Getting the first set of paying customers is possibly the biggest challenge and arguably the happiest moment that an entrepreneur can have. Every entrepreneur who is starting out faces this challenge and unless he/she overcomes it, there is no business. And after you get your first customer, you have to keep up with the process and gradually scale up till you have many paying customers. To understand more about how to acquire your customer and develop a sales process we have Srikanth Vasuraj, advisor, mentor and a sales and marketing expert, with us today.
1. One of the biggest challenges for startups is to get paying customers. Also once you get your first paying customer, how do you grow to 1000 paying customers? How should a startup with a product/service go about achieving this? Please elaborate on the steps one should follow.
Well, there are the usual methods on how to get the first set of paying customers. The one that is expected to yield the best results in the shortest time is to approach some known people/companies through one’s own network or through friends and colleagues. At this stage, the biggest challenge is to get in front of people to articulate about your product and service. So known sources would definitely help. But that is not always possible.
But before approaching anyone, they need to first have their MVP. This is a must as seeing is believing. Once the potential customer sees atleast 60% of the product doing what they believe will attract him, it will give him the confidence to actually engage. The rest of the features can be offered as part of customization.
Alternatively, one should actually get into the cold calling mode. Get a list of atleast 50 – 100 companies from the target segments, of varying sizes in terms of turnover. Trying varying sizes of companies will help to understand the different pain-points that they may be facing, which may not be the same for everyone. Call each one to –
(a) Update information on key people and contact details;
(b) Call the relevant people to request a meeting;
(c) Meet and sell the product;
(d) If there is some traction then offer a Proof Of Concept or a customized demo at no cost, as this will help to validate all the assumptions;
(e) To get them to bite, give them some sweeteners in the deal, like an early-bird offer;
(f) Use such opportunities to actually build the product.
But this is easier said than done. It will probably take several attempts, time and heartburn before getting the first meeting. But there is no gain without pain. To help the process, it is important to get the elevator pitch perfected because the first one or two minutes will determine whether you are going to get that meeting or not.
Most important experience from getting the first set of paying customers is, understanding the customer’s decision making process. This will help them to put in place a customer-centric sales process, which will help to anticipate customer requirements and objections at various stages in the sales cycle and incorporate proactive measures to ensure the sales process does not stall at any stage. This will help to bring in predictability and also bring down time and cost of customer acquisition, as one will be able to take intelligent decisions on either pursuing the opportunity or dropping it. Most often, the decision to drop a prospect is too hard to take, as in the absence of any such intelligence one is living on HOPE. They will continue to pursue in the hope that he will bite one day, without realizing what it is costing them.
Once they have done the above and acquired the first set of paying customers and put in place a customer-centric sales process, they are now ready to scale. Until then one should not attempt scaling as it will be good money down the tubes. To scale one can employ any of the GTM strategies, but I always believe that even here one should do a slow ramp-up. Instead of getting your own sales force, use external marketing agencies and partners to get your customer meetings. Direct sales people can be inducted with increase in number of meetings and revenues.
Also read, Srikanth’s post on building a scalable sales process here.
2. You have bootstrapped a venture in Dubai. Any tips for bootstrapped startups that are often cash poor and need to be prudent. How should a bootstrapped startup prioritize expenses?
This is a question that is very close to my heart because while setting up the Dubai venture I committed all the typical mistakes that start-ups do and splurged a lot of money in the initial phase, believing that a ‘big splash’ would ensure a successful beginning and after that there is no looking back. Within 8 months I had run out of cash and had to go out with my begging bowl and do a song and dance to get someone to fund me. Thankfully, I was successful in convincing one of Middle East’s largest financing houses to invest in the venture and that just about helped me manage till I got the first set of paying customers.
So financial prudency is something I constantly advocate to start-ups. Quite obviously the first and most important expense is towards the product. Until the MVP is ready and tested, all resources should be directed only towards this exercise.
A big challenge for start-ups is to get the right people. This eases out a bit once a customer reference list is established. But until then it is important to utilize resources to get the right advisors to keep the process moving. A product consultant at this stage would help to validate the product and ensure functionality building is done within budget and on time. Appointing a marketing consultant or advisor would be advisable once the MVP is ready and tested. This person would help to put in the first set of GTM strategies to get the initial trend-setters who are willing to pay for your product or service. These are besides the finance consultant who would help with the daily accounting. Using external resources at this stage is good to keep headcount down and conserve resources.
Use social media extensively to not only create some noise and build awareness for your product but also to position your product to your target segment. This is a highly cost-effective means as there are little or no investments.
These are necessary investments to help take the company towards acquiring the first set of paying customers. Thereafter, if they follow the scaling process that I have enumerated, they will be able to bring in some level of predictability to help them scale. Without predictability they will find it difficult to scale.
Also read on Srikanth’s post on conserving resources and understanding product market fit here.
ABOUT THE AUTHOR
The author, Srikanth Vasuraj, is a Business Consultant focused on helping start-ups to grow. He can be reached at +91-98454 78585 or firstname.lastname@example.org. Please visit www.nodiva.co.in for more information.
Some of the notable startups which Srikanth has built include; Ducont.com, Dubai (A value-added services company in the Middle East), Sigma Interior, Bangalore (providing office and residence interior fit-out services), Appnomic Systems, (developed their Sales and Marketing teams), Simbus Technologies,(helped them in their Go-to-market, sales and marketing strategies)
Other articles by Srikanth:
Pricing Strategy for Startups: http://blog.foundermates.com/pricing-strategy-for-start-ups/
Should Startups Pay for Mentoring Services: http://blog.foundermates.com/should-startups-pay-for-mentoring-services/
FOR A FREE CONSULT WITH SRIKANTH
Contact Srikanth for a FREE CONSULT with regards to product-market fit, go-to-market strategy and sales by signing up on FounderMates.com here.