10 Ideas For Those Critical Early Startup Sales

This post initially appeared on Dharmesh Shah's excellent blog, OnStartups.

Closing your initial sales at a startup is one of the most challenging parts of building a company. Many startups die before they ever close a deal.

Unless you’re entering a well established market there will be uncertainty with your product, approach, and timing until you have enough customers to prove that you have a good business model.

When Brendan and I started Wistia, we had questions about how the sales process should work, what kinds of documents we needed in place, how long things should take, and where we should look for potential customers. Through sheer will, conviction, and lots of failure, we found our way to where we are today. Here are the 10 principles we learned along the way.moneygrow

1. Don’t wait to sell

You should start selling as early as you possibly can. Do not wait until your product is polished and launched. We changed direction and started heading towards Wistia about a year into startup life. How’d we know to head towards Wistia? Because we had a real potential customer that was interested when we had NO PRODUCT. We talked to them about what we thought Wistia could be. They liked the concept and we built the first version of Wistia in two weeks. A month later and we had our first customer.

We had just spent seven months building a portfolio website and four months trying to get people on board while our bank accounts shrank and our time to live decreased. In the course of a month we sold our first customer, decreased our burn, and realized that selling early was possible.

2. Do things that don’t scale

We learned an enormous amount from our first customer. That first sale gave us a benchmark for what people were willing to pay, how long it would take to close a deal, and how easy it was to use the product.

We made a point of going to our first customer’s office every couple of weeks to talk about the challenges that they were seeing and how we could make the product better suited to their needs. We could never spend as much time with every customer as we spent working with customer numero uno but we magnified all the extra learning upfront across the customer base.

Trying things that seem like they can’t scale is not just okay, it’s imperative as long as you are actively learning from every interaction.

3. Get inside your customer’s head

What books and magazines would your customers read? What conferences would they go to? What search terms would they use? Who would they follow on twitter? Once you have an idea of where your customers hang out, you need to go there. The more time you spend where your customers are, the more you’ll learn about how they think and whether or not you’re focused on the right group.

We thought some of our early customers would want to use Wistia for training, so we went to learning conferences. When that didn’t work we focused on talking to people from big companies that went to tech events. As we got better at figuring out where our customers could be we had more opportunities to learn from the right audience.

4. Focus on the buyer

Sometimes, especially with enterprise sales, the buyer of your product will be different from the user. That’s why it’s critical that you focus on the buyer.

CRMs are an excellent example of this phenomenon: a product is sold to the VP of Sales that will be used by the sales team. If you focus only on making an amazing experience for the sales team while ignoring the high level dashboards of how the sales team is doing, the VP of Sales will have trouble buying.

Look at Salesforce.com; their application can be an ardous one to setup. In fact, there are companies like OpFocus, whose main business is working with companies to optimize the Salesforce.com system already purchased. But Salesforce.com does have a great set of dashboards for the executives. The buyer, the VP of Sales, is happy and Salesforce is a $18B company with a product that has a terrible UI. All because they focus on the buyer.

5. Don’t price against cost

Cost matters when markets are mature and products are well defined. All that matters to customers is value. Should we charge our customers based on how many servers they’re using or how much video bandwidth they’re pushing because those are our costs? No.

Our customers don’t care how much we’re paying Slicehost or any of our other providers. They want to know if their videos are effective, they want to close more deals, and they want to provide a better experience for their customers. These needs could not be more divorced from our costs.

6. Position against complementary products

For some reason, competitive startups tend to think that they need to position themselves against each other. But as my good friend David Cancel likes to say:

I believe a startup only has one real competitor, indifference.

People not caring enough about your product is your true competition, not some other startup.

David Cancel

When you’re thinking about how to position yourself, look at the complementary products, not the competitive ones. Ask yourself two questions: How much value can I create for my customer? And how much value are they getting from the other products they use?

Say your customers are spending $50 a month on Mailchimp, and they get an email platform they use every week that allows them to design, manage, and market to 5,000 recipients. Don’t try to sell them a video hosting solution for $1,000 a month that they’re going to use once a quarter to train 200 people. We made this mistake, and it’s an important one to learn from. Be honest about how much value you create and how much value your customers are getting from other products.

7. It’s only the beginning

When you first start selling a new product every new customer feels hugely important, and they are. It becomes easy to put a crippling amount of pressure on yourself to close deals and get people interested. While this can be a good motivator, it can also cause you to make mistakes.

When we were first getting going sometimes we’d say things like “Maybe we should wait a bit until feature XYZ is launched. Then they won’t be able to say no.” or “If we can just get company ABC to sign up, then it’ll be way easier to get that other guy too.” Here’s the problem with this: unless you’re dealing with a market in which there are less than 100 customers, the customers you’re trying to sign up should only be floating on the surface of your pool of potential customers.

You should not be afraid of scaring people away with a high price, the wrong messaging, or an initial email that’s too short. You need to try all of these things and more to figure out what’s going to work for your sales process. You need to be able to take risks and push forward quickly. This can be impossible if you structure your plans around closing each and every individual potential customer.

8. Focus on every customer

Even though no one customer should define your business model, you should leave yourself the flexibility to cater to each individual customers in specific ways. The most likely way to get customers to close is to spend a little time on each individual target. You need to personalize the correspondence as much as possible. This is true if you’re sending an email or if you’re meeting with someone in person. Figure out why they’re successful, what their hobbies are, and what conferences they like going to. The more you can understand them the more likely you are to speak in their language.

It takes time to prepare and learn about every target. But as you get more customers you’ll quickly learn what similarities and differences your customers have. It becomes easier to figure out where to focus and how to craft your message.

9. Act your size

When you’re first getting started it’s easy to fall into the trap of trying to act bigger than you are. Common pitfalls include trying to demand exorbitantly high prices, positioning to have more customers than you have, and promising more than your product can deliver. Yes, I’ve made all these mistakes.

When you’re trying to act big, it often highlights just how small you are. Pretend like you have more customers than you do and when someone asks you who your customers are you’ll be left speechless. Position your price too highly like your more entrenched comparables and people will stop responding to you.

The secret is: the right customers will gladly pay startups for services. They’ll think they can get a deal because they’re early to the party, which is likely true. They’ll be excited about using cutting edge technology to get a leg up — again true. And if they pick right and your product rocks they get to tell the world that they were first — how can this benefit even be measured!

10. Just keep going

The hardest part of bootstrapping your sales is sticking with the process. It can take a very long time to get your first deal. But each deal comes faster with practice and more information.

Your initial hit rate will probably be terrible. If it isn’t, you’re doing something right. I have some friends who run a company called Usable Health that just closed their second deal in a complex and emerging space: kiosk-style self checkout at mid-sized restaurant franchises. They’ve been selling for one and a half years and pivoted three times in the process. Now they have a pattern, happy customers, a model that looks like it could scale, and real tangible revenue.

Not giving up is the most important part. Give yourself time to build your business model. Once you’ve done that, you’re golden.

What do you think?  Any tips on getting those early sales?

Dear Continental Airlines,

Brendan and I flew back from Austin on Tuesday having just finished an exciting and invigorating weekend at SXSW. There had been much talk of conversions, funnels, and improving metrics. That’s when I realized; I was sitting right infront of a broken conversion funnel: your in-flight DirecTV.

Let’s take a look at the current state of your funnel. My reactions are in bold.

  1. The flight attendant at the gate announces that we’ll have inflight DirecTV
    Awesome!
  2. Flight attendants hand out free headphones on the plane.
    I have my own, but I appreciate the gesture.
  3. DirectTV is playing on the screens.
    Hmm… What should I watch?
  4. An announcement is made that to access DirecTV will cost $6. A 15 minute countdown begins.
    What the hell? I have to pay for this thing?

The result: 34 people of the approximately 180 in coach decided to swipe their cards. That’s an 18% conversion rate. If you haven’t already guessed, Brendan and I were not in the aforementioned group.
 
Your numbers are not good 
Ask one of your employees to go for a ride on a Jetblue flight and check out how many people are watching TV. You’re going to find much more than 18% of people tuning in.

Total in-flight TV revenue for the flight was $204. Given how many planes you expect to be DirecTV enabled this year and your current conversion rate, we’re talking $2.3-9MM a year on this initiative (Check the math).

You have a positioning problem
When purchasing in-flight DirectTV from you guys I’m faced with a $6 purchase. This is after I just paid $5 for water, $7 for a sandwich, and $25 on a cab. All of these feel like travel necessities as I would like to stay hydrated, nourished, and get myself to the airport. The DirecTV does not feel like a necessities, it feels like an extra I’m gouged to enjoy.

You can solve this problem
The solution is simple: Raise everybody’s ticket price $3 and make DirecTV “free” for everyone.

You have the opportunity to completely re-frame the purchasing process so that people feel like they are getting a deal. All things being equal, I will pick the flight with free TV instead of the paid TV. Watch from minute 11:11 on of this excellent talk with Dan Ariely to learn why:

Just imagine. What if people picked Continental for the free TV in addition to the enormous number of airports you serve. Sounds like a compelling proposition to me.


Food for thought.

Sincerely,
Chris Savage

Update:

Continental has responded on twitter.


What’s in a name?

People frequently ask us why team members at Wistia have formal titles even though we’re such a small company. This is a great question and something that I’ve asked myself. Let’s see how we decided to go with the titles we use now.
Over time, through trial and error, I’ve discovered the secret to a team getting tons of work done: give people autonomy, ownership, and the power to make change.

Autonomy - freedom from external control or influence; independence

Are you more excited to do what you want to do or what you’re told to do? What kind of problem do you find more motivating? Giving people autonomy to find the problems that they think deserve to be solved and to solve these problems their own way is incredibly motivating.

We want everyone who is at and will be at Wistia to have the freedom to solve problems the way they see fit.  One reason we opted to “round up” on titles instead of “rounding down” is so that everyone understands that each team member has this autonomy.

Ownership - the state or fact of being an owner

The biggest challenge of running a startup is deciding what to do next. What should we do tonight, tomorrow, next week, or next year? We’ve handled a part of this decision making process by making sure that one person has ownership over each critical part of the business.

When we make decisions about which feature, partnership, or marketing strategy to pursue next, we always have someone fighting from the perspective of each aspect of the business. This helps us keep all the parts of the company balanced and make smarter decisions. Using this approach, people end up fighting pretty hard for what they believe in.

Power to make change - the capacity or ability to direct or influence the behavior of others or the course of events

Our approach would not work if we had a crew of people generating ideas and one person enacting them. We need everybody to have the power to make change. This can mean having the authority to push “send” on a newsletter, sign a partnership, or commit code. (Side note: Jeff, our Director of Customer Happiness, decided it would be a good idea to commit his code in his first week on the job helping people with support. He wanted to fix a recurring support issue by improving the product instead of creating a canned email.)

Where does this leave us?
We have a team of people fighting to get things done, make the right decisions, and having fun. If that means that our titles are a little more formal than you would find elsewhere, that’s fine with me.

Surprise and Delight: The secret to creating evangelists

I have come to expect that when I call a company for customer support, I am subjecting myself to frustratingly long hold times, mazes of prerecorded soundbites that have nothing to do with my problem, and customer support reps who speak from a script and can’t do anything to help me. I know I am not alone. But, our low expectations do provide companies with an opportunity: the opportunity to surprise and delight consumers with truly positive customer service experiences.
 
Earlier today I unboxed a brand new espresso machine: The Nespresso Citiz. The Citiz is a stunning espresso brewing champ. You can turn around a flawless shot of Ristretto with the push of one button. But first I had to prep the machine for its inaugural brew.

 


Step 1: Fail 
I turned on the machine and it quickly heated up. I was t-minus three minutes from the delicious union of South American and East African Arabicas. My plan was to down the coffee and then dash off to the gym. Unfortunately, I hit a snag. The Citiz did not work.

It turned on, but there was no water flow. I re-read the instructions and carefully checked the steps. I had followed the instructions perfectly. My frustration was beginning to brew. 

I called the Nespresso helpline and was prepared for pain.

Surprisingly a real person picked up the phone within 20 seconds. Carol introduced herself and quickly apologized. She explained that she thought that there was an air bubble in the system but that there was a manual workaround. The Citiz is designed so that the top of the system can be used like an old fashioned water pump. I needed to pump water through the Citiz to push out the air bubble.


 

 
I began pumping the Citiz but nothing happened. We tried five variations of pumping the water while holding down the espresso, lungo, and on/off switch. After 10 minutes it was becoming clear that I was not going to have any espresso today.

I had two options: Carol would overnight a replacement machine or I could unplug the machine, wait an hour, and push out the air bubble again. If the latter option failed I could call her back and she would overnight a replacement Citiz. There would be no need to recount my tale to another rep. I was delighted that they were willing to send a replacement so quickly and that I wouldn’t have to waste any more time. I picked the second option hoping that the Citiz would magically start working in the next 60 minutes.

I hung up the phone and tried the water pump action one final time before my 60 minute wait. Suddenly, steaming hot water was flying through the Citiz and I was ready to brew! A minute later and I was enjoying my Ristretto. It was even better than I remembered. I called Carol back and thanked her for her help.

 
 

My Takeaway
The Nespresso support process was wonderful. They treated me with respect by explaining why the problem was happening instead of just prescribing a solution, they gave me clear and concise options so that I felt like I had control of the situation, and it was clear that they were genuinely concerned that I was not going to enjoy a coffee that morning.

 By the end of the call, I would have been fine with a new Citiz arriving tomorrow because it was so clear they were willing to go the extra mile to make sure I was happy.  But the fact that Carol actually helped me solve the problem made the coffee taste that much better.

 There is no better way to create an evangelist than to surprise and delight someone during the support process. So get out there and help your customers to brew their first coffee.

The value of time in pricing

We’ve changed the pricing for Wistia probably 20 times in the last three years by listening to customer feedback. During the feedback process we monitor how similar groups respond to new pricing. What do videographers think of the pricing? How are medium sized software companies responding? What about life sciences? The funny thing is that we consistently see polarized reactions to pricing within every segment we look at.

We’ll always find a portion of the group who thinks that Wistia is either really cheap or really expensive while their cohorts find it the exact opposite. This was confusing. Then we found one question that helps us calibrate feedback consistently: How do you value your time?

It turns that how one values their time is an amazing indicator across all segments. You’d expect normal purchasing behavior to look something like this:




But if consumers value their time highly then they’ll happily pay for something that saves them time. It turns out that the opposite is true for businesses that don’t value their time highly.  Companies that pay employees very low salaries (like fast food chains) or companies without any money (read: early stage startups) will see business prices and jet in the other direction.

A perfect example of this is email.  Consumers don’t really pay for email….it’s just something that they use and it works.  Flip this to the business side, however, and businesses are more than willing to pay for email marketing tools to help them design emails, manage lists, and track email performance.  These are tools that, for businesses, save time and help them make more money.  However, this is not something that the normal consumer is willing to pay for.

Once you start segmenting pricing feedback based on the value of time it becomes much simpler to manage pricing. Then you can optimize pricing for the kind of benefit and type of buyer you sell to.

Making Ideas Work

I hear great ideas for new companies all the time. Unfortunately, the vast majority of these ideas never mature into startups, and even fewer become lasting companies. This is ironic because most people think building a startup is all about having a great idea. (I believe the phrase goes “if only I had thought of Facebook, I’d be rich!”) The truth is that while a good idea is essential, it’s only the first step in creating a viable startup.

I see three problems that prevent an entrepreneur from following through on an idea: a person doesn’t recognize when the idea is viable, ideas aren’t given enough time to evolve, and there is a lack of commitment to turning the idea into a real-world success.

1. Viable Ideas

There are tons of viable startup ideas that get stopped before they get a chance to start. These ideas get left un-executed for a multitude of reasons including fear, money, and time. But, the most common roadblock I see is overestimation of the competition. The process goes like this: come up with an idea, google to see if it’s been done, find someone doing something similar, and give up.

As it turns out, this is the exact process we went through when trying to start Wistia. We’d think we were onto something exciting because our idea was so unique, then we’d find a company doing something similar and we’d give up on that particular approach. We continued this vicious cycle for 4 months until we realized that absolutely no one else had heard of the ‘competition’ we’d found. It turns out that it’s actually really, really hard to get people to pay attention or use anything. After this epiphany it was easy to forge ahead.

2. Evolving Ideas

One of the first questions that I’m always asked when discussing Wistia is “How’d you come up with this idea?” To which I answer: I didn’t come up with the idea for Wistia. I could never have imagined where we’d end up today and I have no idea where we’ll be in four more years. 

Our initial “great” idea was hosting filmmaking competitions. We started on this path and began building product. It became clear within a month after launching, that our approach would not work. We couldn’t come up with any good models for attracting new users or making money. Let’s just say, we had problems.

We took what we had, a platform for sharing and managing videos, and started seeing how else we could apply our technology. As luck would have it, a medical device company reached out to us. They were looking for a way to privately share videos in clinical trials. This was a completely unexpected use of what were building from a completely unexpected type of company. We pitched them on paying a monthly fee. They bought. A week of building later and we delivered the first version of what we now know of as Wistia. The light bulb went on. Help companies who don’t regularly use video.

3. Seeing Ideas Through

Now in startupland, we like to say “it’s not the idea, it’s the execution” which is definitely true.  But execution isn’t enough. If you execute well for a month you’re not going to get anywhere. You need to be committed if you want to make it through. You need to be obsessed with surviving, obsessed with thriving, and obsessed with doing your idea justice by giving yourself enough time to execute.

Brendan and I started Wistia in June of 2006. We quit our jobs and went in fulltime. It took us almost one year to the day to get our first customer. It took us another year to get to 6 customers. It took us another year to reach 60 customers. This past summer, 1460 days after starting Wistia we crossed 350 customers.

It takes time to build companies. It takes time to learn from customers. It takes time to be lucky. Without commitment, you have no time and with no time your ideas won’t matter at all.

The question is: Do you have what it takes to commit 365, 730, or over 1460 days of your life to your idea? If you do, you may just make it.

Three critical areas that will fall flat without a strong company culture

Every company has a culture of some sort but when it’s clearly defined it makes decision making better, makes hiring easier, and acts as a marketing tool. Defining company culture early can be the difference between success and failure. 

Decision Making 

A company is built by making an incredibly large number of small decisions over time. At the beginning, when the team is small it’s possible to have an influence over every decision. But as your company starts to grow and there are more streams of activity, more decisions need to be made.

Dealing with dispersed decision making is challenging unless you have a consistent rubric for problem solving, a.k.a. a strong company culture. A strong company culture can help every employee learn how to categorize a decision in a couple of basic ways.

For example, at Wistia everyone knows how to prioritize the current task based on: 

  • How the decision will effect the customer experience
  • How the decision will effect the support process
  • How the decision will effect revenue growth 

Hiring

Bringing more people onto your team is one of the riskiest things you can do. The wrong hires will suck up time, resources, and will certainly damage the customer experience through bad decision making.

Having a strong company culture makes it much easier to screen applicants so that you can stop the hurt in advance. If defined properly, it will also help the right people find you.

Example: Zappos’ $2,000 to Quit campaign.

Zappos’s offers new employees $2,000 to quit after they’ve been with the company for two weeks. If the employee values the money over the work environment then they know they’ve hired the wrong person. Zappos’ hack helps determine the commitment and value system of new hires. It also highlights to the outside world that everyone who works at Zappos wants to be there. Sounds like a great place to me!

Marketing

People like to work with companies they can trust and understand. If you know how a company is run, you’re more likely to predict their actions and understand your place in their world.

If your business is obsessed with delighting customers, prospects will be more likely to give you a try. For further insight here, see point 7 of Joel Spolsky’s post on customer service (hat tip to Paul Farnell).

Example: Hubspot customer happiness index

Hubspot, the marketing software company, has such a laser focus on customer happiness that they publish a customer happiness index. Hubspot’s emphasis on customer happiness is so strong that it’s spilled over the company wall for the world to see. Ever wondered if Hubspot customers are happy? Now you know they are. 

Finally, how do you know when your culture is strong?

You know your culture is strong when people understand what you mean when you say, “that’s a very COMPANYNAME thing to do” or “this should be more COMPANYNAMEish.” Think about the companies that you look up to for design inspiration (Apple), customer service (Zappos), or small business acumen (37Signals). Their company cultures are so strong that they permeate company walls and you and I now know what it means to handle a support request the Zappos way. 

For us, it took us about 2 years before we started saying “that’s not a very Wistia thing to do” and about 3 years before we started saying “if only COMPANYNAME was a little more Wistia, then we’d definitely sign up!”