With more than a decade of experience managing and building software startups, Jevon MacDonald is an authority on co-browsing Web technologies. His company, GoInstant, delivers a patent-pending technology that provides “shared” Web-browsing capabilities.
-------June 30th, 2012 :: The enterprise market is changing. IT is loosening its chokehold on software purchasing decisions, and consumer-like products and techniques are finding their way into enterprise software. People expect enterprise software to be beautifully designed and fun to use — a fundamental shift from how we've looked at this market for the last 20 years. These changes are happening faster than ever and generating unprecedented opportunities for software start-ups.
As a founder of multiple software startups, including my current company, GoInstant, I’ve learned a few lessons about selling into this singular market. While my companies have achieved success and were able to implement strategic alliances with large enterprise companies, such as IBM and Jive Software, it didn’t happen overnight. In my experience, if you’re looking to sell into the enterprise, there are two golden rules: know your customer and know yourself.
Knowing your market is critical. Knowing how customers want to buy, how they buy, and how you can package your solution with the appropriate support, training and value proposition is critical for gaining success in the enterprise space. Enterprise companies are slow — and loathe — to switch out existing systems. Once you get into a company and it is using your product actively, this is an advantage. But as the underdog trying to break in, it’s a huge disadvantage.
In this blog post, we’ll examine key questions that need to be addressed to fully understand the enterprise customer in order to gain a foothold. We’ll look at the important questions you need to answer about your own business, as well as the overall market.
Understanding your customer
1. How much should you genuinely innovate versus the status quo?
The status quo or “good enough” is an extremely powerful force. Entrepreneurs clamoring to innovate don’t always realize that companies may actually like something we don’t consider valuable. But just because you would never use it in your startup, don’t assume something isn’t good for your customer. You need to carefully consider the purpose it fills for the enterprise organization. Because large organizations have different concerns and requirements, something that looks broken to you may still be serving an important purpose internally.
Additionally, too many enterprise startups identify top-level problems without appreciating the layers of complexity underneath them. They see a big “obvious” problem (for example: “recruiting top talent is hard”) and assume there is a technological solution that they can build. But look underneath one problem and you’ll find three others. There may be issues with how internal departments communicate, or who owns the budget for specific things, the sophistication of the staff, or something else that’s going to roadblock your great solution.
2. Who are you selling to?
Every company has a hierarchy. There will be gatekeepers (lower-level folks that are tasked with doing research on your market), mid-level managers with some budget but restricted on spending without higher up approval (probably around $5,000 per year), and then C-level executives. You have to be strategic in how you sell to enterprises and how you move up (or down) the food chain, and how the value proposition changes along the way.
One of the best ways to do this is to get engaged within the organization and be accessible. Today’s enterprise buyers have taken a proactive approach in seeking out great software. Your job is to be sure that you are easily available and can clearly and effectively communicate and tailor the value of your solution as needed to people of all levels you’re selling to throughout the organization.
When talking with C-level execs, you need to be able to communicate how your solution can contribute to their overall business goals at a higher level, including projected ROI. Connecting them with C-level execs in other organizations who have already adopted your product might also help. At a mid-level, your approach should focus more on solving a specific business problem within their organization and streamlining existing processes.
3. How are you training customers?
Even with relatively simple software, companies ask about training. Most enterprise startups can’t afford to do on-site training, so look for other ways to provide the necessary handholding and comfort level customers need. One option is to create a video tutorial library. Video tutorials are easy to do and very effective for training. They’re also helpful when your customers on-board new employees or want to introduce your product into other areas of the organization.
4. What level of customer support do you offer?
Most legacy software companies offer poor support (and it’s generally quite expensive), so this presents an opportunity for enterprise startups. However, because startup founders focus heavily on innovation and product development, they often believe that these attributes are also the most important for customers as well. This ignores the premium that enterprise customers place on support — a value that frequently supersedes the fact that your software may be free and offers tons of cool new features.
The value you deliver is in the overall solutions package that you can offer to enterprise customers. And key to that package is a quality experience that contributes to the customer’s own success. While your features may, in fact, be groundbreaking, if they don’t facilitate better work processes for the customer, if they cannot be easily implemented and adopted throughout the organization, and if they cannot offer guaranteed performance, they don’t provide the value that’s required.
5. What are companies’ buying habits?
Enterprises are accustomed to long sales cycles, approvals, demos, trials, more demos and so forth. Changing those habits is not always easy, and in some cases you’ll have to play by the rules to get a foot in the door. At the same time, customers can stretch things out forever, and you will lose momentum quickly.
As with all the aforementioned, this is a delicate balancing act. You need to push your agenda and your sales strategy as much as possible. But you also need to weigh everything with an acute understanding of how your customers like to buy things and the processes they have to go through internally.
As I mentioned earlier, gaining a foothold in the enterprise market doesn’t happen overnight. But without a consistent and laser-like focus on your customers’ needs, it won’t happen at all. In my next post, I’ll take a look at the questions that you need to ask yourself to make sure you’re on the right track.
As the fervor around consumer startups fades, more and more startups are tackling large enterprise markets. Enterprise consumerization is growing through BYOD, and software startups are sneaking in through bottom-up techniques, acquiring a few users or a small department and then spreading virally throughout organizations. And yet, too many startups don’t understand how to sell into the enterprise.
As a founder of multiple software startups, I’ve seen this time and again. Taking your software startup from inception to profitability while selling into an enterprise market demands a different approach. Enterprises are often slow moving, process-oriented, hierarchical beasts. As I addressed in yesterday’s post, startups must understand their enterprise customers’ unique characteristics and needs in order to gain a foothold.
This doesn’t mean assessing the overall market size and talking in the abstract about faceless corporations. It’s about understanding the intricate and complicated components of your target customer and requires much more thought and effort than simply building a product, putting up a website and hoping people show up at your door. In this post, we’ll look at the key questions startup founders must ask of themselves and the enterprise market.
Know yourself and your market
1. How are you perceived in the market?
Most companies are risk averse when it comes to dealing with and buying from enterprise software startups. If you’ve ever sold into an enterprise, chances are you’ve been asked about your funding and financial viability. Or buyers are worried that they won’t get the handholding they deserve, because you don’t have the staff to support them. They don’t care about your other customers, except in terms of how financially stable that makes you, and who they are (if marquee customers are already using your product, that serves as a form of “social proof.”)
Think of this issue in terms of innovation versus status quo. You don’t want to pretend you’re running a big, old school company, but you also don’t want to look like one half of a two-person startup in a garage. Some ways to do this?
- Offer a 1-800 number for customers to call (Grasshopper & other similar services will do the trick.)
- Use press releases to market in a more traditional way
- Build thought leadership through a corporate blog and guest blog writing on other sites
- Publicize news about your company that indicates stability such as the addition of a quality advisory board, raising capital, acquiring customers, etc.
- Get customer case studies as soon as possible
You want to present yourself in a manner that will simultaneously let enterprise customers know that you mean business (and have the wherewithal and sophistication to service them) and at the same time have the innovative technology and scrappiness of a startup.
2. What are your distribution channels?
You should never outsource responsibility for sales until you absolutely understand how your sales work, whom you’re selling to, pricing, sales cycle, etc. Once you’ve gone through the sales process a bunch of times, and you’ve nailed down a fairly repeatable process, you can start outsourcing the responsibility. Until then, spend all of your time in sales learning as much as you can directly from your customers, and keep those one-to-one relationships close. After you’ve developed a sales process that works, then you scale.
A good option for scaling is through distribution channels. Distribution channels give small enterprise startups much more reach into the market. There may be partners with pre-existing customer relationships that you can leverage. Often these partners won’t have your technical sophistication or innovation capabilities, but they will have a larger sales force and greater market access.
3. What are the key market buying cycles?
Companies plan their budgets well in advance for future purchases. They set year-long strategic goals that impact what they look to buy and how much they’re willing to spend. You want to be top-of-mind during these market-planning phases. There will always be discretionary spending and freedom to experiment with new technologies, but don’t miss out on injecting yourself into these key budget cycles.
September to December is usually a good time for enterprise software companies to make a lot of sales. Departments have unused budget and they’re trying to move fast. Summers are often pretty quiet, and so you need to be making a lot of noise in the spring to carry you through the summer into a great buying period in the fall. However, because patterns vary, you must determine your own customers’ purchasing cycles as quickly as possible.
4. What are the nitty-gritty pitfalls?
This is a catchall bucket for me when it comes to knowing your market. If you’ve done your homework and answered all of the questions outlined in this and my previous blog, you probably have already identified the sneaky little details — such as adequate customer support, training and understanding customer buying patterns — that can trip up the sales process. Knowing these allows you to tackle them in advance and adjust your strategy. It also allows you to change how you sell your product into the market. Maybe you have to go up the food chain to someone with more buying power, maybe you have to change your pricing structure. The more you know about yourself and your market — including the types of companies you’re going after, the departments and the individuals in those departments and companies — the better prepared you’ll be to build faster traction.