Business development is risky. And wherever there are risks, there is money burnt.
In an infamous phrase by Wanamaker it was claimed that 50% of marketing expenditure is wasted - we just don’t know which 50%. In business development, you can easily burn 100% of the money without even noticing or the realising the chance of success at all.
It’s natural to look for a cheap workaround to cut the costs of business development. In this article, we summarised some of the most common workarounds (missteps) that everyone tries and most likely fails with. And certainly, we have also made these mistakes!
Quite often the underlying reason is the general position of not having enough money to spend, not seeing enough options to go forward - and sometimes just being unsure of anything.
Disclaimer: Please keep in mind that our suggestions and potential conclusions are based on B2B software and consulting only. Some might apply to your business, even if you are not playing in B2B, but not necessarily.
1. Hire commission based only
Everyone tries it. I mean literally everyone but only a few succeed. The reason behind failure is quite obvious in hindsight: it is extremely hard to find salespeople that can thrive with uncertain propositions. To be successful in that model, you also need to have a product that has a short sales cycle, proven track record, and clear sales playbook. Companies employing this model have some information that you probably don’t. Only 2 out of 50 adventurers will stick with you and it will take 1-2 years of investment from their side to become profitable. For instance Insurance sales, MLM sales, to name a few.
If you know quite well your client and the sales steps, this experiment might end well for you. Otherwise, unfortunately, you are most likely to fail. Here the financial risk is low, and you “only” lose time and opportunity. As well, you create potential problems for yourself: the same sales showing up at the same client causing a so-called channel conflict and confusion for your client: whom should I talk to? If you are in a high ticket B2B business, you most likely do not have any of the above (yet) documented.
2. Hire one salesperson only
If you can’t afford two salespersons, you hire only one. The risk is that unless you are coming from sales, you can’t decide whether it’s the market, the product, the process, or the salesperson who is the cause of failure. Or perhaps, it is just bad luck. Regardless if it’s success or failure, you will have no clue about the why. By having multiple salespeople on your team, you can measure effectiveness, create competition, experiment, and have a more clear vision of what’s working and what’s not. You can read more about this here.
Hiring classic salespeople early seems to check all the boxes of the professional approach. You hire professionals, maybe even more than one, you take the leap of faith by putting the future of your business into the hands of professionals.
3. Hire early
What could go wrong? Is there anything you could do better? By understanding the difference between the different sales roles and how it relates to the sales readiness of your solution. Salespeople need processes, systems, and some proven steps they can apply. If you don’t have the playbook with most of the details, you let your salespeople figure it out. Some will be able to do it, others will not. This will result in frustration on both sides. You expect them to be out of the building, doing sales calls and meetings. Instead, they sit on product meetings, talking to marketing, going to events to check out the competition. They have to do the research themselves to fill the gaps, otherwise, they simply fail on the market.
4. Hire for network
You made the first few sales based on network, referrals and old teammates. It’s just natural that you believe in networks. You try to hire the person you can afford with the thickest contact book. Combining this with number 1 (commission-only) is probably the most common early phase workaround due to its attractiveness. However, when hiring for the network, you fully dodge the sales process problem. How will anyone act in such a situation?
“If I am hired for my network, especially without a base salary, all I will do is call my existing network, pitch the product (or whatever I think should be pitched), and see if I get leads fast. And move on.”
Early phase business development can’t provide salespeople with the proper playbooks and therefore their success rate will be incredibly low. You have to understand the product, the benefit it can bring to any business decision-maker before you can scale up sales. Also, you might end up in the “too many products trap”. Read on it here (in progress).
5. Aim for the biggest market (statistical approach)
You don’t hire a sales rep, but decide to pull up the sleeve and do it yourself. Sales is not that complicated, it’s just a numbers game.
When you understand the funnel, you aim for the biggest top-line numbers. If on top of the funnel you have 100k contacts, it’s impossible not to close at least 10 deals.
You are most likely to be right: the problem you will face is that with a mediocre conversion funnel, you still have to do plenty of follow-ups and the tremendous systematic work stretches the organization. Doing 1000 sales calls is not a small feat, considering you have to run the business too. And doing everything a CEO does is often underestimated in terms of workload. Play with me: your 100k contacts yield 300 leads (0.3% conversion from top of the funnel to the next stage). On average you have to make 3 calls to get in touch with the lead. That’s 15 minutes on average/lead. 4500 minutes for the 300 leads. 75 hours. Considering how a day goes by, that’s most likely one full-time cold call person doing the sales calls. And they are pros, way more efficient than you. So the statistical approach might not cut it for you.
+1 Build partner network
If you feel a little discomfort with doing the sales yourself, this seems to be the absolute low hanging fruit. You know a company that has references your product might fit with. They have a well-performing sales team and the intention to sign a reseller contract. What could go wrong? Usually nothing, except that they will not sell anything to anyone. It’s much like number 3 (hire early), replacing the individual with a full legal entity than with more downsides.
If the reseller has a sales team, that team will get measured, and the success of your product will highly depend on whether or not your product is part of their compensation plan. If you don’t have a clear understanding of why they need your product in their portfolio, you might end up being the anchor or comparison product that helps the sales of their product and not yours.
Partners can work out well, but you have to understand and sell them on the benefits they get. Like being able to acquire new clients and sell their products as well, or farm existing clients or get ongoing revenue after deals based on support contracts. Also, if they have a level 1 support centre, they get more workload for that business unit. Figure out why it makes sense to them and think of it as mutually beneficial cooperation.
Can any of the above work out well? Yes, absolutely! There is always a chance of hitting the jackpot.
Or if you don’t want to do it by yourself, hire a business development company that can support you in the early stages of go-to-market steps. A suggestion for such a company is Ability Matrix ;)
Can we help you? AbilityMatrix mentors are regularly available for free StartUp Office Hours. Our mentoring sessions provide you the opportunity to introduce and discuss your project in about an hour. Would you need an honest, independent and sometimes harsh viewpoint – just book a session! Schedule a session: https://abilitymatrix.com/contact
Contact: info@abilitymatrix.com
