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Sales Growth

How Successful Prospecting Can Ruin Your Company

By: Tallwave

I had an entrepreneur once ask me to help him increase the top of the funnel. "I need the revenue to help fuel the development of my new software product," he said. He had already experienced some success selling an event-based product, and if he could replicate that success a few more times, he could easily cash flow the  development of his new product

So I helped him.. He soon found his sales funnel full of hundreds of targeted, interested customers. And yet, he sold almost nothing. It nearly broke him. Although it didn't cost him much in dollars, it was a complete waste of everyone’s time.

That's when I realized how painful it is to turn on the lead hose without two critical things:

  1. Product-Market Fit and
  2. a basic, working sales process.

What is Product-Market Fit and how do you achieve it? How do you establish a basic, working sales process? Well, I’m glad you asked.

Product-Market Fit

At Tallwave, our rule of thumb is  if at least 40% of your target users aren’t reaching for your product, you’re not at Product-Market Fit. PM Fit means you have a product that meets the need of your target users, and you can sell or market that product in a way that your target users "see" that value and "reach" for it as a result. 40% is not so much a conversion Rate, since users will fail to buy for any number of reasons, but at least 40% should take another step towards purchase after being exposed to your product.

You might be wondering how you determine if you’ve reached the 40% threshold. Well, you need to be in front of your target customers as much as possible. Conduct interviews, do product demos, use lean marketing tactics to attract your target customer, and then take notes. If 40% of potential customers aren’t reaching for your product, find out why and make improvements. Then go back and try again, and again and again, until you reach that 40%. Keep track of the number of customers reaching for your product just as you would any other business metric.

How You Know If You're There

Symptoms of being out of Product-Market Fit are a low sales close rate, less than 50% proposal win rate, or  lack of consistency between the deals or product mix you are selling. You are also not at Product-Market Fit if you are just starting to sell a new product or are selling an old product into a new market.

In my previous example  our entrepreneur was in the latter category.  It turns out his event product was only successfully sold into a group of users within a very specific organization. He designed the product  specifically for those users and relied on existing relationships to gain traction in the group. He had already exhausted that organization when he decided to venture out into an entirely new and broader  market.

He assumed the new group of  users would buy his event package based on his experience with the previous organization, but he never actually validated his belief  with repeated sales. The result: lots of leads. Lots of resources consumed. No conversions.  Which leads us to the second issue...

Creating a Repeatable Sales Process

Before you say, "oh, our product is already at PM fit!", I should tell you that there there is another requirement. You are not at Product-Market Fit until your process for selling new customers is repeatable and predictable. At my first startup, we guessed our way through every sales cycle. We never did it the same way twice for over two years. Revenue was anemic and reps were mostly unproductive, despite a ton of activity. Sales and marketing processes are an extension of your product, if those things aren't predictable and effective, you are still in search of PM Fit. It is crucial you you figure this out before you prematurely scale.

What you need is a general formula for how you sell. Starting from the first meeting, do you give a strong pitch that consistently leads to the next meeting (if you choose)? Do you ask the same types of questions? Do you tee up the same next step?  Do you map out the same buying process for every prospect? Do you follow-up with the same collateral? Most importantly, do you qualify deals out of your funnel with the same criteria every time?

More on building an amazing Sales Process in a future post.  Also see my Visual Storytelling post (link) for a way to increase your conversions throughout the funnel.

To create this process, take your best guess at that formula based on collaboratively examining what works, and then test it. Try to stick to it, develop the process as you go, and experiment liberally within a step, looking for clues to increase conversions. If something works, try to repeat it. Measure your conversions from step-to-step. Identify your point of constraint and pour resources into solving that one bottleneck. Once solved, focus your resources on the next bottleneck.

In the case of our entrepreneur, he did not have a sales process. His description of his company and value prop were different every time. Also, he had no clear next step. No call to action. And no follow-up process to nurture the prospect through the funnel. Leads crashed in call-after-call but disappeared just as quickly, back into the ocean. But worst of all, he didn't know how to qualify a lead as good or not, so he didn't know how to focus his time on only those leads which t had a high probably of buying.

Avoid Prematurely Scaling

Top-of-the-funnel activities are critical even before PM Fit, but don't turn on the firehose until you've sorted out the basics for processing leads into sales.

Written by Tallwave

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