Startup 101: The importance of knowing your sales process

I had an interesting day a little while ago. I spoke with three different friends and all of the conversations ended up going into the sales process that they use for their individual companies. I found this interesting in that each had fundamentally different businesses: a high tech SaaS based product, a service provided to attorneys and a personalized consumer product business. Yet in each case none of them really had a sale process defined and that ended up becoming the topic of discussion. Two of the businesses were just getting started and one was already pretty mature but didn't really have a formal sales process in place.

Regardless of the type of business you have I think it's really important to understand in a reproducible way how to sell your product or service. This becomes critical if you have any desire to grow your company by adding sales staff, large numbers of customers or different channels. Because I'm really an engineer more than anything else I look at the sales process as an old fashioned flow chart: at one end is a raw lead and at the other is either a paying customer or someone that you may get to become a customer in the future. In between are the various decision points and attributes that must be collected in order to move that lead into the next stage.

By breaking down the sales process into stages you can begin to understand what it will take to move prospects through those stages. What is preventing them from moving forward? How many prospects can you expect to see go from one stage to the next? This is where the ability to capture the data in a consistent way becomes critical. If you are regularly capturing what happens to your leads at each stage of sales process you can begin to see trends and start really forecasting your sales efforts. You can see which of your sales activities is paying off and which doesn't have the impact you think it should.

If you own a small business that depends on more than a handful of customers coming in the door every month you owe it to yourself to set up a well documented and managed sales process. There are lots of books and articles on how to do this but my view is very basic and can be distilled down to four pointers:

• Keep it simple! You know your business - break down why you are successful selling your product or service today, create some metrics so you can measure it and then experiment. Each of your steps in the sales process should have a measurable outcome that can be recorded.
  
  
• Document it! You need to put pen to paper (or bits to disk) and keep track of your sales process. It's a living document that should always be current and becomes the fundamental guide for your sales people as your company grows.
  
  
• Track your metrics! It's hard to know what to do next if you don't have a stable base to draw from. Compile data regularly and consistently on your sales. Over time you will begin to see trends that may have not been obvious. At a minimum the data will present you with confirmation about your gut feel on why you are successful or not selling.
  
  
• Be patient! If you want to improve you need to see the impact your changes are causing. Don't jump to conclusions because a change you made isn't having the immediate impact you think it should be having. Continue to monitor your metrics and adjust things at a reasonable pace. This may feel like it runs counter to popular thinking that decisions should be made based on gut instinct and in the blink of an eye.
  

I'm not a sales expert - I'm an entrepreneur. I have always tried to keep everything as simple as possible and the advice I'm providing is about as simple as it gets. If you're not using a well defined sales process now, at a minimum following the steps I have outlined above will give you a great start in getting it under control.

Startup 101: How to pick the right business partner

In the late 80s as a young man I was at a party with my wife's family. There were many very successful business people there that I had conversations with. There was one discussion in particular that I still remember to this day, 20 years later. When I told Tony that I was interested in starting my own business at some point he said:

"David, whatever you do, don't get a partner. Just do it on your own."

Funny how some things just stick in your head. At the time he gave me this advice he owned part of a successful business and he was just a little older than I am now. I didn't follow Tony's advice and in retrospect I'm really glad I didn't.

People pick business partners for all kinds of reasons. Most often it's because they want to have someone to turn to for help, support and encouragement. Starting a business is hard work and the motivation you get from having a business partner is like having a workout partner: you can lift more weight when you know you have someone spotting you and encouraging you to push a little harder.

Picking a partner to go into business with is an interesting challenge, especially when you are just starting out. If you think finding the right life partner and getting married is stressful, think about this: in all likelihood you will be spending nearly double the number of waking hours working with a business partner than you will with your spouse. That's a lot of "quality time" to spend with a person.

The Do's and Don'ts List

Here is my list of the things you will want to do, and not do, when picking a partner to start a business with:

DO: Choose someone that compliments your skills. 

When you are first starting out you will probably not have all the skills you need in order to make the business successful. Sure, you're a bright person and can learn quickly but sometimes you are better off finding someone that can really help you get up and running quickly. 

Every business has at a minimum two critical areas: Sales/Marketing and Product/Services. Someone has to sell it and someone has to provide the product. You can break it down into increasingly more focused areas but in general these are the two biggest areas of concerns for a new business.

DON'T: Choose a partner because you really like them.

Starting a business is not about picking friends, it's about building the foundation for a successful business. Just because someone is a great person to be around doesn't mean that they are someone that is really going to help your business be successful. Before you decide to ask someone to go in with you on a business you need to make absolutely certain that it's because they will add real value to the business. I have watched (and experienced) this firsthand many times and it has contributed to business failures and major complications down the road.

DO: Choose a partner that has connections.

If I have learned anything in business it's the power of networking with others. If you can find a partner that can help you get in the door of critical new customers or open that line of credit you need, excellent. Maybe they have a long list of candidates you want to be able to hire down the road as you grow. Your partner is doing more than just working with you, they are exposing you to their network of people just as you are exposing them to yours.

DON'T: Choose someone that has different goals.

I know this sounds obvious but in the excitement of starting a new business you may overlook a critical attribute of picking a partner: making sure you are both shooting at the same target. You will avoid a huge amount of tension later in your partnership if you are both on the same page and meet regularly to ensure you still are. 

If one of you is shooting for working hard for 4-5 years and then seeing an equity event because you want sell the company and get out, but another partner wants to set up a lifestyle business that will supply them with a steady job and nice salary then there will be problems. Figure that out up front and save on investing in Maalox by the case.

DO: Define how you resolve disagreement up front.

Before you finalize being partners you need to establish how conflict will be resolved. Trust me, there will be disagreement and conflict. You need to make it very clear how that conflict is resolved and ensure that a potential partner buys into that. Put it in writing. If you only have one partner then don't set up a 50/50 split of the company. If you want to make it equal from a revenue/income standpoint make it a 50.5/49.5 split. Someone has to step up and resolve the conflict that will happen.

DON'T: Worry about offending a potential partner.

In your excitement to get your business started you may find yourself walking gingerly around things that you are concerned about with a potential partner. Maybe you are worried that you will scare them off or perhaps it's just not in your personality to bring up sensitive questions. Stop that, and get it out in the open. If you see something in a potential partner's history that you have concerns about, explore it.

Partners are not like employees. You can fire an employee that lied to you and, if you handle it properly by documenting it you can fire them for performance reasons. You can't do that with partners nearly as easily.

DO: Check references.

Ask for and call at least 5 people that have worked with a potential partner, even if it's someone you know pretty well. If you and your partner are young, put college professors or teachers on that list. We all know that people provide references that they know will provide a positive review, but that doesn't mean you shouldn't call them. 

Ask how they handle pressure situations, what they get excited about, specific problems they have resolved. Come up with a list of questions for the reference that focuses on direct observations they have had of your potential partner.

DON'T: Compromise on the issue of ethics.

Just because someone has an incredible skill set or the best network of connections you have ever seen, don't overlook questions on ethics. Explore hypothetical situations with a potential partner about ethics. Things like: "We once had a customer that closed their account and overpaid it by $20. Cash was tight for us, it wasn't much money and they were leaving us anyway - what should we have done?" If the answer to that one is anything but "write them a check for $20", you should have serious concerns.

You will need to trust your partners. They will have access to more information about you than most employers have and will be in a position to take advantage of you if you are not very careful.

So should you even get a partner?

Obviously that's a question that only you can answer. There are advantages and disadvantages to having one or more partners. I was lucky to have fantastic partners, especially in my last business. We didn't always see eye-to-eye and there were time we pissed each other off like crazy but it was easily the best decision I have ever made to take on both of my partners. I highly doubt the business would have succeeded without them.

If you have all the skills you need, are completely self-motivated and are willing to take a little longer to get your business off the ground then you may be able to go without partners. It only took me 20 years but I think I'm going to try starting my next business using Tony's advice.

--David

Copyright © 2008, David R. Alison. All rights reserved.

Startup 101: Do you have what it takes to fire your boss?

I've been asked what it's like being your own boss before and have developed a standard response: 

It has its ups and downs. On the downside my boss is an obnoxious jerk that pushes me relentlessly.

On the upside I'm sleeping with his wife.

Have you given any thought to leaving the "security" of a regular paycheck and going out on your own? If so, this entry is for you. It is my not so humble opinion that working for yourself - owning your own business - is one of the greatest experiences a person can have. I equate it to the difference between living in your parents home and going out on your own and getting a place to live as a young adult. It is initially pretty frightening but the feeling of independence and growth is incredible and once you’ve done it successfully you cannot imagine going back to live with Mom and Dad.

I recognize that not everyone is cut out to start his or her own business - or even work outside the structure of a corporate environment. The skills required to start and then successfully run a business are not always the same and require that you switch gears quite a bit.

I’ve collected a list of attributes that can help you determine if you are the kind of person that can start your own business. I’ve been networking with the owners of businesses of all shapes and sizes for many years and found quite a few common themes that I hope you will find valuable.

You are a good candidate to start a business because…

You are willing to take risks
This is the most obvious one – so obvious I hesitated including it on the list. Starting a business is a risky proposition. You need to be sure that you have set yourself up as much as possible to absorb the risk associated with starting a business, especially the financial issues. Only you can determine what level of risk is acceptable but a good rule of thumb is to have enough money or financial security squirreled away to last you through the time it would take to land a regular job. I’ve known people that didn’t feel comfortable until they had a year of living expenses and others that had virtually no savings, just a surplus of confidence. 

It may be possible for you to start your business while you are still employed by someone else – if so, that’s outstanding. Just make sure you are not going to violate any employment agreement you may have with your company and, if it’s at all possible without jeopardizing your job, let your boss know what you are doing. It is much easier to operate in the clear light of day.

You are an optimist (but a pragmatic one)
If you are going into business by yourself it is critical that you are an optimist. Not someone that lives in a state of denial the entire time mind you – you have to be realistic – but someone that sees positive potential in most things. If you are constantly looking at why something will fail you are going to go out of business pretty quickly. It is the job of others to tell you why something can't be done.

This is not to say that you cannot have pessimist as a partner. Very often having someone that balances out an optimist and throws a dose of reality on the situation creates a good balance.

You have a vision for your business and can share it with others
Having a good idea is one thing, being able to articulate it well and get others excited about it is another. If you are going to be the one that starts the business you have to be able to get others excited about it. Keep in mind that friends and family will usually love anything that you present to them. Get outside of your circle and comfort zone by asking people that would be potential customers or clients.

The list of people that you need to convince that you have a great business concept is quite long: potential employees, bankers, venture capitalists, partners, distributors, landlords, etc. All of these folks will want to hear from you why they should take a risk on your business.

You can modify your lifestyle
When you are first starting out it is critical that you can adopt a frugal life style. While you were gainfully employed you may have eaten out often, taken nice vacations or bought a new car every couple of years. You need to be able to adjust that quickly to take up the slack and minimize your financial risk. That frugality will help you with the business as well – it’s all a mindset kind of deal.

A frugal life style will lead to a closely monitored business.

You have a great relationship with your life partner
If you are living with someone or are married, it needs to be a strong relationship. Some people have successfully started and built up businesses while they were in a lousy relationship – the business became a sanctuary, something that kept them away from the person they didn’t really want to deal with anyway. Others have had a relatively fragile relationship fail when faced with the time commitment, stress and financial burden associated with a new business.

This one is very personal for me. I was blessed with a fantastic wife that supported me every step of the way. On the days I just felt like I couldn’t deal with it I had her to turn to. When I questioned why I was going through the painful process of starting my business I would look at the photos on my desk of my wife and three children. It was all the inspiration I needed to make it work.

If you are in a relationship you need to know if your partner is going to support you. It will not be all happiness and light mind you – my wife and I got into many heated debates on issues that were complicated by the stress of running the business. If however we had a defective relationship it likely would have failed.

You are a jack-of-all-trades
Have you ever been described or described yourself to others as a jack-of-all-trades? If so, that’s a good thing when starting a business. If you are starting the business by yourself then you are obviously the CEO, but until you get employees you will also have a couple more key titles:

• VP of Marketing: You need to develop and execute a plan to promote your product or service.
  
• VP of Sales: You have to develop a sales process and make it happen
  
• VP of Development / Production: Someone has to build your product or provide that service. That someone is you. Outsourcing it? You still have to manage it.
  
• VP of Support / Customer Service: You will need to deal with customer issues and resolve problems people have.
  
• VP of Finance / HR: Run your accounting software (Quickbooks is a popular choice), pay the bills and manage any employees you may have.
  

Depending on the type of business you want, one person can pull off all of these roles and still lead a semi-normal life, though like anything else you need to be pretty good at them if you want it to be successful.

You get easily frustrated with bureaucracy
As companies grow larger they develop processes and systems to help them run more efficiently. Over time those processes evolve and change and can become less efficient. If you are working in a company and see all the places where processes can be improved or eliminated, you have a trait that is valuable in starting your own company.

If you work for a company that is unwilling or unable to change an inefficient bureaucracy and it drives you nuts, you have some of the fuel required to power your business.

You want financial independence
One day you look at your finances and realize that while you thought you were running hard in a race you are actually running on a treadmill. Between car payments, a mortgage, living expenses, etc. you make a decent living but you are not advancing your lifestyle to your satisfaction. If you have children then it’s even more pronounced because you have their living expenses and education to worry about as well.

In my experience the best way to provide yourself with the opportunity for financial independence is to control your own destiny, and that means starting your own business. Not every business is destined to create great wealth for the person that starts it. Many people create life-style businesses that generate just enough revenue to pay the owners a good wage.

Whether you are creating a business with the intention of selling it to obtain wealth or you are creating a long term life-style business, either can provide you with financial independence.

You don’t give up easily
A critical characteristic for a person starting a business is persistence. You need to be able to face rejection and failure not as a personal thing but as a challenge to improve. A new business faces many obstacles that will tear you down and make you want to run screaming for the perceived safety of regular employment if you let them get to you.

You must have a “Yeah, we can take that hill” mentality and like a good challenge.

You like to work really hard
The final attribute I’ll talk about is your work ethic. If you want to build a successful business you have to have the capacity to work very, very hard. You will often hear people say that it’s not about working harder; it’s about working smarter. That mindset is great for employees that have well defined jobs but fails when it comes to a person starting a business. You have to work smarter AND harder because there is so much to do.

If you are a clock-punching kind of person then clearly you should not be starting a business.

Do you have it in you?
I tried to keep my perspective and advice as general as I could so if you were thinking of starting virtually any kind of business this would apply. In future articles I will get a little more specific to Internet and software based businesses.

I hope you enjoyed reading this as much as I enjoyed writing it.

Copyright © 2008, David Alison. All rights reserved.

Startup 101: Getting through the tough times

"What comes first - Success or Confidence?"

--Marty Schottenheimer

Marty Schottenheimer, the coach of the Washington Redskins back in 2001, started the season 0-5. When trying to explain what was happening with the team, he asked the rhetorical question above to reporters grilling him.

Back in June of 2000 my partners and I had finally pulled it off: we got an initial round of angel funding that would allow us to make WebSurveyor a real business.  Now we could start to hire employees, get some office space and start paying ourselves! It was a heady time - we were running at full speed, buying used furniture, setting up a spacious 1,000 sf office space that would ultimately house 14 people (yeah, it was really tight in there), buying a cheapo phone system, etc. By the end of August we were in our new customized office space, had a handful of employees and were watching our sales take off!

Reality started to hit us two months later. Sure, our sales were growing at a decent pace, just not nearly as quickly as we needed to so that we could at least break even. The market had just tanked, the Dot Bomb explosion was going off everywhere and we needed to make payroll. I'll never forget that night in late October of 2000. My partners Tom Lueker and Bruce Mancinelli were at the office with me at about 10pm on a Tuesday night, trying to figure out how we could possibly make payroll the following week. Up to that point in time we were so consumed with getting our facilities up and running and our new people on board I hadn't even thought about how tight we were running our ship. That night the reality of our situation hit me like a ton of bricks. It's now over 7 years later and I can still remember that feeling, like a heavy weight crushing down on me.

Before we took on the funding I had been doing contract development work. Well, all of the contracts had dried up just as I put myself on the payroll of WebSurveyor so for me there was no turning back. We simply had to figure out a way to make this work.

Somehow we managed to get just enough sales in the door and we were able to make payroll that month. We pushed off bills until the last possible moment and, when it seemed that it was the darkest time for our little company Bruce managed to get us a bridge loan from Beacon Ventures. It literally came at the last possible hour.

There would be other challenging times ahead for about a year after that. We rode a constant roller coaster that would bring us fantastic highs and depressing lows, though I think that night in October was a seminal moment because it was so painful to go through, yet somehow we managed to get through it. With that small success came a small dose of confidence.

I believe that success comes from two primary things: doing something you love to do and the liberal application of focused work. When I was building up WebSurveyor my passion was building software that people really enjoyed using. If it made them productive and happy and that feedback reached me it was like a powerful narcotic - I loved that feeling.

I also loved the feeling of running my own company. I had been yanked around by the companies I had worked for in the past far too much to turn the control of my career over to someone else again. That was also a huge driver for me personally.

I believe that was the key to getting through the tough times. I always knew that the product we were building was the best on the market. All we needed to do was stick with it long enough to get that momentum. I'm just grateful that we didn't give up when it looked tough - we just kept our focus and had a fundamental belief that we were doing the right thing.

If you have entertained the thought of starting your own business it must be by doing something you really love. I have met several would be entrepreneurs that fantasize an IPO or sale and believe that is the fuel that will drive them. You can see it when they talk about their business plans and see the sparkle in their eyes when they describe the equity event - they are far more excited about that than anything else. I believe that kind of thinking leads to compromised ethics and poor attitudes towards customers and employees.

If you do something you are genuinely passionate about it will build the confidence you need to be successful. In my view passion and commitment lead to confidence, which then leads to success. 

There's your answer Marty!

Startup 101: Quitting the day job

I mentioned before that I wanted to write about starting up a company and figured this would be a good time to do it. Moving forward I'll put Startup 101 in the title of these posts so that readers that come for my Mac experience won't have to sift through these if they don't want to. My hope though is that everyone can gain some value from this; if not for specific advice on how to build a company from scratch but for the stories that come from those experiences.

Don't worry - I will keep writing about Mac too!

Getting Started

In September of 1997 I decided that I wanted to create something that would leverage the internet. The Dot Com era was really starting to take off and with the internet I saw a tremendous opportunity to create rich Windows based applications that would leverage the power of a common network accessible by anyone.

By day I was a mild mannered User Interface Architect, responsible for developing user interface concepts and models for the technology division of a large publishing empire. I made a good living, worked on some neat technology and was well regarded by my superiors. But by night I was an obsessed workaholic Entrepreneur, trying to come up with a cool idea upon which I could build a business.

The idea I came up with was to build a tool for creating web based surveys. I wanted something that was really simple and easy to use. I cast about for a name and finally settled on WebSurveyor. The tool would allow people to create and publish a survey on the web, then collect and analyze the results. I wanted to make it so that anyone inside a company could do this, not just techies or the IT department. 

From September 1997 until June 1998 I worked nights and weekends building WebSurveyor, often putting in 40-50 hours beyond the 40 I was putting in with the day job. It was painful at times, but usually I enjoyed it and it didn't seem like work.

In June of 1998 I formally launched the product. I had no idea how to market it and I fumbled around, trying to get Yahoo to place it properly in their directory and promote it on certain web sites. Marketing products on the internet in 1998 was hardly a science; it was still the wild west.

I slowly started to grow the business and by September of 1998 I was ready to quit my day job and focus more time on WebSurveyor. Not that WebSurveyor was generating a lot of revenue - I was selling it as shareware at the time. You tried it and if you liked it you would pay me $149 and I'd send you a registration code. By September of 1998 my income was barely over $1200 / month in sales.

At the time I was 35 years old, had a wife that stayed home with my three young kids, a mortgage and car payment, hardly any savings and nearly $19K in credit card debt. Just thinking about my financial situation put my heart in the target aerobic range , which was good since I didn't have time to exercise.

In order to make ends meet I decided to do contract software development gigs. A couple of good friends had started a technology consulting firm and offered me a contract job for 3 months. With that thin rope firmly attached to my waist I leapt out of regular paychecks and job security and into the gaping maw of self employment.

Taking on a Partner

By the beginning of 1999 my business had started to look like it could go somewhere. I was generating close to $3K a month in revenue - a nice boost from just a couple of months earlier. I couldn't make a living off it yet and was still dependent on my contract software work but I figured that if I could just get someone to focus on marketing the product it could get really big.

I met the guy that would become a good friend and partner - Tom Lueker - through a technology networking event. We hit it off and after just a month I realized that Tom was about as driven as I was, if not more so. Tom had some success before and could work for a while without being paid so he joined me as Chief Marketing Officer and I gave up a pretty size-able portion of the company in return for Tom coming on board. 

Tom had a very different approach to WebSurveyor than I did - while I was focused on building a software company, he recognized that what we really needed to do was give the software away free and provide the back-end services to host people's surveys for them. At first I resisted but after many a late night argument decided that it was worth a shot. I spent the next couple of months changing WebSurveyor to use only our servers and built a back end administration system. I used what little money we made in acquiring hosting equipment and in July of 1999 we launched WebSurveyor 2.0.

We stopped selling WebSurveyor 1.0 - the software version - a couple of months earlier. By the end of our first month with the new model we tallied up our results. We had made $211. Let me spell that out: Two Hundred Eleven Dollars and no cents.  I was beginning to think we had made a mistake.

We stuck it out though, trying to figure out what people wanted, learning how to sell it better, tracking web site visitors and seeing where they fell off, etc.  By the end of 1999 we were back to where we were at the beginning of the year, though we were ramping much faster.

Going in to 2000 we still were not generating enough revenue to pay ourselves - Tom was taking a tiny salary since he didn't have any other income and was living off savings. I was entirely dependent on my contract software work. The rest of the money went right back into the business.

Adding another Partner

We knew we wanted to expand the business and to do that we needed money. Then I could devote all my energy into WebSurveyor, both Tom and I could get a paycheck and we would have the money to build up a sales team to take the product to the next level.

A friend introduced us to Bruce Mancinelli and both Tom and I knew we had found the guy that could get us to the next level. Bruce had lots of C-level experience, had run companies before and knew the investment community pretty well. Most importantly, Bruce was willing to work without a salary until we were able to land some funding.

I gave up my CEO title to Bruce and became the CTO. Bruce immediately set about getting us in front of venture firms and within a couple of months had landed us a meeting with the Capital Investors Group, which gave us an angel round of funding to get us moving.

The three of us set about building up the company as quickly as we could. Little did we know that our challenges were just beginning.

Up next: Getting through the tough times.