I hear many Tech CEOs in a constant state of panic and confusion about what to do next in their entrepreneurial journey. In the early days, this is often going after project or initiatives where they believe there will be an immediate success. It is often not the case.
Here are some of extract of the top 10 challenges from my conversations with 100+ Tech CEOs in the UK:
“We’re not focused on sales right now, just on product development”
I understand that product development is an important part of the development of any technology company. On the other hand, I’m always quite worried when someone is not focused on growing their sales revenue consistently as they expand and invest more in their product. Often this is where the influence of US VC and Private Equity money may have clouded our vision in the UK. A sustainable and more interesting investment as an Angel or VC is one that has got traction in the market and has real differentiation from existing suppliers or solutions. You need to be focused on sales from day one. Your focus should be Marketing, Sales, Product Development and Distribution until you get to the point where you are at least a £5million ARR company. Yes, there are multiple areas that you need to focus on and hence you need the structure, talent and execution model to balance these priorities and complete the highest value activities consistently.
“We need more leads, then we’ll be much better off and ready to invest in Sales”
or me this is a complete fallacy when you actually look at the data. When looking at 1000s of lines of data of technology companies, we have found that there are in fact very good at lead generation compared to other industries like Financial or Professional Services. Their problem is often selecting and prospecting the right leads and then consistently converting those leads to sales and invoices. From the large dataset we have on UK technology companies, the average close rate from lead to purchase order is 4.5%. What happens if that became 7%? What happens if you’re proposal to close rate went from 18% to 50%? Might be worth doing this exercise, as this is often where we see some of the biggest growth in our client companies.
“We need to make some more sales, then we’ll be ready”
I met a very exciting and unique tech company recently. I discussed with them their sales traction over the last 12 months and understood that if they kept doing what they were doing they were never going to get these desired sales results that they wanted. Often you’re not making sales for a couple of reasons – firstly your business value and value proposition is not clear, you’re not following up with your prospects consistently whilst not managing the response and finally you’re not asking for the order even when value has been presented. Often as Tony J. Hughes says, “it’s how you open not how you close that dictates your success.”
“Once we get funding, we’ll invest in structuring our sales efforts”
I’m always interested to see how Tech CEOs react while crowdfunding, VC funding and angel funding. This is almost a full-time job on its own whether you are seeking Seed or Series A, B or C funding. Also as one CEO said to me, “I feel like I have never-ending wish list for after I receive funding.” This is the epitome from what my experience shows is that it’s always delayed thinking. I’m victim of this too when running my own company. When we sign this number of clients, we’ll do this. The CEO and I sat down and looked at what his results needed to be in order to gain funding and what areas he needed to show clarity and predictability. He then went onto secure £750,000 in Series A funding.
“It’s not a question of if, it’s a question of when”
his is a personal favourite of mine. If your prospect is in the room and requested to meet with you and you have shared immense value with them and understood their timely priorities then you have one step to go. You ultimately haven’t directed your combined efforts towards agreed and timed objectives. There is no sense of urgency, albeit there is a recognition that you have value to offer and have a solid track record and experience that could be beneficial to them. If you know something has value and you need it badly, why wouldn’t you want to try it?
“We’re doing quite well at the moment, let’s explore this later”
this is the type of client you can have an even larger impact with even if they don’t know it. This means there is some momentum within their sales efforts and it is now a question of optimising and maximising these efforts. This is where knowing a couple of key metrics about the business would be highly beneficial to see where you can expand their operation. Showing the effect of compound growth is an absolute must, if of course the client will allow you to show you how to make 500% growth.
“We’re interested but with no guaranteed return, it’s risky”
an interesting place to be as a supplier and a business. This is often to do with clearly explaining the ROI of your solution and what the risk, rewards and cost of inaction would be. Playing devil’s advocate, how many things are truly guaranteed? For example, my savings in my bank account, are they guaranteed to be there all the time…well 2008 and Iceland, Greece, Northern Rock and reduction of the Financial Services Compensation Scheme (FSCS) seems to point the other way. If you are looking for a guaranteed return, my advice is not to become a CEO or a salesperson. Additionally, the bit I love about our profession and running a sales consultancy is that if we don’t perform, we lose the contract. No HR exit interviews, no redundancy pay, no tribunals. We just leave the next month. It’s a performance-based business.
“We could hire one person full-time for a year”
this is where the value perception of time and return has become slanted. This is often perceived by new founders who are looking at simply operating expenditure. I’m a big believer in strong cashflow management as a CEO myself. This can be a question of life and death for any company. A new client asked me what is your average ROI with retained clients, I logged onto our company dashboard and said it’s 28:1 currently, meaning that if you invested £40,000 with us your return would be £1,120,000. That’s 3.5%. I don’t know any Salespeople, Sales Directors, Sales Managers or VP of Sales who can generate that level of return. When working with these senior managers, our returns are even better, we have achieved a 40:1 revenue to cost ratio when we have worked alongside senior Sales Managers and Directors. A top employee achieves 6:1 ratio according to research conducted by Todd Herman. This would make them in the top 5% out of all available hires in the industry.
“Can you do a couple of days with us, and not deploy your methodology?”
This was the response that one of my team got the other day from client meetings. If you are able to achieving a 28:1 revenue to cost ratio. Why wouldn’t you run with that system? I would certainly, as a CEO myself. A short-term and over cost-sensitive mindset can harm your success. Also it did alert me the fact that when delving into this that the individual had a poor experience with a previous consultant and hence was reluctant to make a commitment. Our system is focused on getting from Revenue X to Revenue Y. The tactics, strategies and methodology underpin how we get from X to Y. We are certainly not looking to make a business just out of commercial analysis projects and one-off assignments. Like any SaaS business, we have retained clients like subscribers that pay us regularly each month for results. That’s our business model.
“Consultancies don’t request payment upfront, I know consultancy”
I did smile when I heard this. It took me back to when we advised one of our first clients moving them to a project related fee where they paid in three installments for the design, build and delivery of their award-winning app. We advised that from a cashflow perspective this is highly punitive. We advised to changing their model to an annual subscription and a regular SaaS model. In the first month of the year they had made their last year’s revenue. Now they had 11 months to focus on delivering value and converting new business development opportunties. Pricing and payment terms are always an area that I advise my team to consult clients on. If you spot a supplier who is doing something clever, often something you disagree with, think twice. It maybe useful to integrate into your pricing model. Finally, I have seen over 100 consultancies take payment upfront, well the good ones that were sold or are now billion dollar companies. We are always constantly learning from the market we operate in, I’d urge you to be the same.
Thanks for reading my post on some of the common challenges that Tech CEOs are faced with when making big decisions around investing in improving their sales revenues and creating a reliable sales structure that produces quarter-in, quarter-out. Feel free to join our community, connect with me on LinkedIn, or simply leave your comments below.
I’d be interested to hear what challenges you’ve heard or experienced recently. Please comment below, share them or connect with me and let’s have a discussion.