How to combat the notoriously long sales cycle of your enterprise clients.
By Ivar Wiersma, Head of Venture Development at R3
I’ve spent the past 6 years working with more than 100 start-ups. As a coach, investor, board member and venture builder, I’ve worked with teams extensively to help them sell, raise funding, build their products, define their go to market strategy or form industry consortia. One thing these start-ups have in common is that they sell their products to large enterprises. The sales cycle for these large companies is notoriously long and can be a death-trap for the unprepared start-up. It’s easy to run out of money before the endless string of proof of concepts and pilots is converted into your first sales contract. A thorough understanding of your audience can significantly reduce your sales cycle — and can tip the balance from failure to success. Here’s what I’ve learned.
1. Know who’s problem your solving
This sounds simple: if you don’t know what problem you’re solving, it’s impossible to come up with a good solution. Similarly, you need to understand who owns that problem and who feels the pain of the problem. What alternatives is she using today? And what happens if you help her with a better solution? What is her drive? A Persona canvas is a simple tool to get under the skin of your main stakeholder and better understand and visualize her behavior. While this is bread and butter for every service designer and common work in consumer-focused start-ups, for many b2b start-ups this is still an alien concept. A logical explanation is that many founders have lived through the problem themselves for several years before addressing it and assume that their future customers feel and act the same as they did. While this may be the case, the persona canvas helps you to focus and articulate this behavior and is even helpful to align with your co-founders or team members that have not experienced the problem you’re solving before.
At R3, we’re helping blockchain start-ups to reach product market fit and for these companies, knowing whose problem to solve also plays at the company level. As argued by our CTO Richard Gendal Brown, the true opportunity of blockchain is to make entire markets more efficient as companies in a value chain now can safely and securely transact with each other acting from one single source of truth. But while that opportunity is massive, it also poses an additional challenge of knowing where to begin. In b2b scenarios, switching costs are high due to complex decision-making processes and costly change efforts across large organizations. This means that no organization will switch for a 10% cost reduction or efficiency gain. Making entire markets more efficient also starts with solving a real pain-point and that is where you should focus as an early stage company.
2. Understand the decision-making process
It’s not enough to understand your main stakeholder and sponsor in the company. The enterprise buying process is complex and can have many layers. There are influencers, nay-sayers, procurement officers, compliance departments and budget holders. So you need to go beyond your key customer and map the stakeholder environment. This simple diagram can be used to map the different influencers visually. Describing who has more influence in the decision-making process, if that influence is likely to be positive or negative and what drives these persona’s will greatly help you to navigate the organization and direct your focus on those persons who matter. This can significantly reduce you sales cycle and improve your conversion ratio.
And it’s often the person you did not consider that kills a project. In my experience, teams rarely have a full overview of stakeholders that influence a buying decision. The tip here is a simple as it is effective — ask your key customer. If she is really interested in your product, she will gladly help to map the stakeholder environment with you as it will improve the probability of success. And every minute you spend on it together will get her more committed to bringing your solution into the firm.
3. Quantify your impact
Enterprise decisions are made on business cases. There are always trade-offs to make and where single consumers can decide to purchase out of emotion, enterprise processes are designed to take the emotions out of the decision. Initial enthusiasm can be killed quickly when more senior managers start asking questions of financial nature. Impact on other roadmaps, planning, implementation time and operational risk — all factors come into play before you will get the eventual “yes”.
You can improve your chances of success by anticipating these questions and formulating the business case with them in mind. Again, working together with your key customer and stakeholders will help you to get the information required to position your solution and it will further strengthen their commitment, so this is time well spent. Be careful not to take ownership of the entire business case though. That will take too much of your time but will also confuse people inside the buying organization. The skeptics will assume the process is rigged and the assumptions of the business case are flawed no matter what you do. You will give them the ammunition to kill your pitch. The key is to work enough with your key sponsor for her to successfully present a good business case. It’s your job to make someone else shine so you can reap the benefits.
4. Know where to spend your time
This all seems time consuming and it is. Sales cycles to banks or insurance companies can easily take 12 months if you don’t apply the techniques described here. Large enterprises love proof-of-concepts and pilots and if you’re not careful, you can spend all your time and runway executing them without ever striking your first real contract. So, it is important to know where to spend your time. When your company gets the first interest from the market, you may feel urged to chase every lead. You can’t. You need to dig in, understand your customer and map the stakeholders and increase their commitment by building relationships. In addition, you need to develop your product, raise funding etc., etc. The list never ends. You also can’t calculate a complete business case for all prospects, there is just not enough data to make good predictions. What’s more important — you are wasting valuable time.
The only thing you need to do is prioritize among the opportunities you have at that moment. If you have 10 prospects knocking on your door to run a pilot and you can only execute 2, it’s your job to find out which 2 from those 10. A forced ranking among the 10 candidates across some simple axes will do the trick. Speed may be more important than monetary value or stickiness. Perhaps you have quick access to decision makers in one firm, and not in the other. The point is that only the priority subjective to the other potential candidates matter, not the nominal value assigned to them. This exercise should not cost you more than 90 mins.
Want to learn more? R3’s Venture Development team is dedicated to helping startups accelerate and cultivate their blockchain applications that sit at the edge of adoption. Visit r3.com/venture-development and fill out the contact form to learn more about Corda Launchpad or one of our other accelerator programs.
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March 20, 2020
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