I know it’s heresy, but not all revenue is good revenue—particularly for start-ups. In fact chasing and winning the wrong deals can be devastating to the long term success of a start-up.
But let me backtrack a little bit, I’ve written about this concept quite a bit beore, if you want to read some of the articles, follow the LINK. But let me give a brief recap:
Good revenue is:
- Business we can deliver profitably.
- Business where we can delight the customer, enabling us to scale within their organization.
- Business where delighted customers will talk about us and help us more easily acquire other customers.
- Business where we learn something that enables us to leverage that knowledge and grow rapidly–expanding our share in an industry, market, geography.
- Business that helps us grow our understanding of how we might grow with the customers–developing new or follow on offerings.
- Business that helps us become more effective and efficient in serving customers in the industries and markets. Stated differently, each subsequent piece of business is more profitable.
By contrast, bad revenue is from opportunities we win that have none (or too few of the characteristics) outlined above.
See the problem with winning deals, is we have to deliver on them. We have to create an ecstatic customer that feels compelled to share their experience with us. In start-ups, sometimes we are so compelled to get revenue, we book deals that completely derail us.
We may get ahead of ourselves, committing to deals that have requirements we don’t quite have ready. We sell the future, but customers are buying what we can deliver today.
To correct this and keep the customer happy, we divert resources to “fix the problem.” But in start-up companies diverting the precious resources we have to fix the problem can derail us. For example, I recently saw a company that realized they couldn’t deliver everything a very large customer thought they had bought. But this start up had to deliver on their commitments. Not doing so would have had serious financial and reputation impacts. To deliver on it they diverted 30% of the development team to fixing the problem. But those people were critical to meeting their product development plans/commitments. As a result, their product plans have been delayed significantly, adversely impacting their plans to grow and scale.
This is something that is really tough for founders (and some investors) to accept. Some are relatively inexperienced and don’t understand the importance of the concept. Many are just struggling for revenue and any revenue looks good.
Pragmatically, as start up founders, we sometimes have to chase and accept bad revenue. But if we do this, we have to do it carefully, recognizing the consequences of what we are doing and having a strategy to manage it.
Sadly, though, too many founders don’t recognize this or ignore it. As a result they struggle and may fail. Of they fail to scale at the rate they could and should. There are few organizations where a relentless focus on good revenue is more important than in start-up and early stage companies.
If you are a start-up founder, or CRO, have you defined what good and bad revenue is (you have to define both). Are you focusing your resources on generating good revenue?
Afterword: Thanks to Amy Volas and Jeff Bajorek for provoking this idea. They recently invited me to my very first “Clubhouse,” meet-up. It was a fascinating conversation and Clubhouse is an intriguing platform. Stay tuned, Amy and I plan to do some interesting things in the near future.
It’s funny, every once in a while I find myself in similar conversations with different executives. Each starts in a different place, but the underlying issues are all the same.
A core issue has come up. It’s actually one that concerns me deeply.
“Do we have enough confidence and trust in our people to let them do their jobs?”
Let me unpack this just a little. To be able to answer that question with a resounding, “Absolutely, without a doubt,” we have to be clear about a number of things.
First, do we have the right people in the job? Do they have the right mindsets, behaviors, values, attitudes? Do they have the right skills, competencies?
Do they understand the priorities, goals, mission, strategies of the organization? Do they understand how we hold the customer and the types of customer experiences we create? Do they understand our value proposition and how we create value with the customer?
Next, do they know what their jobs are? We actually neglect this terribly. We hire someone, saying, “Your title is this…….[fill in your favorite job title]….” and we expect them to know immediately what their jobs are. Even if they’ve held a job with a similar title in another organization, their job is probably different. We have to be very clear, “What does it mean to be a front line sales manager in this company?”
Related to the previous point, do they understand the expectations? This is both the performance expectations, but understanding the why and what for the job. How do they fit in to the overall mission and strategy of the organization.
Do they know how to do the job? This isn’t a static issue, it always changes, so we have to make sure we are coaching them and continuing to develop the skills to do the job.
Included in the how to do the job, do they understand the interrelated work flow, roles and responsibilities. We can only be successful if we work well within the team. Who are the people they depend on to do their jobs? Who are the people that depend on them? How do we effectively work together?
Have we provided them the systems, tools, processes, training, and programs they need to be impactful in their jobs? Do they understand how to use these to improve their ability to perform and meet expectations.
We never will be able to provide everything they need—every situation they face will be different. But have we developed the capabilities within them to “figure it out,” and take action based on their best judgement.
All of these are an ongoing, we have to keep reinforcing these things, coaching and developing our people. Helping them learn, change where they may not be meeting expectations.
Finally, we have to trust them to do their jobs! We have to step away, confident that we have done/are doing the things that will enable them to perform as they/we expect.
Sadly, too often we fail in many elements of this–which cause our people to fail. But the biggest area of failure is the final point. We have to trust our people to do their jobs!
Ban “Corporate Glamour Charts!”
I was reviewing a presentation a client was preparing for a critical customer meeting. It looked exactly like the thousands of presentations I’ve seen. After the title and agenda chart, came a whole series of “corporate glamour charts.”
You know what these are–we’ve all inflicted them on our customers/prospects, and had them inflicted on us. These are the bragging charts. They are the charts where we want to tell the customer how great we are. They always follow the same format. Usually some data about how big we are, how many people we have, our global locations, and all the awards we’ve gotten. The next is the “logo” chart. It shows dozens of logos of “name” customers that we have.
Inevitably, we inflict those and a few more charts on the customer—all focused on us, all focused on how great we are. In the entire presentation, perhaps there are only one or two charts on the customer.
Usually, the presentations continue to be about us. We dive into the weeds about our products, how great they are and why the customer should feel privileged that we should want them to buy those products.
Perhaps, implicitly, we are also saying how fortunate the customer should feel to even be talking to us.
I detest corporate glamour charts. Just when the focus of our attention should be on the customer, we make it all about us.
What if we shifted our perspectives on these presentations? What if we made the customer the center of attention?
Imagine how corporate glamour charts might change. They would be glamour about the customer—based on the results they achieve as a result of working with us.
What if we could imagine, “What would this mean to the customer? How does this make them great? How do they stand out–to their management, to their customers?”
Then the rest of the presentation would focus on the customer, what they are trying to achieve with this project and how doing the project with us enables them to achieve their goals.
We’re supposed to make the customer the center of everything we do. How would things change if we made them the center of attention of our presentations. What if we made them glamourous?
“Heroic Sales Efforts”
We all have them, the “Must Win Deals,” where we pull out all the stops. We do everything we need to do to win the deal.
Often, we are at our most creative moments when we do these deals. We thoughtfully overcome every hurdle, we get the customer to think differently, we mobilize all the internal resources necessary to close the deal.
We manage to present a powerful business case, to defend our value, to minimize discounting.
Then there’s that adrenaline rush when we win! We pat each other on the backs, we celebrate! We are, justifiably, proud to have won the DEAL!
But what happens, when more and more deals require heroic efforts? While we love the excitement, challenge, and the “high” we get from working these deals, we can’t sustain our business growth from these heroic deals. We get so caught up in the excitement of doing these deals, that we neglect to recognize the adverse impact they have on scaling our companies.
These deals, typically, consume more time, resource, and attention, at all levels, than our normal/unexciting deals. As managers, we want to build consistent sustained performance with our people. As more deals require heroic effort, the time and resource involved divert our attention from those deals that are core to building our business.
Often, these heroic efforts are required because of earlier failures in executing a strong deals strategy. We make mistakes, we get sloppy, we stop paying attention—then to recover, at the last minute, we have to implement a heroic deal recovery strategy.
Building and scaling our business is based on consistent, disciplined execution of our deal strategies. The reality, if we are doing the right jobs, it should be very boring. People should be building their pipelines, they should be working qualified deals through the pipeline, they should be managing deal flow with minimal “heroics.”
As managers we want to build consistency of execution. We want to sharpen it, improving it over time, so we can effectively scale and grow. Our time, as managers, can’t be focused on heroic efforts, but rather on coaching and developing consistent, disciplined execution with our sales teams.
As fun as they may be, anything more than the occasional heroic effort means something is wrong with sales performance.
I think the Maytag repair people had the right idea!
