There’s No Such Thing as a Free Product in B2B

Even if your product has a low startup fee — or if it’s completely free (freemium or free trial) — it has a cost.

Time is an investment. Training and implementation is always needed. Mobilizing a team to use a new solution is a risk.

The early risk for prospective buyers of a startup’s product is not financial; the career or reputation risk is more important. Managers put trust and credibility on the line to convince people to embrace a technology that might ultimately disappear.

Early prospects worry that your team is not going to perform or that the product might under-deliver. They want to be reassured that your solution will do what it’s expected to do.

Although the old adage in big business that nobody ever got fired for buying IBM was a creation of its marketing team, it holds some truth. No prospect will ever want to vouch for your solution at the cost of a promotion or, worst, a job.

Understand the strengths and weaknesses of your product and the implications of signing with you. Reduce the perception of risk, provide exceptional value and convince your buyer of the urgency of fixing the problem.

The last thing you want to sell is a career risk…

Why Entrepreneurs Should Innovate From The Customer-Out in B2B

We innovate by starting with the customer and working backwards. That becomes the touchstone for how we invent. – Jeff Bezos, Amazon Founder and CEO

With my previous startup, HireVoice, we started with what we thought was a business problem. The problem we had identified as Human Resources outsiders was monitoring employer brand reputation. We just didn’t know whose problem that was.

Early on, we had to identify industries and stakeholders that could have this problem to validate their needs and the fit with our solution. Ultimately, this process proved to be backwards.

Starting from a problem made us try to match our problem — our view of the world — with target markets. Six months in the business, we realized that, although employer brand monitoring was a problem, it was not a major pain.

The day we decided to solve HR recruiters’ problems is the day we instantly became more relevant. It was easier to work from their problems than to come up with pains we thought they had.

Typical Challenge…

Typical Challenge - Solution

One solution, many problems.

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In my book, Lean B2B: Build Products Businesses Want, I recommend that entrepreneurs focus on the people and the market before creating any hypotheses around the problem or the solution.

By starting with people, entrepreneurs are much less likely to invent a problem and start with false assumptions than if they start with a solution or a problem.

Save yourself 6 months… Get out of the building and meet with your target market. B2B is people-first.

How to Deal with Gatekeepers and Saboteurs in B2B

In every organization, you’ll find saboteurs actively trying to block sales.

A saboteur is an individual or team whose job feels threatened by new software or processes. The saboteur might be the business intelligence group inside IT or the CIO’s department which is currently trying to build its own solution.

Saboteurs often fear losing their influence, or worse, their jobs.

Entrepreneurs often face gatekeeper or saboteur problems when there’s strong interest for a solution, but a deal can’t seem to get signed.

For example, a contact inside the organization informs you that the technical buyer, the CFO’s office or another department is holding back the approval process, things are running in circles and everything seems to be about politics…

If you’re faced with this situation, work with your internal influencers to draft a list of departments and stakeholders that could be holding back the sale. Go through the list and put yourself in their shoes… What do they stand to lose? What do they want?

Meet with all gatekeepers or potential saboteurs one on one. Make them verbalize their concerns. If they’re unwilling to put it into words, you’ll know that the reason might be purely political. Try to increase their win and reduce their risk.

Meet again with your internal influencers. Reiterate the importance of your product’s Return on Investment (ROI) and the urgency to solve the pain. Try to motivate them to put pressure on the gatekeepers.

You must convince gatekeepers and saboteurs that you’re there to help. IT people are notorious for playing the role of saboteurs — try to avoid selling to IT if you can.

Why Founders Should Not Outsource Sales in the Early Days of Startup

The best salesperson is the founder. Others won’t have the passion for it.Bill Aulet, Disciplined Entrepreneurship author and serial entrepreneur

There are different types of salespeople. There’s a kind that sells a clearly defined product following an established process, and then there’s another kind that helps define a product’s features, finds a market and creates a compelling value proposition.

That last kind is generally called a missionary salesperson, and at least one member of your founding team should have that skillset.

Surrendering customer development and early sales to someone you hire that shares none of your ownership for the success or failure of the business is a costly mistake. Your startup will overpay someone to take strategic decisions with none of the risks. This is absolutely not lean.

Members of the founding team must understand the customer negotiation and sales processes. You shouldn’t hire a salesperson until those processes can be repeated.

Don’t look for an easy way out of customer development. Sales – be it recruiting, fundraising or selling – are key skills every B2B founding team should master.

Are Entrepreneurs Scared of the Enterprise Market?

In the last 10 years, there have been 56 IPOs in the enterprise space that have gotten north of a billion [dollars in market capitalization] and just 23 in consumer.Jim Goetz, Sequoia Capital Venture Partner

Enterprise is a major opportunity. Yet, for a lot of entrepreneurs, enterprise is scary.

It looks like a big mess of departments, business units, projects, functional groups, intradepartmental policies, corporate rules, politics and many other things that startup founders may have never been exposed to.

That complexity turns off many entrepreneurs. They choose to start up in B2C because of their personal interests or because it feels easier to scratch their own itch and build a product they can use than build a solution an enterprise customer will use.

B2B opportunities tend to attract different kinds of entrepreneurs than consumer opportunities (Find out if you have the profile of a B2B Entrepreneur).

Unless founders have prior experience working in the enterprise, starting up will force them to get out of their comfort zone to face the following challenges:

  • Acquiring the Industry Context: Domain expertise is often required to target the enterprise. If you don’t know how companies do business, what matters to them, what they fear, how they perceive themselves or what their yearly schedule looks like, it won’t be easy.
  • Building a Relevant Professional Network: You might have a good network, but if it doesn’t connect you to the enterprise market, you’ll have to re-mix it. Connections are the best way to get through the door.
  • Estimating the Return on Investment (ROI): Cost justification is a critical part of selling in B2B. You need an ROI to make a sale, but if you don’t have clients you can’t calculate an ROI… It’s a fine line you’ll need to walk.
  • Raising Sufficient Capital: As entrepreneur and investor Jason Lemkin states: $750k gets you very far along, post MVP, in a consumer start-up. In the enterprise, it gets you almost nowhere. A prototype, yes. Customers? Maybe not. A sales team? No way. Demand gen marketing? Fuggedaboutit. It’s $2M to get anywhere.
  • Reducing the Enterprise Risk: A big part of selling to the enterprise is being able to understand the customer’s perception of risk (migration, change, costs, etc.). If you’ve never worked in the enterprise, you’ll have difficulty imagining the complexity that goes into purchasing new technology.
  • Understanding the Whole Product: In enterprise, the bar is much higher for the product. There are a lot of things that must be put in place just so you can be considered a valid vendor. To sell, you need to understand the minimum feature set.

These challenges can overwhelm the most experienced entrepreneurs. It’s critical for founders to be humble about what they know and don’t know.

Targeting the enterprise won’t be easy, but it doesn’t have to be scary. To succeed, you must be ready to get out of your comfort zone.

How to Get from Consulting to a Scalable Product Business in B2B

Many entrepreneurs start off as consultants to pay the bills while they explore business opportunities.

Working as consultants gives them visibility into business problems, build proximity with customers and allow them to develop domain expertise in their consulting field which can then be leveraged to build startup success.

They can do customer discovery with their clients, learn about an opportunity and create a productized — standardized — solution when they see an opportunity.

This approach is a great way to bootstrap a startup with consulting revenues. It was successfully leveraged by many startups, including social media dashboard company HootSuite.

Hootsuite started as Invoke, a company that did web application development and social marketing before it created a social media tool for its customers.

They learned and iterated the product with their consulting client base and grew the company from a Lean Startup to a global leader in social media with millions of users and many Fortune 100 customers.

Starting off as a consulting firm can be a great way to reduce the risks of starting up while growing a business. To get out of consulting however, your solution must be scalable. It’s important to keep that in mind.

Here’s a great talk by entrepreneur Alex Cowan on Getting from Consulting to Scalable Products:

Why Surveys Won’t Replace Interviews for Customer Development

To many first-time entrepreneurs, organizing and conducting one-on-one interviews feels unproductive. It takes away from product development, design and sales; it’s time-consuming.

Maybe they have access to hundreds of email addresses from their website or have a following on social media, so the temptation is there to send surveys for validation. Why meet one-on-one when you can get hundreds of replies at a time? Wouldn’t more be better?

Surveys and interviews don’t collect the same type of information. Surveys are good only when you know what questions to ask and what answers to suggest. They’re great at validating a direction between a limited set of options (A vs. B) or at collecting factual information on a target population (age, gender, job income, etc).

Prospects are not good at expressing their needs, problems and opinions out of context… and surveys don’t create context.

Interviews are about exploration. They help you understand people individually and explore alternatives. With interviews, the depth of the understanding is more important than the quantity.

Don’t shy away from face-to-face interviews. Relationships are never built through surveys.