Closing Your First Customers
Landing your first customers goes hand in hand with idea validation.
In fact, one could easily say that landing customers IS idea validation. However, I've kept them into distinct categories as they are two separate skillsets whose end goals happen to overlap.
Regardless, during the idea validation stages you should be using the skills below(outreach and closing) to determine if your product idea is validated.
There are many ways to do sales and most of them will work at some stage of your company. But I like strategies that work regardless of company stage or luck. So for that reason we'll be using a very clear cut approach to sales.
Identify > Prospect > Cold Outreach > Close
Cold calling isn't glamorous work. But it's not particularly high talent work either. You don't need to be a rocket scientist to do it and it will work for nearly anyone willing to pick up the phone and talk to strangers.
Cold calling is not only predictable and a guaranteed way to build revenue, it's also absolutely critical at this stage. The product you ultimately end up building in the MVP stage should be entirely based on the discussions you have with your earliest customers. Outsourcing this or having non-founders handle this part of the project turns product development into a middle school game of "telephone."
At Prodigy, my cofounder and I did all the cold calling ourselves for the first year of the company. Whenever we talked to a potential customer, we both hopped on the phone and listened carefully to their wants, frustrations and objections. We took meticulous notes and reviewed our notes regularly during the product development stage.
Identifying Ideal Customers
If you're selling a new product, the standard curve of adoption tells us roughly 3% of your potential market will be early innovators. That means if you try to sell your innovative solution to the entire market, you're likely to strike out 97/100 times.
Save yourself time, headaches and frustration by spending time to hone in on and narrow your prospect list to include as much as that 3% as possible, while cutting out the remaining 97%.
The easiest way to do this is to answer the question: Who needs this product the most and is currently aware that they need it?
To help figure that out, asking yourself more questions can be handy. Some good ones include:
What company size does our ideal customer work at?
What department does your customer work in? How big is that department?
Do they use certain technologies or compete in specific industries?
Does their geographic location matter?
Do certain events make your product more or less important? (closing rounds of funding, open new offices, etc)
...and so on.
The time you spend here has exponential time savings here on prospecting, so don't overlook the importance of this.
Once you've identified what makes an ideal customer for you, it's time to build a list of them. It's hard to say how many companies you need, but a basic list of 200 is a good start if you're in the early validation stage. Even if you absolutely suck at cold outreach, reaching out to 200 ideal customers will usually land you at least one or two people interested in moving forward.
200 may seem like a lot but typical Sales Development Reps(SDR's) do 80+ cold calls a day. With a good system you can work through a list of prospects in just a week or two. In this process you'll be learning so much that it's not uncommon to have to loop back to one of the earlier steps - often Idea Generation.
If not, well then congrats you might have validated your idea!
There are lots of guides on how to build prospect lists but the basic concept is simple:
Step 1: Find companies that fit your ideal customer profile
Step 2: Find the ideal decision maker at that company
Step 3: and get their email and phone number for cold outreach.
There's lots of scalable ways to do this, but don't overestimate the value of caffeine fueled founder grunt work. It's all part of the process :)
Cold outreach is the most important part of this process. The key to succeeding with cold outreach is eliminating as much thinking as possible, especially if you don't have a background in software sales. It should be as simple as following a checklist, so you can maximize efficiency and shake off nerves.
To lift the load off your shoulders, we're going to use the Salesloft 7x7 cold outreach strategy. It's a proven cadence that will allow you to turn cold contacts into warm demos and paying customers consistently and effectively. Start by learning the basics here: A Day in The Life of an SDR
Got it? Good, now all you need is to fill the cadence with your own scripts and emails to use.
Steli Efti, as usual, has an amazing guide on cold calling. Use this guide for your day 1, day 3 and day 7 calls. How to Create a Sales Phone Script
Next you'll need cold emails: 5 Cold Email Templates That Will Generate Warm Leads For Your Sales Team
Finally, you'll need a way to track all your progress. I'm exceptionally cheap so when we started cold outreach we used Google Sheets as our CRM, Yet Another Mail Merge as our cold email tool and our cell phones for calls. As we did each cadence step, we'd manually check it off in our spreadsheet.
The goal of cold outreach is not to sell a product(remember, you don't have one yet!) The goal is to schedule a 30 minute qualification call to talk about your product idea and get feedback.
When I first started learning sales I kept hearing over and over the power of questions on sales calls.
So what did I do? I started asking lots of questions on my calls, completely ignoring their answers as I bulldozed my way onto the pitch. Yes, an idiotic thing in hindsight but it's probably the most common problem I see today even with experienced sales reps.
The goal of qualification questions is NOT to ask questions because they increase your chances of closing your potential customer and making tons of money. Remember, at this stage your goal is to learn more about your customers business and what their top concerns are.
Here's a step by step guide of exactly how I run qualification calls:
How did you get involved at your current company? (Good starting rapport builder)
- What's your day to day like?
- What tasks are most painful in your current job?
- What are the metrics your department is measured on for success? (Examples: # of sales, revenue, ROI of advertising, uptime, customer satisfaction)
- Think about where that metric is today. Now, what are the main reasons that metric isn't 50% better? (This is the critical question)
...from there I start asking more inquisitive questions about the problems they list and why those problems exist. Then I pivot to...
- If you could solve those problems with a magic wand, what would the perfect solution look like?
- Fantastic, if we built that perfect solution you just described and it solved all of those problems would that be valuable to you?
- How much do you think that would be worth to the company?
We've actually been thinking about building something right along the lines of this. It's still really early stages but I'd love to get your feedback on what we're working on. Could we setup another call to show you what we have and see if it might help you? (schedule the demo)
The key to making this work is never force the calls to try to discuss the problems you hope to solve. If the problems you want to solve don't naturally come up as their top concerns, you may be talking to the wrong person, the wrong company or pitching the wrong product. All of these are perfectly fine points of feedback.
Eventually you'll come to one of two conclusions:
- Our potential customers top concerns are not solved by our product solution. If so, congrats! You've gotten some great feedback! Either you need to go back to ideal customer profile brainstorming or idea brainstorming.
- A subset of our customer list has a consistent set of problems that our product can potentially solve. If so, also great! Go schedule the demo and get ready to close.
Note: The first conclusion is far more common and likely at this stage, don't get discouraged.
Now that you've got the demo scheduled, it's time to close them! But wait...what are you going to demo then if your product isn't built?
On your vision of course! The purpose of the demo is to restate the prospects problems in their own words and state how your ideal solution will solve their biggest problems.
This is one of the biggest mistakes founders make in early sales. They think they are selling a product. Wrong! You are selling a solution to some very clear, painful need of your prospect. So rub that pain in and show them you have a product that's "in development" to help solve those exact pains. My favorite post on this topic: People Don’t Buy Products, They Buy Better Versions of Themselves
Visuals help so if you can, build basic product mockups or even hire a cheap designer to build sample "screenshots" of the app you're building.
After the demo is over you'll want to go for the close. Since you don't actually have a real product ready yet, they might not pay you yet. But you can ask them to a sign a letter of intent or even a full blown contract agreeing to pay you once the product is ready to launch.
Whatever you do, make sure you ask for the close. If they say yes, get em a sales contract! If they say no, it's a perfect opportunity for product feedback.
A well oiled B2B sales machine closes ~50% of demos. Don't be discouraged when your first few attempts are nowhere near this. We averaged ~10% our first year of sales calls.
...to be continued in Part IV - Building Your MVP