Why do startups struggle with sales?


cash flow2One of the most important survival factors for any startup technology business is the ability to generate sales revenues as quickly as possible. Cash flow is king. The more that an entrepreneur is able to prove to investors that he is a good businessman (able to generate cash flow) then the more credible and believable his entire venture story will be. The quicker a startup business is able to generate some revenues, the less desperate they will be to get funding from investors. The less desperate they are, the more likely that they will succeed in getting funding.

The Devil is in the details

So how can a startup reduce the time needed to generate revenue? In some of the earlier blog posts, I have emphasized the importance of having a small, carefully selected and manageable niche (a description of a group of people or businesses) . If you can define (in extreme detail) exactly the prospective client who is a perfect match for your product, then you will have a higher sales success rate with exactly this type of prospect. The challenge is in the detail of your definition. How specific and exact can you get in your detailed description of this group of prospects?

Small is good

Most entrepreneurs fail to make their niche description precise and exact enough. They do this because they fear that a small niche will not provide enough customers to support their business. This is the fatal error. The smaller and more exact you can make the definition, the greater the likelihood that you will be able to solve their exact problems, and therefore get the sale. The paradox is that even though your local market may only contain one prospect that fits your exact highly-targeted niche, there are many prospects on a global scale.

The King of the Hill

I once heard about a watch repairman who was left-handed. For years he struggled with tools that were designed for right-handed people. Frustration drove him to create a toolset for left-handed watch repair people. When he went out to sell it he could only find one other left-handed watch repairman in his city, therefore his local market was tiny. He did, however, discover thousands of left-handed watch repairmen in a global market. During the first few years he established himself as the recognized leader in the market for left-handed watch repair toolsets. He was the KING OF THE HILL, even though the hill was not so big. Since he had all these loyal, happy, left-handed repairmen as customers, he decided to branch out and sell lots of different tools and other products to left-handed repairmen. Now there were already a lot of competitors in this (larger) market (there always are), but since he already had an established base of customers, he was able to use them to leverage his position in the market. This simple strategy can work for almost any startup company.

So why do so many technology startups struggle with closing sales?

  • they fail to define an exact, detailed highly-targeted niche
  • they waste effort chasing prospects that are convenient or opportunistic, but not part of their high % target niche
  • their sales arguments get diluted because they are chasing many different types of prospects who each have different problems and needs
  • their reputation gets diluted because they have failed to differentiate themselves from all the other “generalists” in the market
  • they are not focused on solving the unique and obvious problems that their target niche prospects have, but rather general problems
  • they fail to talk to members of their target niche and to truly understand the unique problems that their prospects face
  • they fall in love with their own technology rather than seeking the solution to the customer’s problems

I challenge you to write a niche description for your startup that is precise and painfully specific. Make your niche small (so that you can dominate it), carefully selected (to take advantage of your unique skills), and manageable (a group that you can identify and locate easily).

Want some help in perfecting this? Contact me at Xelerator. We can offer seminars, workshops, coaching and consultants to help you with this process.