Three Sales Channels That Put Your Startup at Risk
Startups need cash to get off the ground. The purpose of the startup cash is to give you time to create a company which generates its own cash. Therefore, it is critical to focus on short-term sales strategies to create short-term results.The fastest way to generate cash is to sell something as soon as possible. You, the founder, must take the lead. You are the best sales rep the startup has right now. You understand the market, know the product intimately and are passionate beyond belief. If you can’t sell what you created then your startup dies.Once you make a few sales, the credibility of the company soars. You made something from scratch. You sold it to someone for money. They are using it and find it helpful. This attracts more customers and more investors. Everyone wants in. Bingo! You are in business.
Slow Sales, Sales Channels
In spite of this need to sell now, I observe some founders focus on long-term strategies first. Their big vision dictates short-term strategy. You must realize your first job is to get out of the startup phase. My friend, Ben Dyer, wrote a great post on this entitled “Finishing the Start.” Here are three risky sales channels to avoid.
Build a Salesforce: Direct Sales Channel
Instead of taking on the responsibility to sell your product yourself, you choose to hire a sales rep. On the surface, this seems to make sense. Salesmen sell stuff, and you’re not a salesman.So you add the overhead of a sales rep. The first day on the job the new sales rep asks, “Who do I call? What do I say? How much does it cost?”You think, “I thought he was the sales rep? Why is he asking me?” This is when you start to burn cash. Instead of you getting paid to learn the answer to these questions, you are both getting paid to learn.
Build Distribution: Indirect Sales Channel
Building an indirect sales channel means you are selling to sales reps who work for other companies. You are one step removed and have no authority over these people.They know your market but don’t know your product. They know their product, and they are making money on it. Your job is to get them interested enough in your product to sell it in addition to theirs.This goes slow, slow, slow. Although these reps like the idea of your product, they are reticent to introduce it to their customers.If they offer it to their customer, they have a sneaking suspicion your product may put their product sales at risk. Then they’ll have nothing. “Why take the chance?” they think.This is just one reason they won’t sell your product. The others include being afraid they’ll be asked a question they can’t answer and lose credibility or there just isn’t enough money in it for them to pitch it.In any case, your product never sees the light of day. You spend all your time and cash talking to sales reps and not to the market.
Strategic Deals: Big Company or Association Sales Channels
Strategic deals take the longest of all to get to cash. You find a champion in the corporate office who is all excited to lead this deal for his company. The company will take on your product and sell it through their channels.Think about it. You are now twice removed from the market. You are talking to corporate folks who don’t even talk to or have authority over their company’s sales reps.
Think Short Term
As the founder in startup mode, you should focus on short-term strategies which will get you off the ground, generate cash, and build credibility. This is how you graduate from startup.