A recent study by NetApp and Zinnov says that B2B tech startups in India have more than tripled (from 900 to 3,200+) since 2014. Investments in B2B startups touched $3.7 billion in 2018, a steep rise of 364% from 2014. This B2B wave is driven by the pressing need for digital transformation across enterprises, financial institutions, hospitals, governments, SMEs, kirana stores etc.
Setting and scaling a B2B business is different from consumer-facing businesses with a unique set of challenges in customer acquisition channels, marketing, servicing, pricing, retention etc. The most glaring difference is that of the sales cycle- often a long and arduous one for B2B startups. Here are tips on how B2B startups can crack the code on enterprise sales.
A client-first ethos
Understanding the client’s requirement lies at the core of any B2B business. It is often advisable to hit the market with a basic product or service and then adapt or customize according to the client’s needs. Advancements in technology allow for such flexibility in the case of most tech startups. From our conversations with B2B startups, we’ve learned that a smart approach is to work on getting a foot in the door with a basic product, perhaps offer a small pilot of sorts. Basically, just get started!
It is important that the value proposition is proven in the pilot or the initial phase.
A client that sees improved efficiencies, reduced costs or increased sales initially will be willing to engage for further development. Enterprise sales is a high-touchpoint model. It involves regular engagement to build lasting relationships.
It’s all about the team
Scaling a B2B startup requires significant synergies amongst various teams. Each team within the B2B startup has a different approach to the product/service’s usability. The tech team is often known for focusing on product enhancement over market distribution, an aspect dear to the sales team. It is imperative to train your tech team to understand the requirements raised by the sales team and vice versa.
To prepare for growth, get your operation systems and CRM processes running efficiently. Hiring the best people for sales goes beyond resumes: focus on experience over education degrees.
As a general rule, for every tech recruit, there should be at least 2x the number of sales personnel. Building a high-performing team necessitates incentives linked to quantifiable, ambitious yet achievable targets. While setting sales incentives, remember that cash is king. Commissions need to be linked to collections too, not sales alone. Paying commissions at various steps: sales contract, first order, collections etc. is a prudent strategy that ensures alignment of incentives between the sales, collections and accounting teams.
Aggregation is key
One of the fastest ways to grow sales is to find a partner or aggregator to sell your product/service. This is an efficient way to tackle the long, arduous B2B sales cycle conundrum. Look for well-established companies that sell into the same segment; the product or service offered may be entirely different but you could leverage the sales channel. For example, a health services provider and a manufacturer of handheld tablet devices can leverage a common channel to sell to schools. Incentives need to be meaningful to make such an arrangement work. Additionally, ensure that alignment trickles down through the partner/aggregator organisation. An oft repeated mistake is contractual agreements with top management without proper guidance or alignment from frontline sales personnel. Such an on-paper agreement is destined to fail.
Set expectations upfront
Collections are one of the biggest pain points for B2B startups. Larger enterprise clients are notorious for delaying payments despite contractual obligations to pay within a certain timeframe. Reasons for delayed payments range from insufficient funds to poor internal processes. Ensure that your sales and accounting teams understand the importance of on-time payments and more importantly, communicate it to the client constantly. Do not give discounts for early payments. This sets the wrong precedent. Instead, incentivize your team to collect better. If delayed payments is a recurring issue, then you may eventually threaten to switch off the service or to take legal action, as a last resort.
The above are broad guidelines for founders of B2B startups to follow and are best institutionalized in the early days of a startup’s journey. While it’s easier said than done, its worthwhile for B2B startups to spend time and effort building a strong foundation for sales and collections processes. Each of the above aspects need to be ingrained in the culture of the company and its employees, paving the way for rapid growth and scale.