What Entrepreneurs Get Wrong

For many entrepreneurs, the process of launching a company begins with the light-bulb moment when they conceive of a breakthrough idea for a new product or service. Very often, they are so passionate about the idea that they believe its merits will be self-evident to prospective customers that the innovation is so obviously superior it will sell itself. Entrepreneurs who avoid that delusion may think of their initial sales as a chicken-and-egg problem: They realize that getting buy-in from potential customers is a top priority, but until they design and build the product (which often requires securing funding, assembling a team, and many other tasks), how could they possibly make a sales call?

But we never know why relatives are buying from us—often their motivation is love, pity, or a sense of obligation,not compelling product quality

Entrepreneurs fails to understand the fact why relatives and friends does that !!

The article examine the common mistakes entrepreneurs cites most frequently, explore the objections they faced when they began making sales calls and present and alternative sales model uniquely suited to a start-up’s circumstance.

  • Starting Late
    More than half of the entrepreneurs fully develops their products before getting feedback from potential buyers. In hindsight, most viewed this as a mistake, echoing one of the mantras of Eric Ries’s “lean start-up” philosophy: Get in front of prospects from day one. Entrepreneur would learn more from talking to five customers than going hours of market research at a computer. The goal should be to gauge customer reaction to the general concept in planning. “Don’t make anything until you sell it,” advised one entrepreneur. Get people really interested in buying it before you invest too much time and effort.

  • Failing to listen.
    Research suggest that even founders who started selling early would be focused on convincing prospects of the new product’s merits and not concerned enough with finding out what prospects thought of the idea. Some entrepreneurs realized that their passion and ego made them respond negatively to criticism and discount ideas for changes that they later saw would have increased the marketability of their offerings. “Listen to the feedback from the customers and reshape your idea and your product to fit what they actually want,”.It’s really all about understanding what the pain point is in the marketplace, and the best way to do that is to talk to prospects and validate, validate, validate your idea.

  • Offering discounts.
    Faced with pressure from themselves or their Ventures to make early sales, many founders offered price discounts in order to close initial deals often establishing unsustainable pricing precedents with those customers. Worse yet, news of the discounts spread around small industries, crippling the ventures’ long-term pricing power. In retrospect, the entrepreneurs wished they had found alternative sweeteners to close early deals—free shipping, say, or a discount on orders placed before a certain date.

  • Selling to family and friends.
    Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But we never know why relatives are buying from us—often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’s length transactions with customers who would have given them candid feedback.

  • Failing to seek strategic buyers.
    For cash strapped entrepreneurs with no sales record, the thrill of getting the first “yes” can blind them to other considerations. Can this customer open new doors or provide referrals? Can the customer sup- ply usage data that could make my value proposition more compelling? Some of the founders we interviewed wished they had conducted a strategic assessment of their first buyers. Others chose their first clients deliberately in order to get feedback, perform beta testing, get referrals, or guarantee repeat business. These strategic first sales often led to long- term success.

Fig: An Entrepreneur-friendly Sales Model

Sorry, You’re too Small
As entrepreneurs looks back on their nascent sales efforts, they describes a long series of hurdles. Many have problems developing lists of prospects. Once they identifies likely targets, they faces obstacles in getting past gatekeepers or securing appointments. This is especially problematic in Latin America and Africa, where most people won’t pick up the telephone if they don’t recognize the number displayed. In those situations, founders needed to find acquaintances who could make referrals simply to secure an appointment. Some entrepreneurs describes difficulty articulating precisely what made their product or service different from the alternatives. The biggest problem with the actual mechanics of selling, however, are handling the objections of potential customers.

Following are the categories of objections entrepreneurs faces

1. Efficacy: Potential customers are consistently skeptical about the ability of new products to deliver on their value propositions. Some entrepreneurs could show results from beta tests or independent lab results, but that wasn’t possible for all products and services. In those cases, offering samples or free trials often proved effective.

2. Credibility: Prospects also expresses doubt about a new company on the basis of the founder’s age, gender, personal background, or experience level. Founders with relevant experience high- lighted that; those who lacked it touted partners or board members with solid industry reputations.

3. Size: How do you make the prospect comfortable with the fact that your company is small?” There is no easy answer. Many founders highlights a key benefit of their company’s size: the fact that customers were dealing with the CEO instead of a sales rep. For companies selling physical products, quality and value helped dispel concerns.

4. Price: Salespeople from established businesses often has complaints about price, of course, but start-ups have bigger problem since their prospects are especially likely to push back on pricing as they knows the entrepreneurs are eager to make early sales. In fact, several prospects states directly that they expects significant price cuts for becoming early users. Some entrepreneurs walked away from those deals, some pushes their limits.

5. Switching costs. To adopt a new product or service, prospects might need to modify their routines, procedures, systems, or internal or external relation- ships. Making such modifications to switch to a new, untested offering can seem especially costly, but buyers do not always verbalize these concerns.

Fig: A Sales Framework for Start-ups

Start-ups faces many challenges, and entrepreneurs must wear many hats during the process of launching a company. It’s no surprise that they often postpone selling (or otherwise engaging with customers) until they’ve already created and begun producing their offerings. The research demonstrates, however, that early customer feedback is essential and that founders who fail to consult with customers soon after the lightbulb moment will ultimately come to regret it.

Article : HBR What Entrepreneurs Get Wrong !!

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