What challenges are faced by startups selling enterprise software?
The sales cycle with enterprise software is typically long. Unless the product being sold is unique, it will be hard to differentiate with competitors. I am curious to know what entrepreneurs do to combat the challenges in selling enterprise software. How do you manage the burn rate during uncertain sales cycles?
- Making sales a priority everyday, for every person in the company.
“We need to improve the product a little, then we can start selling it.”
“Once we get another round of funding, we can start building out our sales process.”
It’s easy for the CEO to work “in” the business – contributing to product ideas, fundraising, recruiting, and keeping a hand in coding – all pushing sales lower down the priority queue.
A startup CEO needs to be the company’s best salesperson, and they need to talk about sales to everyone at your company – from the part-time administrative assistant to the engineering team – so everyone knows what they’re up against in creating a new product, why they’re building it, and who they’re building it for.
This also creates internal accountability when the engineers hear about an introduction to a prospective client, because they will ask. Nothing is more accountable than having an engineer ask you – “Hey whatever happened to that operations VP you were talking with at Wal-Mart about our software?”
- Relying too much on other people
“I met this VP at WalMart and he’s going to pitch us their quarterly technology committee meeting next month!”
It’s convenient to assume that you’re supposed product champion at Big Company – some Vice President you met at a conference – is going do all the selling for you from the inside. Fact is, he’s really not that into you, and even if he is, no single person at Big Company can sell your solution as well as you can. It’s challenging to balance his enthusiasm for your product with a dose of reality about the prospects of a single VP selling for you.
- Relying too much on hiring a salesperson.
“If I could just find a great enterprise sales rep in my space with a Rolodex and who knows how to close customers.”
Per #1, the CEO needs to be the best salesperson in company, and is responsible for learning and building the sales process. Only after the startup has developed a clear sales blueprint can they begin hiring salespeople. Then, the CEO responsible for being the VP of Sales – managing the sales team, holding them accountable, and helping daily with moving opportunities forward – not hiring a VP of Sales out of the gate.
Read SaaStr | The 48 Types of VP Sales. Make Deadly Sure You Hire the Right Oneby Jason Lemkin.
- Focusing on the first 100 customers before getting the first ten, or trying to get ten customers before the first one.
“We need to scale as quickly as possible.”
It’s challenging because as a startup, there’s presumably an enormous market opportunity out there. In the enterprise world, purchases move slowly and implementations even slower. The first customer proves the startup and its product adds value to market participants, and provides a platform for case studies, success stories, and a reference customer.
The first customer may take you a year or more to procure, implement, and measure from start to finish, and that is totally okay. Get the first one right, and the next ten will be much easier. Get the next ten right, and the next one hundred will fall into place. It’s just very challenging to stay patient.
Read Do Things that Don’t Scale by Paul Graham.
- Relying too much on the presentations and product demos.
“We did a really great demo with this guy, then we sent over our marketing deck just like he asked so he could share it with his team.”
Presentations and product demos are important to explain how you solve the customer’s problem. They cannot do the selling for you. They’re easy to send via email, and the challenge is persisting to maintain control of the sale and its next steps.
- Thinking that the product matters.
“Once they see the product, they’ll be really impressed and want to buy it.”
Sure, the company exists because the founding team saw an unaddressed market opportunity, and are now filling that opportunity with a new product. The product is pride and joy of the company. It’s never been built before and the market’s never seen anything like it.
Guess what? That doesn’t matter. This is enterprise selling. It’s not about what your product does – it’s about how your product solves your customer’s problem.
Read A Product Person’s Perspective on Enterprise Selling by Stephen Sinofsky.
- Learning how the procurement, legal, vendor management, risk, IT review process works in enterprise sales.
“We’ve got a really great relationship with the business unit VP and the CEO, so it’s just a matter of getting them to sign the contract.”
That your sponsoring VP has the budget and the authority to write a check isn’t the only factor in approving the purchase. The back office side of the sale (a.k.a. “the technical sale”) is just as important as selling to your sponsoring executive.
Brian Burns talks about the “business sale” and the “technical sale” in his book – Selling in a New Market Space. It’s critical to run these two processes, preferably in parallel so that you know you’re dealing with
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The procurement and due diligence process exists at big companies to protect themselves against a hundred VPs making unilateral purchasing decisions. It prevents business mistakes like overlapping product purchases or the introduction of data security issues. Big companies are inherently risk averse, and the procurement process is designed to identify all of the gaps and risks associated with working with third party vendors.
- Accepting (and circumventing) long sales cycles.
“Now that the VP is on board, we should have a contract in a few weeks.”
“We’ll just have to wait for procurement to get back to us.”
Shervin Talieh nicely covered the long sales cycle in his answer. It’s a long, hard grind in many cases, and this is a where an effective “pilot program” strategy can be useful – finding ways to place your solution into customers in a small, scoped manner which enables to expand down the road. IT, risk, and procurement often give exceptions to smaller projects or projects labelled as “pilots” internally. This gives the startup a chance to prove success and wiggle around from there.
Figuring this out is extremely challenging for startups.
- Trying to sell to the whole problem instead of focusing on pilots.
“I’m sure they could just remove Salesforce and use us instead.”
It’s a challenge to think in terms of “land and expand” instead of “take over the world,” and staying focused on small, short-term wins with the first customers.
- Developing their own sales process.
“We’ll just follow what Salesforce did.”
“Slack doesn’t have any salespeople, so let’s just do that.”
Enterprise sales are ugly, gnarly, and difficult. Every problem and product can take on it’s own purchasing and sales process.
Read We All Get To Our First 50 Customers Our Own Way. Then It’s All The Sameby Jason Lemkin.
- Thinking way too much about price with early customers.
“I don’t want to leave any money on the table. These guys are a huge company and I know they have a big budget. They should be able to pay well over $100k for this.”
Yes, you definitely must get paid for your product – it’s the only way to prove that your customer is serious about implementing your solution. Just remember to think about the long-term. Customers are taking a risk in working with a startup. You’re going to learn immensely from your early customers to inform your product roadmap. Don’t blow the opportunity to build for the future by worrying about a few bucks today.
- Thinking too little about price with early customers.
“We just want to get them using our product, then we can worry about the money side.”
You need to make sure the customer feels some pain in paying you so you know they are invested in your product and solution, and most certainly “free” should never be an options with early customers. Maybe a “success fee” can be part of the overall payment. Maybe.
Just know that once the budget release is triggered, your sponsoring executive will have all kinds of eyes on her internally and the decision to work with a startup up.
Make sure your early customers are invested in your success. Without a payment, it’s easy for them to quit supporting your implementation on a moment’s notice.
- Letting prospects push you around with conditions and how to run the sales process.
“I really don’t want to agree to this, but these guys are really big and we can’t afford to let them get away.”
A few examples:
- Requiring you place your source code in escrow
- Long contract negotiations
- Dictating price instead of collaborating on what investment by them will ensure your company’s success.
- Unfair cancellation terms
- Product customization requirements
- Provisions to own IP developed during the time the two companies are working together
- Anti-competitive clauses
Playing out an extreme case for any of these onerous contract and relationship provisions will lead to a startup’s death, or worse, just plain old purgatory. It’s a challenge to stay patient and true to the startup’s mission. If it doesn’t feel right, it probably isn’t.
**This Q&A article was originally posted on Quora. Check out Scott’s Quora page here.
Hi Scott, thanks for a great post on a topic so many startups are dealing with. I’d have to say point #7 resonates with me the most. I think for startups first starting to sell to enterprise, anticipating the length of the sales cycle can be nearly impossible. This often leads to misestimating the time and costs that will go into closing an enterprise deal. Of course, this can be remedied by experience over time. Thanks again for a great post!