Get Sales. How to Fix What Everyone Gets Wrong in a New Business Plan
Optimism Is Essential in a New Venture — As Long as You Don’t Fool Yourself
“A salesman is got to dream, boy. It comes with the territory.” — Arthur Miller, Death of a Salesman
What does almost everyone who starts a business get wrong? And really, I mean everyone, from Elon Musk on down. What they get wrong — very consistently — is how much revenue their new venture will generate and how fast.
This is not at all surprising once you dig into why — which is what I’m going to do here. My goal is to make you a better critic of your own business plan, so in turn, you learn faster and get better results.
If you’ve been in business at all, you’re probably aware that, in most industries, people in sales tend to turnover more frequently than in other positions. There is also, sadly, sometimes an attitude among non-sales talent in a company that sales jobs are somehow easier. That’s not true at all. Sales is the hardest job in business, which is why it invariably pays the most — that is, if one can deliver results. If one can’t deliver, then sales can be a low-paying and demoralizing slog for which most people are not cut out.
The turnover in sales often happens for one of two reasons:
- The salesperson wasn’t right for the job, either because of skills or drive, or
- Sales management didn’t succeed in designing effective incentives.
As an entrepreneur, neither of these two reasons for sales failure is available to you. You’ve decided to start a business, so until you give up and quit, we’re going to have to assume that you’re right for the job. And as for designing incentives, your incentive is to sell or — give up and quit.
So, here you are, an entrepreneur with an idea you’re sure the world needs and wants. All you have to do is get some sales. Of course, since you’re convinced the world needs and wants your new product, sales should be easy right? Buyers will find you, right?
Nope. Estimating sales is the one thing every business gets wrong at first. You’re going to get it wrong too, let’s just try to make sure that you get it wrong for as short a time as possible.
Whole shelves of business books and countless professional development courses are devoted to teaching people how to execute sales effectively. I’m not here to try to add to that list or magically condense good sales practice to a short blog article. My message is different. My message to you, as an entrepreneur who may be good at many things but inexperienced in sales is:
Never underestimate how important sales is, nor how difficult it is, nor how much it will deceive you in the early days. Backing up your sales assumptions with real customer input from the outset is just as essential as getting your product to work.
In the early stages of new venture planning, you’ll put together financial projections for your new business. You’ll estimate costs for your product and costs for your operation. Your first year will usually look modest — maybe even your 2nd year — but by year three, most new business pro-forma financials show the big growth. $100K year one, $300K year two and boom, $3 million in revenue year three. Any investor or new business advisor has seen countless examples.
And, pretty much without exception, there is decent data behind the estimates on costs. After all, it’s pretty easy to understand costs. Also, pretty much without exception, there is no good data behind the sales numbers. Even in the best and most profitable operating companies, sales projections can be maddeningly difficult to get right. It can feel downright impossible to get them right in a brand new venture with no history. So most people just guess. Of course, all sales projections are a guess, but like so many things, there is a right way to guess and a wrong one.
The first sale that many entrepreneurs make will be not a sale of their product but rather of themselves and their idea. They may need to sell family and friends on initial investment or perhaps they need to convince a partner to come join them with little to offer in the way of compensation. And, actually, many entrepreneurs handle this part of the new venture pretty well. If they are sincere and their idea is well developed, they will often find that it is not difficult to convince a few others to invest or to work alongside them, or both.
The world is full of people looking for opportunity, it’s what we humans do. Professional investors are much harder to sell, very difficult in fact. But professional investors are a few steps further down the road and we will talk about them in another article.
After a bit of initial success winning some angel investors, perhaps a few early customers and partners, it’s easy for an entrepreneur to develop the conception that he or she also has sales momentum. Selling many customers won’t be any different than selling those early buyers, angel investors and partners right? Oh dear. No. Not right at all.
Customers operate very differently from other audiences for your product or service.
If you understand one thing about sales, understand this: Customers will deceive you constantly. Not because they want to deceive you, not at all, but because they want to please you. When presented with a new product or service idea, many people will very truthfully express interest. There is no cost to this. When asked — especially by someone they know — if a new product or service looks appealing, most people will find some way to give a positive inclination. They will usually stop short of out-right committing to buy, but they’ll send a signal that causes the entrepreneur to mark them down as a likely sale. They have no skin-in-the-game at this point, being generally positive is more natural for humans.
Things change when it comes time to lay down their money. Expressing general support is one thing but in making the choice to buy, customers step out of the abstract world and into one where their choice to spend on one thing means giving up the opportunity to spend on another. It gets real. And as soon as you DO have some sales success then your competition will swoop in so fast your head will spin. Sales is the battlefront of business — fortunes change fast, constantly and drastically. No assumption is ever safe.
If you are a good entrepreneur, sales should scare the hell out of you. In a healthy, motivating way of course. ;-)
Good, professional sales people spend a lot of time understanding their customers’ budgets, decision making influences and timelines. Good practices in sales discipline for various types of channels is way beyond the scope of this one article.
Still it should be fairly obvious that there are no time, budget or decision making limits to restrain someone from simply saying they like your product and might buy it. Those very real limits come down hard when it’s time to part with the cash.
Don’t despair. There are ways to bootstrap sales that don’t have to cost a fortune and don’t require hiring and managing a big professional salesforce when you are just starting out. The fundamental thing entrepreneurs need to do when working on the sales portion of their business plan is to:
- Try hard to name specific customers.
- Try hard to get a representative sample of these customers to share a budget.
- Look for ways to get early, preliminary commitments for sales (Kickstarter and Indiegogo are amazing tools for this if used properly).
- Think on a dual-track which includes both getting early sales to prove out product and price and developing a long term go-to-market strategy in the best sales channels for your offering.
Sales is hard and that’s a good thing. Because being good at hard things is fundamental to creating value, in business and in life.
