The Perils of Selling Strategy to Big Companies
By Howard Tullman
The big guys have a knack for stringing little guys along. Here are 5 tips to help you hold your own.
In the “been there, done that” category of mistakes that you should only make once, I would award a place of high honor to the idea that startups should spend their scarce capital and limited resources trying to “earn” their way into the hearts and wallets of big customers by selling strategy as a door opener. By “strategy,” I mean various attempts, presentations, mock-ups, etc. designed to show these big guys the disruptive and scary future, and how your company can help them successfully navigate through the coming tough times for their businesses. These attempts at show-and-tell, which are really just some smart guys showing off, almost never ends well for the little guys (that’s you) and worse yet, it deflects your best people and a lot of your focus in the wrong direction.
I realize that there’s an ego component to this stuff and also some bragging rights about who you’re pitching and getting in front of. But egos aside, the bottom line is whether anyone is going to be writing you a check any time soon. The method doesn’t work, the metrics are always muddled at best, and for sure the math is a killer, because you rarely get paid anything for the privilege of spending your time chasing these guys. To be successful, you need to develop, design, and incorporate your strategies and solutions into your own offerings, rather than trying to use them as come ons and commercials for how well you’ll eventually do for the customers.
And of course the biggest and saddest joke in this formulation is the word “selling” because in 99 cases out of 100, startups aren’t selling anything. They’re really giving away their time, knowledge, and insights for free. You end up spending your precious time educating a bunch of folks who often turn out to be indifferent ingrates at the end of the process and politely tell you that (a) they’ve decided to do it themselves (which we all know that they can’t do, even if they steal your ideas); (b) that they’re going to do it elsewhere; or because of fear, inertia, or ignorance that (c) they’re not going to do it at all. And you and your team are that much worse for the wear.
If that wasn’t bad enough, you’ll also learn quickly from your investors, after a couple of these expensive adventures go nowhere, that they thought they were buying into a product or service business and not a consulting firm. They don’t want explorers and educators; they want executors. They don’t want you strategizing; they want you selling. Fully engaged in turning your ideas into invoices, they’re going to tell you that they’d rather see a month of consistent singles and doubles than wait three months hoping for a home run that may never come. As a scrambling startup, you just can’t afford that kind of investment. So forget it. But just in case you can’t resist the temptation, here are a few things to keep in mind to help you avoid a total wipe out.
1. Don’t Get Pushed Around
The biggest bullies in big companies have the least actual power. They can say “no” all day long, but they can’t say “yes,” and they know it. They couldn’t green light a project if their lives depended on it, unless it happened to cost a lot less than a latte. So they spend their time taking their frustrations out on you and tormenting young entrepreneurs who don’t know any better with big empty promises of good things to come down the line. And in the meantime they’re only asking for the sun, moon and stars, all for free because that’s pretty much all they’ve got to spend.
Here’s the straight dope: You don’t have to give away or prove anything to these guys because they don’t matter. Find the folks who can actually sign a check and get in front of them. They’re a lot easier to deal with and they can make a real deal happen. They’re also a lot nicer too, because they don’t have a big chip on their shoulders. And they know that if you want something of real value, you have to pay for it. If you pay peanuts, you get monkeys.
2. Get Profitable First
Too many complimentary pitches and big bunches of brainstorming freebies will mean too little inbound cash flow and that means trouble for any startup. You need to be sure that your sales team isn’t taking the easy way out by selling air and getting paid nothing for it. It’s not a “win” when all the commitments and all the costs are on your side of the table. The real focus needs to be on making sure that you are identifying and signing up paying customers. The size of the individual deals is nowhere near as critical as the cash. Another important bonus is that these deals don’t take as long to launch or as long to complete as many of the bigger ones might.
The truth is that you simply can’t afford to pass up the small fish while you’re waiting for the whales. Big companies are one of the last refuges of the slow “no” and there’s just about nothing worse for a startup than that. A fast rejection is always better than being stroked and strung out by a guy who gets paid to have meetings rather than to make decisions and progress. Once you’re making more money, you can consider whether to roll the dice on some bigger proposals. Don’t be in a hurry.
3. Get a Pilot Project
Once you’re in the room, don’t leave the conversation without something. A trial, a pilot, a prototype: these are all good ways to get the ball rolling, but not for nothing. And equally important you must make sure that there’s a clear and express agreement on just what you’re committing to do and what exactly will constitute success, and the steps to follow afterwards. If the metrics and measurements aren’t properly aligned and apparent, you’re as likely as not to get to the end of the project and have nothing to show for it, because you didn’t get the right rules established at the outset. And don’t think that any agreement is better than no agreement. A bad beginning agreement can set the wrong tone for the whole relationship. And don’t think that only newbies make these kinds of mistakes. YouTube and plenty of celebrities made $300 million worth of these mistakes just a little while ago. So get something, but make sure you know what you’re getting yourself into.
4. Get Paid
If you don’t ask, you don’t get. You know what your stuff is worth, or you should, and you shouldn’t be embarrassed to say that you stopped giving it away for free a while ago. We have all heard the stories about what great reference clients some of these companies will make for your business and these tales are basically BS because everyone in the industry who matters knows that the very same guys make a habit of never paying new companies anything for the chance to test their products or services. They never pick up the check and, after a little while, they start to lose respect for the companies that keep working for free. Just like the patsy in the poker game; if you don’t know who it is after 30 minutes of playing (or too many free trials), it’s you.
5. Get Partners Who Are Already in the Door
There are a lot of big companies scared to death these days of everything digital and under tremendous pressure from their own customers and clients to figure things out in a hurry. This kind of demand would be encouraging except that these companies simply aren’t built for speed, and that’s where the opportunities are being created for clever young companies with the chops and the technology to get these kinds of jobs done quickly, relatively cheaply and, most importantly, quietly. Think of the big guys as today’s Trojan Horses. They’re already inside the walls, they have the relationships that would take you years to build with the biggest brands and players around, and they’re hurting for help. They can make good partners and you can make them look good as long as you’re careful to make sure that your IP and financial interests are protected and that they aren’t selling you the same bill of goods about future fortunes.
Howard A. Tullman is an American serial entrepreneur, venture capitalist, educator, writer, lecturer, and art collector. He currently serves as CEO of 1871 Chicago, Managing Partner of G2T3V, LLC, and the Managing Partner of Chicago High Tech Investment Partners LLC.