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Entrepreneur Office Hours - Issue #20
Thoughts on startups in the pandemic, sales tips, customer acquisition strategies, and an entrepreneur who fought a powerful industry (and lost!)
My article about The Rock from a couple weeks back did so well that I got an opportunity to publish another “thought piece” in Marker — Medium’s in-house business news publication. The new article includes some ideas on why the pandemic didn’t destroy the startup ecosystem in the way so many people predicted a year ago.
But this week’s issue isn’t just filled with thought-provoking essays. It’s got lots of practical advice about selling and customer acquisition, too!
I also got to speak with Michael Merhej, founder of Audiogalaxy. If you haven’t heard of Audiogalaxy, you’ve surely heard of its chief rival, Napster, and, in a lot of ways, Audiogalaxy was bigger. So if you’ve always wondered what it would feel like to piss off a powerful industry, you’ll enjoy hearing Michael’s story.
“Coronavirus is the black swan of 2020.” That's how Sequoia Capital described the pandemic in a letter to its portfolio companies as it predicted an epic startup apocalypse. FYI -- Sequoia would go on to have its best performing year in history. So what gives?
The Music Lover Who Pissed Off the Recording Industry
Unless you’ve only just gotten onto the Internet in the last few years, you’ve surely heard of Napster. But Napster wasn’t the first music sharing service. Years before Napster, a student at the University of Texas named Michael Merhej launched an FTP search engine — called the Borg Search Engine — on a physics department server. It quickly became the most popular place on the Internet for people to find the songs they couldn't get from the recording industry and its monopoly on music options.
Listen now on:
…or just search “Web Masters” wherever you listen to your favorite podcasts.
Every entrepreneur has to learn to sell, and most of them struggle with it. But becoming a great salesperson is actually a lot easier than you think.
Most entrepreneurs focus on their products. But the valuable part of a startup isn't its product. It's the customer acquisition process. How much do you know about that?
Office Hours Q&A
I noticed you occasionally write about marketing and sales so I thought you could possibly help with a problem we’re having. The marketing team for my startup (SaaS, B2B in the code optimization space) is doing a decent job of generating sales calls, but the people we’re talking to are really bad in terms of being good customer fits. So we end up having lots of sales calls that go nowhere. Any tips or tricks or suggestions for how to get better quality leads into our pipeline? What should I be telling the marketing team to focus on? I don’t have a marketing background, so I’m struggling to help them troubleshoot the problem.
There are basically two levers to pull to improve the quality of leads going to your sales team. You’ve already alluded to the first, which relates to the marketing strategy.
Without knowing your company or the kind of marketing strategies you’re deploying, I obviously can’t get too specific with my feedback here, but it sounds like there’s a problem with your messaging. It’s maybe too broad and attracts too many people.
I realize that seems a bit contradictory. How could attracting too many people be a bad thing? But marketing isn’t just about volume. It’s volume plus quality. As you’re discovering, you’re better off with a lower volume of high quality leads than a high volume of mixed (or poor) quality leads.
If I had to guess, it seems like whoever is running your marketing team is focused on volume. That person probably feels good about sharing a splashy number: “Look how many leads we generated this month!” If I had to guess, the person is probably a little inexperienced.
As the CEO (it seems like that’s your position?), you need to hold that person accountable. Don’t allow a pure volume metric to be the primary metric. Instead, introduce a new metric that prioritizes quality over pure quantity -- something like “total quality leads” -- and set goals/incentives based on that metric. If your marketing lead doesn’t know how to figure out whether the leads are quality or not and isn’t willing to learn, then it sounds like you need someone new running your marketing team.
The second way of improving lead quality is to create a sort of scrubbing process in your sales funnel. In other words, don’t connect your lead generation team straight to your sales team. Put a couple pieces in between to A) wash away the poor quality prospects; and B) raise the overall quality of prospects.
Getting rid of poor quality prospects means adding a qualification process. You can do a lot of qualification automatically by implementing a few simple rules to disqualify prospects such as: target company size; contact’s job title; age of company; and so on. Simply put, toss anyone that doesn’t match what you typically see from good customers and you’ll save lots of time/resources. Sure, you might get one wrong every now and then and lose out on a potential customer, but the overall efficiency will far outweigh the loss.
Beyond criteria-based qualification, sophisticated B2B sales processes will have qualification calls before sales call. This requires a completely different team that spends 10-15 minutes on a call with someone to make sure the prospective customer is a good potential fit. That’s way better than an hour long sales call where the person has no chance of buying.
Through this automated and manual qualification process, you’ll scrub away a lot of the bad prospects before they ever reach your sales team.
Simultaneously, you can raise the quality of prospects through nurturing and educational content. That includes things like blogs, videos, infographics, case studies, etc. In other words, as soon as someone comes into your pipeline, start sending content to educate them about your company and product. The good prospects will consume the educational content and be better prepared to buy. The bad prospects will self-select out as they learn more about what your business can and can’t do for them.
One final note: as with most things in entrepreneurship, none of what I’ve described here is fast or easy. For example, creating educational content will take a good chunk of time. But… well… that’s the business you’re in. Keep making incremental improvements, and good things will happen.
Oh… be sure to celebrate your team for generating lots of sales calls. That’s not easy and is, itself, a big accomplishment.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!