Director of Sales
Sales is the lifeline for your startup, and the founder is the first salesperson. No matter what the fundraising market looks like, if you are increasing sales month over month, you are on the road to success. I’ve been one of the top salespersons at every startup I worked at for the last few years, and have learned a few things that can be valuable for early stage companies in both the open source and the SaaS world. Here are some straight forward tips for negotiating and closing your first few customers. Note: prospects = people that are interested in your product, but are not customers yet.
Tip 1: Remove friction
Remove any and all sales friction. Let prospects use your product on their own, make it incredibly easy for them to self onboard, and make it simple for them to increase their usage automatically. (AppDynamics generated $30M ARR by doing this). Go through your buyer’s journey with different people in your team, and make it very simple and easy for the customer to buy your product on their own.
Tip 2: Don’t hire salespeople
Avoid hiring expensive salespeople until you find product market fit. They are pricey and they won’t be able to save your business if you haven’t found PMF, it’s as simple as that. Plus, the good salespeople will start leaving your company if they see that nobody wants or needs your product. And that’s a lose/lose situation. However, once you do find your product market fit, hire two sales reps and ramp them up. Once they understand the sales process, hire away and let them go wild. You need to grab as much land as you can, as early as you can. One of the things Oracle did in the early days was to pay extra commission when their salespeople brought a new customer coming from X, Y, Z competitor. This strategy drove sales behavior to find and close such deals.
Tip 3: Respond fast
If you have found your product market fit, you are getting inbound requests for pricing or product questions. Make sure to respond to everyone within 5 minutes. Believe it or not, 35–50% of sales go to the vendor that responds first. By responding in a timely manner, you will get them at their desk, and with your product fresh in their minds, you will also have a 9x higher chance of converting them! On top of that, you are standing out, since (believe it or not) most companies do not respond in a timely manner, if at all. I remember requesting prices for a sales tool that I was looking to purchase from 4 different companies — only 1 of them responded, and we ended up buying from them. Note: if you have a chat box on your website, make sure someone is manning up that chat box and respond to questions immediately. If you are not responding immediately, the majority of these people will not come back and you just lost a prospect that was interested in your product. In fact, you just helped your competitor get a new customer.
Tip 4: Be short and concise
This is no news, but worth reminding. Time is money, most people see emails on their phone now a days, be straightforward and to the point. You’re likely to get a lot more responses that way.
Tip 5: Get everyone in the meeting
When you get a call scheduled, ask for the email address of other participants that will be on the call — so you can add them to the invite (and subsequently get more contacts on that account). You’ll be surprised at how many people will give that to you. Get as many people as you can to join that first call, especially the decision maker, if possible. Make sure to say “Can you please add the Director of Engineering to the call as well? They typically appreciate being on the first call, so we can answer any technical questions they may have”.
Tip 6: Tell a story
People remember stories more than they remember stats. That’s right, after a presentation, 63% of people will remember stories vs 5% of people will remember stats (and here I am, sharing stats). That’s HUGE though! 5% vs 63%! Stories can be how some of your customers became successful with your product, or a story of why you started your company and what pains you were going through. One of my favorite stories when working at a browser testing company was to tell the prospect that “Macy’s made $1M more per month when they added one more browser to their tests”, this really stuck with people and helped them see how they could make a big impact in their company by buying more from us.
Tip 7: Ask for their business
During your first call with your prospect, the first thing you need to do is to understand if you can solve your prospect’s problems, and whether you are the best solution for their problem. If you are not the best solution (compared to your competitors), you need to understand if pricing is what will make them decide on your product vs your competitor’s. If cheap pricing is good enough for them, make sure that they are ok having less features in exchange for that. Once you understand that, here’s what you will say: “I’d love to earn your business, what would it take?”. People are typically upfront about what they can spend, and what they are willing to pay for your product. Note: you can try to price it more than what they say they can spend, but you need to think if it’s worth your time trying to get those additional dollars vs just closing the deal right away. This leads me to my next point.
Tip 8: Discounts
There are a few things you can do with discounts, they are:
1. If you end up giving discounts, make sure to always tie them to getting the contract signed by X date, but get their commitment first: “If we can agree to these terms, can you get this finalized by Friday/end of month?”
2. Any discount you give should be always an odd number, i.e 9%, 11%. The reason is that if you stick to the standard 10, 15, or 20% discount, your prospects will always think they can get more, and the next increment (in their mind) will be another round number such as 5, or 10%. When you give an odd number discount rate, they will know that the next discount level could be 2, or 3% for instance. This is a lesson I learned from one of my managers and it has been very helpful in several deals.
3. If they insist on wanting even further discounts, that’s when you start to take features away. You need to be firm and say “We can give you an additional 7% but will have to remove X and Y features, would that work for you?”
Be sure to explain that you understand your cost of doing business, and that you heavily invest resources back into the product.
Tip 9: You have control
Did you know that 80% of buyers (or procurement people) think that the sellers are in control and 80% of sellers think that the buyers are in control? Use this to your advantage! If they are talking to you, they really want to work with you. Don’t ever think that the other side has the power in the negotiation, they are the ones thinking you have all the power.
Tip 10: Show enthusiasm, no matter what
Excitement is the reason I have been able to get my last 3 apartments in San Francisco where I had a lot of competition. I even got one of them at $600 below asking price. When I saw each apartment, I put a big smile on my face, told them how beautiful it was and that I would love to rent it. I also tailored my message to what was important to them: “I am super clean, responsible, will take care of the apartment like it’s my own, and I’ll be the only resident”. After signing the lease, all three of them told me “I gave it to you because you were so excited/appreciative of the apartment”. This goes for sales too, if the customer sees that you want to earn their business, that you will treat them well post-sale, and that you will appreciate having them as a customer (given your product solves their problem), they will choose you. It’s important to always be upbeat and and ask for their business, even if you have a lot of competition, and especially if they are not being nice to you.
You’re now ready to take over the world! But always remember, no great salesperson will be able to save your business if you haven’t found your product market fit. Happy selling!
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