Last month we discussed the quick and not so easy steps to building your business and achieving great results. I discussed the first two steps – Stop hiding, and Quantity of Quality. And this month I’m going to discuss how to build your sales funnel, and how being direct and blunt will help you gain great results.
Step number 3 – Build your sales funnel!
Who should the first 3 people be on any start-up team?
In general, it’s the business owner or CEO (vision and strategy), the head of product/engineering (what you’ll sell), and the head of sales/marketing (how you’ll sell).
You may also hire a part-time bookkeeper, but all other positions will not be filled until you actually start making money and prove you have a solid sales and marketing machine in place. This must generate not only cash flow, but also insulate the company from worst-case scenarios.
There’s great danger in only having 1 or 2 large clients. Sure, it provides a comfortable income and lifestyle, but your business is in grave danger.
The most dangerous number in business is the number ‘1’. That’s right…at some point we all start with…
…One customer
…One supplier
…One employee
…One marketing pillar
…One price
Where do you have “one” of something?
The risk is not that you’ll lose one or both clients due to circumstances beyond your control…the risk is that when one disappears you have nobody to replace them with.
It sounds adventurous…
There’s an allure, a prestige…
But big game hunting in the business start-up world is more often than not a bad idea.
- But don’t we all want to “bag the elephant”, as Bud Fox said in the movie Wall Street?
- Won’t it solve all our cash flow problems and afford us a well-deserved vacation?
And the answer, of course, is: it depends…
Here are 3 reasons why it’s a bad idea:
Firstly, big deals with large companies typically have long sales cycles and a small chance of success. However, the pay-out can be huge which is why so many companies go for them.
Here’s the first question you must consider: How urgent is your cash need? How many months if not days of runway do you have?
If you have enough cash for the next couple of months, then you can move forward and chase big game otherwise go after small deals that put food on the table.
Secondly, big deals are great to win initially from a cash flow and PR perspective, but the loss of a disproportionally large existing contract can be catastrophic.
So the second question to consider is: What percentage of your total revenue would this customer represent?
Anything above 10-15% of revenues will create a large risk if you were to lose all that cash flow down the road. Furthermore, you will face unemployment claims from people you had to lay off, and possible excess equipment and inventory that is no longer being used.
Thirdly, big companies are brutal negotiators. They will squeeze your profit margin until there’ s barely anything left. As my mentor says: I can’t eat prestige.
So the third question is: How profitable is the deal and could there be follow-on deals in a potentially long-term relationship?
If your company is ready to win 7-8 figure contracts, then go for it.
Keep in mind though…
John Maxwell talks about ‘The Law of the Big Mo’ in his book “The 21 Irrefutable Laws of Leadership”. It states that Momentum is a leader’s best friend. Get lots of small wins and build momentum.
At some point you’ll be able to ‘bag the elephant’, but probably not until your company has reached a critical mass to absorb it. It’s up to you to know when that is. Until then, you should keep hitting singles and winning deals. It’s the best way to scale a company.
Key question: What’s the average length of time to winning a new client? How can you make this shorter?
Step number 4 –Direct, blunt and unflinching!
Are you courageous enough to abandon a practice that has made you successful in the past?
If you become an entrepreneur, you’ll find many things change:
Firstly, your network needs to be overhauled. Talking to corporate executives won’t help you get clients (unless you’re selling to large corporations), nor does it help you obtain an entrepreneurial mindset. In the past, executives might have helped you get a new job, but to be successful as a founder you must build relationships with other business owners who face similar challenges you do.
Secondly, your level of risk taking has to increase. You have to start investing your own money now and be clinical with the use of your time as you create and build a business. It’s like a newborn baby needing to be nurtured. It needs oxygen to breathe and food to grow. But too many times start-up’s die young due to a lack of funding and effective use of the founder’s time.
Thirdly, you don’t need to please your boss anymore. Initially, this can be a huge relief…until you realise that unless you make money and bring in sales yourself, you’ll have trouble paying the rent. Your stress has shifted focus and getting a good night’s sleep becomes an art.
Again…are you courageous enough to abandon a practice that has made you successful in the past?
A previous coach helped me to see that you’ll need to have the courage to stick your head above the wall and not worry about someone firing an arrow at your head. Because you need to be able to withstand people telling you your idea is stupid and will never work.
Someone once said, “You will find the people who raise themselves up to exceptional power and wealth, and raise brands and entities with them, tend to be direct (lacking time to be otherwise), blunt (lacking patience for the sensitive) and unflinching to criticism, disapproval or outright combat.”
To reach the levels of success you seek you must work with a coach.
Let’s start with a story. Assume the founder of a coaching and speaking business is looking to grow revenues to $1million over the next 12 months. To do this, she must develop new products, hire staff, and raise $500,000 in a pre-seed level financing. Ahead of her first meeting with investors she has done everything right.
- Firstly, she has spent the last 2 years developing deep relationships with experienced angel investors and venture capital firms in her industry and geographic area
- Next, she’s calculated the correct amount of money to be raised based on net burn rate and having the correct 6-month liquidity cushion
- She has also created the right funding documents, including the elevator pitch, executive summary, and investor pitch prior to a meeting
- Next she has set up her first meetings with a host of VC firms with which she has long term relationships such that all term sheets will be forthcoming at the same time and create competition among investors
- And finally she’s identified 1-2 VCs she would like as her anchor investors
- And hired a strong tax accountant and CFO to help guide her through the whole process
All these elements are critical to successful capital raising.
The founder has created a strong product/market fit and high barriers to entry allowing for 80+% gross margins and high revenue growth. She’s now in an ideal position to seek funding to scale her company in order to capture more market share.
The venture capital firms should be salivating at this deal, but… (sit down with a defeated tone)
The founder was unconvincing in her pitch. The VCs walked away lacking confidence that this individual could deliver on her lofty goals. Even if she ends up with a single term sheet she will receive a below par valuation and poor terms and her initial round of financing will create a weak foundation for future financing rounds.
What really happened? The founder didn’t believe she was able to raise $500,000. She felt out of her depth being in the same room as very successful, rich and powerful people. She had a self-limiting belief telling her she would fail even before entering the room and her insecurity was communicated to all investors by her lack of confidence.
In essence, the founder had invested everything in her company and had neglected to develop herself.
What do I mean by developing oneself?
Through our experience in school, we’re all conditioned to assume we are empty vessels that need pouring into to make us effective. Our environment has taught us what to think and not how to think. As we grow up we collect degrees and expect success to follow.
Richard Branson and Steve Jobs are famous for not finishing high school and college respectively. As some of the most successful entrepreneurs and pioneers in their fields, it’s clear that they don’t wait for someone else to tell them what to do. They have learned (1) how to ask great questions and (2) how to think for themselves.
I was fortunate to be part of a 3-month non-profit technology accelerator in San Francisco that hosted weekly evening fireside chats with respected CEOs. Every week they asked this question: “What advice do you wish you could have given yourself 3-5 years ago when you were just launching your company?” Each time the response was similar. “You must have an executive coach. Looking back, it was critical to my success.”
How can having a coach make you successful?
Let’s return to the story at the start of this video. Everything was set up for success. Likely, the founder had an inner circle of mentors guiding her every step of the way. She had also hired a CFO, in a consultant role, to oversee the capital raising process and to create the necessary pitch and legal documents. And yet the founder failed to achieve her goal of raising $2million. Why?
The founder’s internal beliefs had generated an emotional state that communicated weakness, or a lack of confidence in her pitch, to the investors. In other words, her belief-system caused emotions that dictated her actions that ultimately drove the results that she was trying to avoid. It all started with her belief system and ended with her results.
A coach will help you think into your current results by skilfully asking intelligent, open-ended and curiosity-based questions to shed light on your belief system which is ultimately causing the results you want to change…
Training and mentoring are important, but nothing is as powerful as when you source your own answers, because:
- You’re far more likely to follow through on solutions you have established.
- You become more resourceful in the future, less reliant on outside help, and more confident in your inner ability to resolve issues you’ll face.
If you want to grow your business and raise capital successfully, you don’t need someone to tell you how to run your business. You need someone to ask you thoughtful questions that will unlock the answers within you. A powerful coach will do just that.
It’s all about the things that get in the way – those roadblocks that you don’t know are sabotaging you from getting to where you want to be. And so you must talk about what gets in the way so that the ‘how to’ can be executed successfully.
You won’t grow, you won’t change, and you won’t flourish without the inner work that a great coach brings forth.
As Victor Hugo eloquently concludes: “The future has many names. For the weak, it’s unattainable. For the fearful, it’s unknown. For the bold, it’s ideal.”
Key question: Do you have a coach? If not, when will you get one?
That’s my “Just begin” guide consisting of 4 different steps. Firstly, stop hiding, secondly, choose quantity over quality Thirdly, build your sales funnel, and lastly, get a coach.
