TLDR;
This video outlines the typical B2B sales progression for early-stage companies, from design partnerships to recurring revenue contracts. It emphasizes avoiding common pitfalls like overly long, unpaid design partnerships and premature overbuilding. The key is to rapidly progress through stages, focusing on narrow, high-value solutions, securing financial commitments early, and prioritizing customer success.
- Avoid long, unpaid design partnerships.
- Focus on narrow, high-value solutions.
- Secure financial commitments early.
- Prioritize customer success and onboarding.
- Get necessary security certifications (e.g., SOC 2) started early.
The Typical B2B Sales Progression [0:21]
The typical B2B sales progression starts with poorly defined, long, unpaid design partnerships and ideally moves towards a rapid, well-defined sales process resulting in recurring revenue contracts. The goal for early-stage companies is to quickly progress through these stages to close new Annual Recurring Revenue (ARR) every week. Founders often get stuck in the early stages of long, unpaid design partnerships, and the aim is to help them advance more quickly.
Common Pitfalls in Early Stages [1:00]
Founders often get stuck in the early stages, particularly with long, unpaid design partnerships. While some founders try to rush the process before their product is ready or without sufficient social proof, most are too slow to progress. The most common problem is clinging to long, poorly defined design partnerships that lead nowhere due to low engagement from disengaged partners.
Understanding Design Partnerships [1:38]
Design partnerships involve spending time with a customer to co-design a product, which sounds good in theory but often becomes too long (3-6 months) and poorly defined. These partnerships suffer from low customer engagement because the customer isn't paying for the time and has their own business to run. While having a recognizable logo on the website might feel like progress, it doesn't necessarily lead to real revenue.
Identifying Customer Problems [2:56]
Observing customers in their environment to identify narrow pieces of work that can be automated is valuable. Founders should ask customers about the most hated parts of their job or what they would eliminate with a magic wand. Offering to manually do the work for the customer can provide a deep understanding of the problem. Some founders even go undercover to work in the industry to deeply understand the problem domain.
Avoiding Overbuilding [4:18]
The goal is to identify a narrow, burning problem and build a narrow wedge product in as little as 48 hours to get customer feedback. Once a customer is willing to pay for the wedge product, avoid overbuilding a broad platform. Instead, focus on selling that wedge product to similar customers. Overbuilding can waste time without validating customer needs, and design partners may offer suggestions without expressing dissatisfaction to avoid hurting feelings.
Transitioning to Free Trials [6:11]
After design partnerships, founders often move to free trials, pilots, or proof of concepts. These are similar and used when there's an initial product but not enough social proof. Customers naturally want to try the product before committing financially. The most common problem with free trials is that they are too long (two to three months) and suffer from the same low commitment issues as design partnerships.
Defining Success Metrics [7:11]
When conducting a proof of concept, it's crucial to define what you're trying to prove and establish agreed-upon success metrics. This involves defining the value equation with the customer, such as the percentage of savings or revenue uplift the product will deliver. A well-designed pilot or proof of concept is an ideal way to demonstrate this value, providing the internal champion with the evidence needed to convince the CFO or CEO of the investment's worth.
Overcoming Customer Objections [8:38]
Pilots can be used to convince cautious buyers and address objections. Techniques include back-testing on historical data or side-by-side trials with existing processes. For example, a customer service product can provide answers alongside human agents for comparison. Offering to take on a small percentage of the customer service volume or starting in a smaller geography can also reduce risk.
Moving to Paid Trials [10:01]
Founders should transition to paid trials to shorten pilots and secure a financial commitment upfront. A financial commitment makes the customer take the pilot more seriously, as they are now paying for the time. In addition to the cost of the pilot, it's important to discuss their willingness to pay for the full product and the annual fee.
Securing Financial Commitments [10:20]
Getting a financial commitment from the customer ensures they take the pilot seriously. Ask upfront about their willingness to pay for the full product and the annual fee. To expedite the process, ask the champion for the amount they can personally approve, even if it's a smaller sum, to avoid a lengthy approval process.
Optimizing Pilot Engagement [11:30]
Ensure the pilot's success by securing commitments beyond just financial ones. For example, wait until there's a live project suitable for testing the product. Insist on having client data ready and a dedicated team on the client side for testing. Schedule regular check-ins to quickly address bugs. Keep the time frame short, just long enough to experience the full benefit of the software.
Recurring Revenue Contracts [13:47]
Sophisticated founders move from paid pilots to recurring revenue contracts with an opt-out period. This involves a monthly or annual contract with a 30 or 60-day money-back guarantee. If the customer is satisfied and does nothing, it automatically turns into a full recurring contract without additional sales processes.
Focusing on Customer Success [15:33]
After signing contracts, dedicate significant effort to onboarding customers and ensuring they get value from the product. Some companies need to dedicate as much or even more effort to customer success. Also, get SOC 2 and other security certifications started as early as possible to avoid delays. Identify the internal champion and treat them like a co-founder, working towards a defined closing date.