Ask an Investor: How do I sell to enterprises?

meeting

Welcome to a BetaKit weekly series designed to help startups and entrepreneurs. Each week, investors tackle the tough questions facing founders today. Have a question you would like answered? Tweet them with the #askaninvestor hashtag, or email them here.


Enterprise sales are notorious for how long they can be, yet they can be extremely lucrative for startups since they can provide massive scale and stability given that they are typically awarded for a multi-year term. Selling software to enterprises is further complicated by the multitude of technical requirements that the customer demands, which generally differ substantially from the average SMB client requirements.

If you haven’t sold to enterprises before, the first thing you must realize is that it’s a process. There is almost never a single individual who is both the end customer and the final signing authority within the enterprise. The typical Fortune 500 will have a myriad set of processes documented for all types of vendor solution procurement and the jargon to go along with it. Oftentimes, even the CEO cannot make unilateral decisions. As a startup selling to large businesses, this means you must come to grips with how decisions are made within your prospect organization.

In all these situations, VCs can be helpful in putting you in touch with the best initial relationship, and help you navigate the various aspects of the sales process, overcoming the various hurdles and taking advantage of the many shortcuts that loopholes in procurement processes leave open.

It’s long; dig in

The enterprise sales cycle are often excruciatingly long and have been known to eat through startups’ entire cash reserves before even a single sale has been accomplished. The best defence is to spread your bets.

Don’t focus your bets on any one customer, even if you think it’s going swimmingly well, because you are always one bad quarter away from a total freeze on new spending or similar black-swan catastrophic event.

Your strategy with these individuals is to look as harmless to them as possible. Don’t try to sell them on the benefits of your solution.
 

Prioritize targets which came in via inbound calls. They’ve qualified themselves as a high prospect by self-selecting themselves by contacting you. Fill your sales pipeline with dozens of potential customers and focus your time on moving them all along, regularly vetting them and dropping underperforming targets from your pipeline — also known as, if they aren’t calling you back, they aren’t into you. You need well over a dozen strong leads in your pipeline to land one initial deal in a reasonable amount of time.

Relationships

An essential element to a shortened sales cycle is identifying — and ideally starting — with the right internal relationship. After all, you aren’t selling to a business; you are selling to a collection of individuals each with their own wants and needs trying to work together (but sometimes not!) for a common corporate cause. Finding a champion internally who wants to roll out your solution is key.

It’s a process

Selling to enterprises is a process. A very long process. Understanding the various and many milestones in that process is the first step in successfully selling to enterprises. In your early meetings, ask for a roadmap about how software is typically purchased.

Realize your champion may not know the full roadmap. Inquire if they have recently purchased services from an outside vendor. Ask them what the vendor did well through the sales process and what they didn’t. Understanding the steps in the process from qualification, demo, workshop, pilot, trial, procurement, RFP and RFP response, tender, legal, and more is critical in understanding just how far along your sales actual is. A verbal agreement to a demo is a very long way from a commercial term and full deployment.

Gatekeepers and incentives

Understand that people do what they are incentivized to do. Almost every company has a hierarchy. Enterprise companies even more so. The board and CEO are at the top, interns at the bottom, and many many layers in between.

If you try to divide your energy between too many opportunities, none will get the attention they need for the sale to close. More startups die from indigestion than starvation.
 

There will be multiple levels of gatekeepers: product budget holders, technology budget holders, managers with technology deployment responsibilities, and many more. Understand who can say yes and, just as critical, who can say no. Some of these individuals make a healthy bonus every year regardless of what they do. They have no interest in looking like a hero internally. Taking entirely unnecessary personal risk by deploying new software is not on their agenda. Your strategy with these individuals is to look as harmless to them as possible. Don’t try to sell them on the benefits of your solution — it won’t work. Sell them on the lack of downside and the low risk nature of your product.

Identify who has ambition. Start with LinkedIn. If you see a trail of promotions every couple of years, that individual is likely not content until they are at the top. These are the individuals who will most likely take a personal chance on a startup, if they think a personal promotion could be in the cards. Getting them on as champions will put them in a position to help you navigate the web of decision makers, RFP processes, signing authority, signing limits, legal department, and the procurement department (who, if you let them, will try to squeeze every last penny out of the deal).

Get paid

The freemium model works wonderfully with consumer products. The friction added to user onboarding by charging early is rarely worth it.

Unfortunately, there is so much friction in the enterprise sales process that the removal of cost doesn’t help speed things along and makes things far worse later because you’ve now set an expectations of free. Worse, corporations don’t value things that are free. This is often realized in under-prioritized and under-utilized free pilots that are doomed from the start. Do yourself a favour and charge a reasonable cost from the very beginning. Further, by charging, you will be validating that corporations value your product.

meeting

Shortcuts

There are sometimes ways to circumvent parts of the process. For example, some enterprises require that they only purchase from approved vendors. However, the review process and rigor for approval for a $10,000 trial is often a fraction of the work involved for a million dollar contract approval.

What is not explained is that approved vendors are often binary. If you’re on the list, you’re on the list for essentially all levels! No set of processes are perfect, and working with your internal stakeholders and experienced advisors, including your VC, will likely help you identify a number of these shortcuts in an enterprise sales process. Obviously, relationships are key. Without an internal stakeholder who wants to see you win willing to provide insights into the internal process you won’t have access to any shortcuts.

Professional

Don’t look smaller than you are. If anything, err on the side of looking bigger. As the saying goes, don’t dress for the job you have, dress for the job you want.

This goes for corporate brand identity as well when selling to enterprises. Brand identity crosses over everything, from leave-behind material for meetings, your website, your brand and business cards, even your email addresses and LinkedIn profiles. If anything screams fly-by-night, your prospective clients will drift away. Your first sale will be the hardest. As you add signed client logos to your sales deck, the less risk each incremental customer will be taking and should make it easier to sign further clients. Lastly, it should go without saying that you should act professional at all times.

Enterprises are accustomed to long sales cycles, many approvals, a series of demos, workshops, pilots, trials, and more. Rather than trying to change those habits, learn to take advantage of them when building out your sales process. Be prepared for long sales cycles, spread your bets among many prospects, get a roadmap to the purchase process, use shortcuts when you can and be prepared to play by the rules when you can’t. Use your network, including your investors, to help facilitate each of these steps.


Sarah’s take

Sarah Marion

I don’t entirely agree with Christian’s advice to spread your bets to increase the odds of closing a deal. This is a great strategy for raising capital, and on face value, it feels like there are lots of parallels between the two. Large dollar amounts in one transaction? Check. Reselling opportunities spaced out every two years? Check. However, trying to run a process with your enterprise sales customers akin to the process you run with VCs is a disaster waiting to happen.

You can, and probably should, aim to pitch at least five to 10 different partner meetings to secure a term sheet. You cannot invest enough time and energy into five to 10 different enterprise sales opportunities — you’ll end up dropping the ball on all of them. By all means, identify a dozen leads across your core target vertical and evaluate those prospects to determine their willingness to buy. Good signs are a strong personal relationship, a reputation for working with startups in the past, and a clear link between what you’re selling and their top three business priorities. But once you determine those that you have a meaningfully chance of selling to, pick one or two maximum and put all your energy into them.

The size of your team isn’t relevant here. If you’re reading this post, it’s because you haven’t sold to enterprises before. That means you don’t have an enterprise reference customer yet! (Obviously.) That first enterprise customer will demand to be sold by the CEO, not the VP Sales or COO or anyone else. Your company is still very much dependent on you, and any enterprise customer will want to get comfort with your ability to deliver value to them, react quickly, and build an enduring business. There’s a reason startups are typically tech team-heavy in the early days.

Startups in general are relatively binary, and hedging your bets is a hard strategy to pull off when you’re under-resourced (the definition of a startup). If you try to divide your energy between too many opportunities, none will get the attention they need for the sale to close. More startups die from indigestion than starvation.

Got a question for the investors? Email them here.

Photo via Burst.

Christian Lassonde

Christian Lassonde

Christian Lassonde is the founder and managing partner of Impression Ventures, a venture capital firm focused on investing and leading deals in FinTech companies raising late seed to early Series A rounds. Her is a former founder, having built and sold Virtual Greats, a luxury online IP rights broker, and Millions of Us, a digital agency. Christian spent a decade in San Francisco building software for Second Life, LucasArts and Electronic Arts and selling solutions to Sony, Nike, Warner Brothers, General Motors, Coke, Intel and many more Fortune 500 companies. You can follow Christian on Twitter at @classonde