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.