Have you ever heard start-ups or entrepreneurs claim that they can’t afford to pay for marketing and sales? They’ll “make it up to you” on the back end with a high commission payout. Yet these same entrepreneurs will invest hundreds of thousands of dollars in their time and money in building a product and then claim that they don’t have any money to invest in marketing and selling the product. Or they want to do it as cheaply as possible. As a career sales professional, I am openly biased on this subject yet am objective in the sense that I have frequently seen the results of not properly valuing marketing and sales. Conversely, I have witnessed the consistently positive outcome and results associated with proper valuation of good marketing and sales.
I was engaged by a “bootstrapped” entrepreneur to act as an interim VP of Sales. We went back and forth numerous times because the entrepreneur kept claiming that they valued marketing and sales, but simply didn’t have the money to invest. It was the cart before the horse challenge in that once they got funding they planned to invest in strong marketing and sales, but they weren’t ever going to successfully raise funding without real marketing and sales.
Their problems were numerous:
• Unsuccessful in trying to raise funding for a year and a half • Unable to close deals • Didn’t have a repeatable sales process • Needed real customer “proof points” beyond the founders network • Needed F1000 customer who would pay $100K+ per year for their solution
Given these challenges, one might question my sanity for agreeing to work with this company and it would be warranted. As my father always said, I am a glutton for punishment☺ I sat in on a few of their Venture Capital (VC) presentations and saw that they initially generated interest with the VCs but couldn’t get over the hump of not having real customer proof points that validated the business model. In other words, don’t try to pitch VCs that you will sell 100 new customers in the next twelve months at $150K per year subscription when you have only closed 10 customers total in two years of selling and the highest price point paid to date is $45,000. Not to mention the fact that the highest paid customer is the founder’s old employer and close friend. VCs sniff that out in about a nanosecond. The math simply doesn’t compute and VCs are great at math.
Next, I spent time with their sales team. I sat in on multiple sales calls and presentations. I listened in on contract negotiations. It was painful! First, these people were not real sales people. They were friends and relatives of the founder that were willing to work cheaply. They weren’t building proper value and addressing the real pain of their customer decision maker. Their negotiation techniques were laughable. My first day on the job there was a negotiation call in the afternoon with one of their existing customers. They had a proposal that had been on the table for a long time to upgrade their license. Our sales rep was leading the call and started back pedaling when they insisted that they didn’t have enough money to get everything that they needed from us. This was a large company and I knew that this was ridiculous. I interjected and informed them that the pricing had changed since the proposal had been sent and that the new licensing would be an additional $30K and that we wouldn’t be offering discounts on small purchases moving forward. I also told them that we needed a commitment from them by the end of that day and if so, we would provide them the licensing that they needed at $20K more rather than $30K more as a one-time exception. They faxed us a PO and signed amendment at the end of the day for $20K more than what our sales rep had been proposing. I told the CEO at the end of my first day that I had more than paid for my monthly retainer as a result of that negotiation.
I’ll summarize what ended up happening over the next six months of my engagement:
• Developed a sales process that resulted in a $450K+ deal with a F100 customer in an 89 day sales cycle where we worked directly with the CFO • As a result of that deal, successfully closed $8.5M in funding during one of the most challenging times to raise VC funds • Restructured the sales team by building a small professional marketing and sales team • Introduced a sales pipeline and forecasting methodology to run the business with visibility and confidence • Significantly restructured the pricing model to be more reflective of value delivered to customers through their solution (i.e., enterprise class)
This is a true story and although the names change, the story remains the same with countless other entrepreneurs and companies I have worked with or talked to that have undervalued good marketing and sales. So next time someone claims that they can’t afford you as a good marketing and sales professional, you should reply with a direct question in return: The question really should be- “Given all of the marketing and sales challenges that you have, Can you afford not to engage me?”