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As CEO, Are You Investor-driven or Sales-driven?

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If you’re running a startup, then you must know if you’re a sales-driven CEO or an investor-driven CEO, and if you’re in-between, how in-between are you…

For real?

Unfortunately, starting a startup has become a fad nowadays. Driven by all the #BYOB hashtags on social media, everyone with a half-baked idea wants to run a startup, so they register a company, edit their Instagram account to CEO and get started.

Maybe they talk to potential clients about their idea, or develop a product and send it out to the market, receiving a paycheck or two in the process.

All of that is well and good.

Until they take a detour and start spending a majority of their time chasing any event where there’s the tiniest glimmer of hope that they could get funding. They start working on activities to serve their dream of bagging huge funding that will help bring in the beanbags and billiards table through the door.

If the startup is built around a tech product, thanike calças de treino billige matratzen meilleur lampe uv koaxialní kabel hornbach balmain carbone fragrantica brandon aiyuk jersey carhartt uk ipad 2019 hülle mit tastatur und stifthalter isolateur cloture electrique ruban checkerboard vans ochre callaway reva femme nike air max ivo black and white nike wiki archivador cajonera carpetas colgantes nike air max ivo black and white t means doing anything to increase the number of downloads and registered users to sell the story of exponential growth. It also means putting together a cool catchy website and high definition videos and posts on Facebook and Twitter to tell the story of how they’re changing the narrative in Africa and making the world a better place.

It’s supposed to work on a positive-feedback mechanism: The more the startup gets enough people to talk about how big they are, the bigger they become by attracting more business.

The problem is, the process of building a business does not work this way.

But that’s like putting the carriage in front of the horse.

Then unharnessing the horse and letting them run away.

At the end of the day what matters more than the number of subscribed or registered users on your product are the number of engaged users and churned users (the former tells you what you’re doing right, while the latter gives you an opportunity to discover what you’re doing wrong). Also, what matters more than cool websites is the actual work that is being done behind the website and how all of those metrics [user engagement/field work] translate to an increase in revenue.

We’ve mentioned in several posts (Link 1, Link 2, Link 3) that it has become the norm for founders to focus on investor-chasing activities. But that’s a bad strategy not only because it diffuses the founder’s focus but because it wastes a lot of the company’s money since a lot of investor in-person meetings happen on different countries/continents thus requiring flight tickets and accommodation.

Money the startup already doesn’t have enough of.

The alternate for you as a founder is to spend 80 % of your time with paying clients. Not just talking to them about how awesome your idea is, but actually proving that awesomeness by closing sales, signing contracts, delivering work and getting paid.

Given, it’s a slower process than trying to sell the idea of the company directly to investors, which is why many young founders drag their feet there. They erroneously think, “Let’s focus on getting the funding first, and then we’ll start to close deals later.”

First of all, it is true that actually being in the market trying to sell to clients one by one is no fun. It requires training your mind to face rejection with a positive attitude. It also means you wouldn’t be backing your Instagram’s CEO title with the right image — the fancy suit and offices. Instead, you would need to keep your burn low, and maybe live with your entire extended family for a while, listening to their barrage about how you need to get a real job like your cousin, Tim.

But being in the market selling is very important because it validates your idea by bringing in revenues. And the lack of revenues would signal that maybe you would need to rethink your product or service, which most founders are reluctant to do because it tends to tie up to their ego.

Also, the phrase, “Necessity is the mother of innovation,” exists for a reason. Having less resources sometimes pushes you to innovate in order to keep your burn rate low.

Setting up your entire survival strategy on fundraising can be likened to playing slots at a casino. It’s a short-term strategy that could work or not. The slower more certain strategy is to acquire clients, and deliver to them directly, then having them pay you for the product or service.

There is no denying that having enough financial capital is important for a business to survive — and it has been the nail on the coffins of far-too-many startups, especially in Africa, so I’m not saying to never seek funding. What I’m advising against is seeking it as a first option rather than a last option after self (or family)-funding or bootstrapping.

As much as there are millions of books on how to be an entrepreneur and run your own business, you can’t really learn the how until you do something, because there are millions of tiny nuances to selling and entrepreneurship that require continuous human interaction.

In the next post we will delve deeper into the topic of seeking investments if you’ve grown your business to the point where you absolutely need external funding following conversations with Tania Ngima, CEO of Demo Ventures, and Jason Musyoka from ViKtoria Ventures.

 

 

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Deconstructing the Local Angel Investment Cycle in Kenya (Part 2)

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Deconstructing the Local Angel Investment Cycle in Kenya (Part 2)

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In the last post, we went through the initial stages of the Investment Life Cycle that includes Screening, Due Diligence and Deal Structure. However, not unlike a marriage, the real work in an investor-entrepreneur relationship begins after signing the contract and popping the champagne. This blog post explores post-investment activities such as monitoring, value addition as well as exiting.

Monitoring

When it comes to monitoring, investors tend to exist on a spectrum that ranges from the ghost investor who is clueless about what’s happening — or not — at the startup they’ve invested in to the hovering investor who keeps a close eye on everything.ipad 2019 hülle mit tastatur und stifthalter jayden daniels jersey nike technical cross body bag handcitruspers nike air max 90 nike calças de treino tp link remote control nike daybreak uomo callaway reva femme táskafül bőr Purchase Florida state seminars jerseys, football, and various accessories for Florida state seminars kallax korkekiilto hylly blogspot scarpe eleganti senza lacci ciorapi compresivi pana la coapsa Purchase Iowa rugby uniforms, Iowa olive jerseys, Iowa rugby shoes, and other accessories

As an investor, it’s good practice to be informed about what’s happening within the startup, partly due to its high-risk nature, and partly because you might be required to make additional investments in the future. On top of that, you may also have tax reporting obligations related to your investment.

You also get a chance to formalize the monitoring process by serving on the startup’s board. Since the board is legally mandated to make strategic decisions, hire (or fire) the CEO, and put the stockholders’ interests ahead of an individual’s personal ones, that ensures that you’re always aware of what’s going on within the organization.

Value Addition

In additional to potential financial rewards, as an investor you get the chance to give back to society by mentoring the next generation of entrepreneurs. There’s also the joy of business creation without the headaches that come with daily operations. Through skill-sharing and the provision of networking opportunities, investors don’t just get a chance to grow their portfolio companies but also contribute to the entire startup ecosystem, as well as building their countries’ economies, thus causing what Steve Jobs would call, “a dent in the universe.”

Exits

When it comes to exiting a startup, Jason Musyoka from Viktoria Venture advises the investor to plan for it from the beginning and not treat it like an afterthought. Basil Peters, an experienced Canadian angel investor, provides the common rationale behind that advice in the book “Angel Investing,” by saying that a well-defined exit strategy would affect how the business runs.

Peters notes, “Businesses designed for sale at a […] sharp valuation increase will be purchased with an eye to their future growth and profitability, rather than their current earnings, or even revenues. They should thus be willing to take bigger risks, accept outside equity and debt capital, and swing for the fences, focusing on growth above all. In contrast, a business that the founder intends to own and manage for the long haul as a cash-generating sinecure should focus primarily on generating near-term profitability and avoiding debt, while retaining most or all of the equity in the founder’s hands.”

So what exit options do investors have in emerging economies?

As mentioned previously, unlike Silicon Valley, exiting into an IPO is a rare occurrence. Options that do exist for an investor however are as follows:

  • Strategic trade sale/corporate sale
  • Management buyout/sale back to the founder
  • Sale to financial/secondary buyer e.g. bigger Venture Capitalist or Private Equity
  • Self-liquidating instruments

There is also the unfortunate exit outcome of the startup going belly up and closing its doors for business, which — naturally — translates to a failed investment.

What Does African Exiting Landscape Look Like?

The Weetracker African Startups & VC Ecosystem Report that published the activities of the first half of 2018 showed 14 merger and acquisition (M & A) deals, with only 2 being mergers. This positively shows a nearly 3 fold increase compared with only 5 M & A deals during the first half of 2017.

While not entirely bleak, the current exit landscape still shows room for growth, which is what would happen if we encourage more venture builders rather than venture capitalist to enter our startup scene — which happens to be a topic for another day.

Co-written with Amina Islam

 

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From Leads to Clients

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From Leads to Clients

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Have you ever followed up on a lead for 8 months without closing a deal then realized not only will your lead not give you business but also that they cannot? As a salesperson, you want to maximize the number of leads you convert to clients using minimum resources. Many salespeople approach this by increasing the number of leads they have. However, they can waste fewer resources by focusing on quality leads rather than just more leads. This makes it really important to qualify your leads.

Superficially, someone can say qualifying a lead is about who you reach in the organization, what their role is and where they stand in the hierarchy of the organization. But qualifying leads is more of an art than a science, and it requires high levels of both emotional and social intelligence as well as a deeper understanding of human relationships and dynamics.

First of all, let’s discuss why it’s important to qualify a lead:

  • According to entrepreneur Steven Tulman, 67% of your lost sales come from sales reps not qualifying leads properly before going ahead with the rest of the sales process.
  • Qualifying a lead helps evaluate sales projections by estimating the size of expected business from the prospect, thus aids in the allocation of appropriate time and resources to the lead.

Even though qualifying leads would vary from one type of lead to another, having a general process helps streamline operations and leads to a bigger impact on your sales growth. So what are the ingredients of a good process?

  1. Build an Ideal Buyer Persona Profile. This can be as detailed as possible with imaginary — or not — names, ages, occupation. In the profile, answer the following questions:
  2. How does he find you?
  3. What are his pain points?
  4. What is his budget?
  5. What role does he play within his organization?
  6. What does he need to know prior to purchase?
  7. Why would he buy from you and not someone else?

Building a profile shouldn’t be an imaginary exercise especially if you’re already in business. All you have to do is call your best customers and find out the similarities between them. If you’re not in business yet, that information would come out of your product-market fit research.

  1. Understand how long the sales cycle is for the type of deal you’re trying to make in that particular industry- If you’re a salesperson who works across industries, you’ll need to understand that sales cycles vary depending on many factors such as the size of the company, whether it’s a startup or a traditional organization, whether there are many technical aspects in the deal that might require customizations, etc. In other words, just because following up might take 12 months, that doesn’t necessarily mean the deal won’t close eventually, as it could just mean there are many fine details that need to be agreed on.
  2. Know the difference between interest and intent. People who are only interested in buying will ask general questions about the company, but those with intent will ask specific questions related to your demo and pricing, information about maintenance, etc.
  3. Know how much your lead usually spends on solutions similar to yours. Understanding that not only helps you price your solution better but also helps you drop those for whom your product or service is too expensive.
  4. Most importantly, understand the true decision makers in the companies. Just because a person has a role or a job title doesn’t necessarily translate to them being able to influence the project. This is where social intelligence comes in as you’ll need to connect with many people within the organizations to understand where the true power really lies, and who makes all the decisions concerning budgets.

Ride the wave before it forms

Another thing to consider in the pre-qualification process is whether the demand for your product or service is established or emerging. This helps pre-empt qualified leads and get to them before your competition.

Most salespeople are familiar with Established Demand. It’s when customers have figured out what they need and how much they’ll pay for it. General attributes for Established Demand are as follows (Link Here):

  • Senior decision-maker involvement
  • Buying authority
  • Customer consensus
  • Approved budget
  • A clearly articulated need

Emerging Demand is one that is driven by some form of internal or external change. Internal drivers of organizational change could be ongoing poor commercial performance, senior leadership turnover etc. External drivers of change such as changes in legislation, technology or macro-economic trends usually impact multiple organizations at once thus widening your leads. For instance, Kenya’s ban on plastics brought about a demand for alternatives.

Once you’ve qualified your leads, the number of leads you have might be less but their quality would definitely go up so you could focus your resources on each one, naturally increasing your conversion rate.

Co-written with Amina Islam

 

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Frame Your Product As a Painkiller Not a Vitamin

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Frame Your Product As a Painkiller Not a Vitamin

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Pain is a powerful motivator.

It drives people to do anything in their power to stop it.

Now.

It’s very good to understand this while framing your product for sale because in some cases you need your potential customer to view it as a painkiller rather than a vitamin. It comes as no surprise that due to the complex and challenging nature of the market, customers’ expectations are rising. It’s getting harder to do business nowadays, and rise above the noise to convince customers to part with their hard-earned cash.

So when you frame your product like a vitamin that is nice to have and might get your customers benefits in the long term, you are more likely to face more rejections because they don’t find the delayed gratification enough reason for immediate purchase. However, when your product addresses short-term pains, then your probability of closing more sales increases.

For some products, the classification between painkillers and vitamins is easy. For example, productivity tools, and content aggregators tend to fall under the vitamin category, while products that help you satisfy a regulatory requirement or win sales.

However, if you’re unsure, how do you even know if the product you’re trying to sell is a painkiller or a vitamin?

  • Measure the length of your sales cycle — people and businesses with real pain push for short sales cycles
  • Take note of how your customer acquisition metrics. When you get more customers through referrals and inbound leads rather than outbound leads, chances are high you’re in the painkiller business.

But just because you see your product as a vitamin doesn’t mean that the customer shares that perspective. If you talk to enough customers and listen to them, you might realize there’s a pain your product is relieving you might not even be aware of. And listening to your customers doesn’t need to happen in person, but could be done by gathering stories around your product through customer service channels, and on social media.

Another thing to understand while selling is how context always matters when it comes to making a purchase. Sometimes how one product is perceived would depend solely on your customer, their needs and problems. Some might view your product as a vitamin while others might view it as a painkiller. To understand the context, you’ll need to do in-depth interviews with your current customers to understand a few basic things. For B2C customers, you would need clarity on what was happening for them to purchase your product? How does it tie in with any personal goals they might have? For B2B customers, how was the business performing, what was happening around them to make them reach out to your product?

This makes it necessary to have a clear understanding of who your user is, or defining your user profile, which is why there needs to be continuous alignment between sales and marketing departments. Some of the activities the two departments would need to align on are:

  • Persona Profile Development: Persona profile is a detailed description of your target customer, capturing everything from demographic information to hobbies, values, fears, goals, and challenges.
  • Brand Positioning and Messaging: Understanding how your brand is perceived internally and externally is crucial for your organization. Sales teams can help marketing teams identify gaps in brand consistency, and together they can address a plan to improve them.

But what if your product is a vitamin that can’t be framed into a painkiller in any way? There are some sales strategies you could use:

  • Talk money: At the end of the day, if you can make a case about how your product increases revenue or reduces cost, clients will be more willing to be sold on it.
  • Build Credibility: This is done through testimonials, case studies with real clients, focusing on the impact of your product. Because the timeline between the purchase and the value might be more extended for vitamins, the more real-life examples of the ‘ultimate’ value — even if delayed — would need to be communicated, for the clients to be able to make a decision now.

Last but not least, remember that sales is a numbers game. No sales call goes to waste. Even rejections can be seen as good market research as even if you do not close a deal with a lead, you still gain enough by listening to them to understand their perception of your product.

Co-written with Amina Islam

 

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