Stop Sugar-Coating Your True Opinion

Too often in business, people want to be nice, avoid conflict or not upset their boss or co-workers by stating their true opinions. But what that does is create problems for all involved. You get frustrated that the business is not going in the direction you think is most logical. And your listener gets an opinion which he or she believes you truly support, but which is potentially the wrong direction for the business and not truly what you feel is the right thing to do. What's more, the listener himself (or herself) is now headed in the wrong direction.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

When to Trade Equity for Services

Giving up equity in your business, as an alternative to paying cash, often sounds like a great idea to cash-starved startups. But, giving up equity in your business is often a very big decision, and can come at a long-term price, both financially and operationally. This post will help you figure out when it is appropriate to trade equity for services, and when you should avoid it. As well as, certain potential pitfalls along the way.

Read the rest of this post in The Next Web, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #209: Which Selling Technique is Best for Your Business?

Not all products or services are created equal in terms of how you sell them. And, not all customers are created equal, in terms of how sophisticated or needing they are for a product or service.  And, selling into different levels of an organization, often requires different types of selling techniques, in order to get their attention.  This post summarizes the three most typical selling techniques used today.

Product Selling

Product selling is exactly what it sounds like: selling the advantages or features of a specific product or service.  With product selling, the questions are predictable from customers, products are used in similar ways by customers, prices are typically set, marketing materials are standardized and salespeople typically require a lot of formal training.  Product selling is typically sold to low-to-mid level employees of the customer’s organization.

Solution Selling

Solution selling goes beyond simply selling products or services.  Instead, you are trying to focus on a customer’s pain point, and address how your product or service is the best solution to that pain point. And, the bigger the pain point (e.g., can dramatically reduce cost, improve customer service, or open up new revenues streams), the more needed your solution will be.

With solution selling, customer questions are unpredictable and typically need a lot of research, the solutions vary from customer to customer, prices can vary substantially based on the level of services provided, sales reps customize marketing materials to the specific customer needs and the salesperson typically trains themselves in order to get a deep understanding of a situation.  Solution selling is typically sold to mid-to-high level employees within a customer’s organization.

In 1998, Neil Rackham published the popular book “SPIN Selling”, to help create a process for solution selling.  SPIN stands for the four sequential steps of the process, and the right types of questions to ask in each step: (i) Situation questions where you collect facts (e.g., simply learn where the customer is today); (ii) Problem questions to identify problems (e.g., what is not working in the current situation); (iii) Implication questions to learn consequences of problems (e.g., quantifying the scope of the problems); and (iv) Need-Payoff questions to identify the value payoff of a solution  (e.g., quantifying the economic lift from the solution to the problem—new revenues, lower expenses, better customer service benefit).  This process gives your salesperson a playbook to work from in selling your solution.

Insight Selling

Solution selling is not to be confused with insight selling, which has become more broadly used in today’s era of big data and big analytics.  With insight selling, the pain point is unknown to the customer.  You are helping your customer to identify a problem that they did not know even existed, opening a white space for you to easily sell your product or service.  With insight selling, your salesperson is actually playing the role of business coach or strategy consultant to the client, holding their hand through the process of buying and implementing your solution.  Insights are typically sold to the high-to-executive levels of a customer’s organization, the people who care the most about taking their business to the next level of success.

The Common Mistake Startups Make

So, as you can see, sales is not a “one size fits all” solution.  You need to employ the right tactics and hire the right type of salespeople, to fulfill whichever of the above techniques is most relevant for your business.  And, the biggest mistake most entrepreneurs make:  they are so focused on selling their product, that they often forget to think about the solutions and insights their product offers its customers (which could make it a much easier sale).  So, do a critical assessment of your needs, and more importantly your customer’s needs, and plan accordingly.

Be sure to read my companion piece, The 1,024 Types of Salespersons—Hire the Right Ones, to make sure you recruit the best sales team for your specific needs.  As you will learn, not all salespersons are created equal, and hiring the right person can make or break your success.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #208: Five Sales Pitfalls Today, That Can Hurt You Long Term

As a serial entrepreneur and growth consultant at Red Rocket, I have been exposed to hundreds of companies, and some of the common pitfalls they run into as it relates to sales, and the impact it has on effectively growing their businesses long term.  Below are five common pitfalls I see entrepreneurs make when chasing near-term revenues, that can often create long term hurdles for the business down the road.

1. Avoid Dependence on One Industry

Sometimes an entrepreneur has no choice.  If they are a car parts manufacturer as a business, they are pretty much tied to the ebbs and flows of the automotive industry (which is highly cyclical and tied to the health of the overall economy).  But, when you can, you should aspire to have a nice mix of customers across many industries.  So, if one industry gets negatively impacted by the economy, it does not take your entire business down with it.  I have seen a lot of companies see their revenues get cut in half over night, based on some unforeseen economic event (e.g., 9/11 in 2001, mortgage crisis in 2008).  Don’t let your business be one of them.

2. Avoid Dependence on One Customer

Similar to above, you want to avoid dependence on any specific customer.  You never want to have “all your eggs in one basket”, so to say.  In a perfect world, no one customer should represent more than 10% of your overall revenues.  That way, if you lose that customer for any reason, you are only putting 10% of your revenues at risk.  Too many times I have seen companies living dangerously close to the edge, with more than half of their revenues at risk with one customer.  You lose that customer, you lose your business.  And, that is not a good situation to be in.

3. Not All Customers Are Good Customers

Too often, a startup is so desperate for revenues that they will take it from wherever they can get it.  Even if it means they are “going outside of their comfort zone” in terms of what is a perfect fit for their business.  That is a recipe for long term disaster.  Customers that do not fit squarely into your core competencies, puts both the company and the customer in a bad position.  This could include taking on a project that is too difficult to fulfill.  Or, taking on a customer who is never satisfied, and has you constantly spinning your wheels.  It is perfectly acceptable to walk from a customer or a project if it is not the right fit for business.  Don’t get so romanced with near term revenue, that you lose sight of long term fulfillment costs and heartaches.

4. Avoid Customizing Sales

Where you can, it is always best to “productize” your business.  You want your sales team perfectly trained on those products, and your operations team perfectly fine-tuned for fulfilling those sales.  Nothing causes more chaos in a business than custom sales requests.  The sales team is not sure if the company can fulfill it, slowing them down.  The technology team needs to drop what they are normally working on in your product road map, slowing them down to squeeze in time for a custom development.  Your operations team is not sure how to fulfill it, slowing them down.  Sometimes, custom sales are OK, if the product being customized was already in your long-term product roadmap anyway, and now you are just accelerating it for a paying customer.  Or, if a huge client is requiring it, to protect the relationship.  But, as a rule, custom is typically a bad word when selling.  You can learn more about how to productize your business in this other post I wrote on the subject.

5. Don’t Use Your Clients as Guinea Pigs

If you are not sure your product or service will be successfully delivered with a high odds of confidence, do not sell it.  Period.  That means making sure you have done a proper quality assessment of the product, on your own, before pushing it live into a client deliverable.  The worst thing you can do is to use your clients as guinea pigs, to test out your products, unless they are perfectly clear they are being used in a test pilot situation and they are fine with that.  Because when things do not deliver as planned, you have soured the relationship, and most likely, have lost a customer.  Not to mention all the negative bad will that customer may spread to other client prospects calling for references.  Be sure to read my companion piece, Doing the Smoke and Mirrors Dance, for more insights here.

So, when looking to close your near term sales opportunities, keep the above pitfalls in mind.  As you don’t want to be paying for any costly mistakes you make today, down the road.

For future posts, please follow me on Twitter at:  @georgedeeb.

Lesson #207: Big Companies That Embrace Intrapreneurship Will Thrive

It has been well-documented that big companies typically struggle with innovation.  Once companies get to a certain size, their investors become more conservative, their leaders less entrepreneurial, decisions are managed by consensus and their employees become less willing to stick their neck out with “out-of-the-box” ideas, that may not work out and result in losing their jobs.  And, without innovation, companies get too “comfortable” with their past success, just before going out of business (e.g., Woolworth, Montgomery Ward, Borders, Blockbuster, American Motors, Pan Am).

The Birth of Intrapreneurship

But, although that is largely the rule, there are several examples where entrepreneurship inside a large organization can and does prosper.  This is the world of intrapreneurship, a term popularized by academic researcher Howard Edward Haller, management consultant Gifford Pinchot III and the great Steve Jobs, back in the early-to-mid 1980’s.

Several big companies today actively promote intrapreneurship within their organizations, allowing their employees to spend 10%-20% of their time on innovative ideas of their own, that are unrelated to their normal day job.  Companies like Google, 3M and Intel are well known for their efforts in this regard.  Not surprisingly, some of the best performing big companies in the world of business today.  But, they are surely the minority, and more big companies need to get on board here.

The Best Examples of Intrapreneurship Success

Here are several examples of some of the best businesses that were born out of intrapreneurship inside a big company (with Hall of Fame honors to Steve Jobs at Apple, Richard Branson at Virgin and Larry Page and Sergey Brin at Google, for leading serial intrapreneurship successes at their companies):

• Mac, iPod, iTunes, iPhone, iCoud computer inside of Apple
• Gmail, Google News, AdSense, Driveless Cars, Google Glasses and other innovations inside of Google
• The numerous divisions launched by  Virgin (e.g., airline, hotel, casino, books, music, megastore, mobile, wines, games, galactic)
• PlayStation inside of Sony
• Saturn inside of General Motors
• Post-It Notes inside of 3M
• Elixir Guitar Strings inside of W.L. Gore (makers of GoreTex)
• SkunkWorks fighter jet project inside of Lockheed Aircraft
• Java Programming language inside of Sun Microsystems
• Digital Light Processing Technology inside of Texas Instruments

How Big Companies Can Drive Intrapreneurship

If you are a big company looking for innovation, create a culture of intrapreneurship inside your organizations.  Let your employees know it is OK to spend part of their day jobs tinkering around with new ideas.  That it is OK to make mistakes, and that failure will not be punished if things do not go as planned.  Hire people that have entrepreneurship wired into their DNA; leaders who are not afraid to make decisions on their own and take risks.  And, most importantly, stop focusing on next quarter’s profits, and start focusing on the next decade’s worth of revenue growth.

How Employees Can Drive Intrapreneurship

If you are an employee inside a big company, good luck finding a company that is going to let you spread your wings.  So, keep looking, until you do.  And, when you do find that right company, don’t be reactive, sitting back waiting for opportunities to present themselves.  Be proactive; take the lead on whatever great idea that has a chance to become a major future revenue driver for your employer, and pitch it to your management.

At the speed in which change is happening in the business world today, big companies that do not embrace innovation and intrapreneurship will fall by the wayside.  Maybe not right away, but the writing will surely be on the wall.  And, the companies that do embrace it, will surely distance themselves from their competitors and thrive long into the future.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #206: The 4 M's of Evaluating Startups

Red Rocket was recently asked to judge a startup competition.  As I was filling in the questionnaire which evaluated the startups, I noticed that the questions being asked were really revolving around four topics all starting with the letter M: market, model, management and momentum.  I thought that was an elegant way for all of us to think about evaluating startups, and I will share my thoughts on each of these topics below.

1. MARKET

The market assessment comes down to a look at the startup’s industry and competition.  From an industry perspective, the larger the industry and the faster it is growing the better.  Investors would rather invest in $100BN markets than $100MM markets, to build as large a business as possible.  As an example, a business selling travel to passengers around the world would garner more interest than a business selling whitewater rafting trips in Colorado.

From a competitive standpoint, the less competition the better, especially if that competition is already well-funded pointing their fresh venture capital marketing bullets in our direction.  So, where you can, first movers or early movers are preferred, as opposed to the tenth startup entering a crowded space.  So, look for white space opportunities where you can stand out and shine amongst the crowd.

2. MODEL

The model assessment comes down to two things:  the overall business model and the unit economic model.  In terms of the business model, how does the company plan to make money?  Is it ecommerce selling online merchandise?  Or, advertising sales in a content publishing model?  And, most importantly, how large can the revenues get in the next five years, and what does that mean to the ROI on my investment.

The unit economics comes down to two things:  the lifetime value of a customer’s revenues compared to the cost of acquiring that customer in the first place.  So, as an example, If you are Starbucks, and your average ticket is $10 per transaction, and a customer buys one cup of coffee a week, that is a year one revenue potential of $520.  And, if we lose customers at a rate of 20% a year, over five years that is a lifetime value of $1,560 in revenues.  As a general rule of thumb, I prefer not to spend more than 10% of my lifetime revenues on an initial cost of acquisition.  So, in this case, if the initial marketing cost per customer is under $156, the startup is going to be in in pretty good shape for attracting capital.

3. MANAGEMENT

The management assessment has several variables.  How experienced are the founders in this industry?  How experienced are they in building startups?  How experienced are they as working as a team together?  How credible are they?  What is their personality fit with the investors, given the amount of time they are going to be spending together?  For a more comprehensive list, take a read of this post I wrote on How Investors Define a Backable Management Team.

4. MOMENTUM

If I had to pick one thing investors gravitate towards more than anything is the speed of customer adoption.  If customers and revenues are scaling quickly, that is a pretty solid proof of concept that instills confidence and excites an investor to write a check.  Frankly, if you had all of the other three M’s, and this one was missing, it would be very challenging for you to raise capital.  As I have said in the past, focus less on the product and focus more on the proof of concept marketing around that product, and you will be in great shape.

So, whether you are a startup seeking capital, or an angel investor looking to invest capital into a startup, make sure all four M’s of evaluating potential startup success have been checked.

For future posts, please follow me on Twitter at: @georgedeeb.

Reduce Customer Churn To Drive Revenues & Excite Investors

Customer churn is one of the most important metrics a startup can measure and reduce over time.   Churn is basically the percentage of customers that stop shopping with you in a given period, typically calculated for businesses with recurring monthly revenue streams.  The higher your churn, the poorer job you are doing at retaining your customers.  And, worse yet, instead of getting lower-cost marketing efficiencies from retention marketing to current customers, you are back fishing again in expensive pools of fish for new customer acquisition.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] Congrats to @ross_w_petersen at @BlitsyCrafts. Winner of the 2015 @IR_Events (IRCE) Startup Pitch Competition

Yesterday, I had the pleasure of hosting and judging the e-commerce startup pitch competition at the 2015 Internet Retailer Conference & Expo.  It was a close battle between three veteran e-commerce startup entrepreneurs in Chicago:  Chris Conn at MightyNest, Sharon Schneider at Moxie Jean and Ross Petersen at Blitsy.  But, there could only be one winner of the $1,000 in free consulting from Red Rocket.  Congratulations to Ross Peterson and Blitsy!!  A nice job by everyone, so be sure to check out each of these great up-and-coming e-commerce companies.

A Startup's Biggest Pitfall is Finding the Right Salesperson

A startup cannot survive without revenue, and more important, revenue growth that will impress investors. Often, this success rests squarely on the shoulders of your sales team. Therefore, your sales team will make or break your success. Members of your sales team are arguably the most important hires you are going to make. You have to get it right!

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[NEWS] Welcome to the New & Improved Red Rocket Blog

The Red Rocket Blog launched back in February 2011, and the original Blogger template served us well for over four years.  But, it was time for a face lift with a more contemporary design, more images and an easier way to navigate the site by subject.  We hope you like the new and improved Red Rocket Blog!!  Thanks for helping us spread the word.

For future posts, please follow us on Twitter at: @RedRocketVC.