Startup Sales Advice: Choose the Right Customers

Ask any enterprise software entrepreneur what his/her biggest challenge is and you will hear some variant of the following:

… sales … revenue … customers ….

My experience at 4 early stage (less than 40 employees) startups has taught me the value of choosing the right customers, especially the right initial customers.

While a startup usually does not have the luxury of “choosing” a customer (heck – any customer will do, right??), the following guidelines will help:

1. AVOID “OUTSOURCED DEVELOPMENT ORG”:  Avoid an overly demanding customer that essentially uses your organization as it’s outsourced development arm! One of my startups licensed our software to a major telecommunications carrier. Thereafter, 65% of my company’s effort went into supporting the customer, instead of using that valuable time/effort to develop additional capabilities that would have attracted more and less-resource-intensive customers. Keep in mind that “cost of sales” and “cost of support” are as important as “sales revenue.”

2. SEGMENT THE MARKET: In seeking your intial customers it may be tempting to cast a wide net and try to win any customer regardless of industry, company revenue etc. My experience has taught me that it is better to focus on a few industries and company sizes (e.g., financial services companies with revenue = $ 50MM – $250 MM etc.). Choose segments that are early adopters and need relatively less support. One benefit is that your sales team can leverage the experience gained from selling within the same segment.

3. SUCCESSFUL CUSTOMERS ARE YOUR BEST SALESPEOPLE: One of my companies learned this the hard way. We acquired quite a few customers but were unable to help the customers get tangible value from our software. As a result we did not have an adequate number of referenceable customers. In retrospect, had we limited the number of our initial customer wins and instead focused on helping our few customers become successful with our product, we would have acquired more customers later at a lower cost of sales.

Here is a 3-step mantra: choose wisely, choose few and make everyone successful!

What do you think?

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