Thus, “I’ve gotta sell more product” becomes “I’ve gotta sell a product more people want.”
But that mantra can be just as dangerous.
Riding flexibility until it breaks you
A small company has a lot of disadvantages compared to its bigger and more robust competitors, but one advantage every startup should lean into is flexibility. I’m not telling you any secrets when I bring up the power of a startup to bend to fit the needs of almost any customer, at almost any time, for almost any order.
But there’s a point at which that flexibility is taken too far, and the startup can sink under the weight of its own bloat — the end result being a product that does a lot of things, but none of them very well.
Luckily, you’ve got another flexibility superpower up your sleeve that can stop that from happening. And that power isn’t about being flexible in building your product, but rather how you sell it and even who you sell it to.
Call the bully’s bluff
Look, a lot of big, old, crusty customers will try to force you into a bad deal because they can — because they have the chequebook and you need the runway. What they don’t realise is that you started your company with a mission and a vision, and you’re not afraid to fail as long as it’s on your terms.
Every once in a while, you need to threaten to walk away from an offer you can’t refuse.
I’ll go back to an example in my past where a Fortune 500 company wanted me to “erase” certain transactions from my invoice because people way down their own chain of command were misusing what we delivered. In other words, I would eat about 10% of my revenue to pay for their mistakes.
That’s cool, right?
I offered to do that, provided the big company gave me a timetable for when those mistakes would be corrected. Over the course of a week or so, their answer to my request went from “Absolutely!” to “We’re just running it by management” to “Maybe” to “We’ll try our best, but no timetable.”
So I gave them my own timetable, which was my 60-days notice to terminate the contract.
What the big companies sometimes forget is that they’re too big and too set in their own ways to be able to pull off what a startup can do for anywhere near what they are paying, if they can indeed do it at all.
Suddenly, they realised that their own management had put them in a position where they would either have to spend 10% more to pay for their own mistakes, or who knows how much more trying to do it themselves. They rescinded their request for me to remove the line items, and we got along super well after that.
How often does the bluff work? I don’t know, not often, it’s kind of your own risk to assess. So bluff sparingly, and always go in prepared to lose the business.
Repurpose the deal
When you land big deals, one of the more common disappointments is the almost guaranteed letdown when the actual numbers don’t come in anywhere near what you projected. This can happen when the deal is a big deal for you, but just another contract for your customer. And when the customer is big and you’re small, that happens a lot.
At one of my former startups, a deal with a partner — one that was supposed to bring us more business than we had ever had — soured when the partner put forth such a lacklustre effort on our behalf that the customers they were sending us never converted.
Everyone was so excited when the deal was signed, then the partner moved on to its next shiny new object, and we became another in a long chain of them throwing “stuff” against a wall and hoping some would stick.
My team and I scoured the contract and found an out. After six months without a purchase, any customer brought in through the deal would revert to a neutral status, belonging neither to them nor us. They had written that language in to protect their obvious advantage as the much more well-known brand. We used it to devise a campaign to attack those customers after six months plus one day. Then we put all our efforts into that campaign instead of the partner deal.
When the partner deal came up for renewal, we almost renewed because our own campaign had worked so effectively. But we chose not to press our luck.
Let them fail and come back
If you’re as good as you say you are, there’s a bit of inevitability built into your demand. This inevitability can be small for some companies, larger for others. But if you’ve got it and you recognise it, you can use it like a lever to get better margins.
At one of the startups I worked for (but didn’t run), we achieved a point at which almost 60% of our business was made up of customers who had originally said no to us, then tried to do what we did on their own or with a third-party, failed spectacularly, and then came back.
This happened so often that we started building a time gate into our deals. If the customer signed up “right away,” we’d offer them a 20% discount, which evaporated once they walked away. Once this started happening on a regular basis, we decided to raise our overall prices. By 20%.
There are all kinds of ways to use flexibility to your selling advantage, and just as many ways to turn that flexibility off to avoid ruining your product or your reputation. Some of these tactics may seem bold, even mercenary. The difference is, when you’re a startup, you’re betting on the strength of your solution, not the weakness of your customer.
Joe Procopio is a multi-exit, multi-failure entrepreneur. He is the founder of startup advice project TeachingStartup.com and is the Chief Product Officer of mobile vehicle care and maintenance startup Get Spiffy. You can read all his posts at joeprocopio.com
If you want more direct advice and answers, look into Teaching Startup.