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Old 06-09-2014
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Default Where Entrepreneurs often go Wrong

What Entrepreneurs Get Wrong
by Vincent Onyemah, Martha Rivera Pesquera, and Abdul Ali



For many entrepreneurs, the process of launching a company begins with the lightbulb moment when they conceive of a breakthrough idea for a new product or service. Very often, they are so passionate about the idea that they believe its merits will be self-evident to prospective customers—that the innovation is so obviously superior it will sell itself. Entrepreneurs who avoid that delusion may think of their initial sales as a chicken-and-egg problem: They realize that getting buy-in from potential customers is a top priority, but until they design and build the product (which often requires securing funding, assembling a team, and many other tasks), how could they possibly make a sales call?

Both attitudes fail to recognize a simple fact: Salesmanship is central to the success of any young company, and entrepreneurs ignore this at their peril. Yet many do ignore it, in large part because they have little sales experience and have probably not taken classes in how to sell, even if they have formal business education (as Suzanne Fogel and colleagues explained in “Teaching Sales,” HBR July–August 2012). For those in search of guidance, the research and advice on salesmanship may not offer much help: The vast majority of techniques, models, and strategies are aimed at large, established companies, not start-ups, which tend to face a unique set of objections from prospects. And when entrepreneurs get around to making those crucial first sales, they often make common mistakes, such as not considering the strategic advantages of a particular customer or extending a deep discount just to make the sale.

In our study of entrepreneurs in Hong Kong, Kenya, Mexico, Nigeria, the United Kingdom, and the United States, we shed light on how they approached the task of making their first sales and what they wished they’d done differently. In all, we spoke with 120 founders, more than half of whom had previous start-up experience. In this article, we examine the mistakes they cited most frequently, explore the objections they faced when they began making sales calls, and present an alternative sales model uniquely suited to a start-up’s circumstances.

Regrets, We’ve Had a Few
The founders we interviewed cited the following five missteps most frequently:

Starting late. More than half our interviewees fully developed their products before getting feedback from potential buyers. In hindsight, most viewed this as a mistake, echoing one of the mantras of Eric Ries’s “lean start-up” philosophy: Get in front of prospects from day one. As one CEO told us, “You’ll learn more from talking to five customers than you will from hours of market research [at a computer].” The goal should be to gauge customer reaction to the general concept you plan to build. “Don’t make anything until you sell it,” advised one entrepreneur. “Get people really interested in buying it before you invest too much time and effort.”

Failing to listen. Even founders who started selling early said they were too focused on convincing prospects of the new product’s merits and not concerned enough with finding out what prospects thought of the idea. Some realized that their passion and ego made them respond negatively to criticism and discount ideas for changes that they later saw would have increased the marketability of their offerings. “Listen to the feedback from the customers and reshape your idea and your product to fit what they actually want,” one interviewee advised. Another described the process this way: “It’s really all about understanding what the pain point is in the marketplace, and the best way to do that is to talk to prospects and validate, validate, validate your idea.” As one U.S. entrepreneur who had approached the task correctly said, “The goal of our demo was not only to explain what we do but also to give the illusion of explaining what we do, while we really tried to extract information about their business and how we could help them.”

Some founders realized that their passion and ego made them respond negatively to criticism and discount ideas for improving their products.



Offering discounts. Faced with pressure (from themselves or their VCs) to make early sales, many founders offered price discounts in order to close initial deals—often establishing unsustainable pricing precedents with those customers. Worse yet, news of the discounts spread around small industries, crippling the ventures’ long-term pricing power. In retrospect, the entrepreneurs wished they had found alternative sweeteners to close early deals—free shipping, say, or a discount on orders placed before a certain date. And if you’re going to offer temporary discounts, they told us, it’s smart to put the terms in writing.

Selling to family and friends. Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But you never know why relatives are buying from you—often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’s-length transactions with customers who would have given them candid feedback.

See original article here.
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Old 10-14-2014
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Originally Posted by Narkissos View Post
Selling to family and friends. Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But you never know why relatives are buying from you—often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’s-length transactions with customers who would have given them candid feedback.

See original article here.
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Old 05-19-2015
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Selling to family and friends. Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But you never know why relatives are buying from you—often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’s-length transactions with customers who would have given them candid feedback.
Mexico is among the countries where this study was conducted and this paragraph was brought to my attention because I have seen many online Mexican factories and big companies encouraging people to join their sales force by selling to family and friends.

All of them have the same target clientele, and encourage entrepreneurs and work-from-home moms to take "advantage" of selling repeatedly to people they already know including also their own neighbors.

I believe this is the wrong strategy because family, friends and neighbors will say "oh no, here he/she comes to pester me with his/her catalog" and while they may buy on a regular basis, their might come the time they will be tired of buying or this will be an argument against the seller if for a reason they fight.

I'm sure there is always a better way for a startup
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Old 06-25-2015
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Originally Posted by MyDigitalpoint View Post
Mexico is among the countries where this study was conducted and this paragraph was brought to my attention because I have seen many online Mexican factories and big companies encouraging people to join their sales force by selling to family and friends.

All of them have the same target clientele, and encourage entrepreneurs and work-from-home moms to take "advantage" of selling repeatedly to people they already know including also their own neighbors.

I believe this is the wrong strategy because family, friends and neighbors will say "oh no, here he/she comes to pester me with his/her catalog" and while they may buy on a regular basis, their might come the time they will be tired of buying or this will be an argument against the seller if for a reason they fight.

I'm sure there is always a better way for a startup

That's why I've never been a fan of any form of affiliate marketing. There's absolutely no way you will be successful in any business by targeting your friends, family and neighbors. As you've already mentioned, very likely they will grow tired of you and start avoiding you.

Startups needs to get good at coming up with solid business plans, attracting funding from reputable sources and eventually hiring the right people. They also need to spot good opportunities when they present themselves and be nimble enough to capitalize on these opportunities.
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Old 06-30-2015
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That's why I've never been a fan of any form of affiliate marketing. There's absolutely no way you will be successful in any business by targeting your friends, family and neighbors. As you've already mentioned, very likely they will grow tired of you and start avoiding you.

Startups needs to get good at coming up with solid business plans, attracting funding from reputable sources and eventually hiring the right people. They also need to spot good opportunities when they present themselves and be nimble enough to capitalize on these opportunities.
Agreed 100%
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