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Money shrub

by • November 4, 2011 • Best of, Listening, Pitching & sellingComments (3)386

You’re a startup. It’s okay to ask about money.

While I would admittedly be uncomfortable asking a colleague how much cash is sitting in their bank account, directly re-applying personal etiquette to a business discussion is generally a mistake.

You’re a startup. It’s okay.

There exists some critical, make-or-break information that you’ll find impossible to tease out in any other way. As long as you know what you’re looking for and how to ask, you’ll find those revelations surprisingly easy to get at.

And it won’t even be an awkward conversation.

Quantifying “value”

Common wisdom is that you price your product in terms of value [to the customer] rather than cost [to you]. That’s true. And you can’t quantify the value received without prodding their financial worldview.

But just asking if they would pay £X for your product fails the Mom test.

Like all good questions-for-learning, you want to ask about what they currently do now, not what they believe they might do in the future.

The 2 most important questions for sales-driven startups are both about money.

Ask about their current solution to find a price anchor

“What are you using now?” gives you a price anchor. If they are paying £100/month for a duct-tape workaround, then you know which ballpark you’re playing in. On the other hand, they may have spent £120,000 this year on agency fees to maintain a site you’re replacing. If that’s the case, you don’t want to be having the £100 conversation.

Sometimes, both of the above will be happening simultaneously and you get to choose how you present yourself.

Are you a replacement for the tool at a yearly value of £1.2k or a replacement for the agency at 100x that?

Ask about their budgets to unearth hidden decision makers

“Where would the money come from?” leads to a conversation about whose budget the purchase will come from and who else within their company holds the power to torpedo the deal.

The real goal here is to figure out whether you’re talking to the right person.

Often, you’ll find yourself talking to a user who is different than the budget owner. Your future pitches will hit unseen snags unless you learn who else matters and what they care about. This knowledge will eventually turn into a repeatable sales roadmap as you grow toward adding non-founders to your sales & customer team.

Sales are a side-effect

As a bonus, these questions also tell you how likely a particular client is to convert into an early sale.

If you hear, while digging in, that he is the budget owner and just happens to have the funds already allocated for a purchase of this ilk, then you might want to violate rule #1 of customer development (“learn, don’t pitch”) and reach for your sales hat.

[Post thumbnail by AaronPatterson]

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3 Responses to You’re a startup. It’s okay to ask about money.

  1. kelley boyd says:

    I generally don’t comment on a blog that I agree with everything in it – but just wanted to compliment this blog post. Very succinct – so happy you started blogging again!

    I did a ton of “customer development” as a sales and business development person person. These were slightly more mature startups – most of the time the companies were transitioning to early adopters form innovator stage. At that stage, occasionally you find the problem/solution fit for a certain market and are not able to make the business case for the development efforts for whatever reason. I have approached the customer to partner with me and underwrite development of the features they wanted in my product. The benefits are obvious…I then had the features to dig deeper into that vertical, market etc. and had a great reference partner in the space. Of course, there is some finesse required in making sure you don’t get in too deep – but well managed it is a beautiful relationship – and profitable.

    I agree whole heartedly with the last paragraph about sales being a side effect. I have heard it said that sales is something that happens when you are delivering great customer service. I like it like that.

    Looking forward to more – keep ‘em coming!

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