If you are a B2B software startup, look out for bad revenue.
It’s like junk food. It tastes great at the moment, satisfies you for a while, but hurts your long-term health.
The good news is that it’s avoidable if you know what to look out for.
Here are 10 of the most common mistakes I’ve made or have seen with clients.
#1 Getting paid to build one-off features.
Reasons to avoid:
- They aren’t valued by the broader market.
- It trains your customer to keep asking.
- It trains your team that this is OK.
The exception:
- When you are closing your first lighthouse customer.
#2 Signing customers that don’t value your product
Reasons to avoid:
- Leads to massive discounting
- Drives up your churn rates
- They won’t be any less demanding
- Will be impossible to make them successful
#3 Closing deals by setting unrealistic expectations
Things to consider:
- Likely the #1 cause of churn.
- Selling ahead of the curve is OK, but only if you deliver.
- Be clear about what you can do today vs. tomorrow. The right customers will get on board.
#4 Closing deals outside of your target segments
If you were off by 1% going from San Francisco to D.C. you’d end up in Baltimore.
It’s the same when you sell outside of your target market. It’s fine in the beginning, but down the road, you’ll realize you’ve taken the company off course.
#5 Building and selling products that don’t align with the company’s strategy
Reasons to avoid:
- Execution requires focus.
- It won’t be easy and everyone needs clarity about how products support the strategy.
- Focus and clarity increase the chances of success.
#6 Massive discounting to close a deal in a certain timeframe
- Sales teams are motivated to hit quota. I get it.
- CEOs want to deliver the quarterly number. I get it.
- The reality is a few weeks won’t change much. Get what you’re worth & build a healthy business.
#7 Revenue that comes in too late
Cash is king for a startup
- Ask for everything to be paid upfront.
- Best case you get it. Worst case it’s the start of the negotiation
- If you end up getting it all in arrears, you are creating stress and pain for your startup.
#8 Running a product-led growth and direct selling motion in parallel
- Each one requires sales, marketing, product, delivery, and customer service support.
- You’ll always be behind because it’s impossible to serve two masters as a startup.
#9 Not distinguishing customer types & what it takes to deliver success
- Be intentional about what drives success
- Recognize different service models impact margin
- Think through how it impacts value creation.
- Don’t assume all customers require the same level of service
#10 Having the wrong sales strategy for the product
- First, figure out what it takes to sell a new product
- That means getting customers to part with money (not giving it away)
- Before you try to scale a sales strategy, make sure you know the correct one to pursue
In Summary:
- Avoid one-offs
- Value the product
- Set realistic expectations
- Focus on your segment
- Align with the company strategy
- Don’t trade dollars for time
- Get paid fast
- Pick 1 selling motion
- Understand how to drive success
- Choose a sales strategy wisely
What would you add to this list?
