Selling to large enterprises — do your early customers have what it takes?
A framework to communicate your early enterprise traction to investors.
At Point Nine, we see a lot of startups every year that just closed their first large customers and therefore want to understand in detail how valuable the early traction is, hence if their pilots, prospects or the like are ready to buy.
My colleague Christoph summarized in this post already which criteria we’re looking at when we try to assess the degree of product-market-fit of an (Enterprise) SaaS company. There can be vast differences — pilots that can turn into a company-wide rollout in a few weeks after our investment or endless year-long pilots. If you work in the manufacturing industry, for example, you probably have heard of the pilot purgatory — pilots with large enterprises that don’t seem to move forward and drag along forever (“need more time”).
From my discussions with founders, I realized that it’s often not very easy to communicate the early traction with other stakeholders such as investors if there is not much data yet. In the last couple of months, I worked with a bunch of founders on how we can make it easier to report their early enterprise traction. The result of these discussions is a framework that covers essential questions which you need to have answers to. I think this framework does not only help you in communicating your early enterprise traction but also in reflecting if your first customers are really ready to buy. Let me start with a summary of the areas that I think are most important, and I will dive deeper into each of them afterward. Please note that this summary is far from complete, but I think it covers the most critical aspects. Here is the Google Doc if you want to use it as a template.
If you fill that framework for your first couple of customers once, you can send it to all the investors you’re talking to and thereby save a lot of time in answering the (same) questions they might ask you. Let’s dive deeper into the details.
Understanding the customer profile
This part is pretty straightforward and easy. It should include a short description of what the company does, the industry they are in, and some necessary numbers such as revenue and profit. Also, it helps if you add other relevant figures for the product you are selling, e.g. the number of factories, marketing spent, or the number of goods shipped per week.
Understanding the customer mindset
Great enterprise salespeople have an excellent understanding of the mindset of the customer, and they can read between the lines what is essential for both the company but also the person they are selling to. Having different touchpoints with different people in the organization can give you more insights into the overall customer mindset. Maybe your buyer persona wants to get a promotion, and her goal is to cut costs by 20%, and therefore, your solution could help her a lot in making her a superhero. Or the company is planning to stop production, so your project probably has low chances of success. It’s important that you know about other projects and issues that are going on in the company.
Understanding the problem
Before you start talking about your solution, you should start with what the problem of your customer exactly is and how your customer is solving it today. Moreover, customers who have tried to solve the problem before can move faster because they have the resources in place, budget, and already problem awareness. Therefore, understanding how much resources your customer put already into solving that specific problem is very interesting — maybe they even worked with one of your competitors before — something you should try to find out.
Understanding the solution
Especially for broad solutions, it is important to know how your customer is using your product and what the use case exactly is. I have seen cases where customers are using the product differently compared to how the founders would like to have them using it, which is usually not great. Also, covering many different use cases at the beginning is useful to show the potential of your solution, but bear in mind that investors look for early repeatability. Lastly, at an early stage, it’s well possible that the ROI is not proven yet, but it would be good to understand the success criteria and the estimated ROI the customer wants to get from your product.
Understanding the sales process and acquisition
Let’s go deeper into your sales process at your customer. Besides the acquisition channel and where you stand with your customer — e.g. signed contract or pilot started — you can add the sales cycle, revenue (license vs. service), and what you have validated already. Usage can differ widely, and sometimes it’s even better if the customer does not spend much time with your product because you can automate parts of her job (e.g. RPA). Also, you should add the different stakeholders you are talking to, which is also important to define your ideal customer profile.
Understanding the customer evolution
Since you are selling to large enterprises, there is usually a lot of potential to roll-out your solution to other departments or subsidiaries. Therefore, it is essential to understand the account potential but even more what additional buy-ins may be required to go from pilot to rollout and how precisely the expand motion works. This means you need to have answers to what you still need to validate and the additional buy-ins that are required to move on.
I know that all of this sounds a lot, but I think it’s very important to understand your early enterprise traction in detail. Maybe the framework can help you in navigating through complex enterprise sales cycles and give you the big picture if your early customers are ready to buy.
This is the first version of the framework, and I would like to adapt it over time, so I appreciate any feedback. If you think you have acquired your first customers and they are ready to buy, please reach out here — I’d love to hear from you.