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Archive for the ‘sales’ tag

They Have Money. Can They Spend It?

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Most B2B entrepreneurs have a general sense of the ROI they would get by selling to any particular client. Sell your product to the government, for instance, and be prepared for years of investment and dedication before seeing any money. But once you’re in, your company has a client that is willing to pay very well for your work. If you were to sell to smaller organizations, you could likely get away with much shorter sales cycles — but there is a significantly tinier pot of money on the other end.

So there’s a direct relationship between the amount of money a client can spend and their difficulty in spending it. But it’s certainly not a perfect relationship, and I’ve seen the imperfections trap many entrepreneurs — including me. In fact, the relationship probably looks something like this:

Relationship between money to spend and purchasing process difficulty

When selling software or services, being below the line of best fit is critically important to keep yourself sane and your margins high. Go too far above the line and it’s unlikely that you can even make the business work — the cost of selling each unit will overwhelm the available revenue.

I learned much of this the hard way. My first company, GoCrossCampus, promoted campus-wide games through student governments. Another company I was involved in sold software to technology transfer offices within universities. For both of these businesses, the amount of bureaucratic red tape involved in the purchasing process was way out of proportion to the amount of money our clients were able to spend. University bureaucracies are notoriously budget-constrained, and student governments can rarely spend more than a few hundred bucks on any particular purchase.

While there are often fewer competitors in these difficult markets, I would caution any entrepreneurs against reading too much into the competitive landscape. Often, highly frictional organizations will stick with fundamentally inferior products (e.g., mainframe systems) rather than switching to any new solution — yours or your competitor’s. If there isn’t any competition because all the other firms have entered or left, that isn’t a good thing. In other words: when you see a graveyard, don’t play there.

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Written by Brad Hargreaves

September 11th, 2010 at 12:00 pm

Go Into Sales

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Let’s say you’re a college student who wants to be an entrepreneur. Let’s also say — for one reason or another — you don’t want to jump in and dedicate all your time to an idea right now. Maybe it’s money, maybe it’s confidence, maybe it’s the lack of available co-founders or some combination of the above. From what I’ve seen, most people in this situation do one of the following:

1. Join a big company and plan to do your startup later.

2. Join another startup as a non-founder.

3. Go to graduate school.

I have a different suggestion: go into sales. Take a commission-heavy sales job at a company that gives you the ability to source and manage your own leads with as much independence as possible. Find a larger company in your space of interest and just go learn to sell things there.

The ability to sell is the most underappreciated startup skill. In the get-bought-by-Google model, you just have to be able to code and (possibly) market a product. Ideally, you build something so awesome it just takes off by itself. Sadly, this rarely happens. Instead, almost all companies have to sell something at some point in their lives. And this isn’t a bad thing. It can keep your company (and you) independent of venture capitalists and other control-seeking investors. Having a fundamental understanding of the psychology of sales and the sales process can be the difference for your startup.

Also, sales isn’t IBD analyst-style slave labor. There’s literally no cap on the amount you can make, which means that you can potentially bring home a decent six figures a year if you’re really good — way more than most first- or second-year analysts in investment banks. The hours can also be ridiculously flexible; if you’d like, you can work hacker hours.

For whatever reason, sales jobs are off the radar of most Ivy League college graduates. Since a nice degree doesn’t mean anything in sales, little to no recruitment is done on campus. And Ivy League undergrads love to be recruited.

There’s no better training for being an entrepreneur than actually starting your own company. But if — for whatever reason — that’s not feasible, sales is an good and woefully underappreciated route.

Written by Brad Hargreaves

July 11th, 2010 at 9:07 am