The biggest issue when running an early stage company with a burn rate when selling to Early Adopters is the inability to predict the close date of the pilot projects. These make up the majority of the pipeline and are your lifeline. This uncertainty tears apart the executive team and drives the investors to distraction.
The issue is clear once you think about the IMPACT process. IMPACT is the buying cycle of all corporate customers. It is described in this blog : IMPACT – the buying cycle from the corporate buyer’s perspective. You can download the free abridged (20 page) eBook which explores IMPACT in more detail and how to sell innovative technology solutions. This is selling to the left of the chasm for those who remember Geoffrey Moore’s Crossing the Chasm and Inside the Tornado books.
If you are making smaller sales then these are the pilot projects to assess and prove the viability of your solution. This is in the MPA part of the IMPACT process. You may run a number of these MPA projects before there is sufficient evidence to build a case for the enterprise roll out – the CT part of IMPACT. When we say “smaller sales”, these can still be $100k or more, so significant for your survival, but they are not the enterprise or global deal.
So if you are in MPA, then you are driving the deadlines, not the customer. You are not in a customer’s procurement process. Therefore it is impossible to predict a close date for the deal. Only once you reach the CT part of the process are you in a procurement where the customer has set deadlines. Then you can start to have confidence in the forecasted sales.
You can beat up yourself, sales management and the sales guys but it doesn’t make any difference. You do not control the buying cycle and the customer has not committed internally to any deadlines. The projects are being pushed forward by your sales team and the energy of your customer evangelist and sponsor. The moment that you realize that you cannot control the deals and therefore more and more granular forecasting is not going to help, then life becomes more bearable. So instead you need to rely on a different mechanism to ensure the long-term survival of the company.
You need to make sure that you have a large enough volume of sales in play so that enough will close each month. Combine that with enough investment so that you are not going to get killed if you have one bad month when enough deals don’t close.
Remember, you don’t really “lose” deals. There is rarely any competition. What happens is that deals get delayed and put on the back burner and can reappear later. The only way to really lose a deal is for your evangelist or sponsor to leave the company. The trick is to make sure that your sales guys are not devoting too much time and effort trying to push deals along that are moving slowly. Sometimes, deals need to be left alone so that the sponsor can progress them internally. Your sales team should be reactive rather than proactive. This is a very different approach for most Value Added sales guys who are very disciplined with their daily call lists that they use to hound customers.
It also means that the tools to drive sales have a stronger marketing focus i.e. Hubspot & Marketo rather than a sales forecasting approach ie Salesforce.com & Netsuite.