a look inside the deals
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the audience: q&a
Ms. Smith: That
was great. Thanks.
Ken, what if you are into the process, but you know you
don't have quite the right person? Is there a way to overcome this or are you wasting your time?
Mr. Kiser: At a certain point you
always have to be willing to walk.
As Doug said earlier, you're looking for the “no.”
The value in any good salesperson is when they can figure
out at a certain point whether it's going to go or not.
Obviously, if you're not at the right person, the most
important thing is to chart the organization and try to figure out
who the decision-maker is and who the big objectors are.
It's equally important to figure out who doesn't want you
as who does. You have to spend the time with the people who don't
want you, not reselling to people who already like you.
You always want to go spend time with people who make you
feel good and say yes, but that's a waste of effort.
Look for everyone who is telling you that you're too small,
that your product doesn't work, that they don't know who you are,
that your value proposition is out of whack.
Those are the people you have to go after.
The champion, the white knight, is the person who usually
will do that. If you're not making any progress and the odds are stacked
against you, you're better to walk.
What I really mean by that is to de-allocate resources
against that opportunity. Keep
it on a warming mode, throw emails over the fence every couple of
weeks, but move on to something that's going to be more fruitful
in the near term.
Ms. Smith: Larry,
when you were discussing getting the Army as a customer then using
that to leverage other government contracts, at first it sounded
like TRW was your customer. How
do you get through the integrator into a direct end-user customer
Mr. Schlang: That's a really good
question. I guess a
couple of things pop into my head.
First, I think about what a lucky situation we were in.
There are so many companies out there that are looking to
focus on the government and haven't gotten their first customer
yet. I know how
difficult that is because we tried to do it.
It has a lot to do with what Ken was saying, that
proactively selling is tough.
It's actually something that we do very little of.
We try to market a little bit, then let them come to us.
That's how TRW came to us.
To go after the government, the sales cycle is at least 18
months, usually, so it's a big investment. It's a good one, but
it's a big investment.
In terms of
systems integrators, we have tried to focus on specific ones based
upon business that we've already gotten with them, then use them
as a channel for additional engagements or business.
With TRW, they had a very specific job that the Army had
given them, and that was to set the requirements and identify the
right vendors to meet those requirements for the initiative.
From the very beginning they were key to our success.
The Army, we knew from early on, was sitting directly
behind them waiting for their definition of what the ultimate
solution was going to be. We
had to work with them. The
sales process was through them, it wasn't through the Army until
the very end, then we got to the Army.
We didn't struggle to get to the customer because we knew
that TRW was the one that was making the decision.
That said, once
we moved further into the process, we made it our business to work
extremely hard to find who the decision-makers were for the
overall project at the Army and to work on that relationship. We
found that the ultimate decision-maker was a CTO at Ft. Belvoir,
and we spent a considerable amount of time working with that
person and building trust. That
person has been incredible for us.
In fact, that person retired from the Army, which was
extremely disappointing to us, then went to work at a different
government agency and is now a customer for us at that agency.
The government is very relationship driven.
They can be a very difficult customer, but they can also be
excellent customers, and, in large measure, it's up to the vendor
to decide which way that's going to go.
Mr. Clark: In the government space
and certainly among the systems integrators, and we are not too
proud to take advantage of this, there is a lot of emphasis on
using small business in the government.
The systems integrators, especially in the large programs,
are, I'm going to verb this word, incentivized, to use
small business. We
started on one company within Lockheed; now we're working for five
different companies within Lockheed and using the small business
angle. We're now selling directly to the government and playing that
small business angle with them.
Somebody like HUD, for instance, 50% of their business goes
to small firms. That's
the good news. The
bad news is that the sales cycle is forever and a day, but, once
you're in there, the backlog is really nice.
It may not be sexy, but it keeps the lights on.
Audience Member: You talked about farming additional business from a customer,
which includes getting good feedback from people who are actually
using your product to the management.
How do you gather that feedback?
How do you bring it back to management, how do you control
it, and how do you leverage it?
Mr. Payne: That's a great question.
It was mentioned earlier and should be emphasized that the
easiest new customer is an existing customer.
It's so much easier to sell to someone you already know and
have made happy, and you've got to figure out how to leverage that
when you get in.
How do you find
out? This is key.
Ken was picking on us CEO types, so I'm going to pick on
the sales guys for a while. Salespeople
will not give you that feedback.
Their job is very clear.
It's get in, sell, and, if it's the model, build
hunting elephants, and, as Ken mentioned, they don't like to hear
“no.” They need
to hear “no,” but they certainly aren't in the feedback
business. You have to
find another mechanism to get feedback.
At Cigital, as
you would imagine given my sales process, we try to structure it
and make it as effective as possible.
We have a couple of different avenues.
First, we do a 360 degree review of our key people on
projects, including the project manager and the account manager,
which means that the customer is part of the evaluation process
for our people. Also,
our project managers and our account managers are taught to ask
three questions when they sit down with a customer to review a
project: What should
I keep doing? What
should I start doing?
And, what should I stop doing?
We drill that into their heads.
What should I keep doing?
What should I start doing?
What should I stop doing?
They have to document that for us.
The other thing
we do is a check and balance with the customer.
The account manager at Cigital owns a customer account.
The risk of that, of course, is that if you have a bad
account manager, what's the avenue for the customer to tell you
that there's something going wrong with the account manager?
Probably the account manager is not going to tell you, so
we have two ways we deal with it.
One is that the initial salesperson's job after the close
is to maintain a periodic relationship with the customer to
leverage that customer for routes to other places in the
organization as well as to get to his friends or follow him if he
goes somewhere else. The
second thing is to periodically meet and get additional feedback
about what Cigital should start doing, stop doing, keep doing.
Sometimes it turns out that the customer tells you that
there's a problem in the hierarchy of people dealing with the
account they're working on.
I also spend my
time going around and asking those questions, typically higher up
the chain, because the other thing you have in big organizations
is perception issues. Your
customer down in the trenches may be very happy with what you're
doing, but, for whatever political or communication reasons, up
the chain there might be a misunderstanding about what, how, or
why you're doing something that might mean you're not appreciated
at a higher level or that they don't feel you're adding value.
You need to have someone working at the higher level to
figure that out.
Mr. Clark: It goes back to that
weekend we went to a concert with one of our customers.
Her husband was playing in a concert.
We know a lot detail about our white knights' families, and
it's taking that personal relationship to the level that they're
going to be honest with you.
When they tell you that things aren't going well or that
you need to do something, they feel comfortable that it's
person-to-person and that you'll act on it. It's key that the white knight stay with you the whole time
and continue to be the white knight.
The only way you're going to do that is to strengthen and
deepen that relationship.
Ms. Smith: What
about outsourcing the role to sales consultants? Is that a good solution for trying to ramp up account
managers or the process of building your sales team, particularly
when you're in a transition stage?
Mr. Schlang: That's something that
we've been trying to explore for about nine months.
It's tough to go to outsourcers with sales, although I
think it's very possible. I
remember when I was first starting to ask some key advisors about
it. People I knew in
the market were very interested in working with outsourcers to get
our feet on the street faster and work out creative relationships
for people to introduce us into customers.
I still believe in it, but we haven't executed on it yet.
The main issue is that I think there's a hard balance that
is mathematically possible, but we haven't found it yet.
The people who are most interested in you, your company,
and your product, are you and the people in your company.
At the end of the day, they're the ones who are going to do
it the hardest and, hopefully, the best.
Sales consultants are always going to be balancing any
number of other issues in their business or their individual
lives. So far, we
haven't been able to find the right balance for how you craft the
right kind of incentive structure for them to get engaged,
educated, and motivated to take your product into their key
contacts—which is basically what they're negotiating for, to
introduce you into their contacts.
I still believe it's possible, but it hasn't happened.
Mr. Kiser: As you probably recognize,
selling is an emotional business, and, when you're a consultant,
you tend not to be as emotional; you're a lot more antiseptic. “I do this, you pay me.”
The other problem I find as I've talked to people who have
both tried to hire sales consultants and be sales consultants, is
that what you get when you buy a sales consultant is that person's
Rolodex. The gamble is that somewhere in it there's one of these white
knights, or that somebody in there has a problem that matches your
possibility of that is usually very, very small.
So, sure, you can do that if you clearly understand what
your target market is and you're trying to get at some very
specific people. Then,
when you interview the sales consultant, you can say, “I want to
know this person, that person, that person, that person.”
If it does
match, then it probably makes sense because they'll introduce you,
they'll get the process going, take whatever financial
compensation they have, and go away.
But if you're counting on them to help you define your
market, help you figure out which messages stick and which don't,
and help you figure out the right people, that type of
relationship typically won't yield much results.
Mr. Clark: Make no doubt about it,
the reason that Ken makes more than all three of us put together
is the fact that sales is absolutely the toughest position in the
company, and it's the most valuable position in the company.
Are you're going to outsource that?
It's very, very difficult.
We've had zero success.
We keep trying it and we continue to have zero success.
You would think we'd have learned by now.
We've taken to trying the home-grown approach—find really
intelligent folks and bring them along.
Hopefully, they'll make more than us, too.
Mr. Payne: We've had similar issues
and problems with that. It's
very hard to do right. One
of the things that we have had success with is not looking at
outside consultants for sales, but more for a marketing function,
meaning leveraging people outside the organization—whether
you're paying them or not—to get you to places you want to be.
Stop thinking about this person as if they are going to
close business for you. Think
about them instead as introducing you in places you want to get to
with a reference and some credibility that you don't currently
have. Figure out how
to do that and give them some finder's fee for doing it, then
consider it marketing and don't even consider it part of sales.
All they did was to get you in front of somebody.
It's lead generation that can work in certain situations. It depends on your sales model, your process, how it works,
and how you integrate marketing, sales, et cetera.
That's a separate discussion.
Audience Member: My name is Peter Pawlus from intraWerks.
We often hear success stories, but can you share with us
one of your lowest points or one of your near fatal ones, and how
did you recover or what did you learn from it?
Mr. Schlang: [Laughing] I'm eager to do
We had a very
long, extended sales process with one of the largest investment
banks in the world, and it was excruciating.
Part of the problem was that they kept us at the lowest
project manager level. We
struggled mightily to get above that in a number of different
ways, but they kept us at that level.
That said, the process moved forward in a slow but
predictable path all the way through contract.
We closed the deal, signed it after an excruciating legal
process, and it closed in the beginning of February of last year.
We were extremely excited about it, until a day later when
they called and said the contract was done, off the table, pulled.
We were shocked. We
shouldn't have been surprised because the company, like all their
fellow companies in that market, were going through incredible
problems and still are. I don't know that it nearly killed us, but emotionally, for
an early stage company, it took a lot of wind out of our sails.
We had been pitching that deal to everybody—to our
investors, our board, our partners, just about everybody in the
world. We got it,
then it was almost worse than not getting it because it was
could put your finger on it, it was their fault, but that doesn't
get you very far. It was a huge expenditure of resources, but it was the right
thing to do and we got to what we thought was success.
Failure is probably too strong a word, but it was a very
problematic couple of months for our company.
Mr. Payne: The worst ones that get
away are the ones that you didn't do anything wrong in. Those are the ones that kill me.
If you do something wrong, then you learn something out of
it that you can apply and do it better next time.
It's frustrating, but that's what life is about, I guess.
We had a
situation with an existing customer that we had done a first phase
with for about $75,000. It was a very large telecom company a few
years back, so there's your first point of warning.
We invested heavily in what we were doing because there was
a huge upside for Cigital, and they were totally excited about
what we were doing. We
put in front of them a proposal for a next phase that was probably
about $1 million, and this deal was done.
We did everything right, had everything lined up all the
way up. All the
signatures, everything was done.
Done, done, done. As my CFO always says: Until that ink goes on that paper,
anything can happen. We
literally had travel reservations set, we had people showing up
there to start to deploy our system on a Monday, and Friday at
about 6:00 p.m., they called and said, “We just announced a
merger and a massive layoff and budget freeze.
The deal is off. I know we told you to be up here, but we're not going to sign
it.” Then, of
course, they all got fired, so there was no hope to work with them
later, and the whole thing just dissipated.
Mr. Clark: We've had our fair share,
so let me take it to a higher level.
I know you may think I have some kind of obsession, but
where we have struggled the most is with control when we went in
with partners. As a
small company, what are you going to do?
You're hanging on their coattails and saying, “Sell!
Those have been the most difficult.
There was a large government contract and they lost it for
us. We had it, we did
our part, they were very excited about our technology, then the
prime contractor that took us in lost it for us.
I will say that subsequently we've continued to sell in
there and now we've turned it around on our own, but it took a
little wind out of the sails.
As a small company, it's just so key to keep control of the
sales process as much as you can.
Keep control of who is representing you.
Your message and your success are everything. You can't lose a deal that you've already won because your
product doesn't do what you promised it would do. These early sales are so critical. You have to keep as much of it to yourself and go at risk
only for the big whales.
Mr. Kiser: Sure.
In my personal experience lots of deals have gone south,
unfortunately, more than I wish to talk about, but the one that I
take to mind was an extremely large opportunity. I was running my direct sales team and management was
involved. It was a
huge name company, very large revenue opportunity, and everyone
got really excited. There
were a lot of things getting queued up on top of it, including the
next round of funding and capital expenditures to grow certain
parts of the business. The
management team tried to overdrive the process. I was guilty of it as well.
As a small company, big companies see you as a lot of risk,
especially today. If
you try to force the process, to create compelling events to get
them to buy, it's very easy for you to scare off the customer.
If you create the impression that you're desperate, that
their business is a make or break for you, regardless of whether
it is or not, you can often spook the customer and convince them
that all the reasons they're afraid of doing business with a small
company are true.
experience, the idea is very important that management is
involved, it’s very important that there is a process and
everyone signs up to it, but it is equally important that people
don't try to force it and jump the steps, to send “the big
guy” in to close the deal.
As everyone has mentioned, the close is a very small part
of it. In this
particular case, that's exactly what happened.
Everyone got on this bandwagon—do or die, have to do it,
fourth quarter, all the stupid sports terms—and basically blew
the thing up. It was
a big, big mess. That's
my most stinging example to date.
Audience Member: I’m Karl Sandberg. Ken,
you mentioned the importance of making the company visible.
Could you speak to the aspect that made your company most
visible to brand new customers, and what is the most important
thing you would like to leave with us?
Mr. Kiser: The most important thing
is knowing who your customer is.
The shotgun approach into the market is not all that
effective just because it's such a large market.
You don't know, so make some intelligent guesses.
Think about who the right prospects are, target that
market, and figure out whether it's effective.
Usually it's a multidimensional thing—email blasts, trade
rag advertisements, targeted trade shows, but not these mass expos
that attract huge numbers of vendors.
Basically, figure out who your customers are and direct
your efforts there. Obviously,
do it in a way that's cost effective because you can't afford to
spend your way into huge exposure.
Then, as the sales process provides you with feedback in
terms of who's buying and what sticks, redirect your marketing
efforts around who the target market appears to be.
It's a constant back and forth—sales gives feedback, and
marketing guys drive their part of the business.
Mr. Schlang: All we focus on is sales.
We promote our sales.
Right now at least, what we're hearing from our board, from
our investors, and from our prospects is: Who have you sold to?
So, when we close the sale, then we announce it and we
promote it as much as we can. It's the credibility factor.
Then we'll get leads from articles or press releases or
whatever. Even more
gratifying is when we get that customer to walk us into another
customer, either directly or indirectly.
Mr. Payne: We call this
“differentiate or die.” I
believe that you sell on one of two things—you either try to be
the best and different and unique and provide a capability that no
one else does, or you compete on price.
I can tell you which one you want to do, and it's not
compete on price. That
is a hard row to hoe, so what we try to do is differentiate.
We differentiate partially by doing a lot of writing and
speaking. We write a
lot of books, 11 in the last 10 years.
We speak at a lot of conferences, and these are not
sales-oriented talks. I've
found that when I speak, I get the best sales opportunities when I
talk about a problem or a need and how to help an organization
solve a need or a problem. They
view that as education and information, not sales.
We use that as a way to position and differentiate
ourselves so that we do not compete on price.
Ms. Smith: Thanks so much for being
here today. I also
want to thank our panelists.
We look forward to seeing you all at the next Netpreneur
Coffee & DoughNets.