The types of software and communications startups I deal with every day face difficult challenges in developing their early customers. These sales are inherently complex because the dollar price invoiced is far outweighed by internal effort required by the customer and risks associated with changing from their current way of doing business.
A trap I frequently see vendors fall into is being too eager to please prospect requests, yet never seeming to get business closed on time. But this classic startup challenge has a proven solution.
Moving prospects along a path to full customer status requires leadership. Technical founders are generally product visionaries and adept at securing a technical champion on the basis of peer respect, but stumble at maintaining progress on the business side. I’ll assume for this case — as is necessary — that the value proposition is sufficiently compelling for the champion to say, “yes I’m interested in buying, subject to x,y,z technical milestones being met”. The trap at this juncture is in giving the customer a free ride – pursuing x,y and z without reciprocity. This grave error inevitably results in z becomes a moving target. The well-meaning prospect sucks up your resources as weeks become months with no measurable progress toward revenue. Vital cash drains out of your company without commensurate increase in customer goodwill. This is the vampire prospect at work.
Putting suitable speed-bumps to test and advance the customer’s commitment to working with you in exchange for your commitment of resources to the project is a fundamental art of business judgement. Determining up front that the customer is both Ready and Able to buy at the organizational level — in additional to having a champion that is Willing — is the essential objective accomplished by these speed-bumps.
Lest you retort, “but the relationship is young and fragile, and if I ask for something from my scarce customer at this point it may spoil the deal!” I say emphatically NO! Exerting structured leadership over the customer development process — rather than simply being a passive resource to prospects in hopes they will send business out of goodwill — is what separates the true entrepreneur from a technical business founder.
With practice and good advisors, your instinct will develop to know when to take such steps and how big they should be. It may be a simple memorandum of understanding (MOU) to force the discussion up one level in the organization, or requiring a signed license agreement (with a 60 day free-for-evaluation terms) to establish value. Or documenting agreed mutual outcomes with target dates before agreeing to support an evaluation process. Or requiring the prospect — after those agreed 60 days have elapsed — to schedule a meeting with the internal business owner in order to extend the evaluation license another 30 days.
The careful design of steps to move prospects through your funnel will reduce the time to close business but more importantly focus your efforts away from the vampires that would suck scarce cash from your business. Prospects unwilling to engage in reasonable processes that work toward closure would never have become a customer anyway!