4 Mistakes Not To Make When It Comes To Sales
Originally shared on Harvard Business Review
As part of an ongoing research project on entrepreneurial selling, we’ve conducted one-on-one interviews with founders of 120 startups in China, Kenya, Mexico, Nigeria, the UK, and the United States.
Start Earlier. The biggest insight is that many startups wish they’d focused on selling much sooner than they did. Many company founders say they could have cut development time or better understood key customer objections (before they’d sunk huge money into product development) if they’d simply started trying to sell their product sooner.
Your Cousin Doesn’t Count. Our interviews found that a surprising number of startups make initial sales to family, friends, or other acquaintances. While these transactions provide revenue, these buyers are often moved to make a purchase out of love, politeness or a feeling of obligation, rather than real market demand — and crucially, these sales don’t offer candid feedback or give any indication of what a real, unbiased customer might think of your product or service. While it’s fine to utilize a professional network to sell — for instance, in the B2B service space, we spoke with several startups whose first sales were to their previous employers — don’t neglect to realize that the best customer feedback will come from transactions that are truly arms-length.
Avoid Discounting. Without a long track record, it can be hard for a startup to establish and hold firm on the value of the product or service it’s offering. For that reason, we’ve found many startups feel compelled to offer big discounts to get a first sale done. In particular, we found companies that received venture capital financing often faced pressure from VCs to achieve a first sale as a milestone, and were encouraged to offer discounts to achieve it.
But in our interviews, we encountered startups who regretted offering big discounts to achieve a first sale. Doing so can set a pattern, diminish the long-term value of a product or service, or hurt cash flow (if the sale results in a loss). Companies talk, and if you sell to one industry player at a very low price, you can expect future customers to hear about it and push hard for a similar deal. To counteract that pressure, if you’re forced to offer an initial discount, formalize it as a one-time or short-term offer: Announce that any customer who signs a purchase order by September 1 will receive 20% off, for instance, but after that the discount will disappear.
Be Choosy for a Strategic Buyer. When a company has no incoming revenue, it can be tempting to cast a wide net for sales prospects, and to do business with the first potential customer that comes along. In our interviews, we frequently heard regrets from companies that had gone that route. They wish they’d been choosier and had more carefully selected their first customers, based on the customers’ ability to provide important usage data, references to a next set of customers, or credibility and reputation enhancement. The message was clear: When considering a first sale, don’t focus only on the much-needed cash, but think clearly about what other benefits this relationship can deliver to help drive future sales.
After speaking with 120 company founders about what they’ve learned about selling and what they wish they’d done differently, the biggest advice we can offer is that selling is the core function of any business, no matter what the industry.
About the authors: Vincent (Vini) Onyemah is associate professor of sales and marketing at Babson College. Martha Rivera is secretary general and head of the marketing program at IPADE Business School. Abdul Ali is associate professor of marketing and entrepreneurship at Babson College.