Startup? Setting Up A "Sales Division"

Setting Up a Sales Division in Your Start-up

It is difficult to sell a product when there is no finished product yet. But you can already start with “customer development”.

 

Few people understand what customer development means or why it is essential for start-ups. They think in terms of common roles such as sales, marketing and operations. And the worst thing you as a start-up entrepreneur can do is to hire a sales professional. At least in early stage. Not many experienced sales people are comfortable going out to sell without a product.

It’s a well-known fact that more than 90% of technology start-ups fail. A huge piece of that pie is the result of never finding the product/market fit. Finding a market for your new product is key.

To do this, the founding team must start with customer development to find the right market for their ‘minimum viable product’ (MVP).

Finding the product/market fit

As Brant Cooper explains very well in his blog post: companies that are pre-product/market fit should start with ‘customer development’. It’s pretty simple: if you don’t find your product/market fit, your company will die.

To find your product/market fit, you need to get out of the building and start finding your customers – i.e. customer discovery. Customer discovery is part of the customer development process, combining product development and business development.

To explain it simply: customer development is an intense collaboration between two people (or two departments). I call them the Geek and the Fool. The customer developer (the Fool) and the product developer (the Geek) must collaborate closely with each to find the product/market fit together. The Geek, usually a tech guy, is solving a problem which might result in a “minimum viable product” (MVP) for a market. The Fool gets ‘hypnotised’ by it and takes it out of the building to show it around to anyone willing to take a look.

Finding that product/market fit depends on many different parameters (we’ll discuss these in another blog post). It can take years, many MVP versions, and even a one or two ‘pivots’ to really find it, finally resulting in product sales shown on an exponential curve. I call the customer developer a Fool because he is some sort of sales person who will never sell a product (at least not in the first few years) and is not getting paid for it. In most cases, the Fool doesn’t realise that the chances of success are less than 10% in that phase of a start-up (even less in capital-intensive tech start-ups). And that’s a huge advantage 

So What about Marketing?

Some time ago I saw a question on Facebook from a start-up entrepreneur who was just starting out. He was looking for a ‘growth hacker.’ If you’ve never heard of it before, ‘growth hacking’ is a marketing technique created by Sean Ellis where digital marketers from internet companies try to find hacks that generate super fast organic online growth (usually subscribers, product signups or leads). I responded to him by saying that he doesn’t need digital marketing in the earliest stages of his start-up, he needs a customer developer. (See the reasons above).

If we assume that he or his team have been very busy building a product, and have managed to create the first version of a minimum viable product (MVP), or have at least one in the making, this MVP must find its product/market fit first. Finding a product/market fit is not usually done as part of traditional marketing activities.

Market testing

Now, I’m not saying that we shouldn’t use marketing techniques to do some ‘market testing’. On the contrary, creating a landing page to test your preliminary value propositions is essential, even before your MVP is ready, just to check is there is a potential interest in your product. By using a landing page with a form, you can easily start to interact with your market; real people. In other words, there is no better market research than potential customers reaching out to know more about your concept.

But that’s only a small part of the job. As a co-founder, you must physically go out and start co-creating with the very early potential customers.

But who’s going to open the doors to potential customers?

The first sales efforts

As mentioned before, people think in traditional roles such as sales, marketing and operations, but these are all roles that come later when the start-up has a product with a fit in a particular market. And that’s just what’s missing in the first place.

There’s a very small chance that your first product will be just what the market needs. That’s why the worst thing you can do as a start-up entrepreneur is to begin by hiring a sales person to sell your product or a marketer to market your product. Very few of these experienced professionals are comfortable going out to sell without an existing product. Instead, you’ll need an entrepreneur kind of person with some knowledge of business development and marketing, but more importantly; a lot of energy to discover the market.

I call these first steps ‘Front-End Sales and Marketing’  but they are better known as customer development.

Customer discovery

There’s a saying, “In a startup, no facts exist inside the building, only opinions.” If you start a business and never leave the building you’re guaranteed to fail. There’s a very low possibility that your product will be aligned with your market’s needs at the time of release.

I like the term ‘customer discovery’ because in a start-up it’s true that everything is still to be discovered. And nothing is more important than the discovery of your very first potential customers.

So you’ll need to get out of the building and start discovering markets for your new, usually unfinished, product. At least you should try to discover which market it could be sold in, because you could spend months or years finding a market, –any- market that might need your product.

Ideally, you’ll have detected a gap in the market and can bring this to the drawing table to develop a Minimum Viable Product (MVP).

Does this mean that you should always start marketing right away? No, by definition. There are cases where things are the other way around; you create a product first and then find the right market for it. The start-up world is not black or white, it’s always grey and as a start-up team, you need to dream our future. Visionaries exist, like Steve Jobs and Henry Ford. A century ago, when a reporter asked Henry Ford why he was building a horse with wheels, he said: “If I asked what people wanted, they would just have said faster horses.”

It is possible to develop a product first, but it’s usually more a guarantee of failure because 9 times out of 10 the market wasn’t waiting for your finished product. So test your MVP as soon as possible.

Sales vs Customer Development

So what’s the difference between customer development and sales?

Check the customer development process, originated by Steve Blank

Sales is selling a predefined product to a predefined target audience in a predefined time (with your predefined targets :-)). Customer development is testing an MVP to an undefined target audience against time (so preferably before you run out of money).

Back in 2006, Steven Gary Blank wrote the four steps to the Epiphany. A start-up bestseller, it describes the customer development process in detail. There are four stages in the customer development process: Customer Discovery, Customer Validation, Customer Creation and Company Building. Usually, the discovery and validation takes place at the same time.

You discover new potential customers by testing different value propositions (direct or via digital marketing) and you try to align your product with the needs of the first users. This is an ongoing iteration process as described above.

Your first sales guy

So don’t hire a sales person before this process has reached a certain point of maturity (in other words, when you have some first customers willing to buy it). Discover your customers, modify your product, and built some traction first.

The next steps, customer creation and company building, require more project management and the setup of the first sales and marketing processes. In the last phase (company building), you can start creating departments, governance, HR processes and everything a company needs to be successful in serving the market.

Customer development is entrepreneurship. It’s trying to sell an unfinished product to early adopters (or even visionaries). Because in a start-up, there is nothing predefined, certainly not the product. At an early stage you don’t need a sales person, you need an entrepreneur. It’s an uncertain and chaotic world and not everybody likes that. Even the income is unsure (more likely to be zero instead of a predefined monthly fee).

I’m open to your questions, feel free to message me. 
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Daan