Exclusivity

This is more of a continuing series of tips for B2B startups that are trying to develop pilot projects.

Often, organizations want to be early adopters of key technologies and solutions to get ahead of their competition. This actually needs to be one of your key selling points. But be careful not to get trapped into any type of exclusivity agreement that locks you into that major deal and thereby effectively shuts down your overall go-to-market strategy.

So how do you get around exclusivity?

First avoid it. Make the case that it will kill future market opportunities and makes the survivability of your business very low. Focus on shared opportunities, first-to-market capabilities, and perhaps creating a custom version of your offering that won’t be like what you may eventual sell to their competitors.

Second, if you are being pressed hard and want to get the deal done, then try to severely limit the scope on the basis of geography, time (e.g. six months), industry scope, and other factors that reduce the scope of the exclusivity.

Third, if you can’t negotiate something reasonable then consider walking away. It may not be worth your effort to get locked into something that will harm your startup and make you uninvestible. Investors will see that deal and know that you’re not a company that they can put their money into as you’ve limited  your growth opportunities.

Always read any contract presented to you and make sure that you don’t exclude yourself from your market with unnecessary and cumbersome exclusivity language.  

Pricing your Pilot Project

This is more of a continuing series of tips for B2B startups that are trying to develop pilot projects.

The issue of “What should I charge for a pilot?” is one that comes up frequently for startups. What’s particularly challenging about this is that a startup may not even yet understand its business model, its revenue structure, its cost model or other attributes that will help it eventually determine whether it can be a profitable entity.

So how do you price a pilot project? 

One approach is to think in terms of “value exchange”. That is, what value are you receiving back from the customer that is going to assist you in determining product and services viability along with feedback on your business model. With this approach, you can offer a substantial discount because of the tangible and intangible benefits you are receiving from the pilot project. You are asking the customer to spend considerable time on a new product, to try things that may not work, to live with the frequent changes that you’ll be making, etc. With the value exchange approach, you can compensate them in some way for their time and effort by giving them a discount.

It’s difficult to put a one-size-fits-all model around this so one way is to diagram it out and put a price on the activity/feature they are receiving and then to guesstimate how much value you are receiving back in terms of feedback, testing, dealing with bugs, etc. Here’s a simple way to map it: 

Your product and services

Your list price to customer 

Value receiving from customer

Your net price to customer

Product 

$1000

$1000

$0

Implementation services 

$3000

$1000

$2000

Net cost

$4000

$2000

$2000

This gives you a framework to at least consider how you might move forward with coming up with an agreeable price and something that provides more than just an “out of thin air” price. With this approach, you can be transparent with your pilot project customer and show them that you appreciate the value you are receiving back from them and how they are contributing to the overall project.

Finally, for SAAS business models, you may want to put a time limit on the discount but still considering giving the customer a long-term (or even lifelong) discount because of their early adopter status. This can help keep them engaged for the long-term and create a strong partnerships that benefits both parties. 

Getting legal

Every startup that will be entering a formal agreement with another organization must have legal representation. What’s critical at this stage of your existence is that you have a lawyer that recognizes the financial constraints of early stage startups, understands the concept of relative risk (that is, risks you may have relative to your financial ability to completely mitigate those risks) and is willing to allow you to do as much legwork as possible in order to reduce costs and to get to a fast end-result. You want a lawyer that recognizes you’re not a small version of a big company and that you currently don’t have the financial resources and people resources that you (hopefully!) will have someday.

Know, however, that lawyers are like any other business in that they are working to make money for themselves and their firm. You should work to find firms that may offer discounts or offer predetermined amount of hours for a specific dollar amount. Another approach is to look for law firms that allow their partners to offer pro-bono (free) services with one client a year. You can also leverage law clinics offered by universities that have law schools. These programs provide free services with the work performed by law students but supervised by credentialed attorneys. 

Beyond helping you with basic transactions such as company formation and contracts, your lawyer should also be your strategic partner. This is why you don’t want a lawyer with no experience in working with startups. You want someone who knows your market, knows the investment scene, knows the value of your solution and knows what’s most important when putting together a deal. The best lawyers are the ones that are focused on helping you grow, as your growth means more work for them in the future. 

Choosing your attorney is one of the most important early decisions that you will make. While you don’t need a lawyer to do everything and there may be some things you can do yourself, make sure you have your lawyer do the hard stuff that requires their knowledge and experience.

Finding ideal candidates for pilot projects

This is more of a continuing series of tips for B2B startups that are trying to develop pilot projects.

Not all organizations are created equally. Some are new, some are old. Some are big, some are small. Some are conservative in their approach to business, some are more experimental. One of the best reference points for this is Moore’s technology adoption lifecycle which indicates that organizations are on a continuum.

With this theory, some organizations are early adopters and will experiment while others are later adopters who won’t try something until everyone else has. Note that this is not equally applied the same in any organization. Some units within the same organization may have more flexibility and be earlier (or later) adopters than other units. Consider divisions, geographic regions and even smaller units such as departments and then assess them independently. Additionally, some large companies have innovation departments that may be open to listening to you just purely out of their curiosity and openness to new ideas which could lead to interesting opportunities. 

You also will want to consider the overall health of the company. It is very important to find out if company is struggling financially, potentially making their buying decisions a struggle unless your solution is focused on saving them money in the short-term. They will have much bigger issues to deal with during a time of struggle so consider your timing and research your potential client before spinning your wheels on trying to get a pilot project that will be better run another time.

Do your research and don’t make assumptions about which organizations you think are ideal candidate for your pilot project. 

What do you want them to do?

This is more of a continuing series of tips for B2B startups that are trying to develop pilot projects.

A pilot project has some noticeable differences from the more standard sales and implementation processes you’ll encounter once you’re out of startup mode. In particular, as a startup, you are asking your pilot customers to engage very highly with you on the overall pilot program objectives, sales process, implementation process, critical assumptions, and use results.

Unlike a traditional sales approach, selling the value of a pilot project has some unique aspects. While you need to sell your value proposition, you want to be upfront and honest about the fact that this is a pilot and that you’re looking to establish mutually agreeable pilot program objectives in order to validate a number of assumptions. Your customer is likely getting into this with you because they want to be early adopters yet they still must have some solid business reasons for doing this with you. It essentially comes down to agreeing on “shared risk”.

You also want to get feedback on your sales process. Don’t underestimate the value of this as you are learning a substantial amount about your future. Potential ways of getting feedback include

  • Interviews with management
  • Interviews with users
  • Surveys
  • Online chat / Slack / Trello

Once everything is agreed to (see more later about contracts and deal terms) you then start the implementation process. Again, this is another significant learning opportunity for you. Get feedback on what works and what doesn’t. Find out what’s confusing to the customer. Find out what else they can do to better get up and running. These are critical learning points for you.

You also want to have a solid plan for evaluating use results. Don’t be afraid of bad news and learning about what the customer truly finds valuable (or not!)

Final point: you likely want to have multiple pilot projects going in order to have multiple data points. Many startups make the mistake of assuming their first pilot or two are the models for everything. Unfortunately that’s usually not the case. Remember that you are validating your entire approach to the market and not all customers are created equally. You may have some luck with very early adopters but as you move beyond them then you need to continually evaluate your situation and ensure that what you are building, selling and implementing truly has product-market fit. 

Finding your way

This is more of a continuing series of tips for B2B startups that are trying to develop pilot projects.

A big question for B2B startups is, “how do you find your way into an organization?”

This topic brings up a wide range of considerations such as who is the person most interested in your solution, where are they in the management hierarchy, what decision making authority do they have as it relates to your solution, and what budget (if any) have they allocated for it. These questions are only scratching the surface as in later posts you’ll see that we get into process issues in the organization including legal sign-offs and procurement processes. A most critical consideration in the short-term, however, is finding your key supporter (often called “sponsor”) who will help you shepherd this project through the organization and will help you to find others that you will need to secure the deal and then even others who will ultimately implement and support it.

But words of caution: it’s very important to think like the customer and consider things such as individual reputation, budget, capability, capacity, among others. Who is going to bat to you and what is their motivation? What happens if your sponsor leaves the organization? Is your solution something they urgently need or are they lying to you to be nice and just dragging you along until they wear you out? 

Sometimes it may be beneficial to reach out to the CEO or someone else in upper management. They may not respond to you directly but there is a chance that they will redirect you to the right person and that person will feel obligated to help you. However, this too can backfire. The person directed to help you may not be interested in what you are doing, and they can feel threatened or under undue pressure because upper management asked for this favor. 

Even worse, consider the people in the organization with influence who may want to shut down your idea even if others are on board. You may also need to consider that you have a “sponsor” in the company for your solution but there could be another “sponsor” for a competing solution.

Regardless, start by finding your sponsor and then diligently map out all the key players who you need to get your pilot project underway.

Sales Tips for B2B Startups (yeah it matters)

My friend, Todd Cohen, is famous for saying that “everyone’s in sales.” And he’s right. As a founder or co-founder, you are the lead salesperson in the company. Entrepreneurs sometimes think that sales is someone else’s job, but it isn’t. It’s yours. This is especially true for people who are not technical co-founders; most of what you must do is sales and customer development.

B2B pilot projects become great vehicles to not only prove out your technical elements and core value proposition of your startup but they become great ways to better understand what you’ll be facing when it comes to selling at scale someday. Remember all the pain, delays, issues, and more that you faced when trying to get your pilot? Well, those likely don’t go away much. It may be somewhat easier if you become a brand that people have heard of, but even then, you’ll still encounter the many challenges of being successful in sales.

There are many terrific books on sales and selling. At the startup stage you likely don’t have the luxury of time to digest all that you need to be good at sales. So here are a few very important tips:

  • Know that the entire pilot project, from start to finish, is part of the sale.
  • Listen more than talk with your prospective customer.
  • Recognize who you’re talking within the organization, where they stand, what power they have.
  • Don’t be afraid to ask for help from others in the organization. Sometime a manager may want to help you but doesn’t have the political capital.
  • Document everything you do. It will be important for later repeatability as you on-board others to help you.

Sales isn’t a dirty word and entrepreneurs must get used to (and love!) being in sales. It’s the lifeblood of every organization and one of the most critical elements of your startup.