As a serial entrepreneur and growth consultant at Red Rocket, I have been exposed to hundreds of companies, and some of the common pitfalls they run into as it relates to sales, and the impact it has on effectively growing their businesses long term. Below are five common pitfalls I see entrepreneurs make when chasing near-term revenues, that can often create long term hurdles for the business down the road.
- Avoid Dependence on One Industry
Sometimes an entrepreneur has no choice. If they are a car parts manufacturer as a business, they are pretty much tied to the ebbs and flows of the automotive industry (which is highly cyclical and tied to the health of the overall economy). But, when you can, you should aspire to have a nice mix of customers across many industries. So, if one industry gets negatively impacted by the economy, it does not take your entire business down with it. I have seen a lot of companies see their revenues get cut in half over night, based on some unforeseen economic event (e.g., 9/11 in 2001, mortgage crisis in 2008). Don’t let your business be one of them.
- Avoid Dependence on One Customer
Similar to above, you want to avoid dependence on any specific customer. You never want to have “all your eggs in one basket”, so to say. In a perfect world, no one customer should represent more than 10% of your overall revenues. That way, if you lose that customer for any reason, you are only putting 10% of your revenues at risk. Too many times I have seen companies living dangerously close to the edge, with more than half of their revenues at risk with one customer. You lose that customer, you lose your business. And, that is not a good situation to be in.
- Not All Customers Are Good Customers
Too often, a startup is so desperate for revenues that they will take it from wherever they can get it. Even if it means they are “going outside of their comfort zone” in terms of what is a perfect fit for their business. That is a recipe for long term disaster. Customers that do not fit squarely into your core competencies, puts both the company and the customer in a bad position. This could include taking on a project that is too difficult to fulfill. Or, taking on a customer who is never satisfied, and has you constantly spinning your wheels. It is perfectly acceptable to walk from a customer or a project if it is not the right fit for business. Don’t get so romanced with near term revenue, that you lose sight of long term fulfillment costs and heartaches.
- Avoid Customizing Sales
Where you can, it is always best to “productize” your business. You want your sales team perfectly trained on those products, and your operations team perfectly fine-tuned for fulfilling those sales. Nothing causes more chaos in a business than custom sales requests. The sales team is not sure if the company can fulfill it, slowing them down. The technology team needs to drop what they are normally working on in your product road map, slowing them down to squeeze in time for a custom development. Your operations team is not sure how to fulfill it, slowing them down. Sometimes, custom sales are OK, if the product being customized was already in your long-term product roadmap anyway, and now you are just accelerating it for a paying customer. Or, if a huge client is requiring it, to protect the relationship. But, as a rule, custom is typically a bad word when selling. You can learn more about how to productize your business in this other post I wrote on the subject.
- Don’t Use Your Clients as Guinea Pigs
If you are not sure your product or service will be successfully delivered with a high odds of confidence, do not sell it. Period. That means making sure you have done a proper quality assessment of the product, on your own, before pushing it live into a client deliverable. The worst thing you can do is to use your clients as guinea pigs, to test out your products, unless they are perfectly clear they are being used in a test pilot situation and they are fine with that. Because when things do not deliver as planned, you have soured the relationship, and most likely, have lost a customer. Not to mention all the negative bad will that customer may spread to other client prospects calling for references. Be sure to read my companion piece, Doing the Smoke and Mirrors Dance, for more insights here.
So, when looking to close your near term sales opportunities, keep the above pitfalls in mind. As you don’t want to be paying for any costly mistakes you make today, down the road.
Image credit: CC by David Morris