BeyondVC

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.