HomeKnow-How5 sales mistakes to avoid as an early-stage B2B startup

5 sales mistakes to avoid as an early-stage B2B startup

Many founders dedicate themselves to product development in the early stages of building a B2B startup, and may find it harder to gain sales traction.

Sales of course mean revenue and most importantly cash-flow, but they also signify that your product or service is on the right track and are a necessary signal for a young company. Along the way, though, there are a few generic mistakes that can (and should) be avoided, and no doubt identifying these key issues is a first step in the right direction.

So without further ado, here are 5 of the most important sales mistakes B2B founders should pay attention to:

Mistake #1: Delayed sales launch

Many founders focus on product development and try to gain competitive advantage relying on a sophisticated product. However, delaying the sales launch risks missing the opportunity to test the product in a real-life scenario. Early customers are the best sounding board and speed up the process of finding product-market-fit. Moreover, building a lead funnel and winning early customer attention will send strong positive signals to other prospects and stakeholders like employees and investors. For this, founders should start selling early on and avoid excuses like “we need to finish our product before talking to potential clients”.

Mistake #2: Wrong target group

When eventually kickstarting sales, B2B startups often target large corporations due to their deeper pockets and stronger brands. However, enterprises usually act very ponderously due to their complex hierarchies and tedious decision-making processes. The purchasing and integration processes take significantly longer to close, increasing sales efforts, (unpaid) consulting and onboarding time, as well as reducing the efficiency of the feedback loop.

Smaller customers, on the other hand, tend to be much more agile. Leaner organizations allow faster decision-making processes to sign and seal contracts. Once you’ve found your first customers it might make sense to rely on this client’s reference to target similar organizations: a more focused and agile target group can help you in your early days to win clients faster.

It can also be crucial to understand cultural and company-specific differences among your prospects. US companies for instance are usually much more efficient at making decisions compared to European enterprises where buying decisions are often more democratic, including more stakeholders involved. Understanding how buying decisions are operated among your target group is key to streamlining your sales efforts. Using a sales framework like BANT can help you make sure that you invest your limited resources in the right prospects.

Mistake #3: Thinking big bucks too early

Once the primary target group is defined and the first leads are identified, the product needs to be priced. The priority in an early sales strategy should be to win customers first and gain non-financial benefits like reputation and referrals, rather than hitting a few hot cash home runs early.

It’s key to aim for low monetary entry hurdles at first to build a solid customer base that understands the nascent stage of the product development while remaining very careful when it comes to unpaid pilots, proof of concepts or other services. Startups get easily exploited by large enterprises as cheap service provider in need of customers references.  What costs nothing is worth nothing.

So, make sure your customers have some skin in the game to align interests and increase the chances for success with your first clients. After a few wins, when the product and sales processes have been tested and improved with locked-in customers, you can start optimizing your pricing. Don’t be afraid to be bold: most early-stage startups underprice in the beginning – for good reasons – and are surprised how much they can charge if they test their limits. Large organizations operate on a totally different scale which means that the smallest improvements in a product can lead to significant efficiency gains, justifying prices that an early-stage founder perceives as high.

Furthermore, early-stage founders who usually operate with very limited resources prefer short-term contracts, over long-time commitments with service providers. Large organizations have another perspective and prefer predictability over flexibility, which means they are in favour of multi-year contracts with predictable costs. Long-term contracts are also favourable to startups as they allow better planning capability and cash-flow upfront charged frees. Ultimately you will strive to develop a flexible, value-based pricing model that allows you to exploit the individual surplus of each client.

Mistake #4: The wrong sales team

Putting sales in the hands of a dedicated sales manager is really a good idea – but not at day one. An experienced sales manager from a scale-up environment in a very early-stage company will most likely be inappropriate to start the business from scratch. Early-stage sales are very tactical and driven by the know-how, persistence, and persuasiveness of the founders: the CEO must be the first and best salesperson in the company.

Then an annual recurring revenue of €2 million – €3 million usually is the stage when successful B2B SaaS startups have found a replicable sales process and are ready to hire an experienced Head of Sales to structure and grow the sales team. Over time, new skills and processes will then be required and as investors we see business structures reinvent themselves when they reach 8-digit revenue levels.

Mistake #5: Neglecting after-sales

Making sure your first customer cases are a success is key as your first customers will be your lighthouses and references for new clients. Here are few basics to be considered:

  • Ensure enterprise readiness in terms of scalability, security, and compliance
  • Set up a Customer Success team that fully takes care of the customer from onboarding to system integration to after-sales
  • Guarantee a high level of integration capability and smooth interoperability
  • Create sufficient and easily accessible documentation for tech and business users
  • Provide consistent analytics to measure product benefits to help your customers justify their investment

Successful selling is an obstacle course and in the early days sometimes an art as much as a science. Avoiding these pitfalls certainly does not ensure hockey stick-like sales but offer a handy guide to maneuver the challenges of B2B sales, and help startups on their way to become a mature company that stands on its own two feet.

Thorben Rothe
Thorben Rothe
Thorben Rothe is a Partner at Iris Capital, acting as Head of Early Stage Germany in Berlin. He has been in venture capital since 2010. Prior to this, he worked for several startups.

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