulting, All rights reserved.
  • Prasad said, “We have, by far, the best product in the market but no body is ready to paythe price. The industry sales cycle is long and painful. Further, the implementation andcustomization period is unending. There are low quality competitors, who are offeringproducts 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, Ihad 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. That’s painful.Since, Prasad claimed that he had been busy all these days in developing products andthat he had a very good development team, he perhaps had a constraint outside hisoperations i.e. in the market. He did not have enough orders, he was not able to capitalizeon his good product and his team was running with poor utilization (utilization oncustomer projects).An analysis of the current reality brought out the fact that the owner by habit hadneglected establishing sales process. Actually, Prasad told that he was not interested inand does not like to, sell himself. He did not feel that either he or his colleagues had inthem any thing to sell.His opinion was, “If somebody can bring orders or leads, it would be ok for me to run thebusiness (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 productdevelopment. 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 withrequest 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 thebusiness and how important is sales. In such a situation, I always tell that the team hasenough technology background may be for another decade and it is wiser for them to firstsell this huge asset that they have. Then, I tell them that only if sales happen, thecompany gets money; and for today as well as for tomorrow for the company to surviveand grow, its sales must grow faster than growth in operating expenses. And it is theprime responsibility of the promoter/leader to ensure this. i.e. sales is the primeresponsibility of the promoter, at least in the beginning, such that the sales process isestablished. 2Copyrights ©2010, CVMark Consulting, All rights reserved.
  • 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 elseabout the product, not only its features but its fitness to the market, its pros and cons. Heknows better than anybody, what benefits customer can get and why a customer shouldbuy his product. What is needed then is, to verbalize these into buy in pitch and a franktranslation into customer’s language. I also tell to my clients that almost every clientwithout exception hates meeting sales people, however, they are always excited to meettechnical teams or owners (there is a reason behind that).Further, Hiring a sales man will not allow the salesman to come anywhere closer to thebuy-in an entrepreneur can bring in. Bringing a salesman at this stage, without thecompany having a sales process, will only mean that the salesman will have to follow hisown process and since, there is no standard process to induct him (which is normal in astartup company), the sales he does, will be based on ones own contact and style, thatmay not harmonize with requirements of the promoter and the state of the company.When a startup company hires salesmen without setting an experienced based salesprocess, it faces situations that Prasad faced with the two sales men. They had their ownunderstanding of the product, they had very little understanding of the company’scapabilities, they hardly knew how to customize product for clients and least aboutconsultative selling (since the offering is a solution and not a product). In short they didnot own the product.Actually, it was good that Prasad let them go, because it was tipping to the level that theywere dumping unnecessary noise from the market onto the development team andskewing 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 organizationdid not have a sales process and the revenues were totally dependent on such salesmen , ithad to pay dearly for its lack of competency in sales. This is true, since for a smallorganization, the owner is the main salesman, which was the case with Prasad’sorganization.Prasad realized that for him, the cause and effect of organization’s debacle made sense.And he left that day requesting for a help in building the sales process.Dec, 2010 & Jan 2010After this, we met a couple of times and that continued to unearth the fragile state thecompany was. I also got the message that recently, he invested 80LINR in his office up-gradation. Ooofff! Height of luxury !Anyway, I asked him to send details of his organization to me, a sample of offers made toclients and details of products. 3Copyrights ©2010, CVMark Consulting, All rights reserved.
  • I checked back quickly and realized that he had actually built a mammoth product thatwas almost an ERP, definitely it would have taken 5 years to build it for his team of35+. It looked excellent and was worth far more than the price he has was selling for. Soone gap (product capacity gap) was that his expected pricing was far lower than what hecould command. And the second was that he was selling it at far lower price than hisexpected price but well above the competitors’ price. This was horrific. By the way, whyentrepreneurs succumb to such pricing pressure? Then, realizing that different clientshave different paying capacity or perception of product, he had brought out 5 versions ofhis product ! Micro, Lite, Standard, Main and Enterprise. Above this there were 2variations based on operating system and another two based on web and client-serverarchitecture. All in all 16 variant. Actually, all with same footprint but differently enabledfeatures. Upon deeper enquiry, I learnt that the product version is primarily from thepoint of view of having more price layers than customer segmentation. Since there wasno customer segmentation, the usual sales process was to first pitch for Enterprise orMain, 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 sensewould guide. But that’s how Prasad and his team saw from product point of view; andnot from clients’ need point of view.Last time, I met him in the fist week of Jan and by then, my team had analyzed thesituation well and was wanting to push him with sales process. He listened me again withpatience and said, “We need to do something about sales process.” I told him thefollowing.At the moment, cash flow is the prime need of the company. We must not only moveahead 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, itmade sense to start a campaign to sell these version. These versions, though are at lowerprice points and the market is price sensitive, if one focuses well, it will be possible tomake quick sales and improve cash flow. It is then not only cash flow, but also the salescycle would be shorter, and each sale would allow him and his team to understand themarket and sales process better. This will give them a crash course experience inunderstanding the clients’ need better. Even if mistakes are made in the sales process, itwill get corrected quickly, with least risk and losses. Further, since the product variantsare really Lite, it would not have a complex and lengthy sales process preparation orbaggage, it would not require a specialized sales skillset and most of his team could dothe sales by following, ‘doing by learning’. Actually, if Micro and Lite were sold well, he could realize that he and his team hadenough skills and capacity to sell. And while focusing on Micro and Lite, they wouldalways have an answer in terms of other versions, should anybody want them. And ifthat happens, they actually, do not have to do any additional sales, since the clients wouldhave automatically expressed the need for bigger footprint product. So, if everything goeswell, the organization will be on a self learning curve that would simultaneously give 4Copyrights ©2010, CVMark Consulting, All rights reserved.
  • growth and stability. However, once the sales process is set, he would have the option torecruit sales people and ask them to follow the proven sales process and thus, expandrapidly.Prasad agreed to the basic argument. BUT before we could close the meeting, hedropped the bomb shell. He said that the has got an investor, and he was inclined inhaving the investment. I started doubting if he was really serious about doing business. Ialso doubted if the money at stake is his. For me there was no reason to go for fundingwhen cash could be generated by focusing on the constraint, which is sales. Never theless, I quickly worked out the math on investment and it showed that he was awfullydevaluing his company. Of course, he could not be in a bargaining position, when he hasnot 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 dosales and would like this investment to come in and then spend his time in the technologydevelopment.What he said was that for the next 4 years, the investor has agreed to bear the cost of theorganization and that he would also bring in known management and client network. Itwas not what I thought Prasad to be, I thought that he is cool and matured. But this was avolte-face. I actually, then gave him an alternative plan to get best deal from the investorand 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 shockedwhen Prasad told that, he did not know how a business plan looked like and moreimportantly, he did not want to get his hands on preparing business plan. This wasappalling that he was so much focused on technology that he could not get time to planhis business. This was an extreme situation of unplanned business I ever faced, in mydecade of working with promoters of startups. But this also opened up the fact that hehad never intended to build a company for selling to anybody or making a money out ofcompany sale, but for the situation he fell into. That was heartening, and he definitelyneeded help. Before I bid good bye on that day, I re-emphasized the importance of salesand the hidden opportunity to improve cash flow through focused sales process. I toldhim that which ever way he wants to go, he has to immediately have a business plan thatwill 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 thathis valuation is intact. He agreed to that. And I left.2nd week Jan 2010Prasad called me to his office at 7:00pm. I reached early and he was not there. Heultimately, 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 Litetoday’. 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. Inmost of the cases, he had to wait at clients’ offices. He did not loose his cool, just waited. 5Copyrights ©2010, CVMark Consulting, All rights reserved.
  • All his discussions started abysmally, but he kept his cool and got opportunity to enterinto discussions. He was surprised how he turned the table and made those who were notgiving 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 norbrochures; but he was able to get a sales order. He told me that our last discussion madehim restless and he wanted to try his best. And that gave him a confidence of an order ofmagnitude. He was very happy. He had validated the hypothesis that sales is the primeresponsibility of an entrepreneur and also that an entrepreneur has all the chance to dosuccessful sales. He did not have to learn sales from any body, he did not do anyrehearsal, he did not improve his language; he just did it, without worrying about anyshow or presentation, except for himself and his belief that he had something to offer tohis 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 thismarket before it could go outside the city. This would help in many ways. 1. In buildingthe sales process. 2. Understanding the clients better. 3. Lowering risk. 4. Providing fullsupport 5. Experimenting various offerings. By doing so it would validate and innovateits business model. Once the city was exhausted, the company would know how to rollout the product outside. By any measure, the market locally was big enough, a client baseof minimum 400, with a penetration of less than 20%.Second, they must start an all out focused campaign to sell Micro and Lite. Otherversions will be offered only if the client would ask for (remember that the sales cycle forthe other larger versions was complex and long, and the team still needed to build therelevant sales capabilities). So we made a prime rule for next 3 months: Sell only Microand Lite, only if a clients asks for higher version, it will be offered; BUT the higherversions will not be pitched in the normal sales process. The target was set to flood thecompany with Micro and Lite orders by March.Prasad committed to this and agreed that his focus would solely be sales and he asked apart of his development team also to support in sales activities. He gave his personalexample, exhorting his team not to seek any external sales people. And that they must dotheir own sales. He said that it is not difficult and if they could build such a complexproduct, they have enough logic to sell their product. But then to test themselves, theymust start with Micro and Lite.They believed that they had a capacity of installing 10 Micro/Lite per month. Which Iagreed to start with. But I said that we needed to flood the company with orders. Thepoint was that the capacity of 10 is an apparent capacity. Once they would reach 10, their 6Copyrights ©2010, CVMark Consulting, All rights reserved.
  • work as managers would start then. That is, the next target would be to do 15 with thesame 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 thebenefits to clients upfront and then highlight the choice available to pickup from otherversions. He readily agreed and instructed his designers, accordingly. In the currentmarkets, it is becoming increasingly important that While the list of features areimportant 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 tomake the process efficient. And the campaign must start with awareness. We needed amedia to reach the clients, so that at least 50 people know us before we reach them. Hetold about the fee he had already paid to sponsor a medical conference and I told him thatwe must make its full use. And he agreed that we would make a presentation there, with ademo. I also told him that as a part of campaign, we need to make a focusedannouncement e.g. Lite footprint, great price and; up & running in 1 week. And we mustuse 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 salesorder.Now a days, when I call him, mostly he would be rushing to meet clients. As he foundhis hidden capabilities to sell, he became more confident of his value proposition. Sincethen, 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 theteam was wrestling with. And it seemed to be a better situation, although, we must dosomething about it, before it would be too late ! 7Copyrights ©2010, CVMark Consulting, All rights reserved.
  • Disclaimer:CVMark Consulting is an independent business-innovation research agency based in Bangalore, INDIA.CVMark Consulting intends to serve business community through advisory, consulting and coachingengagements. As a part of its engagements, it regularly brings out insights, perspectives, research reports,newsletters, issue-oriented reports and other products.This caselet captures description and direction of solution to generic problem faced by business owners. Itis intended to share experience of CVMark with a wider business community. This document in part or fullcan be reproduced subject to a reference to CVMark Consulting and to this document.Factual material contained herein is obtained from sources believed to be reliable, but the publisher is notresponsible for any errors or omissions contained herein. Opinions are those of CVMark and are based onresearch conducted for this report. CVMark holds no responsibility for decisions made on the basis ofcontent of this report.CVMark ConsultingBangalore, INDIAClet:09-10___________________________________________________________________CVMark handholds entrepreneurs in navigating through the dynamics of business.For developing, innovating and executing your business model, call Tel: +91 94480 70081 or Email details to : lolla@cvmark.com .CVMark Consulting, #2304, Nandi Park, Gottegere, Bannergatta Road, Bangalore 560083, INDIA Web: http://www.cvmark.com 8Copyrights ©2010, CVMark Consulting, All rights reserved.