“Learn to build, learn to sell. If you can do both, you will be unstoppable” ~ Naval Ravikant
There are two main skills needed to build a startup - building and selling. If you can build but you can’t sell, you will have a product with no customers. If you can sell but not build, those customers won’t stick around for long.
Startups tend to undervalue sales. But getting sales right can in itself be a competitive advantage, per Peter Thiel;
“Superior sales and distribution can make a monopoly out of even an undifferentiated product”
Sales can include a lot of activities, from marketing to fundraising, but here I am going to focus on getting your first customers. And today, I’m specifically thinking of business customers (B2B) rather than a consumer product (B2C).
For many founders, myself included, sales feels scary or uncomfortable or just a bit icky. You may believe that your product is good enough to speak for itself.
YC always advised that you want to get your product into the hands of users as quickly as possible. But Sam Altman recently said he feels so bad about the advice he gave at YC that he is considering deleting his entire blog. This is because his current company OpenAI did the opposite to the advice he preached for years - they didn’t talk to customers for ages! They built something amazing for years, and yet when they finally launched it became the fastest growing company in history.
This approach worked well for OpenAI. And this is disconcerting because, as Sam himself said, this contradicts much of the advice he used to give at YC. Even so, I don’t think Sam should throw out his previous advice. There is a lot of risk in this approach, in that if you end up building something for 4.5 years and it turns out nobody wants what you built, you are in trouble. I would suggest that OpenAI is the exception that proves the rule.
Sam could get away with this because he had a track record, and was already well respected as a founder. He got enormous leeway from investors willing to invest and wait and see.
But if you are a first time founder, the YC advice still stands, you want to sell as soon as possible. Get your product into the hands of real customers as soon as you can.
As Patrick Mackenzie from Stripe put it;
“If you build it, they will do absolutely nothing.”
So if we want to think about sales, where do we start?
I found this video by Tyler Bosmeny really helpful. Here is some of the key takeaways I got from it.
Sales is not some ‘Don Draper’ character. Sales is you. You talking to your users.
“Founder passion trumps sales experience”
You might not have sales experience, but as a founder you are the best person to do sales, because you know your product and the problems it solves better than anyone else. This means your passion and depth of knowledge can help overcome any shortfall you might have in sales experience.
If you have more than one founder, ideally one of the founders should make this their core focus.
Sales is a funnel
“Your first mission is to figure out who will even take your call”
The good news is, the steps for how to sell are pretty simple;
Identify your ideal customer, make a list of a bunch of them.
Figure out where you can reach potential customers
Work out some messaging that gets you to a call
Be persistent to move potential customers towards a yes or no
It’s simple, but it’s not easy.
When starting out, Patrick Mackenzie says you should aim for 10 customers. Why ten? Because at 10 you know that it isn’t a fluke, that something is working. So you just have to get ten customers all the way to the end of the funnel.
Find the innovators
“Just 2.5% of companies will even consider buying a product from a startup with no revenue”
You may have seen the ‘technology adoption life cycle’ image above. Realising that only 2.5% of companies are going to be sitting in that ‘Innovators’ bucket, will give you perspective when you are hearing ‘no thank you’.
You are going to hear a lot of ‘no’s’ and that is not only ok, it’s to be expected.
It’s a numbers game in the beginning, so don’t get disheartened.
Sales is about listening
“Remember to shut up and listen”
Once you finally convince someone to get on a phone call or a zoom call with you. It’s time to shut up and listen. Don’t think of this call as a chance to hammer home some pre-prepared talking points or go through all the cool features of your product but instead think of it as an opportunity to ask questions and dig deep into the challenges they face.
Tyler recons you should be listening 70% of the time and talking 30% of the time.
Be persistent
“You need an inhumane willingness to just keep going and push through”
Closing a deal can sometimes take a long time, but don’t give up! If they seem interested - keep pushing until you get a clear yes or a clear no. Sales cycles can take a long time, and you may need to keep reminding prospects that you are there and you want to keep moving forward.
And if you hear a no, that’s also ok, because it means you can focus on other prospects that might get to a yes.
Ok, so you finally got to the magic “yes”.
Don’t wait around. Try to shorten the time from “yes” to using the product as much as you can. Patrick Collison from Stripe was famous for this. As soon as someone said they would try the Stripe beta, he didn’t hang around or send them a link to sign up later. Instead, he would say "Right then, give me your laptop" and set them up on the spot.
You might not be able to go quite this fast, perhaps you will need an agreement with the company before they will use the product. But don’t hang around, make sure you have an agreement ready to go when someone says yes.
Oh, and one last thing. Two numbers that you may not know right away, but will be extremely important, are the LTV and CAC. What are these? Lifetime Value and Customer Acquisition Cost. Basically, how much money are you going to get from this customer, and how much does it cost to get the customer.
Why is this so important? Because it will inform what a sustainable sales process will look like. To illustrate this, Tyler referenced this graphic from Christof Janz.
If your customers look like mice, your approach will be totally different than if you are going after whales. It’s super important to think about this from the very beginning, so you know where you stand. As Christof says, referencing Orwell;
To quote the pigs in George Orwell’s “Animal Farm” : All animals are equal, but some animals are more equal than others.
Getting your first customers is always a challenge. In the early days you haven’t got any credibility, your product is probably limited and buggy, and you haven’t yet got your sales pitch dialed in.
But hopefully this breakdown has helped you see 1) how important sales is and 2) how to get started.
Until next time,
Jamie
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