SALES AND NEGOTIATION

WHY IT IS NEEDED

Sales is one of the hardest and most important jobs for startups. Your product is still being built and improved, the team is new, you have few customer references and low budget. And in some cases you might even be not quite sure how well the rest of the team is going to to deliver what you are selling once you close a deal. Therefore having the right sales strategy and skills can make or break your startup.

If you want to be the best at sales, you have to mentally and emotionally prepare. The reality is products don’t sell themselves. No matter how great your product is, or how much your potential client needs your product or service, you have to be prepared for tough sales calls and meetings. Thats the reality.

1. Prepare yourself menatly and emotionally

If you’re going to be spending a lot of time calling, knocking on doors or otherwise reaching out to potential clients, you need to prepare yourself for what’s coming your way. That’s part of the reality of being a salesperson, or even an entrepreneur focused on selling. What you’re selling isn’t going to be perfect for everyone – regardless of what you may think. So, before engaging into sales activity, you nee to build confidence – it will be your strongest asset.

  • Seriousely prepare for meetings. Before the meeting starts, you must know why the potential customer is willing to take a risk on you and your company. Come up with at least three theories and run them by your team the week before. Try to figure out what the bigest objections will be and craft your answers to those objections.
  • Quick „NO” is the second best answer. You will be rejected. There’s no way around that. No one has a 100% close ratio. Yes, it hurts and looks like there’s nothing good about getting rejected on a deal quickly. But it’s better than taking too long to get rejected. If you can’t push the needle towards a positive decision, you can at least respect those potential customers who decide quickly, and provide you a honest feedback, that could be used to improve your sales process or even the product itself.
  • Even if it’s no, it’s better to know. Sometimes, prospects are only claiming they need to think about it or discuss it with other people. Might be they’ve already decided not to buy, but just don’t want to break your spirit by telling directly into your face. So how do you stop the cycle of endless calls to see whether they’ve decided? Change the question. Don’t ask people simply whether they have a decision. Instead, ask something like: “Can you see yourself making this purchase within the next month?”
  • Don’t try to convince. This seems counterintuitive, but it’s essential. If you go into sales thinking that you need to “make” people buy, you’ll fail. Instead, get to know your customers – companies and people who represent them. Your tasks is to understand their situation and needs. Focus on them, first and foremost. Your product or service comes second.
  • Be direct about next steps. If someone is seriously considering a buy, you need to get structured about making it happen. As for instance, a prospect might need to bring the offer to other people in the organization. So they might say something like “let us think about it and then get back to you”. Don’t leave it there – try to find out what else they might want to know, what concerns they might have and when you should plan to reach them once again.

 

If you are working in business – to business market, start with five to ten target companies to focus on. Having too many options might be too confusing and there is a great chance to spread yourself too thin and don’t pay enough attention to each prospect. Once you’ve made some progress with those initial leads, you can expand your search and sales efforts.

2. Plan your sales pipeline

A sales pipeline is very practical concepot that helps you understand your sales process, increase your sales, and make you confident about your data. Therefore, a sales pipeline is extremely important for startups. Somebody might argue that there is a difference between sales pipeline and sales funnel, but generally, the idea is the same. Both reveal how close the potential customer is to becoming a real and even repeat customer. The sales pipeline usually defines steps to be taken by the seller, while the sales funnel concept looks at the steps to be taken by the buyer.

 

Most common stages of sales pipeline and funnel

Sales pipelineSales funnel
1.     Initial contact

2.     Qualification

3.     Meeting

4.     Proposal

5.     Close

1.     Website visitor

2.     Sign-up for trial or gift

3.     Login or download

4.     Active user

5.     Paying user

6.     Evangelist

 

A traditional business (where sales are mainly done by personal selling) would most likely use something similar to the standard sales pipeline stages. Each potential client has an attribute in the seller’s CRM (customer relationship management) database defining how hot (close to actual sales) the lead is. The sales manager’s task is to grow his client’s portfolio by a number of leads (potential clients) and their stage in the pipeline (move each client closer to actual sale as possible). By the way, you can and should use some kind of customer data base where you could collect information about your potential customers and your sales progress. You might want to try one of free online CRM systems like https://www.bitrix24.com, https://capsulecrm.com or https://www.insightly.com.


Example of standard sales pipeline

 

An online business where most of the sales are done with marketing automation tools more often focuses on the sales funnel instead of the sales pipeline. This concept illustrates the idea that every sale begins with a very large number of potential customers (for example, landing page visitors) and ends with a much smaller number of people who actually make a purchase. Stages might be different depending on the marketing strategy and business specifics, but the most common stages of a sales funnel are illustrated in the next figure.

Example of sales funnel

Choose which concept is closer to your situation: if you plan active personal sales, you should draw your estimated sales pipeline. If you plan to use various marketing channels and tools to bring customers to you, a sales funnel would be a more convenient choice. By the way, it would be wise to set up Google Analytics goals on your website for the significant stages of your sales funnel. This will provide you with meaningful insights and will help with your channel verification hypotheses. The fastest growing startups have been tracking and constantly improving the conversion rate of each sales pipeline or sales funnel stage. A few checkpoint examples are provided in table below. If you want to consistently improve your sales, you must raise and check the hypotheses related to your sales pipeline or funnel.

 

Physical and online channel checkpoint examples

Physical channel checkpoint examplesOnline checkpoint examples
ü  One of five potential clients will buy if they have a chance to talk to the CEO or a member of the board

ü  We can sell our product within a month after the first meeting

ü  Customers will use our service at least three times in six months

ü  An average order will be around $5,000

ü  One out of ten clients will actually recommend us to others

ü  At least 20% of website visitors will sign up

ü  More than 70% of signup visitors will log in to their account

ü  Average session duration will be 2.5 minutes per visit

ü  30% will become paying users after trial period

ü  Every new customer invites three friends who signup

 

 

3. Understand customer’s problem

Some businesses wait until their product is perfect before they do any marketing or awareness campaigning. For startups that can be a costly mistake. Many businesses expect to sell their product as soon as it’s ready. But if you are building an innovative product or service, how do you know you are building something your potential clients will happily buy?

Start by meeting potential clients to talk about problem and validate the size and scope of it, how often, when, what department, how they cope with it now. Client owns the problem, you own the solution. You do not pitch them the solution at this initial stage – you just verify that they acknowledge that they have the problem. If you are aware of LEAN startup methodology, you should know that talking to customers and validating the problem is the first step even before building the product. If you don’t know what problem your prodct solves and how meaningful this problem is for your customer, you should not be investing product development.

Another important step here is to talk about existing solutions and why customers do not use them. Your goal is to understand what is the blocker and whether it might be an obstcle for selling your product. If you find out that you are not ready in current situation (i.e., you’ve discovered that target customers have other problems and concerns that you could address, but you haven’t yet prepared for that), just say something like „I’m not sure you are ready for this. Let me come back when we have made more progress on that.” Your contact will always remember you and you’ll keep the door open.

Initially, if you don’t know how the rest of your start-up team is going to perform. Save your big contacts and the full power of your network until you know enough about customer problems you can solve and your team is prepared to deliver the solution.

4. Introduce solution and get feedback

Rather than presenting your solution as the sole solution to your potential customers’ problem, be honest with them about any risks associated with making the switch to your product or service. The reality is that there’s no opportunity without some measure of risk in business, so why try and paint a reality that isn’t true for your potential customers? That’s the direct way to failure. Instead, focus your sales strategy around proactively identifying the potential risks associated with using your solution, and provide measures and advice to minimize the risk. It will show your prospect you’re already familiar with the risks and oriented to help.

Since most people you’re selling to likely don’t possess a strong understanding of how your product works from a technical standpoint, your sales strategy needs to get them to trust you and your company. Build that trust by being completely honest, sharing both the good and the bad, sticking to your commitments and showing that you’ll be supporting them long after closing the sale.

Adam Ferrier’s made a notion that humans are ultimately motivated to take action by either pleasure or pain. Having that in mind you could use the PAS (Problem–Agitate-Solution) framework as the core of your sales strategy regardless of what type of product you’re selling. This sales strategy is defined by shaping all interactions with your potential clients around the context of identifying their biggest problems and positioning your product as the best possible solution to them (if indeed that’s true). PAS framework covers three stages:

  1. Problem: identify and clearly state the most important problem your product solves for the potential client. That’s why tprevious step we talked about was to understand customers problem.
  2. Agitate: highlight how dangerous the problem is and remind prospects about all the negative implications it can have. If you did the right job, by know you should not only know what are the bigest problems you target cients have, but also how painful and dangerous these problems are. This is important to know not only for new product or service development, but sales as well.
  3. Solution: position your product as the most suitable solution to their specific problem in particular situation. Definitelly this must be true! If you would like to find out more about how to create highly valuable offer you should check a chapter on value proposition in business development guidelines.

It’s important to note that the PAS framework isn’t about creating false problems or convincing people to buy overhyped products or services. The goal of this sales strategy is to help your prospect make their challenges more clear, which gives you the opportunity to agitate that problem, make a clear picture of how the situation can worsen and what would be different for their business if they could solve it. Then, if your product can really help solve the problem, you position it as the solution is the natural last step in this sales strategy.

 

For startups it’s vitally important to get feedback on their sales offer as soon as possible. First of all, it can help you validate that your solution is acceptable for your target market and prospects are ready to pay a certain price for this solution. That’s called a market fit. But you will definitely face different types of objections in any case, and you need to know how to handle them.

Essential objections – during your sales pitches you might find out, that your solution (product or service) doesn’t meet some criteria or reasonable expectations of your target customers and they won’t buy it. Don’t worry, stay focussed. Maybe something has changed in the market while you were developing your product. Maybe the problem you planned to solve became less important. Maybe new solution emerged in the market and yours became not as good as you initially planned. There can be many other reasons and your task is to find out the root cause of these objections. You, as a startup founder, will have to make decision if some major pivot is needed in your business model or even the product itself.

Other objections – you will get these objections even when your proposed solution will be ideal for target clients. It’s normal because:

  1. your prospects might not be aware of the problem they have and how complicated it can became; or they might not be familiar with your solution as good as you are – maybe they didn’t want to spend so much time to get to know your solution better. If this is the case, your task is to find the right way to approach prospects and implement PAS framework.
  2. In some case many companies use objections as part of their tactics to bargain the price or to get some other conditions better. The next step will help you to prepare for this.
  3. Of course there might be a bunch of other objections that are not related to understanding of the problem or your solution, and they are highlighted not for the purpose of negotiation. As for example, the person to whom you did your sales pitch is not a decision maker, maybe the prospect doesn’t have funds to purchase your solution right now, or maybe there are some other more important problems that you couldn’t know your prospect is dealing with.

 

 

Good or bad, you want to know what your prospects are saying and what objections they have for not taking your offer. You should even think one step further and foresee how you will get their feedback once they became your clients. If you don’t provide your clients with a possibility to complain or give you positive testimonials, it might look it look like their opinions don’t matter to you. Remember, even if furious customer comes to you, take it as a great opportunity to improve your product or marketing and sales communication.

5. Prepare for negotiation in advance

Potential clients will sometimes reach out and ask for a discount on your product before they take the time to try or use it at all. Instead of debating what size of discount you should or shouldn’t offer them, you need to refocus their attention on what really matters: your product and the value it delivers to them.

Most likely you will come up to three core reasons why you never want to negotiate pricing before someone has had a chance to at least try your product and determine that it’s a good fit:

  1. Negotiating on price versus value

People who ask you for discount before they have invested any time into using your product are usually trouble. This can often lead to winning a new customer that is going to expect you to give premium support, prioritize features based on their needs all while trying to pay you cents. If you start by giving them everything they ask for, don’t be surprised if they keep asking for more and more. Instead focus on value you provide, but not the lower price!

  1. Buying for the wrong reason 

If prospects can’t tell if your product is a good fit for them since they have never used it, your first priority should always be to help people discover that your product can really solve their problem before negotiating on the final price. Yes, discounting the product upfront might help you close some deals faster but will also lead to more cases when these clients ultimately discover that they shouldn’t have bought in at all and will ask you for refund or start spreading negative feedback. Therefore be aware of prospects that don’t want to do their homework upfront.

  1. You’re negotiating without leverage

The more time people invest in exploring and trying your product, the more attached they become and naturally the harder it is for them to acknowledge that they wasted so much time in vain. Therefore you always want to postpone the most complex parts of the sales negotiation till the end of the sales cycle. In such way you avoid too much upfront friction and ensure the right momentum as you move forward in the sales process.

 

It doesn’t matter if you’re just going to your first negotiation or if you are a seasoned sales professional, you still to likely loose objective sight during the process. As you lose your objectivity and willingness to walk away from the deal, you lose your ability to negotiate effectively. It’s psychological factor, but there is a very simple and effective solution to this problem – pair negotiations. 

Present the terms of the deal to someone in your team who has not been involved in the negotiation and has no personal stake in it. Do that during the final stages of negotiation to make sure your assistant has the proper distance to look at the deal with fresh eyes. Your assistant should be someone who you fully trust and who has critical thinking abilities. In a startup, you might want to bring in an engineer or programmer to fill this role (usually, engineers and programmers have systematic approach and are highly useful to spot important holes in the deal). You present the current terms and demands from the other party and ask for feedback. Almost always, the person whom you invited to be your assistant will push back hard on you. You might get question why your position is so weak and why you’re willing to give in so much to the other side. Yes, this can look very uncomfortable situation.

If you’re self-aware and you trust the person you’re pair negotiating with, this can be a very fruitful interaction that will highlight opportunities as well as weaknesses in your current position. Take it as a good checkup before sealing the final deal. It will help you avoid costly mistakes and take advantage of big opportunities before closing a great deal.

THE RESULTS

After reading this topic now you have understanding about:

  • how to prepare mentally and emotionally for sales process
  • what are most common stages of sales pipeline and sales funnel
  • what is PAS framework and how to implement it in your sales process
  • how to avoid negotiation traps when you are asked for a discount
  • how to use pair negotiation method before sealing the final deal

The point is, start-ups don’t have the luxury of being attached to any sort of process or routine. Always be testing and improving your sales process! Don’t be so married to your current sales process if it wastes your time and brings no result. If something isn’t working, change it because there is no “one fits all” solution in sales.