Check Industry themes prior to placing your bet

A good friend texted a link to an article a few days ago.  I finally had a chance to open it and within the first few minutes of reading the article I had more questions.  You see, my friend knows I work for a company that operates in the nascent drone industry.  This is why he forwarded the article to me.  What he didn’t realize is he helped me see a few broad themes that should be important to the company I work for.  I’m sharing this because if you work for an under-resourced (limited time, low investment capital, small number of personnel) company, then you need to learn how to look at industry themes and determine where you want to ‘place your bet’ (i.e. determine where and how you want to play/win in the market).  Here’s a back of the napkin approach to determining how to place your bet:

1.      Gain a high-level overview the market

Here’s the drone market ecosystem from 2016:

 

Crowded eh?  Irrespective if it’s crowded or not, there’s still a few organizational plays you can make as a company in a crowded market.  Especially if the overall market is growing at an outrageous rate.  I’ve talked to several entrepreneurs that solely focus on growing industries so they can ride the momentum of the industry to a profitable outcome.  I’ve been told countless times that you can build an average company in a hot industry and the reap an above average exit.  I’ve seen this happen in the IT security and energy sectors. I’m a believer now!

Bottom line: There are several players in the space and the number of companies and the amount of capital invested will increase in the coming years.  So…of course you want to play in this game.

2.     Determine where you’ll play and if you have an advantage

Take a look at this 10,000 ft. view of the drone industry:

Fairly quickly you should notice there are companies trying to win specific verticals and other firms pursuing a horizontal play.  And one of the first thoughts you should consider is 1) where do you sit in the industry ecosystem? And 2) do I have the resources to win or lead in that specific space. I work for a drone services provider that can produce competitive deliverables compared to the software firms listed in this graphic.  However, these software firms have a big head-start on us and they have raised in excess of $565M, and it doesn’t appear to be slowing down anytime soon.  Let me cut to the chase.  We shouldn’t play in the drone software space.  We don’t have the money or personnel to win or lead this software ‘arms race’.  We don’t have an advantage here.

3.     Can you win?

Can we win a specific subset of the vertical or horizontal space? That’s the next question we need to ask.  We employ some of the most talented people in the construction drone insights space.  And I’ve seen the problems we’ve solved for clients in a shorter time period than our competitors.  We’ve also led the way in terms of delivering new products that our competitors tend to imitate a few months after our product release.  So, can we win?  Well, and I hate this answer to…”It depends”.  If we’re going to win or lead in a specific vertical, say construction, then the prospects need to buy our innovative technology  products/offerings now.  Unfortunately, construction and innovative technology are an oxymoron.  Tech adoption in the construction space is slow.

The upshot of this KPMG survey of construction firms is as follows:

  • 8 percent fall into the “cutting-edge visionary” category
  • 69 percent are considered either “followers” or “behind the curve.”

This means that the firms playing in this space will need to wait for sales to occur.  And if you have to wait for sales to occur because the industry needs to be educated and ensure the value of drones outweigh the risks, then you better have a ton of money to survive the adoption curve.  Or you can use resources to ‘buy the market’.  We’ve seen this occur as firms reduce prices below the cost of providing the service.  The intent is to lock in the customer and sell higher margin products/services in the future.  Bottom line: It will be very difficult to win and/or lead in this specific vertical without the financial wherewithal to overcome slow adoption rates and the need for vertical education.

4.     Find your core.  Compete.

Before you make a final decision about where your business will play within the ecosystem you should determine ‘who you are’. What I mean by this is to decide if you are a sales driven company selling technology in your DNA (e.g. CDW) or a marketing company (e.g. Dropbox), or are you a sales company driven by technology (e.g. Groupon). The easiest way to quickly determine who you are is to understand why people buy from you and what value you truly provide to them. When people purchase your product/offering simply ask them why they bought from you.  This provides you with key insight about who the customer thinks you are in the marketplace.  Notice this is letting the customer tell you who you are, not the other way around.. And if a paying customer is telling you that your company is “X”, then you ought to really consider this input. Because regardless of the market you’re playing in, your value and your ability to sell that value to a prospect, is what will ensure you win or relegate you to a losing situation.

When I consider why prospects are excited about the company I work for it revolves around one thing: our reach (nationwide network of pilots). So the question for the company I work for is, ”Can we use this capability to play in a crowded market?”  I believe the answer is a resounding “Yes”! We should compete against the 2-3 other network operator firms.  We have a decided advantage and the field is less crowded than the other segments of the drone ecosystem.  And if, as a network operator, we can tightly integrate with software providers then we increase switching costs to another network provider.  Given limited resources we don’t have a strong chance to win or lead the market when competing against the software or hardware players.

The network operator appears to be our best play at the moment considering available resources, the ecosystem, industry adoption rates, our core, and our ability to compete.

 

We can’t raise money, what should we do?

This is such a common question among startup founders/leaders.  The question is typically asked after several months of pitching every VC, family office, rich friends the founder knows.  It comes after receiving feedback, iterating the pitch, augmenting the business model, working in the business and on the business and eventually landing in the same spot you were when you started the fundraising journey eight months ago.  Now, a measure of reality begins to set in and you ask yourself, “What should I do with this business?”  The answer is different for everyone given there are typically other stakeholders (co-founders, board, family, angels, etc.) involved that would have a say in the final decision.  But quite often we ponder the question as if we’re trying to cure cancer.  It’s not that hard!  The answer to this question usually falls into four (4) buckets:

  • Grow organically
  • Continue as-is
  • Sell the company
  • Close the Doors

Now how you execute given the category you select is another question.  But suffice it to say, these are your options.  Let’s take a brief look at each and determine what’s right for you

Grow Organically

What do we mean by “organic growth”?  Organic growth is growth that’s generated by an increase of output….typically sales.  Startups can choose to continue to grow organically at whatever growth rate they are currently experiencing.  However, many ‘startups’ aren’t growing at all.  They have more promises and employees than customers.  I’d first ask these ‘startups’ to realize what/who they are…which is an idea trying to become a company, not a company ready for funding.  I like Steve Blank’s definition of a startup.  He says it’s a temporary organization formed to search for a repeatable and scalable business model.  Many startups that are trying to raise money are simply too early for investors, even some angel investors.  But hey if you have a few customers, perhaps you should continue to grow organically while devoting all of your energy to customer development in the hopes of finding true product/market fit.

Continue as-is

This option is a bit different from growing organically in that your company’s burn rate may be outstripping your revenue.  Simply stated, you’re spending more money than you’re making!  This scenario would appear to make your decision-making easy, but many startups continue as-is with the belief that it’s possible to 1) hit an inflection point that spurs exponential growth. Often this inflection point occurs when a company achieves product/market fit. 2) build a solid user/client base and try to upsell this base to increase the average revenue per customer, or 3) try to monetize the customer base via some form of acquisition (e.g. sell your book of business).  The key if you opt for the continue as-is approach, is you need to have clear goals so the entire leadership team understands the expected outcome and can organize their work effort(s) accordingly.

Sell the Company

This is a fairly straight forward option.  You have a company, a few customers, a great team, some proprietary technology, and a few value hypotheses that still need to be proved or disproved.  However, your runway is too short and you don’t have time to ‘figure it out’ or you realize that you can’t compete against larger well-resourced companies.  So you opt to sell the company.  This scenario has played out hundreds, if not thousands, of times in business...and it manifests in the form of an acquihire.  The larger competitor sees the opportunity to hire a talented team and they purchase the company.  Another option is the invest some money to build-out the technology thereby making the company more valuable in addition to the talented team. Still, it’s really difficult to time the market properly and sell your company.  Tomasz Tunguz of Redpoint addresses this question and offers some directional data on when to sell your company by examining the relationship between growth and enterprise value.

Close the Doors

Self explanatory eh?  I can’t tell you when enough is enough and it’s time to wind down the company.  But four things you should consider when making this decision are:

  • Data – Runway, product/market fit, customer feedback, sales numbers, etc. What is the data telling you?
  • Employees – Always look out for your employees.  They assumed some of the risk by joining your early stage company.  The least you can do is attempt to give them a soft landing.
  • Intuition – What does your gut tell you?  Be honest.
  • Tolerance – Building a business is a laborious, long process.  You have to love the process more than the desired result.  Can you tolerate spending more money and time on this venture?  Only you (and your investors) can answer this question.

So make a decision and get on with your life and venture.

My Questions → His Wisdom

A few days ago I was wrestling with a business issue and I decided to call a close friend to get some advice.  I grab my cell phone and instinctively dialed a number, even though my friend’s number is programmed into my phone.  After the phone rang a couple of times I realized that something was amiss.  I called the wrong number. I accidentally called my old boss/mentor with whom I had a close relationship. I hung up and oddly enough I dialed the same number again.  Weird!  Doesn’t seem like a big deal eh?  People dial incorrect phone numbers every day.  But what’s weird about this episode is that I twice instinctively dialed the number of my mentor, a man whose funeral I attended earlier this year.  I knew my mentor had died earlier this year but I still dialed and unconsciously reached out to him when I needed advice. Although he is no longer on this earth, many of his business and life lessons live on through me.  I thought I’d share a few of them given they were so impactful to me when I received them in my mid 20s.

Let me provide a bit more color of my mentor’s background so you can better understand his advice/wisdom when I share it later in this post.  His abbreviated story is:

  • Born in Aurora, IL in the 1940s
  • African-American male
  • Father drowned on a fishing trip while my mentor was young
  • First in his family to graduate from college (Southern Illinois University)
  • Joined Black Panther organization
  • Worked at Continental Bank (acquired by Bank of America)
  • Became a Partner at PriceWaterhouse Coopers
  • Started his own firm in 1984
  • Loved his wife and four daughters
  • Grew a multi-million dollar business

Ok, now you that you have a sense of the man that I had the pleasure of working with for eight years, I’ll share some of the business and life lessons, in no particular order of importance, that were impactful to me:

Look the part

My mentor was probably one of the best dressed businessman in Chicago.  The previous statement is not hyperbole, people would comment on his fashion sense all the time. He was always impeccably dressed in an expensive suit, shoes, watch, pocket square, etc.  When we first met he ‘encouraged’ me to upgrade my wardrobe.  It was a point of contention given I was of the belief that all that mattered was what I can deliver in terms of value, not so much how I look.   He agreed to a certain extent, but his experience taught him that as an African American male in corporate America we are judged ‘on sight’.  Research shows all people are making judgements within minutes of meeting you based on appearance no matter your race.  But my mentor realized that there are additional biases that come into play for African American males as well.  One of the ways to combat these biases is to present one’s self in the best possible light and that included how you dress.  I had a hard time accepting this at first b/c as young idealistic guy I believed the world operated as a meritocracy.  Hahahaha…it doesn’t.   My mentor knew the world, let alone corporate America, doesn’t operate in this manner.  The funny thing is he understood that looks are superficial, but he realized we needed to ‘look the part’ as soon as we walked through the door to give us fighting chance.  I invested in my appearance and upgraded my professional wardrobe. I’m still not at the level of my mentor because I’m cheapskate, but I’m working on it.

Listen, Questions, Facts

My mentor had the uncanny ability to listen.  I think listening is a lost art these days.  But those that actually listen during conversations tend to reap rewards for employing this skill.  My mentor would listen intently to every word, ask a few questions and then hit you with facts.  Not just facts, but statistics.  He was well read across a wide variety of subjects and he was blessed with the ability to recall specific stats. For example, I recall he once quoted the percentage of failed businesses in 1984 compared to those in 2004.  How can you argue against that?  And therein lies his lesson.  He taught me to have facts at my disposal because people’s arguments fall down because most people can’t argue against numbers/facts.  Their rebuttal is weak.  I read more than these days and I try to remember some facts.  I’ve realized he was right.

Who told you don't belong?

I’m smiling as I write this because I can hear my mentor asking, “Who told you that you don’t belong? And why do you believe them?”  It’s a rhetorical question he posed and he would pose this question when he sensed that I was experiencing some doubt about approaching someone and/or my hesitation to speak up in a meeting full of executives.   It was a great question, it made me realized that somewhere along my journey I accepted it as truth that I should be happy to be ‘here’ (wherever here is).  But my mentor made me realize that not only was I supposed to be ‘here’, but I should be leading the conversation.  Basically he was encouraging me to have confidence and know that I belong.  Today I know this.  I consider myself the man with anything at the intersection of business, technology, and growth...

Own it

I recall eating lunch with my mentor and asking him about working for multinational firms and rising to the ranks of an equity partner.  We talked about the time, effort, and sheer luck needed to accomplish this type of feat.  Then he began to shift the paradigm and he asked, “Would you rather work in a $500M firm and have a 1% ownership or build and own 100% of a firm worth $5M?”  You can do the math if you’d like to do so…but the value is inconsequential.  The real wisdom is understanding these are two totally different lifestyles.  Ever since I heard this question I began to care less about working for established brands just because of their reputation in the marketplace.  I desired to build lifestyle companies in which I controlled a significant amount of ownership and worked with talented and amazing partners.

I see families

There was a period of time when the company that my mentor owned started to contract.  I was in business school during this time and thought I really knew how to run a business…even though I had never done so at that point.  I recall encouraging my mentor to “reduce expenses” and “cut the dead weight”.  He just looked at me, smiled, and shook his head.  You see, my mentor had seen tough business times before.  He knew it was just a tough period in time.  But what he shared with me during this conversation has always stuck with me.  He said, “Jamail, I just don’t see employees.  I see the families attached to each one of these employees.  I can’t in good conscious make wholesale cuts.  We’ll be fine.”  This logic flew in the face of most of what I was learning in business school.  He brought a human element to business that I hadn’t considered at that point.  He didn’t establish this business just to make money, but rather he wanted to make money and help others make a decent wage and support their families.  I still struggle with this logic given you have to do what’s best for the business, but maybe what’s best for the business is going through hard times with others, winning their loyalty and trust, and coming out on the other side together.

Generous Capitalism

This leads into another amazing quality my mentor possessed. I like to call it ‘generous capitalism’.  He was all about business, but he realized the business allowed him to give to others.  And boy did he do that.  I don’t know all that he’s done for employees and families of employees over time, but I do know that he:

  • Provided internship opportunities for underprivileged high school kids
  • Paid for tutors for kids he realized were falling behind
  • Paid for college for employees’ kids
  • Provided jobs for men and women that needed to “get back on their feet” after being downsized by larger companies
  • Donated time and money to the arts in inner city Chicago

He just did a ton with his resources.  This was a reminder that building a business is not only for me.  Life is much larger than my selfish wants and desires.  Now I ask, “How can building this business help others as well?”

“That's not your problem”

Is the refrain I’d hear often from my mentor.  He was adept at understanding and analyzing a situation to determine what needed to be done.  Often he suggest doing nothing because the issue didn’t lie with him, but it was something that the other party was struggling with.  Let me provide details.  My mentor was a commanding figure. He wasn’t tall (under 6 feet), wasn’t big, and didn’t have a booming voice.  But he had the strongest most authoritative presence of any one that I met.  As soon as he walked in the room people began to show deference to him.  It’s unexplainable why this happened time and time again, perhaps it’s a result of the way he carried himself.  Now the added layer is that he was a black man, super confident, would speak his mind, and had a commanding presence.  I hate to say it but this doesn’t sit well with many in corporate America.  I wish I could explain why this is the case, but there have been many times where he was pushed out of a deal or passed over for a partnership.  I used to review the business reasons to understand these occurrences but I could never find the reasons to justify the actions of the other party.  My mentor understood what had happened each time.  He would tell me how some struggle with working with a confident, smart, black man.  He also advised to never mute your strengths because others are insecure.  He would say, “That’s not your problem…that’s their issue”.  No need to waste energy solving for their issue(s) and biases.  Having worked in the corporate world for almost twenty years, I can say that my mentor was right.

RIP buddy. Thanks for the wisdom, fun, and generosity. Your presence is greatly missed…

10 symptoms that manifest when you’re trying to grow sales before achieving product/market fit

  1. The prospect displays a lukewarm reception to your service/product
  2. Your high quality sales team has high activity without corresponding results
  3. All of your direct competitors that offer similar services/products aren’t ‘crushing it’
  4. Your company is unable to succinctly articulate its value prop for a specific target
  5. Your product team is over-engineering the product at the request of salespeople
  6. Your close rate lags behind the industry's close rate (e.g. industry adoption rate) for similar services
  7. You’re constantly changing sales strategy, not tactics, in hopes of driving more revenue
  8. Upon prospect pushback your first impulse is to reduce the price to try and close a deal
  9. You’re reducing the price and still not closing more deals
  10. Your top producers began to leave for other jobs

Only two things matter in business, especially early stage businesses: Customers & Cash

A wise man once told me that customers and cash are the only things that matter in early stage businesses.  I recall hearing this statement and thinking, “it’s not that simple”.  Well, yes it is.  It’s that simple folks.  I’m sure all you super-duper smart people reading this will tell me otherwise, but think about how a businesses survive.  In the most simple terms businesses survive because they make enough money (i.e. sales revenue from customers) that cover the company’s expense base.  And the remaining money (cash) can be reinvested in the business. And we get cash from either customers or investors.

So you can debate all you want to about the importance of products, technology, brand, scaling, disruption, viral loops, flywheels, unfair advantages, TAM, SAM, CAC, LVT, MRR, ARR, etc. All of this is irrelevant unless you have customers (i.e. sales revenue that funds your company’s operations) or cash (which you get from customers and/or investors).  Without customers or cash you company will end up on a list similar to this one.

Tell me why I’m wrong (Bill O’Reilly voice).

P.S. Full disclosure, I’m not a fan of Bill O’Reilly.  Just had to document this fact on the internets : )

How should you grow sales? Consider your levers.

This past week was a tough one.  I spent most of the week refining a key component of a company’s sales strategy.  Now I love love love to think about business and how to spur growth for the company, however, too much time planning/thinking about growth about means one thing.  You aren’t DOING.  So this past week was tough because I arrived at the precipice of thinking too much all the while realizing there needs to be some action happening.  Btw, let me refrain from calling it a “strategy” lest you think it resulted in some grand plan that will change the company’s fortune overnight. The company had a relatively straightforward goal.  To grow sales.  But all of us that has ever tried to grow revenue knows that it’s not always such an easy task.  

I came up with several (good, bad, and just plain ludicrous) ideas on how this company would grow its top line.  But it wasn’t until I considered how the company makes money that gave me the focus and insight to develop a credible and winning approach.  I’m writing because I think this simple logical line of thinking can help you consider and develop a path to more revenue for your company.  First, write out the simplest equation that explains how your company earns revenue.  Another way of asking this is, “what do you need to sell, how much of it do you need to sell, and at what price?”  The answer will be typical of what we’d expect to see if most companies wrote out their revenue equation.  The revenue equation for the company referenced in this post is as follows:

I’ve changed some of the labels in the formula to maintain the confidentiality of the company.  But check out how this company generates monthly recurring revenue (MRR).  Revenue comes from three main buckets:

  1. Sales from Master Service Agreements (MSAs)

  2. Sales from Enterprise accounts

  3. Sales from an Indirect channel

At the core each bucket contains a specific quantity multiplied by an average sale price.  Note that the portion of revenue generated from MSAs is a result of the number of executed MSAs the company has multiplied by the number of locations the MSA client has multiplied by the average sales price.  Similar logic applies to the indirect channel as well.

Note that formula is relatively simple.  But it become more powerful and useful once you’ve identified the levers and, more importantly, the levers that you can influence the most.  With regards to the company referenced in this post, we decided we had the most influence over the levers that are highlighted in green.  Given we know where to focus to drive MRR, we can now develop a tactical plan to address specific levers and drive to more predictable outcomes.

Hopefully this simple exercise helps provides an alternative approach as you consider growing your company’s revenue.

How do you sell when you’re a little ahead of the market?

Sucker

I’m a sucker for early stage companies.  I just love the ability to craft my own journey while helping the company establish a path to success.  Most companies at this stage within the business life-cycle are trying to determine if what they offer is more than just cool...but will people actually buy it?  I recently joined a company that flies drones over construction sites and provides the site leadership (Project Manager & Superintendent) insights that can help them save money, improve safety and coordination, and increase efficiency.  Sounds great huh?  Well, everyone makes similar claims no matter what they’re offering. And construction firms have been doing an amazingly great job of standing up buildings for over a century without the use of insight from drones.  

What Can You Do For Me?

Considering the contextual knowledge and expertise that most Project Managers (also known as Site Supervisors) have, it's no surprise they are skeptical about drones. PMs might not think there’s much beyond the coolness factor of having a drone fly their site and, if you've met any PMs lately, they don't care about coolness. They want to know how can you help them stay on schedule, deliver their project under budget, and run a safe operation.  We’re constantly developing new ways to gather insight from drone flights and deliver that to PMs.  And we’re sharing these new insights with construction firms.  But the construction industry is not an early adopter...and nor should it be.  I hope you can appreciate this predicament; we’re producing deliverables that are being validated and confirmed as valuable by a target segment, BUT the majority of the segment is in the process of slowly becoming aware of these valuable deliverables.  So the question that keeps me up at night is, “how do you sell into a market that you offerings a little ahead of?”

I pinged a couple of friends to hear their take on this question.  I received a derivation of the following:

  • You have new products and you need to educate the market before selling to it
  • Find the top influencers in the industry and get them on board...laggards will follow
  • Create case studies that show the value of your offering
  • Give them samples of your offering
  • Just keep selling, sticking to your process, and be patient

While all good feedback I had to weigh this advice relative to the reality of working at an early stage company.  What does that mean? Simply put, we don’t have time or money to wait for the market to catch-up. We need to engage and activate the customer now.  So what did we do?  We took a combination of all the above and tailored the experience for our target market.  You ask, what does that look like? For better or worse, it looks exactly like the Freemium model.  We decided to fly missions and provide a small subset of the insights for free.  The underlying assumption is the PMs will begin to see/feel/understand how these insights can help achieve their end goal of delivering projects on time and under-budget.  And subsequently pay for access to the entire suite of deliverables.

Show The Value First

So, how does one sell when they’re slightly ahead of the market? For more than just us, the model is to share a little value first and then walk your prospect to the promised land of all the true value you can create.  We’ve chosen this approach plus a high touch/high interaction engagement with the assumption this will lead to continuous desire to benefit from our deliverables (videos, images and site insights to ensure on time, on budget and safe project delivery) and ultimately closed deals.  Admittedly, this approach is not new to the world, but we’re seeing positive results with our early test.  Would love to hear how how you’d tackle this issue.

the 'BRIEF' framework for providing deal updates

VP: “Hey Tim. I have a call with our Sr. VP later today and I need an update on the [Insert Company Name] deal that you’re working on.  I recall you were working with Joe (Prospect) trying to get him to commit.  Where are we with that?”

Rep: “Funny you ask. I just bumped into Joe in Starbucks and by chance we both were wearing the same tie.  We had a good laugh and I asked him about the proposal I emailed last month.  He told me he hadn’t reviewed it because he’s been on vacation for 2 weeks.  He had to use his vacation prior to the end of year or he’d lose it.  You know their fiscal year is June – July, so Joe had to take his vacation this month.  Isn’t that odd? Usually vacation policies are tied to the calendar year, but I think this company is different.  Now that I think about it…other companies may do this too.  During our conversation Joe was really apologetic that he hadn’t returned my calls or emails.  He told me he’d definitely review the proposal.  I think we have a great shot to close this business.  He just needs some time to review the proposal.”

Does this sound familiar?  I’m sure the VP is pulling out her hair because this Rep has just wasted valuable time and she still has no clue about the true status of this deal.  Sharing or receiving irrelevant information is a problem for many professionals.  We believe that the more information we share the better.  However, experienced managers only need the answers to the questions they’ve asked.  They’re smart enough to dig deeper with follow-up questions if needed. 

So how about we save each other time when updating your manager about a deal by following the following simple heuristic?

“BRIEF” is a simple mnemonic you can use the next time someone asks you for an update.

B- Background

Provide a current synopsis of the deal or situation.  This gives your manager a base of knowledge from which to work from.  Example: “I’ve been working the Federal Bank deal for 3 months.  We’ve moved past the initial discussions and I’ve discovered they’ve allocated money for this project.”

R- Results

Share the current results/status of the deal.  Example, “Although they have money for this project. We have not had subsequent discussions to effectively position our offering versus the incumbent

I - Issues

Highlight the issues that are impacting the current results.  Example, “We hadn’t positioned our offering b/c the primary decision-maker has left the company. Her departure has left a huge void in the evaluation team. Tomorrow the company will announce that her direct report is expected backfill her position immediately.”

E - Essentials

Provide the company-specific essential process information that will move forward or close the deal .  For example, I worked for a services firm that knew when prospects interacted with consultants on 3 or more occasions, there was an 86% chance that the deal would close.  It’s ok  if your company doesn’t have that level of specificity.  But if your company has been in business for a few years, someone internally understands the essentials needed to get a deal done in your company.  Share those essentials when you brief your manager.

F - Future

Provide an intellectually honest prediction about the future status and timing of this deal.  If you’ve delivered an accurate assessment using the previous steps, then this step should be relatively easy.  Simply think about the information provided in the previous steps and make a prediction.  Example, “I think we can close this deal next month after we bring the new person up to speed with a facility tour and she engages our Security VP and lead engineer”.

Good managers will quickly digest this information and ask relevant questions to clear up any items to ensure there’s no misunderstanding.  They may not agree with your final prediction but at least they have enough relevant information to make a decision for themselves. 

Happy BRIEFing!

Is the Sales Professional Becoming Obsolete?

I’ve worked in client-facing roles for most of my professional career. Always choosing to stay as close as possible to the intersection of technology, sales, and innovation.  It’s how I make a living and I thoroughly enjoy it.  So you can imagine this quote from Forrester discussing the future of B2B sales professionals caught my attention:

Forrester forecasts 1 million US B2B salespeople will lose their jobs to self-service eCommerce by 2020, accounting for 20% of the B2B sales force.”

 That’s a really bold prediction.  I used to work for a competitor to Forrester and I understand making these types of bold statements, supported by evidence, is in part how the research industry proves its value to drive sales.  It works.  Forrester states, “B2B buyers are living in a 2015 digital-first world, but B2B sellers are still living in a 1965 salesman-first world.”  This statement is interesting, but does a misalignment of buyers and sellers render the seller group expendable?  I don’t think so, but I can see how we can use logic to make such predictions.  I lean more towards the sentiment shared in this HBR article written by Andris Zoltners:

 “…hundreds of B2B sales jobs will get eliminated as e-commerce plays a larger role in straightforward buying steps and for well-understood products. But as complexity and uncertainty decline in some situations, new complexity and uncertainty get introduced elsewhere.”

 Professor Zoltners (he was my business school professor at Northwestern University) and his colleagues do a fantastic job providing a historical perspective of this type of doomsday prediction as it relates to the sales profession.  He argues that the sales professionals numbers have always fluctuated as a result of innovation.  Sales professionals were at one time (early 20th Century) the primary communication channel to carry new product information to buyers.  Innovations such as TV, radio and later the internet eventually led to salespeople not being solely responsible for communicating new products to prospective buyers.  As more advanced technology come to market, sales professionals are needed to help buyers make purchase decisions.  In essence, we’ll see sales staff reductions for mature technological products that are well understood by buyers and the sales force will transition to selling more complex offerings where the Buyer needs to be educated about the value of the product.

 So if we’ve witnessed how innovation, especially technological innovation, has impacted the sales profession over time, then why do we continue to see bold predictions about technology eliminating the need for sales people?  I believe the answer is that we’re beginning to see innovative advanced technology such as artificial intelligence and machine learning finally being applied to the sales profession.  This coupled with statements like “software is eating the world” could definitely make you feel uneasy if you’re sales professional.  But rest assured sales pro, I think bringing AI to our profession is a fantastic trend.  I’ll share in another post what’s happening and why you should be excited. 

 Hang in there, your profession will change a bit but as long as the world continues to innovate, there will be a need for the B2B sales professional to deliver real value by helping clients acquire solutions that truly impact their business.

Dreamer vs. Entrepreneur

I consider myself a dreamer. I regularly get lost in thought about random stuff (e.g. watching people’s behavior, contemplating solutions to everyday common problems, imagining myself 15lbs lighter).  You get the idea. 

I’m also an aspiring entrepreneur.  Although I worked at an early stage startup and was the very first “official” hire I still can’t call myself an entrepreneur.  Some would argue that I joined the startup so early that I could be considered part of the founding team - and therefore an entrepreneur.  Maybe…perhaps, but not really.  A few months ago I set out to execute on a business idea I’d been dreaming/thinking about for about 2.5 years now.  I’d been getting advice from the entrepreneur of the startup I worked for. He also happens to be a close friend.  He suggested a number of actions and today I put one of them into play.  After spending a days with potential customers, studying their business and asking questions I realized that for 2.5 years I designed the wrong dang solution

But the larger takeaway was self-realization.  I realized I’m a DREAMER! This isn’t a bad thing, I just need to be aware how being a dreamer slows my progress towards becoming an entrepreneur.  I also realized some fundamental differences between a dreamer and entrepreneur.  For my fellow dreamers and aspiring entrepreneurs I thought I’d share these differences to help you NOT waste time:

Dreamers are thinkers, Entrepreneurs are tinkerers

Dreamers, stop wasting time building solutions (in your mind or in reality) to an unconfirmed customer problem/pain.  Stop spending time in your mind and spend time with the potential customer.  Entrepreneurs intuitively know this.  That’s why they tinker.  They will pull out their discovery tools (intuitive insights, questioning, and common sense) and tinker to uncover customer pain.  Only once they uncover real customer pain will they begin to think about a solution.  Otherwise they will continue to tinker.

Dreamers are talkers. Entrepreneurs are about that action (Marshawn Lynch reference).

 We’ve all seen it before.  Some dreamer telling you all about market inefficiencies, industry consolidation, and the opportunity to easily build X that will capture 10% of the market.  It’s right there in the dreamer’s spreadsheet – in column ZZ row102 – with a green box around the revenue numbers.  $500M by month eight post launch.  Easy peazy lemon squeezy.  Hahhaha, that’s my boy, don’t be hard on him!  But you have to know he’s a dreamer.  The entrepreneur on the other hand has 5 signed LOIs from potential customers and 5 page slide deck asking for $ to build a prototype.  Clearly he’s bout that action.

Dreamers move to markets that are slow to adopt, Entrepreneurs move away from those markets.

When you’ve developed the ‘perfect’ solution for an underserved market that has been historically slow to adopt technology let alone a new way of doing business – you’re a dreamer.  Entrepreneurs see these same market dynamics and say, “This market isn’t ready b/c the customers aren’t able to see the value we’d deliver for them.  It takes too much time, energy, and effort to make a market think like us and see problems and opportunities like us.  We’re better off tracking other industry themes and engaging an industry that’s ready for us.”

Dreamers fret, Entreprenuers fight

While dreamers are fretting over some irrelevant detail with their solution that no potential has even seen, the entrepreneur is on the front lines fighting for the next introduction/meeting/pitch/deal.  He’s “fighting the good fight” while the dreamer is fretting.  C’mon dreamers stop it.  Let’s go fight.

Dreamers are very patient, Entrepreneurs are very persistent

Because dreamers have this “solution” in their minds and have minimal contact with potential customers, they can be very patient when launching.  I say that ‘tongue and cheek’ b/c the dreamer won’t launch.  He’ll just constantly dream about launching in addition to what could go wrong when he launches and how he’d quickly fix it.  All the while the entrepreneur is persistent in his pursuit of acting on his vision.  C’mon dreamer, at least try to be a persistent dreamer.  That’s a move in the right direction …right?

There are so many other differences I could mention. However, the purpose of this post is to help the dreamer get off the bench and into the game.  As I said earlier, there’s nothing wrong with dreaming.  We need to do it.  For some of us, it’s who we are.  But if you don’t watch out you’ll be ten years older and watching that entrepreneur ring the opening bell on a random Friday.  Hopefully you won’t see this and lean back in your chair, hands behind your head, and start dreaming about how you’d ring that bell. 

Don’t do it dreamer.  Get to work!

Update: I had someone ask me what was the business idea that I referenced earlier in the post.  I built a platform that allows hair care professionals to run their business efficiently and increase revenue.  The product promise entails giving the urban hair care professional a mobile infrastructure to increase his seat utilization thereby driving recurring revenue.  Perhaps I'll write another post about market dynamics in this competitive industry.

Product promise and laying a foundation for future sales

A client of mine was launching a platform that helped energy brokers run their business.  For the sake of confidentiality, lets call the platform "ED".  He asked that I consider how he could introduce a new product into a highly competitive existing market.  Think about it…new product introduced to an existing market.  Sound familiar? It should.  Igor Ansoff provided this framework out a long time ago (1957) when Harvard Business Review published the Ansoff Product Growth Market Matrix.  The matrix shows which growth strategies businesses can undertake and helps them consider the risks of their chosen strategy.

So what growth strategy makes sense for ED? I’ll cut to the chase and tell you.  ED would fall into the Product Development category - new product entering an existing market.  There are several implications to pursuing this growth strategy, but let’s assume it’s a go and move to what really matters (i.e. getting brokers to use the platform - sales).  So how does ED convince brokers that it can “manage all aspects of operating as a broker/agent” and that the platform is “so good that it would be foolish to operate without it”?  Let’s break this down into bite-sized chucks and see if we can get some answers.

“manage all aspects of operating as a broker/agent”.  Ask yourself, “What does this really mean?”  To understand the operations of a broker you first need to understand broker behavior. Over the past months ED has spent a considerable amount of time understanding the needs of brokers.  During this period ED has also observed broker behavior as well.  Understanding the behavior is important because once the behavior is documented we can determine whether or not the behavior supports complex or simple operations.  We may intuitively know the answer, but it’s always helpful to work our way through the thought exercise.  Here is a high-level view of broker behaviors and the associated tools used and interactions during each behavior.   Put simply, this is the foundation of broker operations.

Note: You may need to increase your view to 200% to read this chart : )

Note: You may need to increase your view to 200% to read this chart : )

Why is this important?  Well you can use it to develop marketing interactions within the product, but we can tackle that in a different post.  This is important to sales because it helps us determine a sales distribution approach to lay the foundation for future sales.  A sales distribution approach is primarily determined by the solution and marketing complexity.  When analyzing this chart one can quickly conclude that a broker’s behavior is very tactical and in many cases simple.  With the exception of selling, the broker’s behavior is full of administrative duties…and very simple ones at that.  What make the job complex is the management and coordination of these tasks.  However, relative to ED sales efforts this simplicity means the platform and marketing doesn’t need to be complex.  Both the platform and the marketing of it should be simple…at least in the mind of the consumer.  This means we can consider an online distribution model.  See the graph below:

This distribution selection model is taken from Paul Weifels ‘ book The Chasm Companion: Implementing Effective Marketing Strategies for High-Technology Companies.  In short, Paul argues when selecting a distribution channel the solution complexity and marketing complexity should be proportional. If the product is easy to use, then it should be easy to buy.  If the product is complex to install, then it will be more difficult to support, and therefore will require a more complex distribution channel.  The five key factors to consider when evaluating a distribution channel are: 1) market size and variation in customer profiles, 2) cost of the distribution channel, 3) type of product, 4) Degree of risk and control, and 5) flexibility.  Grab the book and read more.  With regard to ED, the ideal distribution channel is probably somewhere between online and retail.  Perhaps a hybrid of the two although I’d substitute retail for telesales.  This would keep customer acquisition cost (CAC) low and manageable.

Now onto the platform being “so good that it would be foolish to operate without it.”  Ok, how will the prospect know that ED is the most amazing product and he can’t live without it?  Well, ED could tell the prospect over and over until he believes it and eventually buys the product.  Or ED can simply give it to him for free and let him use it for a specified amount of time.  Again, this is not a new concept.  Salesforce changed the game in 1999 when they launched and a month later had five corporate customers.  The kicker was Salesforce didn’t charge the customers a dime.  The subscription was free in exchange for the customers’ feedback/input into the design phase as Salesforce moved from beta to full launch. 

This approach helped Salesforce tailor a product that delighted their target customer.  But more importantly it gave them a quick start because all five beta users were more than happy to become paying customers as they longed for Salesforce’s full functionality.  Salesforce continued this model by allowing prospects to use the product for free to understand and internalize the value delivered.  By the time they heard from a Salesforce sales rep they were ready to become paying customers because they had already experienced to value of the solution.  There are some risks associated with this approach.  Read this brief case study about how Salesforce secured their first customers.  ED should consider expanding its beta customers to somewhere between 5 – 8 range.  In addition to increasing the beta group, ED also needs a defined approach to let prospects experience the platform for a specified time.  The trial period should be followed by aggressive conversion tactics (phone calls, short online conversion funnels, testimonies, etc). 

We covered a lot in this post, let’s se if we can summarize in a few sentences.  ED is a new product entering an existing market which necessitates a product development growth strategy.  This is already occurring today.  It’s imperative that energyDesk build a simple and powerful product using the input of beta customers throughout the design/development process.  This is the only way the platform will address the needs of target segments and adequately handle broker operations by replicating their existing behaviors.  Given the platform’s simplicity, the marketing of the platform should be simple as well so as not to confuse the customer. But more importantly, this solution/marketing balance warrants something similar to an online customer acquisition approach supported by telesales once the product is fully launched.  Prior to outbound sales calls ED must develop marketing tactics to get the platform into as many broker/agent hands as possible…and do this at no charge to the customer.  This is how ED should lay the foundation for sales given the promise of the platform.

Agree or Disagree?  How would you go about laying the foundation for future sales?

Finding the most attractive price point for an Energy Broker platform

A few days ago I wrote a post about setting a sales foundation for an energy broker platform ("ED") that a client of mine was working on.   After a few discussions, the client asked that I think about how to price this platform offering.  I immediately began to  consider about the amount of revenue a typical broker grosses and nets.  Why is this important for EDBecause it impacts ED’s pricing, more importantly finding a price point that’s palatable to ED’s target market reduces friction throughout the sales process.  Speaking of target market, let’s first understand the broker landscape, then we’ll make some assumptions to determine average broker gross revenue, and finally we’ll land on a plausible price target for ED. 

So what does the broker landscape look like?  The only valid source we can reference is the DNV KEMA Channel Partner Study that was completed in 2012.  We understand there are hundreds, if not thousands, of unregistered people selling electricity (e.g. MLM agents) but for the sake of this exercise let’s focus on the ecosystem as defined by DNV KEMA.

The chart below shows a total of 600 channel partners of which 75% of these firms have less than 1,000 customers. This is not earth shattering.  It simply confirms what we already know about this space.  It’s highly fragmented and a majority of these firms can be considered lifestyle companies and/or a means to generate passive revenue for the part-time energy broker.

To get to a gross revenue number for an average brokerage firm we need to make some assumptions.  Let’s assume the average customer consumes 100,000 kwh per year.  This means that the segments have 20M, 45M, and 1.485M Mwh under management (e.g. 450 brokerage firms * 1,000 customers*100,000 kwh = 45M Mwh) respectively.   I have no idea if this passes the eye test.  Perhaps an industry insider could tell me.  However, I do know that if I take the Mwh under management and multiply by a conservative $3/Mwh commission then I’ll be able to see the total estimated revenue for these 3 broker segments:

EDprice1.png

Again, I’m not sure the estimated revenue for each segment passes the eye test, but when I divide the estimated revenue for each segment by the number of firms in the segment, here’s what I get:

Now this looks accurate to me.  As a former commercial broker that focused on the SMB market these numbers feel about right.  For example, the broker segment that has ~1,000 SMB customers (consuming ~100,000 kwh annually) and getting a $3/MWh commission will have annual revenues in the $300,000 range.  I personally know of several firms that fall into this segment.

Ok, so what does this have to do with pricing? If we have a relatively good understanding of each segment’s annual revenue, then we’re able to determine with reasonable accuracy a dollar range each firm dedicates to SG&A expenses.   Why do we care about SG&A?  Because SG&A is the line item that’s positively influenced by using energyDesk.  Operations are where energyDesk provides immense value to the broker.  Knowing what the firm spends in SG&A gives us a baseline of the dollars ED can capture from the brokerage firm.  Take a look the chart below that assumes brokers spends 15% of revenue on SG&A expenses.

We can safely assume that a brokerage firm that grosses $300k in annual revenue spends about $45k in SG&A.  Now consider the operational demands of brokering electricity (info gathering, pricing deals with various suppliers, organizing the info, quoting prospects, contracting, reconciling commission, etc.) many of which are administrative.  It’s a safe assumption that a firm grossing $300/year has some administrative help performing these tasks…even on a part-time basis.  And the cost of this help when annualized is probably in the $45,000 range plus or minus $5,000.  We can look at this and say, “…foremost firms in this segment, ED has a potential revenue pool of $45,000 (e.g. ED replaces this admin and does a better job).  Or ED can make this admin more efficient and capture 10% ($4,500) of his/her annual salary as ED revenue.

If choose the later then ED now has an expected ARR of $4,500/broker that equates to an MRR of $375/broker.  This feels about right especially when you consider comparables such as Salesforce who’s monthly pricing range is $5 - $300 per user.  Given ED is designed to manages all aspects of operations for the energy broker, I think it can charge a premium of $375/user/month.

$375/user/month sounds small but it equates to $4,500/user/year.  And a brokerage firm with just three brokers will drive $13,500 in ARR.  There’s a great opportunity to create a highly profitable enterprise if ED can capture these users via an online channel at a low customer acquisition cost (CAC).

At the end of the day a monthly fee near a target price of $375/user and a focus on the segment that constitutes 75% of the broker landscape makes sense to me…assuming ED uses a subscription based pricing model.  Conversely, ED can hold to the industry norm of charging Mils.  If ED charges $0.50/Mwh per month for the Mwh that are run through ED then the typical firm in the middle segment would pay an ARR of $50,000 and MRR of $4,166. to energyDesk.  Again, this assumes that this segment has ~1,000 customer consuming 100,000 kwh annually and are running this through the ED platform.  I know…there’s a huge delta between $375/mo and $4,166/mo.  Which end of the spectrum will promote sales and allow ED to grow into a decent size business?  We’ll never know until we ask the broker! 

Agree or disagree? What price range do you think the market can bear?

4 tools that make every sales person better

We all use tools that ideally make us more effective.  Here’s a short list of tools that should make any rep, especially reps working in smaller organization, more efficient and productive as they work to close deals:

Note: I’ve used these tools and I’m a fan of the companies that produce them.  I have no affiliation with any of these companies.  Nor do I receive any commissions from telling others about these products

1)   Yesware

Did you read the email that I sent to you?  I know you did.  You even forwarded it to someone else.  Yesware let’s you track email and work more efficiently.  Knowing that a prospect received, read, and forwarded your proposal is great.  Knowing this information and no receiving a reply from the prospect…not so great : )  But at least you can make a decision to pursue the opportunity or move on to another one.  Yesware offers much more, but its basic functionality is valuable to sales reps.

2)   Base CRM

I love Base.  Great mobile UX, love that you can customize the funnel to match your sales process, it’s intuitive, and data entry is not a hassle.  It also integrates with Outlook.  It’s a simple yet powerful tool.

3)   JoinMe

I can’t tell you how many times I’ve been on a call talking to a prospect, customer, investor, etc and needed to share my screen to drive home a point.  JoinMe is a collaboration tool.  It’s ridiculously easy to use and it works great. For example, JoinMe provides a link that you can send to others.  Once they click the link they’ll be able to see your screen.   I’ve been using it for a few years now.

4)   x.ai

It gets no better than this for the busy sales person.  x.ai is an artificial intelligence (AI) powered personal assistant for scheduling meetings.  I first experienced x.ai when a friend used it to schedule a conference call with me.  The experience was so amazing that I felt like I was communicating with a real person.  I even asked my friend, “when did you hire an assistant? : ).  Try it b/c it will save you a ton of time by eliminating the back and forth that happens when attempting to schedule meetings.

How do your clients buy your products/offerings?

That’s the question I asked a CEO that was trying to address his Board’s mandate to accelerate sales.  I asked a ton of questions, but this is the question that seemed to resonate with him.  Why?  I believe it’s because 1) he didn’t know the answer and 2) he realized how knowing the answer could help his firm accelerate sales.  Take a look at the simple diagram below and tell me what’s wrong:

You see it don’t you?  It will be hard for anyone to accelerate sales when your entire sales process to identify and capture a client doesn’t align with how your typical client buys your service/offerings.  In the simple example above there are countless ways that the selling company can augment their process to align with the prospect’s buying process.  As alignment occurs the odds of closing deals should increase as well.  Ideally this alignment will result in increasing your pipeline velocity as well.  There are several tactics to accelerate sales, but this structural change is important to review prior to leveraging other tactics.

Call a few of your clients and ask them how they buy your products/offerings.  Map out their decision-making process and purchasing process to see how it aligns with your company's sales process.  There's a good chance that a small realignment in your process could positively impact your top line.

Get it done!

“Your solution is too expensive, we’ll have to pass.” What next?

What does this statement really mean? Don’t think too long…let me tell you.  The prospect is telling you that they don’t see enough value in you offering given the cost of your solution.  You have two primary options. 1) convince them otherwiseor 2) adjust the price accordingly…but proceed cautiously with #2. Neither of these two options are ideal so you want to figure out a way to get to a yes, but only if you’ve clarified whom your customer is.

Here are a few questions and tools to help you with both options:

Convince them otherwise

1)   Rejoice/Empathize/Confirm the value of your solution - Your first reaction should be to rejoice when you hear objection from a prospect.  That’s right…rejoice b/c now you have an idea of why they aren’t buying from you and you can address that specific objection.  Prior to addressing the pricing concern please make sure that is the only objection from the buyer.  If not, you need to get them all out on the table.   Now it’s time to empathize..  Prospects don’t like sales people that aren’t authentic and they can spot them from a mile away.  When I say empathize I’m encouraging you to acknowledge the prospects objections.  Let her know that you hear and understand her objection.  Now it’s time to circle back to the value (quantitative and qualitative) that your solution delivers for this prospect.  You need to have the prospect reconfirm (I’m assuming you covered this in a previous conversion) the value of your solution to her company/department/primary objectives/etc.  Start having a value discussion and position to price vs. the value delivered.

2)   Push back – This may be uncomfortable for you.  Think of it this way.  If the client has confirmed that your solution is helping her meet an important corporate objective (e.g. solving a major problem , increasing revenue, reducing expenses, increasing brand awareness, etc.) then you have earned the right to push back.  Still nervous about pushing back?  Perhaps this study by CEB will give you some confidence.  Note that “Challenger” reps are more effective and respected by clients. Important: Please challenge in a respectful and professional manner. 

3)   Reference - Highlight how their peers and/or competitors are leveraging your services and why?

Ask the prospect, “At what price would it make sense for them to buy your services?”  The answer to this question will tell you a lot.  If the prospect says he doesn’t want to pay for it then chances are you haven’t uncovered the real problem they are trying to solve in addition to the challenges the prospect is facing while trying to solve the problem.  Regardless of whatever sales methodology you’re using, I’d encourage you to circle back and really try to understand the problem and challenges faced by the prospect.  If the prospect wants to pay less than the proposed price point then you need to understand why.  There is probably a simple solution (adjusting terms, reducing scope, shortening contract length, etc.) here that will allow you to close the deal.

Adjusting the price

I really don’t like this option, especially if your solution delivers real value to the client.  There are some companies that will not budge when it comes to pricing.  If you’re a SMB chances are you’re happy to make concessions within reason.  In the spirit of getting a deal done, try this approach:

1)   Don’t, I repeat don’t discount your price without getting a clear confirmation from the prospect that your solution is the only one that the prospect wants.  And that price is the only issued preventing them from singing on the dotted line.  If there is a clear confirmation then proceed to #2.

2)   If/Then – This is an oldie but goodie.  Ask your prospect, “If we do X, then can I count on you to execute this contract?”  Simple question right?  You wouldn’t believe how many people are afraid/uncomfortable asking this question.  Get into the habit of asking this or some version of this question.  It’s simple and powerful because it helps you cuts through all the minutiae.

3)   If you have to discount pricing to close the deal, be sure to set expectations with the client that this is “promotional pricing”.  And when it’s time to renew services and/or buy additional products you expect them to do so at traditional pricing.  Obviously you can’t hold them to this promise, but it’s best to have the conversation right now to there aren’t any surprises months down the road.

Make it happen!

Who is Your customer?

A few days ago I was on a call with a client (Jim –not his real name) that owns a small firm and he said, “…We need to increase our monthly recurring revenue (MRR).  That’s want we want to do.”  To which I replied, “Got it.  Tell me more”.  Jim began talking about all the wonderful products/services/offerings they provide.  All the different price points for these services.  And all the type of customers they can serve etc. Before I go on let me share that it’s a blast to work with entrepreneurs that are passionate about their business.  It gives me great energy and I love the “this can’t possibly fail” attitude that seems to be innate within entrepreneurs.  Their mindset is contagious. 

So I let Jim talk for about for 3-5 minutes without interrupting as he talked about his company. Then I asked, “Jim, who is your customer?”  There was a palpable and uncomfortable silence on the line and then he proceeded to describe a few of his clients by name and age.  His answer told me everything I needed to know… 

Who is your customer?”  is not a complicated question but I’ve found that it’s a really tough question for small to medium size businesses (SMBs) to answer.  Considering the primary goal of most SMBs is to drive revenue, you’d expect that they'd have a deep understanding of knowing who is their customer.  Without knowing this, any subsequent tactical approaches that are executed will result in little to no return on investment.  Or said plainly, without some insight as to who your customer is, most of the tactical approaches you take will result in a waste of money and not contributing to any new MRR.  So here are four low cost approaches to help SMBs understand who their customer truly is:

1.     Ethnography Research –Ehtnographic research is the study of people in their own environment through the use of methods such as participant observation and face-to-face interviewing.  So what am I telling you?  I’m encouraging you to study/observe/interview your customers.  If you’re a B2B company call 5 clients and ask them if you can simply hang out in their environment so you can better understand their business.  Inform them that your objective is to learn more about their business so you can produce and/or develop better services and products to meet their needs.  While you’re observing them please take notes of everything you notice (e.g. how they make decisions, what they evaluate opportunities, culture, mindset, how they develop their products/offerings, the types of partners they work with, etc.).  Consider all the rich information that you’ll be exposed to.  What a way to get a deep understanding of your customer.  Note: Make sure your conversation is not related to your business.  Just get to know them and capture who they are at their core.

2.     Demographic Research - I’m not telling you anything you don’t know here…especially if you work for a larger B2C company.  But several B2C SMBs aren’t too certain about the demographics of their client base.  For example, sometimes I receive blank stares when I ask them to share the top 3 common characteristics their entire client base. There are some very sophisticated approaches to answer this question.  However, we don’t need sophisticated all the time.  Sometimes we just need the data to help us make better decisions.  Here are two resources that B2C  SMBs can use to determine the types of clients that you serve.

3.     Check your financial systems – SMBs have a wealth of data within their financial systems.  Open your Quickbooks/Square Dashboard/Stripe panel/etc. and begin to look for spend trends. How much do your clientsbuy, when do they buy, how do they buy your products, what do they buy, etc. Perhaps you have limited time and/or you’re unable to spot trends.  Here are a few tools that allows you to upload your data here and run simple analyses for you.

4.     Talk to your customers – That’s a novel idea eh?  Select a representative sample size of your customers and begin the dialogue.  Engage them at a deep level.  Ask them about who they are, what they like/don’t like, why they by your products, if they buy your competitors products and why, do they refer your company to others (why?/why not?).  I recommend you do this in person as often as possible.

Now that you’ve observed your clients, performed secondary research (e.g. demographic study), identified trends using transaction data, and talked to your clients you start to notice that specific client archetypes will start to emerge.  You’re getting closer to understand who is your customer.  Pretty soon you’ll be able tell other with confidence who’s your customer.  And your answer will be supported by the data that you uncovered and analyzed!  With this newfound understanding of your customer, you’ll be able to design and execute better tactical plans to attract new clients and grow revenue.