Marketing, Product-Market Fit, Sales Process, Startup Sales

The Easy Guide to Product-Market Fit (PMF)

90% of startups fail because they never reach Product-Market Fit (PMF). PMF is a function of a variety of daily, outward-facing activities that occur at an early stage: customer & product development. This represents the basic framework all startups need to find success and to really begin scaling.

I have met, mentored, and seen too many startups and entrepreneurs waste valuable time, effort, and money chasing a problem that doesn’t exist, with a solution that no one wants. Enthusiasm and passion alone don’t cut it. Often, startup failure directly correlated with the lack of these critical development efforts. But you don’t need to take my word for it.

Steve Blank, esteemed Silicon Valley pioneer and author, is a huge champion of the process. His books and research powered a lot of Eric Ries’ thinking in the Lean Startup approach today which is generally the gold standard by which modern tech companies are run. And be sure to check out Marc Andreesen’s famous post on the matter here too.

 

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SteveBlank.com

 

Customer Development is a formalized process in which the Entrepreneur and his team must “get out of the building” and ultimately communicate with their prospective customer base to identify the key ingredients to a successful startup. It’s a combination of all the “outward-facing” activities (e.g. sales, business development, followed by marketing) that the founding team must engage ideally before they go all-in with the startup.

Steve breaks it down into four steps:

  1. Customer Discovery – Who’s the customer base? What’s the problem that I’m solving? Talk to 50 potential customers and get to know them. Do this before you invest too much, if any resources, in building the actual product. Revenue should always be aligned behind. There’s enough data to begin developing a Minimally Viable Product (MVP) and core features that begin to help the Client overcome the problem you’re solving for.
  2. Customer Validation – Is the market reacting positively and buying your solution? Is there some semblance of process and marketing messages that are resonating positively with the customer base?  This is the beginning of demand-generation and the production of a marketing message that will further drive demand. The Product is there and new features are being added to the product that will continue to meet the clients’ expectations. The first sales are complete and the organization begins to understand what actions are required to move a buyer down the sales funnel.
  3. Customer Creation – Can the organization drive repeatable, end-user demand that gets added to the sales funnel? This is where the marketing message matures as more knowledge is acquired about how the clients’ organizations are run. The sales team identifies what the Ideal Customer Profiles (ICP) is, the key decision makers are, buyers, budgets, and processes and how to incorporate those key factors the decision. There are more data points, more customers buying, and more customers lining up to buy. There should be some level of inbound activity and the startup needs to understand and provide material to the customer along their Customer’s Journey. This is where the funnel starts becoming optimized, and the sales and marketing organization is able to provide the customer with resources that answer their relevant questions.
  4. Company Building – How is the startup going to scale? What departments and leaders need to be hired now to continue growing the organization and repeating the customer development process in a way that will generate successful returns? Are we maintaining relevancy as the market is changing? Is our product still #1?This is once product-market fit is obtained and the organization has crafted a product that is directly solving the clients’ challenges. Recruitment, hiring, HR, diversity, and other internal initiatives become more important.

Each of the above steps needs to be studied, understood, and executed. In theory, if this is done correctly, the entrepreneur confirms and defines the purpose of their organization and can grow into a larger enterprise. It is an iterative process that continues to propel the organization forward.

To close, the common theme you will find here is sales. This team represents the outward facing component of the business gathering new information to bring back to marketing, product, and other organizational leaders. They are key and critical to the company’s success and just as important as the idea itself. An early stage sales hire that understands this is key to the success of that organization – often more so than the founders themselves who are not engaging in sales related activities.

A team can have the best product ever, but without the right customer-interfacing mechanisms for adoption and growth, there is nothing.

In my next post, we’ll take an even deeper dive into the importance of an excellent early stage hire, the rescaling your early stage, startup sales organization.

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Sales Process

Controlling the Sales Conversation

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One of the biggest rules of thumb in sales is to control or own the sales conversation. That’s not to say bully, assume, be pushy, or put words in your prospects mouth or anything of that nature. Instead, the modern salesperson is arming their prospect with information (ex. content, stats, data, observations from other clients, etc.) when they need it.

In maritime law, when navigating closer to shore, there are regulations and rules for safe navigation. Keeping your vessel within the navigational beacons is one of those rules. If you stay the course,  you’ll make it to your destination barring any Acts of God. I like to think selling is the same way. A decent salesperson who follow the sales process, remains persistent, and has a viable product that solves business problems, will close if that customer wants to buy.

In modern sales, there’s rarely any traditional selling to do anymore. The “A-B-C” (NSFW) days are over. In fact, according to the CEB when it comes to b2b sales, 57% of the sales process is already complete if the prospect reaches out to you. All the information they need is at the fingertips, and they’re free to demo with any one of your competitors, choose a different solution, build their own – whatever they want to do.

It’s up to you as a sales person, with the best product, to intimately understand the prospects’ business (being an expert takes 10,000 hours), reframe and challenge the way they do business, unlock insights, and then present to them your product. Sales is a two way street for a reason – there’s intent to buy from the prospect, and it’s up to you to guide them through your sales process along the buyer’s journey.

An excellent way to do this is to plan out how you’re going to win accounts (following a sales process) and gain commitments throughout the deal’s lifecycle from the very beginning. Remember, your time is also valuable, and you will be solving a problem or generating significant revenue/results with your product.

There are two methods I recommend to approach this ‘control in sales:

1 – IF X, THEN Y

Scenario: After an introductory call, the sales rep needs to set the first demo and get that decision maker to attend the web conference.

Salesperson A: “So let’s set a demo for next Taco Tuesday at 5:00 PM.”

Prospect: “Great; I’m in. Looking forward to learning more.”

(Remember, it takes at least 5.4 decision makers to sign off on a sale. No one wants to personally absorb all the risk of working with a new vendor when they can spread this risk amongst colleagues.)

Salesperson A: Awesome. Do you think we can get the VP to join us on the call?  And maybe the Head of Success? That way we don’t have to hound them down later on and maximize our feedback.

Prospect: Yeah, sounds great. I’ll coordinate with her and confirm.

In this case, if the buyer can get her VP to join the call, then the rep will save the buyer time.  In return for the Rep’s valuable time on the demo, the ideal prospect will respect the rationale and work to get the decision makers on.

As you mature in sales, master rapport building, and get more comfortable engaging and speaking with the prospect, these conversations can be even more explicit. These sort of scenarios are more prevalent in complex deals (i.e. enterprise deals) where the prospect also has an internally complex buying process that you as a Rep will not know.

You can ask for something directly “in return.” There’s no hard and fast advice for knowing when to drop this one in your sales conversation. Use it when you feel like you’ve really nailed down a champion who speaks openly and freely with you and is exhibiting a level of trust in you. Or they need to get this done as soon as possible. Often this is going to be an individual who has clearly expressed their interest in buying your solution and is explaining to you what it’s going to take to get it to move forward.

2 – IF X,  GIVE ME Y

Scenario: After a qualifying call, the VP of Sales learns that an influencing buyer needs to get this deal done as soon as possible (one can wish right?) and that based on his research, the one key feature he needs exists only with the pro’s product.  It’s clear that the buyer is a champion.

VP of Sales: “Appreciate your time today. Before we jump to the next step, I’d like to ask one last thing of you. If I set some time aside to do research, prepare an awesome presentation for your team next week, and nail this deal with you, will you provide me a list of every decision maker in the room and what I need to know about them? I’ll send you a deal map I’ve been working on that I can use your help on filling in the blanks.”

Prospect: “Yeah, definitely. Send it over and I’ll fill it out right away.”

In this case, the seller is explicit with his or her ask. Fill this deal map out, and I’ll put together an even more amazing presentation.  The buyer gets what they want, and the seller obtains information that is critical to closing the deal. It’s another mutually beneficial arrangement.

Deals don’t close themselves. The onus on ensuring that the buyer’s needs are being met while pulling the prospect down their organization’s sales funnel rests on the salesperson.

Always-Be-Controlling.

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Fun with B2B Funnels

At a high level, startup strategy is generally the same when securing revenue. There are tons of variations of the startup sales funnel, but generally, they can be classified underneath four activities that help acquire modern customers and build the business:

  1. Awareness – Marketing team produces the message, crafts, and pushes the content. The sales team is developing business through their own channels.
  2. Interest – Prospective client consumes Marketing content, and/or responds to Sales call request. The bulk of the education tends to happen here.
  3. Decision – Prospective client is educated, challenged by the company (read: Challenger Sale), and addresses any questions and concerns. This is typically where the sales professional has an opportunity to not only sell her solution but reframe the decision maker’s thinking – while making her product and organization look great in comparison to the competition.
  4. Action – The Client consults with their team and makes a final decision by way of a verbal commitment or signature on the dotted line.

Value is heavier towards the bottom of the funnel. Both parties mutually increase their engagement, devote more of their time, and transfer valuable information to one another. This value can exhibit itself in a variety of ways: from the rep educating the business owner, sending out company swag, to mapping out deal plans via sales methodology (ex. MEDDICC) These can be observations that the selling organization has seen or trends.

Usually, new pieces of insight and information the business owner is unaware of. In return, the prospect confesses their problems, struggles, and helps the rep map out how the deal is going to get done. This is where the sales rep has earned the opportunity to showcase his or her knowledge and expertise – and win the trust of the prospect.

Now you have startups flipping the funnel and engaging in more modern processes such as Account Based Marketing/Sales which specifically targets your ideal buyers. The framework above is representative of more traditional b2b SaaS which is the world I live in.  The beauty of startups, and why I choose this career path, is that startups are typically freed of “traditional” business practices and methods.

The beauty of startups, and why I choose this career path, is that startups are usually released of “traditional” business practices and methods. Entrepreneurs can play around with the different types of sales processes and methodologies within the funnel that work best for their product, industry, customers, and organization.

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