first time founder

  • Lead qualification across SMB vs. Enterprise

    In my last post I mentioned that I believed “intent to purchase” is the #1 criteria that makes any lead qualified.

    I also mentioned that for the lead to stay truly qualified, they would need to purchase my product, or a product like mine at the conclusion of the sales cycle.

    So what happens if they do neither? What happens if they make no decision on your product or a product like yours? Then I think its important to take into account what part of the market the lead came from so you can start to understand what is going on with your deals.

    That is: was it an SMB lead or an enterprise lead?

    If it was an enterprise lead that didn’t close for you or another vendor, then it was probably not qualified in the first place. Barring buyer force majeure, enterprise leads have to budget for purchases. Thus, my first question that I ask: was it ever budgeted in the first place for it to not close for anyone? Should it have even remained in the funnel? Should we have ever considered it for one of our myriad forecasts? Probably not.

    If it was an SMB lead, it can get a little murkier in the event of a non- decision. Because attention spans in the SMB are so short, intent to purchase one day becomes intent to purchase something categorically different from your solution the next day. Their budgets are often not as clear cut (or large) as enterprise buyers. And this can take sellers for a loop. What seemed like a good product demo just a few days back might be the start of months of misleading behavior by the buyer and their organization.

    For an enterprise lead to be truly qualified, budget must be set aside for this product or a product like it. Earmarked, appropriated, whatever.

    And for SMB leads to be truly qualified: let me know what you have found a way to verify intent purchase at all stages of the deal cycle without being too needy for the buyer. You will have solved a major challenge all sellers have when going after the SMB category.

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  • What makes a qualified lead “qualified” in the first place?

    To answer this, I like to ask the following question: did that lead eventually purchase our product or a product likes ours? Because if not, was it ever a truly qualified lead to begin with?

    As you can see, the problem here is hindsight. We don’t have it. We can’t know if the prospect has purchased our product or a product like ours until they do or don’t. And that’s a problem.

    In any case, let’s suppose that one defining trait of a qualified lead is the intent to purchase our product or a product like ours. That is probably #1 on my list (because without the intent to purchase, they become casual product-demo interlopers).

    But what happens if they are a prototypical organization that fits our criteria for organizations who have purchased in the past, displayed initial intent to purchase, and yet they make no decision on the purchase. They ghost you.

    Unfortunately, this is not that uncommon especially in the mid-market where resources, FTEs, and attention spans for purchasing products are always in short supply.

    So was it ever a qualified lead to begin with?

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  • The #1 thing I do when a [qualified] prospect goes dark

    Selling is complicated. Some deals close out of left field, while others you expected to win months back still haven’t pulled the trigger. Here’s what I do when it feels like a prospect is ghosting me along the selling journey:

    I email them a concise story about a similar use case to theirs with no direct ask.

    And I do it persistently. I will include pain points that the prospect has mentioned in the past, and how one of my other clients was able to alleviate them using our platform. Even more helpful is when I high-light just how costly those pains had become to their business.

    And if the email hasn’t become too long, I will include the improvement stats that the other client witnessed as a result.

    I refrain from spamming. Sure, I will sprinkle in a voicemail touch here and there. But I would rather show prospect that I care deeply about their use case with a concise but informative email on how we can help and let them respond when they are ready to. That is the best kind of buyer after all: someone who wants to work with you under their own volition!

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  • My #1 qualifying question I ask on product demos

    An important question I like to get answered on the initial product demo: If you don’t solve the challenges you are having today with my product or a product like mine, what will be the cost/impact to your business?  

    Occasionally I get a really great answer from a prospect when I ask this after a bit of discovery. But at least 9 times out of 10 I get an answer that is telling.  

    Why do I ask this question: because if my prospect ever plans to purchase what I am pushing, they will have to change what they are doing currently, and adopt a new platform and process. And I need to confirm that there exists a good enough reason to do this. Afterall, for them to part with budget, they usually need a pretty good reason. 

    So when do I ask this question: once the prospect shares with me what their current process is, and after I ask what sorts of shortcomings exist in that status quo. 

    How this question helps my sales process: it helps me fight against the urge to broadly claim that I can help solve their challenges just because I THINK I know best. Example: after a prospect shares pains that you know you solve for, it is tempting to claim (broadly) that “I [you] can help them [prospect] with that [business challenges]”. The prospect shares something helpful to you about their daily work, and you bridge the conversation with something that is hard to believe at best, and condescending at worst. Instead, take the opportunity to dive even deeper and understand why it comes at such a cost to their business.

    If nothing else, you will establish a bit more clarity.

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  • Part 2: What a small ACV actually means to your business.

    In the last post we established that only a small amount of accounts within your market are purchasing a product like yours in a given cycle. Say, no more than 3% under even the best of circumstances.

    Now let’s talk turkey. Take 2 companies playing in adjacent categories within healthcare (say, across those 600 health systems mentioned in the last post).

    • Company A: ACV of $150,000, sells widgets to buyer Jane Doe.
    • Company B: ACV of $40,000, sells doodads to buyer John Doe.

    Of the 600 accounts in your market, 3% or ~18 accounts are ready to make a purchase on these solutions.

    • The Jane Does of the world buy 18 widgets at $150,000 a piece. Company A nets $2.7M in new ARR.
    • The John Does buy 18 doodads at $40,000 a piece. Company B nets $720,000 in new ARR.

    But, ftFounder, they are two different companies selling two different products, at two different ACVs. Why do we even care to compare them? Just let them be.

    Correct but unfortunately for us bleeding heart founders, the “capital” doesn’t care. It is only looking for a return. They don’t care how it looks as long as the returns are pretty. So, ask the tough questions we must.

    Now what happens? With most first-time founders, they would love the first outcome, but are happy with the second. Ostensibly, both should reach revenue milestones in short order, right?

    All things being equal, Company A races to near $10M ARR in 3.5 years. Company B, doing its own thang, takes almost 14 years to reach the same milestone! Not exactly the high growth startup your cofounders or board were buying into.

    So where does the disconnect come in? Afterall, it is easy to see the math if you are being intellectually honest about ACV and our 3% rule. To even reach 5m (and become a viable acquisition target), Company A does it in less than 2 Years. Company B takes 7. Oi vey.  

    The truth is: Founders often (way) over-estimate the market’s willingness to adopt a solution and purchase it in droves. It. Just. Takes. Time. And lots of ‘marketing’. So, if both “time horizon” and “marketing budget” are equal across company A and B, and neither company can escape that 3% rule, then it becomes fairly easy to see the affect of ACV on your company’s growth trajectory.

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  • ACV – The mother of all growth hacks

    What is the number one piece of practical information I wish I would have known when starting my first startup? That average customer size is the mother of all growth hacks.

    Pardon the use of the term ‘hack’; I’ll try and spare you of any gimmicks on here. But seriously: getting customers to pay you a lot for your product or (SAA)service both in relative and absolute terms can be a huge strategic advantage over time.

    Part 1: How many buyers buy in a given year?

    Consider the market I played in: health systems. You’ve got 600 of them in the country. From the biggest of the big like Cedars-Sinai and The Mayo Clinic down to tiny critical access hospitals in towns with more cows than stop lights. (Side note: US healthcare is not THAT huge of an industry in terms of numbers of accounts to pursue. Interloping VC’s and first-time founders just think it is large because of the gross contributions to GDP they heard about in their AP Econ class. The reality is that across those 600 systems, your business might have only a few thousand (or hundred!!) buyers to call into).

    So, 600 accounts. Next: have you ever stopped to consider how many accounts your business could win in a given year if all things went perfectly? Rather: have you stopped to consider how many businesses in your target market actually plan on making a decision on your product or a product like yours in the next 12 months? Throw out a number to yourself – 10%? 20%?

    I can guarantee you a one-way trip to monopoly jail if you said anything over 3%. Yep. Sorry. Bring those year end targets in line and cash runway down.

    In any given year, for even the best startups with the best products, you can’t – and should not – expect more than 3% of your market to be making a decision on a product like yours. And 3% is for those of you who established and reliable marketing channels.

    By that math, out of the 600 accounts in your realm of focus, it is safe to assume that only 18 will be making a decision on a product.

    Gee wiz, how am I ever supposed to hit these lofty growth targets I promised my board and VC’s?

    See part 2 for more obnoxious suggestions.

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