a look inside the deals

early stage sales

It’s no secret that big companies are risk averse when it comes to buying products and services from small companies. It’s also no secret that the aversion can be overcome with hard work, good contacts, and solutions that meet real needs. At this Netpreneur Coffee & DoughNets event held March 25, 2003, a panel of entrepreneurs discussed how they have been able to win those deals and gain traction for their young companies. The keys are a sound sales process, good visibility, and finding your white knight. This event was hosted by the Northern Virginia Technology Council, and sponsored by Comerica, Ernst & Young, and Fenwick & West.

panelists:

Doug Clark, co-founder and CEO, Métier

Ken Kiser, Director of Mid-Atlantic Sales, Foundry Networks

Jeff Payne, co-founder and CEO, Cigital

Larry Schlang, President and CEO, Bantu

moderator:

Esther Smith, Partner, Qorvis Communications

Copyright 2003 Morino Institute. All rights reserved. Edited for length and clarity.

Disclaimer: Statements made at Netpreneur events and recorded here reflect solely the views of the speakers and have not been reviewed or researched for accuracy or truthfulness. These statements in no way reflect the opinions or beliefs of the Morino Institute, Netpreneur.org or any of their affiliates, agents, officers, or directors. The transcript is provided “as is” and your use is at your own risk.

bobbie kilberg: welcome

Good morning.  My name is Bobbie Kilberg and I am President of the  Northern Virginia Technology Council (NVTC).  We are very, very pleased to see you here this morning.  NVTC, the Technology Council of Maryland, the Washington DC Technology Council, and Virginia's Center for Innovative Technology are all very committed to seeing that Coffee & DoughNets continues as a vibrant gathering, and I think the turnout this morning shows that it definitely is. We think it's important to do this.

          Before we begin our panel discussion, I want to tell you quickly about an NVTC program that may be particularly relevant to your businesses.  The program is our CEO Team Solutions, a business advisory service that offers young companies the opportunity to have an intense—and I stress intense—three-hour session with a panel of senior advisors on a topic or topics of your choosing. Esther Smith is one of those advisors.  Our list of advisors includes leading experts in everything from business development and marketing to legal, human resources, and financial advice.  In addition, CEO Team Solutions has recently added a company mentoring program which is co-sponsored by Virginia's Center for Innovative Technology. 

          We're also pleased to announce the formation of a new entrepreneur’s committee which will build on NVTC's current activities for emerging growth companies.  The committee will focus on identifying areas of need within the entrepreneurial community and develop services, resources, and programs to assist with those needs.  Anybody who is interested in joining that new committee, please stop by our membership booth on the way out.  When you stop there, you will discover that we are pleased to say that NVTC will be offering a complimentary six-month membership to entrepreneurs here this morning who are new to NVTC.  This will provide you and others in your company with access to valuable benefits of membership, including CEO Team Solutions, our BeneNet and RiskNet affinity programs for insurance and employee benefits, plus all of our networking and educational events that involve the entire council membership, as well as the events and activities of our 18 committees and their 17 subcommittees.  For those of you who are based in DC and Maryland, we strongly encourage you to join the Technology Council of Maryland and the DC Tech Council.  We all work together closely and cooperatively, and we plan to work with all of you on a continuing basis.

          Our program this morning is entitled “Early Stage Sales,” and we have a knowledgeable panel of experts on this topic.  I am pleased to introduce our moderator, Esther Smith, who is a member of NVTC's board of directors and Partner of Qorvis Communications, who will moderate the panel and introduce the participants.  Thank you. 

esther smith: introductions

Thanks, Bobbie.  Welcome.  It's nice to look out over an audience of survivors.  It is 2003, it's spring, and we have a great panel this morning.

          One of the most interesting things you will find today is the market synergy that is finally emerging in Washington between what had previously been known as “commercial technology” companies and companies that do government business.  All of these companies are very entrepreneurial, all of them are small but growing—all except for Foundry—and you will find some real lessons in having the value of the biggest IT customer in the world, the federal government, sitting there next door.

          With that, we're going to start with Jeff Payne.

jeff payne: a well-defined process

Thank you, Esther.  Good morning, everyone.  To give you a little background on Cigital, we make software behave.  Our business is helping customers with reliability and security issues for their software applications, whether they're buying those applications, building, or integrating them.  We help analyze software to make sure it works, then we work with business executives to figure out how to improve their software development processes, make their organization more efficient, and make better decisions around when they should release software, who they should buy software from, and how you control a software development vendor that you have hired.

          Today I'm going to talk about two things.  One is our sales process, because we have a very defined sales process that we follow, and then I'm going to walk through a case study of the use of that sales process and how it resulted in some business for us this year.  I'll also give you a couple of lessons learned and answer any questions you might have at the end of the panel.

          We have a defined sales process, and it's really a sales and marketing process.  I believe very strongly that those two functions have to be very well integrated from a lead generation and sales perspective.  The process goes as follows: We target, we penetrate, we qualify, we define, we scope, we close, we farm.

          What do I mean by those things?

          Targeting, of course, is about figuring out whom you want to sell to within the organization, what kinds of organizations, where you've had success, and where you want to focus the messages that you feel will have the most impact.  I'm a big believer in targeting.  As a small company you can't go after everybody, you've got to figure out who is going to buy, then you've got to get in front of them. 

          Penetration is about getting in front of the right person in those organizations through lead generation, marketing campaigns, and other things you can do to get to the right customer.  The goal in lead generation is to get what we call a “first date,” which is a qualification meeting.  When we go into an organization, the first and foremost thing we do when we qualify a customer is listen to their problems and needs.  We're big believers that in sales, first you have to understand what the customer needs, not tell them what you have to sell.  That’s because you're going to tailor your solution, even if it's a product, to the needs they have.

          We go in, we listen to the customer, and we try to understand what they need and where the pain is in the organization.  Where are the problems and the issues that they have to deal with?  Then we tell them about Cigital, because most of them haven't heard of us.  We spend a little bit of time on our corporate capabilities and the types of things we do for our customers.  The goal in that meeting is to identify a couple of pain points or need points that the customer has and for which Cigital has a solution so that we can sell into that customer.  The goal is then to introduce those ideas to the customer, get them bought into the idea of seeing whether it fits into their organization, and setting up a follow-on meeting to dig into detail on the definition of exactly what this solution is, how it fits into their organization, and how it can help.  To show them the benefit of what Cigital brings to their business.

          We then move into the definition stage, which is digging down into the solutions we have to provide, the technology we have, the processes we follow, and the things we do.  We get them behind the idea that we have something that fits into the organization.  We qualify budget and so forth, and get it honed down to what we think the customer will actually buy.  Then we ask them something that I think is critical in the sales cycle—we ask them to put time and effort into the rest of the process.  I'm a big believer in this because this separates the people who are just meeting with you because they don't have anything else to do from the people who are actually serious about buying something.  Before we move into what we call our scoping phase, which is where we're going to put a lot of time and effort into configuring our offering for this particular customer, we ask them to be part of it in what we call a “workout,” where we sit down with the customer—it's usually a half-day or a day in length—with a team of their people, a team of our people, and we dig through the specifics to figure out how we're going to work together.  If the customer will not do that with us, we won't do business with them because we know they're not going to do business with us.  We're not going to spend the resources.  During scoping we’re exploring the specifics of our technology, how and where it is going to apply in their organization, what the ROI is going to be, exactly how they're going to use it, what the deliverables might be, and what they're going to buy.  Out of scoping comes, ideally, a trial proposal that they have pretty much already bought off on, and they've agreed that this is something they need, they have budget for it, and they agree with the tasks, so now it's just an issue of terms and price.  We're big believers that you sell the car, you don't sell the price, so you get the customer to buy what you have that they need, and you qualify their budget, but you don't focus on the price and the terms of the deal until after they've decided this is the car they want to buy. 

          Then we move into what we call the close piece, which, if done properly, should just be about the terms of the deal, including the licensing, maintenance, consulting, and professional service aspects of what they're buying.  What's the price?  What do they get for the money?  What's the ROI?  How do we sell it to the decision-maker and how do we get this thing closed?

          For us, it doesn't stop there.  One of my key lessons learned, is that the easiest customer is the existing customer.  In your sales process, you've got to figure out how to take advantage of your existing customers, both to get more business out of them and to get to other people they know.  So our seventh step is what we call farming, which is why we have a dedicated account management force that moves in during the sales process, takes over the sales process, helps close the deal, then stays around to make sure the project is a success, that the technology is used, and to make sure that if additional needs and wants are identified, we take advantage of it to get more business.

          Let me give you an example of how this works.

          Late last year, the good news and the bad scenario was when marketing came to me and said, “We have a great opportunity to get in front of 200 CIOs who all have a budget of over $100 million to spend in 2003, and 35 to 50 of them are in our target market.”

          I said, “That's great.  Where do I go?”

          They said, well, now that is the bad news.  You've got to sponsor this CIO conference, and it's going to cost around $75,000, plus probably $25,000 to get everything we need in place to go out and do it.”

          Based on the target focus we're talking about, we spent time looking at who would attend this conference and where the target market was.  Our analysis was that to get in front of those 35 or 50 people would probably cost that much money anyway.  Our sale isn't a shrink-wrapped, out-of-the-box tool that sells for $1,000.  Our typical engagement in the first round is a couple of hundred thousand dollars, and our goal is to get $1 million out of a client a year.  We don't need thousands of clients, we need five to 10 new clients a year spending a million dollars with us and we're growing very nicely.  So for us, 35 or 50 targeted market opportunities is a pretty nice number in one spot.

          Based on that, we decided to do it, but we decided to go in with a plan.  We put together a campaign to aggressively attack this conference before it started, during it, and after it.  We put together direct mail, we made calls, we divvied up the names of people that were going to the conference that we wanted to target, and we aggressively contacted these people before the conference even started in order to introduce Cigital and get the ball rolling.

          Of all that we got out of the conference, by far the most important was the speaking opportunity.  It was the chance for me to get up and not talk about Cigital, but to talk about something that would draw an audience into hearing about Cigital indirectly.  We crafted a message that we thought would play to this audience, and we selected a fun giveaway, a flash drive.  If you haven’t seen these things, they’re tiny disk drives that hang on your key chain and can hold many megabytes of data.  They're cool.  We put our logo on them, we put my presentation on them, we put our corporate capabilities on them, and we told everybody we called before the conference that if they came they’d get one for free if they dropped a card into a basket.  The typical turnout for these types of presentations is 35 people; we had about 75 in our session.  I know that they were all there for the key drive, not to hear me speak, but what came out of it, interestingly enough, was that someone who wasn't even on our target list, who we didn't know was coming to the conference, the CIO for a very large, very well-known, very controversial financial services organization that I cannot name—although, hopefully, we're going to do a press release in the next few months and you'll figure out who it is.  They were building something mission critical.  He came up after the talk and said, “I love what you have to say.  I need a lot of help, here's my card, call me tomorrow.”  A great lead, right?

          The next day we called the gentleman and within a week we had a first meeting with him.  We expected it to be a qualification meeting, but it actually skipped through three steps in our process in one day.  Based on what he heard me say, he knew exactly what he needed and told me what he wanted.  Interestingly, through discovery we learned about something else he needed which we also subsequently sold him as well.  He wanted to get something worked out and in process within a week so that we could get going on a project that he had looming and needed help on.  All of this happened a week or so after the conference, and, in less than a month, we closed the deal, the first phase of which was $300,000 and which I estimate will probably be about $1 million by the end of this year or so.  We're now in that account, farming it, doing what we do.  That's an example of how this process works.

          A couple of key lessons learned: First, you have to have the defined sales process with defined steps in it and defined criteria that you can sell against.  As a CEO, I need that to make sure that we're actually making progress and that sales isn't sandbagging me—which they've been known to do—and so that we can predict revenue.  Second, I'm a big believer that you don't rush to proposal, you make a customer work to it with you.  If they're not willing to work with you, they're probably not going to work with you anyway. 

Ms. Smith:  Thanks so much, Jeff.  I want to come back later in the discussion to the role of the account manager, including how you fund and manage it.  The next person to speak is Larry Schlang from Bantu. 

[continued]

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