Category: Entrepreneurship

I had 2 board meetings last week, and it seemed that we spent a fair amount of time digging into each company’s sales process, understanding and mapping out each phase of the sales cycle from sales lead to to actual installed customer.  Many times one can focus too narrowly and only look at a sales pipeline or customer conversion rate and spend too much time talking about the numbers – did we make or miss our quarter and did we grow our sales pipeline and by how much.  While those are always imperative to look at, it is also important to dig beneath the surface and understand how you got from Point A to Point B and deconstruct each step of the sales process, figuring out the time and resources it takes to move each prospect through the sales cycle and get them to become a customer.  As one of our marketing consultants, RIchard Currier, once said, one must look for the Big Boulders in the sales cycle, the point in the funnel where things seem to take too long or cost too much, and put programs in place to move them.  Once you map and understand what it takes to convert a lead to a go/no go decision, it will become quite apparent where you and your company will need to focus its efforts to maximize sales and marketing efficiency, move the boulders, and minimize sales friction.

For example, in one portfolio company, as we dug deeper into the sales funnel, we clearly saw that there were two distinct types of customers – one with a very short sales cycle with more do it yourself implementation and another set with a longer sales cycle.  The natural question you have to ask yourself is how do I put programs in place to reach the first group of sales prospects to increase my efficiency.  One other huge boulder we found was that sales pilots were taking too long to get started.  As we dissected the problem, we discovered that a large portion of this time sink was because it took too long for a customer to get the required hardware to run a pilot.  In order to reduce the friction, we brought in our own appliances to minimize the time to pilot and also mapped out a plan to run sales pilots in an on-demand fashion with no installation onsite at all.

In another company, the boulders that we discussed were less a sales targeting issue but more of an implementation issue.  While we had a great distribution deal with a partner, the conversion rates were not as high as we liked.  To move this boulder, we spent plenty of time discussing how we could get our customers to use our service with as little friction as possible – in other words, how to get a customer using our service with 1-2 clicks instead of 5 – 6.  This may sound trivial but trust me it is not.  Reducing the barrier to usage can make the diifference between a huge win or a mediocre effort.  This applies in both the enterprise and consumer world.  Once again, it is quite important to deconstruct your sales cycle and look for those huge boulders and put programs in place to move them to create a more streamlined process.

On the heels of my earlier post on questions "entrepreneurs should ask themselves," I got a flurry of emails from readers about other points that I did not address.  Anyway, I strongly believe that we can sometimes get too enamored with our own technology and not do enough market assessment in the real world.  Later this week, we are actually going to have a strategy review at one of my portfolio companies and these are the questions we are asking ourselves:

1. What is our unique value proposition to customers?  Is it truly unique and differentiated (come on-we need to be brutally honest with ourselves here)?  If not, how do we leverage our strengths to create a compelling value prop to customers?
2. Who do we want to be when we grow up?  In this world, I strongly believe that one must put a stake in the ground and either go big, go niche, or go home.  Which one are we and why?
3. Where is the market headed?  What are the opportunities – are we a leader or follower?  If we are a follower, how do we become a leader? 
4. Given all of the above, what are we uniquely positioned to deliver given our strengths and weaknesses?  What are the biggest threats that keep our company from delivering?
5. How are we going to reach that customer at the highest point of pain and in the most capital efficient manner?

As one of the entrepreneurs in the portfolio pointed out, some of these questions can be theoretical and murky and until you get a product out into the hands of customers or consumers, it may be hard to answer them.  My perspective is that yes this is true, but you need to have few of these basic questions covered before going into the market and then with the data take a step back and refresh, rethink, and reload.  In other words, you need to take market feedback to validate or invalidate some of your initial thinking and adapt.  I know these are all basic questions but you would be surprised at how many people come in and have not put their mind to some of these questions.

Andy Sacks, CEO, of Judy’s Book has an excellent post of what simple questions management can ask themselves to assess their current state of play.  If you are an entrepreneur, I encourage reading his post and some of his follow up commentary (Andy’s questions below).

1. What are the hardest problems in our current business approach – the market issues that we keep struggling with over and over?
2. What’s (surprisingly) easy about our business – the things that are working better than expected?
3. Where’s the parade?  What major trends are we trying to get in front of with our business?

What would our business look like If we:

• Stopped trying to do what’s hard,
• Did more of the things that are easy, and
• Made sure we were in front of the biggest parade we can find?

I think all too often management can get bogged down into day to day details and it is extremely important to take a step back every once in awhile and think a little more strategically about what you are trying to accomplish, where you are going, and how you are going to do it.  It is hard to build a great company without answering these questions.  The beauty of Andy’s questions are that they are simple yet powerful.  This reminds me of the good old SWOT analysis where management looks critically at their company and themselves to assess their strengths, weaknesses, opportunities, and threats.  This is also a great discussion to have at the board level since having input from others who know your business quite well but are not involved in the daily hand-to-hand combat can be quite valuable.

I encourage you to read what Evan Williams has to say (courtesy of Gigaom) about some of the mistakes he made at Odeo.  Evan is one of the founders of Blogger which he sold to Google and is also founder and CEO of Odeo, a podcasting company.  He goes on to outline a number of mistakes that he has made as an entrepreneur such as not understanding who his customer was and wanted, starting off with too broad a market focus, and raising too much money too fast.  It takes alot of guts to publicly tell the world that you screwed up and how you screwed up.  More importantly, it seems that Evan has narrowed the company’s focus and cut down some excess management to rightsize his business.  As I have mentioned in a previous post, having too much money can be a curse and not a blessing.  If you don’t know who your customer is and what your customer wants and how you uniquely deliver that, no amount of money will help you answer those questions.  As you know, the more money you raise, the bigger the expectations are for your business.  If you raise too much too soon, you may feel extremely pressured to go big and broad too fast without really getting the basics down first.  I am sure Evan is not the only CEO to have felt this pressure to run fast, even if he didn’t ultimately know in which direction he was going.  My only advice is that in the early days as your are experimenting and understanding your market and customer base, a smaller first round of capital may be a better bet for you as it forces you and your team to be resourceful and focused while better aligning investor expectations.

As an entrepreneur, you are most likely spending most of your time building your product and getting it to market.  in other words, you are focusing on the big picture which is what you should be doing.  I do want to share with you a couple of anecdotes about not forgetting to take care of the little things – little things like keeping proper files and records.  It is quite simple to overlook this aspect of your business but taking care of your company and keeping your house in order is easy to do, especially if you start from Day 1.  Make sure your basic finances are in order and that all customer contracts, employment-related documents, financing paperwork, etc. is all stored properly and securely.  Sure we have electronic copies of many of these items but real signatures are quite important. 

1. Example #1: Your company is about to be sold and as the acquirer is doing due diligence it wants to make sure that there are no outstanding claims to the intellectual property of your company.  In other words, the acquirer does not want to have an ex-employee or founder come after them once the transaction is completed.  Well, this is easy to take care of, right?  Typically most companies have their employees and particularly technical personnel sign an assignment of inventions and confidentiality contract where any product or patent developed while working for your company is owned by the company.  So in order to satisfy the acquirer’s needs, all your company has to do is find the signed documents for the key technical founders.  Well, guess what – if you didn’t keep proper records and don’t have the signature, there are two options – the acquirer may walk or you have to go back and get another signature from an ex-employee.  Good luck with that.
2. You are about to sell your company.  5 years ago, you and a technical co-founder conceived of the idea and launched the service.  However, your technical co-founder decided to work full-time at another company and ended up just consulting with your startup post-funding.  While this person may have signed an assignment of inventions agreement with you, he also signed one with his current employer.  When you closed your first round of funding years ago, the lead investor did his diligence and found out that the technical co-founder’s existing employer may have a right or may even own the startup’s technology.  After much debate, you secure a release from the technical co-founder’s company stating that they have no claims to the technology.  Fast forward 5 years – you are about to sell your company, you have switched lawyers twice, and the acquirer needs this release.  You can’t find the signature page.  Guess what, you are going to have to go back to the technical co-founder’s employer and get another release.  I can pretty much guarantee you that it will cost you to make this happen.

The net net is to not forget about the little boring things like record keeping when you start your business because it may come back to bite you in the ass and cost you real dollars when you need a document or signature most.