The Importance of Value-Based Sales for Startups and Early Stage Companies

In this initial entry I would like to bring for discussion an analysis based on interviews with executives and account managers from 12 different B2B software companies, ranking from large multinational to small early stage companies.  The driving hypothesis is that sales effectiveness is a consequence of the maturity of the software solution and the strength of the vendor’s brand. In this case, we understand “sales effectiveness” as the ratio and the speed on which you convert “cold calls” into closed deals, considering that the calls are addressed to the right person in the target client and the lead is highly qualified.

The difference in the sales effort between new companies with new solutions compared to leading brands with mature solutions, is dramatic. In a leading company with a mature solution a sales rep needs around 30 calls to open 18-24 doors (client visits), from which 7-12 can be turned into closed deals within 6 – 12 months. However, in the case of a new company with a new solution, the sales rep needs to double the number of calls (60) to open the same number of doors (18-24), and thereafter, the sales conversion rate drops dramatically: only 2-4 deals within 9-18 months. Note that in the case of new solutions, in order to close a deal it is necessary to successfully run pilots and convince everybody in the client about the benefits (and "controlled risks") of adopting the new solution.

Why a value-based sales approach is critical for new companies with new solutions?

It is ironic to note that while leading software companies have established sound value-based sales practices, new companies with new solutions are far from even considering to try this sales approach. For a common understanding , for value-based sales I mean a sales approach in which the main focus is to demonstrate and jointly assess with the client the business value of the solution (i.e. cost reduction and/or increased revenues for the customer, via process optimization, cross selling, client retention, new business models), rather than focus the discussion around product features and pricing.

During their initial years, software companies’ efforts are mostly oriented to product development, and the team mind-set is naturally oriented toward resolving technical issues. But once the product is ready - or almost ready - to market, there is the strong need to state a powerful business-oriented value proposition, and develop value-based sales materials, processes and tools. In the following image we can see how a value-based sales practice can help startup and early stage B2B companies throughout the client acquisition process.

For more information on how to build a value-based sales practice you can always refer to the following sections in our webpage:


http://www.valuesearchteam.com/vbs_enablement.php

http://www.valuesearchteam.com/approach.php