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SanfordFox Vdsp
- 1. Start-up Sales Consulting Ted Sanford SanfordFox LLC Email: [email_address] Cell phone: 415-370-9025
- 11. Back-up Slides Background References
Editor's Notes
- Hi I’m Ted Sanford founder of SanfordFox. I specialize in building the initial pipeline, closing first deals, and laying in a sales process designed specifically for start-ups. I work on an hourly fee and success bonus basis.
- Most start-ups use an activity-based sales models – talk with 100 prospects, to get 25 appointments, to get 12 engagements, to make 4 proposals to land one deal. This is horribly inefficient and because of it start-ups suffer from low close rates and long sales cycles, you end up wasting valuable resources on low probability deals. So why do it? Because nearly all sales people are trained in activity-based selling - all SFA and CRM programs measure activities – valuing quantity over quality - which is exactly the wrong way to sell as a start-up. Given the economic downturn I think it is going to get even more difficult for start-ups. The top performing company in any industry only closes 15% of their pipeline and their competitors close another 15% which means 70% of all prospects don’t buy from anyone. It also means 85% of all sales resources are wasted. Sales, marketing, sales engineers, customer service, sales management and lots of other employees waste 85% of their time on activities that will never produce a sale.
- There are a couple big problems with activity based selling – one is that it is reactive – it’s customer driven – you chase every inquiry with equal vigor - exhausting your limited resources until you have nothing left for your best opportunities. Granted there is always a statistical model that falls out monitoring sales activities – no one lands every deal so a funnel is inevitably created. But using those statistics to manage the process is the tail wagging the dog. You instead must focus on quality not quantity. Very few sales people are ever in the position of having to closing their companies first deal. And I’ve seen highly successful sales people join start-ups with great fanfare and high expectations only to see them fail miserably. Why? Because normally sales rep’s step into a territory with some deal flow and their job is to increase the volume in their patch. They get product training and sales training and mentoring – and then they are expected to go close business. That’s completely different than starting from zero. Sales reps are accustom to operating with a certain set of tools – reference accounts and various financial proofs. Start-ups by definition have none of that. I’ve sold the first deal in 6 of my last 8 companies. In those 8 companies I closed the first OEM in 7 of 8, the first partner and partner sell-through in 8 of 8 and the largest deal in 7 of 8. I am uniquely qualified to deliver start-up sales consulting.
- So what do I do differently? First I approach start-up sales from the perspective that I will only pursue very highly qualified prospects, that in as much as possible I only deal with decision makers at those prospects, and that I will give the decision maker everything they need to make a decision as quickly as possible. That means we – the client and I - must develop a clear understanding of how to articulate the potential economic value of the product or service. Using this value-driven process my client can expect to meet with highly qualified prospects to validate their product or solution, and to ensure the pain and business issues they are aiming to solve are actually aligned with the solutions value, and to gaining unvarnished insight - which is the kind of intelligence that management, marketing, and R&D really need. If you have a GA product then you can expect I will put you in position to close business, and I will do everything I can to ensure deals close in the shortest time possible. In addition you will end up with a very solid pipeline. In today’s environment VCs will measure start-ups with one yardstick – revenue - closed deals - if you have a GA product and want to raise another round you must show sales, you must have referenceable accounts, and you must have a pipeline of highly qualified prospects. Pre-product start-ups must deliver unambiguous evidence that prospects will buy once the product is GA. They must produce LOIs, MOUs, or similar unequivocal statements by executives to get their investors to step up with additional funding.
- So let me give you a short overview of the value-driven sales process. The first thing we would do is to develop the profile of the perfect prospect. To do this we will sit down and discuss the value drivers of your solution. We will identify the characteristics of an organization which we believe is a perfect prospect and from there we will derive a set of target companies. To generate high level executive interest we will need to articulate the decision maker-level business issues the product or solution solves then tie that benefit down to the features and functions of the solution. From there we predict the dollar value of the direct and indirect savings the solution will produce. With respect to Moore’s “Product-Adoption Life Cycle” we will solely focus on Innovators and Early Adopters – as they are the only companies who culturally will buy from a start-up. It also means that the predicted dollar savings does not have to be that accurate – however the method used to derive the savings must be logical. Innovators and Early Adopters will buy from start-ups because they are confident they can make the product work on their own, and they can envision the competitive advantage better than we can – they intuitively realize the value but must be given the financial tools to gain approval to buy. With the perfect prospect target list in hand I will work my network, do research, identify decision makers, contact them and secure meetings. The purpose of the initial meeting will be to convince the decision maker to partner with us to confirm the predicted value, then to get the decision maker to assign trusted managerial level people to work with us on confirming the savings. We will then engage in a short process of discovery along with the trusted managers to verify value and to co-author a presentation for the decision maker (working with the assigned managers is our best selling time). Then along with the trusted managers we will deliver the co-authored presentation to the decision maker providing all the evidence and financial predictions to make a positive buying decision. Because the value is already understood and agreed to - closing the deal and negotiating the contract is far simpler, (as opposed to being ground into a competitive bid where professional buyers try to turn the solution into a commodity). Once the paperwork is signed then the real work of delivering the solution along with the trusted managers begins, here we want to follow through to success – we must prove that the value the decision maker used to push the deal through is realized – only then will the customer become referenceable – support case studies – speak on our behalf, make referrals, etc.
- The value-driven sales process focuses solely on decision makers because they are the person who can actually authorize a purchase and in many cases authorize a purchase even without a budget, they are the person who is trying to solve the pain, the person who owns the business issue, they will be the ones who make promises to get the project approved, and they are the ones who will have to deliver on the promises. The value-driven sales process gives them everything they need to make a quick decision. In the beginning we use a value hypothesis to get the meeting with the decision maker, then the proposed value is backed up by the managers the decision maker assigned to us – this process delivers the shortest path to start-up sales success. It takes skill and discipline to sell the VDSP way but the results are well worth maintaining the structure. Let’s take a minute to examine the characteristics of a decision maker… they d o not do studies, they are paid to take prudent risks based on anticipated value, they like to take action, they like buy solutions that fix problems, and they always talk value. Decision makers are the opposite of the “RFP manager” or operations manager that most sales people get stuck with – these people get paid to gain consensus, to study everything, to avoid risk, they tend to reduce solution options to commodity status, they live to conduct POCs, bake-offs, and pilots, they like to be sold and will negotiate price per feature per function – If you allow yourself to get stuck at this level it is very hard to go higher.
- By spending time up front to profile and target perfect prospects, and engaging in a value–driven demand creation process you eliminate spending valuable time on low probability first come first served activity-based selling. And we continuously qualify the prospect, for example if we meet with a decision maker and they don’t accept our value hypothesis or don’t agree to back us by sponsoring access to their managers then we have effectively qualified that prospect out and will stop pursuing the deal. It’s better to be prospecting and working on deals with a higher likelihood of closing than chasing after low probability deals. Especially when up against the “now or never” measure imposed by burn rates. VDSP is a strategy of “firsts”: the first to win or first to exit, we must never finish second.
- Many start-ups are under the impression that giving a demonstration of all the features of their product, as soon as possible, to who ever shows up at the meeting, is somehow a good thing. That’s simply wrong and is another example of activity-based thinking over-riding intelligent selling. As a rule of thumb you should always discuss value and vision before product and price. Demonstrations always carry a certain amount of risk. Demonstrating every detail of your product also exposes product weakness. Process owners can be territorial. Each demonstration is process specific, with the objective of showing how the new process eliminates the pain and problems associated with the old process. The demo lasts only as long as it takes to get agreement from the prospect of the value created. Depending upon the product an evaluation may be necessary. We will only agree to an evaluation after the decision maker has been presented with, and agrees with, the co-authored value verification document (which provides all the evidence and financial predictions to make a positive buying decision). Evaluations can consume enormous resources and must be entered into as a last step to prove functionality and close the deal. In some cases we will be able to charge for the time invested in an evaluation. The key to a successful evaluation is to have a clear plan of action, with written timelines, goals and objectives – the decision maker must assign the necessary resources and provide a level of urgency to drive the evaluation accordingly. A pre-eval close goes something like this; “ working with your people we have verified that the predicted $XX million of value is achievable by addressing your business issues , if we are successful in this evaluation then we would expect you to buy our solution. Can we shake on that now?” To quickly conclude an evaluation we must actively manage the agreed to process, getting sign-off on each step, then using the value verification documentation and our successful functional evaluation documentation to close the deal.
- I have already many of the generic templates need to implement a value-driven sales process. However I will be creating many documents specific to your company. All of these documents will be delivered in a form useable by internal sales reps. I will create a solid pipeline of perfect prospects and a method for calculating a relatively accurate close rate. If you already have some prospects in the pipeline we will review those prospects against the perfect prospect profile and will drop low probability deals. I will close deals and manage the implementation process from a sales perspective to ensure we have happy referenceable customers .
- I charge $XXX per hour for a minimum of 40 hours per month (minimum number of months?) Bonus $ for getting LOI, MOU, etc from decision makers (for start-ups without a product and seeking evidence of traction and confirmation their solution solves a valuable problem) Quarterly commissions of X% on revenue for the first year and y% for the second year from companies I introduce the client to and have primary responsibility for. If you would like me to stay engaged with the company beyond the contract period and act as an advisor - that can be arranged on an equity basis - for a fraction of a point I will keep a seasoned eye on the sales team, making sure they continue to use the value-driven sales process, and provide x hours of my time per month.