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The Entrepreneurial Selling Process

The Entrepreneurial Selling Process. Bill Collins. Exercise. Elevator Pitch. Selling Process Phases. Phase I – “Education Phase” Set your success pattern “ Invent ” your customer Establish “Lead” customers Phase II – Volume Sales Repeat your success pattern

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The Entrepreneurial Selling Process

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  1. The Entrepreneurial Selling Process Bill Collins Bill Collins EFP Caltech

  2. Exercise Elevator Pitch

  3. Selling Process Phases • Phase I – “Education Phase” • Set your success pattern • “Invent” your customer • Establish “Lead” customers • Phase II – Volume Sales • Repeat your success pattern • “Mass produce” your customer • Establish predictable sales funnel Bill Collins EFP Caltech

  4. Selling Process Phases • Phase I – “Education Phase” • Set your success pattern • “Invent” your customer • Establish “Lead” customers • Phase II – Volume Sales • Repeat your success pattern • “Mass produce” your customer • Establish predictable sales funnel Bill Collins EFP Caltech

  5. Quiz: Why do Fish School? Bill Collins EFP Caltech

  6. Adoption Challenge You are faced with a host of valid initial customers – how do you proceed? Potential Customers Pepsi Neutrogena Kelloggs Vigilistics Exxon Darigold You Amgen Nestle Kroger Texaco General Mills Merck Foster Farms Chevron Bill Collins EFP Caltech

  7. Phase I Overview • In Phase I, you pick out a few reference-able customers of the same type to win • Education intensive – both directions • Make “alterations” to fit • Allows “characterization” of sale Potential Customers You Education Bill Collins EFP Caltech

  8. Phase I Overview • In Phase I, you pick out a few reference-able customers of the same type to win • Education intensive – both directions • Make “alterations” to fit • Allows “characterization” of sale Potential Customers Vigilistics Foster Farms Kroger Darigold Education Bill Collins EFP Caltech

  9. Portfolio Examples Bill Collins EFP Caltech

  10. Phase II Overview • In Phase II, you the leverage lead customers to help similar ones recognize the value, rapidly adopt • Establish repeatable process • Make revenue predictable Recognition Dean Foods Nestle Swiss Valley UDA Education Bill Collins EFP Caltech

  11. Momentum Additional types then require less education and have faster recognition based on initial success Recognition Education Nestle Neutrogena Bill Collins EFP Caltech

  12. Alternate Approach • Addressing multiple types at the beginning • May feel faster, but is actually slower • Education spread too thin • Longer for specific types to recognize • Recognition still tends to be by one type at a time Recognition Education…. Education…. Bill Collins EFP Caltech

  13. Process Benefits • Phase I enables market recognition • Enable market analysts to position you • Enable target company interest in you • Enable funding community to put a value on you • Phase II enables predictability • Financial risk reduced • Return on assets can be projected • Operational investments scale an established model • Solidify your value to funding community, acquirers • Equity, debt, purchase Bill Collins EFP Caltech

  14. When Should I Start Selling My Solution and Who Should Sell It? The Short Answers….. Now and You! Bill Collins EFP Caltech

  15. Lead Customer Pre-Requisites • Reference-ability to rest of target market • Location allowing intensive interaction • Looking for competitive advantage • Have both pain that can’t be solved by others and a specific compelling project or event necessitating solution • Sponsorship from customer manager(s) that control priorities and budgets • Willingness to engage a start-up company (this is by definition a small percentage) Bill Collins EFP Caltech

  16. Ways To Reach Initial Customer Most success comes through relationships In order of effectiveness…… • Customer helps found company/is early investor • Founder/CEO/CXO has relationship already • Engage established partner(s) with privileged access • Engage established sales person with privileged access • Leverage referral from close mutual associate • Leverage referral from distant mutual associate • Cold call Bill Collins EFP Caltech

  17. When is Phase I Complete? • When you have a credible answer to: “What have you done successfully for someone just like me?” • Complete ~ 5 sales. • Make ~ 5 installations, demonstrate value. • Know why they bought it. • Get at least 2 to be references for value. • Be ready to deliver in production form. Bill Collins EFP Caltech

  18. Phase II • Establish, characterize sales funnel • Stages of sale, Cycle-time, Attrition, Resources required, Selling costs • Use funnel to establish revenue plan • Assign quota by resource building blocks • Assume productivity & price changes, lead-times • Measure and drive key metrics • Tailored to your business • Get a professional to run this • Different from a Phase I activity Bill Collins EFP Caltech

  19. Example Funnel/Pipeline 100 50 25 Suspects 15 Target/Prospect Lead Qualified Lead Present Propose 10 4 Close 3 weeks 2 weeks 2 weeks 13 weeks total 4 weeks 4 weeks Bill Collins EFP Caltech

  20. Funnel Definitions Bill Collins EFP Caltech

  21. Example Metrics • Choose the ones most important to your situation, such as: • Number of opportunities in each stage • Hot list of accounts at proposal stage • Close ratio • Time to qualify leads • Performance to quota • Actual ASP of deals closed Bill Collins EFP Caltech

  22. Channels “Channels are NOT customers, they help you reach your customer” Bill Collins EFP Caltech

  23. Why Are There Channels? “Channels enable quality sales time with the customer” Bill Collins EFP Caltech

  24. Channel Comparison Bill Collins EFP Caltech

  25. Channel A Gp A Ch B Group B Ch C Customer Group C Using Multiple Channels • You will typically end up using multiple channels • “One size” usually does not fit all # Of Customers $ Per Customer Bill Collins EFP Caltech

  26. Sales Plan “Building Blocks” Bill Collins EFP Caltech

  27. Attracting & Motivating Sales Forces • Great salespeople / channel companies are looking for two things: • A great solution to sale • High variable compensation • Sales people / channel companies are highly motivated by contests Bill Collins EFP Caltech

  28. SalesmanAct.jpg Top Sales People Bill Collins EFP Caltech

  29. Hiring Top Sales People • Top Sales people have common traits: • Have professional & personal relationships with your specific target customers • Each market has a “club” – they are in the club • Consistent high achievers to quota • Consistently number one or close to it • Consistently highly paid • Hire these people - pay a premium if required • Particularly for your early sales team • They are well worth the money!! Bill Collins EFP Caltech

  30. Summary • Your business model must be: • Acceptable to your customers • Able to provide recurring sales. • Able to deliver more for less while generating profitable growth. • Your pricing must: • Have a credible reconciliation to value • Get early validation from lead customers. • Create excitement for both your customers and investors.

  31. Q&A

  32. Business Models

  33. Business Models • Business Model as defined here is your structure for receiving compensation. • Your choice of business model is a critical consideration for your company. • It is also a critical point of review by prospective financiers.

  34. Biz Models – Basic Questions • How will you charge for your solution? • What makes your customers excited about your price/structure now? Differences? • How will you generate recurring sales from your customers (printers versus ink)? • How will you deliver continuously increasing value over time? • How can you extend your model to enable continuous cash flow, profits growth?

  35. Set A Value Roadmap • You must plan to increase your value each year • Cost-performance improvement curve is inexorable • Stems from human expectations model – continuously expect more for less. Each industry has it’s norms. • Productivity improvements enable price reductions • Additional features enable stable or higher prices Cost versus performance Expectation Slower = margin loss Faster = margin gain

  36. Industry Case • Whether your model is selling “cell phones” or “minutes” you need a roadmap. • Cell phones: Started out expensive, got cheap, then were given away to get the minutes, now need to be combined with cameras and PDA’s to have value…… • Minutes: Started out expensive per unit, got cheaper, went to lump sum, then needed lots of additions just to keep the lump sum, eventually are basically free….

  37. Portfolio Examples

  38. Models – Vertical/Horizontal • What gross margin can you generate? • Primary indicator of value • Needs to support your overhead • Needs to allow room for partners/customers to make money. • How do you generate positive cash flow? • Payment terms with suppliers and customers – bias these in your favor • Working capital needs - minimize • Understand who is paying the cost of money

  39. Pricing

  40. Pricing Fundamentals • Always price to value • Approaches: • Price to payback • Rule of thumb – 6 months to 1 year • Price to displace existing solutions on cost basis • Rule of thumb – 30% net savings or more • Price to displace existing solutions on performance basis • Rule of thumb – hard to get customers to pay more • Price to protect against indirect competition • Rule of thumb – highest price that allows end solution to stay attractive versus alternative approaches

  41. Value Pricing • Know your value • What is the current solution? • What money do you save/increase versus this? • How easy/hard to change: time, cost, behavior, risk? • Do customers agree with your assessment? • Know your cost • What can you provide it for? Now and over time? • What does it cost to implement? • Be confident in your value • It WILL sell If credible/consistent with rules of thumb

  42. Portfolio Examples

  43. Value Factors • Price • Performance • Quality • Lead-time • **RISK/PRESTIGE PERCEPTION**

  44. Lead Customer Pricing • CRITICAL validators of value, ROI, price • Set future “success pattern” • Lower risk/increase prestige of solution • Eventually you want to become a “safe bet.” • Lead customers must pay for solution • Not credible otherwise – others WILL ask • Can receive a favorable deal, not too much • Best to pay full price, get other benefits • Make sure they’re willing to brag about it!!

  45. The Pricing Acid Test Does your pricing excite both your customers and investors at the same time?

  46. Summary • The two-phase selling process drives a successful business • Set the pattern, repeat the pattern • It all starts by choosing similar customers • The key factors are education & recognition • Phase I enables recognition, Phase II predictability • Phase II is for “mass producing” customers • Top Sales people: • Want superior solution, high variable comp • Know your customers, have the track record • Pay them the money – they’re worth it! Bill Collins EFP Caltech

  47. Q&A

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