In my previous blog on selling to mid-Market companies and bigger we addressed the challenges with your product offering, and how to get your product ready. In Part 2 I’m going to talk about your company, what the blockers are, and how to be ready.
Company Is Too New
Consumers love to be early adopters. Companies don’t. Asking the CFO of a Fortune 500 company to bet their company on your new AI financial modeling software that you released last month won’t fly.
There is an old saying: “No one got fired for hiring IBM”. It’s a bias that I don’t necessarily agree with, but it illustrates the challenges that young companies face. It’s the notion that even if things went really badly on the deal, the choice of picking the larger and more established vendor gives you cover – “Who would have guessed that they could have screwed it up so badly!”
Many larger companies have expressly stated criteria for doing business with new companies that include size, financial stability, revenue, and team size. For example, I’ve seen criteria that your company must be in business for at least 5 years, have $10 million or more in revenue, and have 25 people on your team.
Talk to your potential key customers and learn what those criteria are before you build your product. Your growth strategy should have a plan for reaching those benchmarks before you approach those customers with your product.
Key Insight
How to address “You’re too new”
To be frank, this one usually isn’t truly solvable except through time. However, there is a huge difference between knowing this is a blocker ahead of time, and finding out when you are getting stonewalled at your target customer’s gatekeepers.
This is where playing the long game is essential. Your business plan needs to accept this reality and to plan for it accordingly. You do this by cutting your teeth on smaller businesses who will have lower bars for you to cross and scale up over time.
You also need to have enough runway to get there, and that’s going to mean real revenue. Most startups can’t wait 4 or 5 years to make their first sale, so your plan needs to have a plan for achieving revenue that you can use to scale and grow.
Here’s another opportunity that you can tap into, but you’ll need to do some research. Many big companies have created innovation teams within them that are nimbler and less risk-averse than the company might be as a whole. If you have a new product that is innovative, you might be able to get traction with those kinds of groups.
The good news is that many of these innovation teams are very visible. Big companies want to be seen as innovative, and the leaders of these teams are often easy to identify and connect with. Also, look for innovation events like Idea Jams and Innovation Summits that are open to outsiders where you can begin to network to those who might be able to unlock doors for you.
Company is Too Small
Large customers are all about weighing and mitigating risks vs. rewards. Small and new vendors are risk points for large companies, it’s a simple as that. Even if you have been around for years, small vendors with limited resources often are often not considered seriously because there are concerns of ability to scale and perform. Small vendors can be swamped by landing a big client, and buyers know that. You will be scrutinized very carefully if you get your foot in the door.
And it’s the same problem for digital products as it is for physical ones. If you are delivering a physical product and you have production capacity for 1000 units a month, and get an order for 100k units, you are probably in trouble unless you can figure that out gracefully.
In the software world, there are a myriad of tasks and functions that include onboarding, integration, training, testing, support and maintenance. Cisco has got that down to a science, but a small team of 10 people might fumble that ball big time.
And this illustrates how the risk cuts both ways. It’s not an uncommon story to have a small company land a huge client only for the reality of delivery and support becoming an unrecoverable nightmare, and even closing their doors.
Make sure you understand and plan for the revenue gap you need to close from the day you sign the contract to when the cash begins to flow. It’s a tough situation if you need to spend $50k on a custom feature that you promised to close the deal, hire an onboarding team of 20 people, and scale up your support desk and your first check could be 6 months away.
Don’t make the mistake of thinking that just money can fix this problem, because it’s a lot more than that. It’s resources like your team, your product, and your supply chain. If you play the game where you try to close the sale, and then use the revenue to scramble to support it, you will either lose, or at least damage your reputation with your client, and your market.
Key Insight
How to solve “You’re too small.”
So much of this problem is solved through proof, and that’s done through demonstrating that you can perform at the level necessary. But this is a bit of a chicken and egg problem – you can’t build your infrastructure to support large contracts without the revenue from those big sales, but you can’t make big sales without the ability to deliver. How can you do both?
- Ratchet up – It’s not easy to grow 10x in one year and expect to do that gracefully. Have a growth plan that allows you to scale incrementally instead of exponentially.
- Invest in your team – This is almost always a huge sticking point for handling bigger clients. If your team is stressed out now, what will happen when their load is tripled. Invest in the people sooner than later.
- Partner – In the digital world there are often resources such as development, help desk support, security, and systems infrastructure that can be provided by partners. You’ll give up margin but improve your delivery. And, over time, you can grow your own team and resources the right way.
- Get your finances in place – Landing the whale always is a strain on your financial picture. Often you have to spend a boatload of cash supporting a big sale. The time to make arrangements for financing that big sale is now, not when you need to hire 20 people and don’t have the money to do so.
- Sell your nimbleness – You have a distinct advantage in that big vendors often have rigid policies and products. If you can do it, sell the advantage that you will bend over backwards for them. Just don’t get in over your head!
Be Prepared to Walk Away
Lastly, you have to be prepared to walk away from a sale if you can’t realistically see a path to handling it the right way. “We’ll figure it out” isn’t a formula for success. And your client will respect you if you say that you aren’t ready now, but you will be down the line. When you come back to them in a year or two you will be much more credible.
Summary
Young and small companies are at a disadvantage when selling to big companies, yet there are ways to overcome those obstacles. It must be strategic and with your eyes open and know how to play the long game. Look for innovation teams and events, and connect with the influencers. If you do that right, you’ll eventually make headway.
