Qualifying for the Right Customers (Startup Founder Sales Series, Part 7)
If you search on Google for “best free kicks football,” you will see some of the most dramatic goals in the history of the sport. Even with a wall of opposing players in their way, the most skilled players are able to thread the ball with such precision that the ball appears to fly through the air as if guided by a wire straight to the back of the net. Most free kicks amount to nothing. After the few seconds of frenetic activity dies down, play resumes on the pitch as normal. Scoring goals is incredibly difficult, and you need just the right combination of things to go right before the ball crosses the goal. In the same way, it should be just as difficult for any prospect to enter your sales pipeline.
If you are a founder reading these words, you might think that is crazy. I just spent the last six posts in this Startup Founder Sales series helping you to build messaging and prospecting mechanisms to turn contacts into active prospects. Why am I now telling you to make it hard to sell to prospects? Because not every prospect is a good customer.
As an early-stage startup, the difference between good versus bad customers has a huge impact on your success. Good customers realize your product is early, are willing to invest in your idea, are more accepting of errors, and do not expect a polished product. Bad customers want a fully featured product now, have zero patience, waste your resources in endless support issues, and bully you into product decisions that are not in your long-term best interest.
Seth Godin sums this up in his post, “Choose your customers, choose your future.”
“Sell to angry cheapskates and your business will reflect that. On the other hand, when you find great customers, they will eagerly co-create with you. They will engage and invent and spread the word.”
For startup founders, the time is your biggest constraint. You are running a company, seeking capital, guiding product, hiring staff, and leading marketing and sales. If four out of five deals turn out to be duds and each deal take ten hours, you have lost a week of time. This is why rigorously qualifying your deals is so vitally important. You need to focus your time on finding the right customers.
Qualifying is the process of ensuring that a prospect is an appropriate fit for your organization as a customer. Many prospects may appear promising on the surface at first, but then either fizzle out and disappear or can become problematic customers. By asking a series of targeted questions when you first engage, you can better determine which customers to spend more time with, ones that will most value your solution and are most likely to buy.
How do you qualify prospects in a systematic and repeatable way? That is the goal of a qualification methodology. There are many types of qualification methods like BANT, CHAMP, MEDDIC, etc., that are quite similar to each other and used by sales teams as a core step in the sales process before a prospect can be considered an active opportunity.
For a startup founders, because customer selection is so critical, another approach is needed. The approach I have used an approach is called PRIM, which stands for Problem, Risk, Impact, and Money. This approach better maps to how founders need to qualify prospects to identify the right customers:
The single most important qualifying question to ask is to determine if there is a need for your solution. It is common for prospects to try stuff out without having a need, especially for more technically oriented solutions. For self-service solution, this is okay. For solutions requiring more customization and setup however, that requires resources that you do not have time to spare.
Make sure you ask open ended questions about the current situation. Open ended means questions that require more than a no/yes response. These type of questions usually begin with “how” and “why” and lead to more questions. For example, asking how a particular process works today and following up that question with why that process not ideal.
The biggest challenge for most startups in sales is that many prospects that will say they are interested but have no ability to buy. Working with a startup entails taking a leap of faith, and the larger the organization, the less desire there is to pursue anything further than a conversation because of the risk involved of failure.
The second but even more important reason for highlighting risk is to assess the risk to your startup with working with a prospect. For example, if your solution only works on certain platforms, but the prospect uses a different platform, or if there are compliance issues such as the need for ISO27001 or SOC2 certifications.
Create a list of questions specific your solution so you can readily qualify out poor customer fits and ask about these “gotchas” early on to avoid wasting time. Getting answers upfront also avoids wasting the prospect’s time and builds trust to reengage later on when you can better serve the needs of the prospect and their specific situation.
Even if a problem is mentioned and there are no roadblocks to solving it, the problem itself may not be important enough to warrant solving at this time. Multiple things will compete for prioritization because time and resources are finite in a company. Therefore, unless a problem impacts costs, productivity, or revenue in a meaningful way, it may not rise to the level of being worth the time for a prospect to solve.
When clarifying the problem, understand the magnitude of the problem. Ask how a problem impacts certain teams or why solving it would be of value to the organization. Then compare the magnitude of the problem by asking about other current priorities and major initiatives going on at the same time and if it is related to the problem being discussed.
The last question to ask is about money. This is a critical question to ask early on but the most awkward to discuss. Cost and how you are pricing your solution are ever evolving early in your startup’s existence. This leads founders to hedge or deflect when questions of cost come up. It is much better however to be upfront, even if the pricing is not fully established. The reason is you need paying customers, validation of your pricing, and commitment that a potential customer is both willing to and has the means to pay for your solution.
However, you are not asking about budget. If there is a budget, that’s great. Most likely though, there is no budget set aside and money needs to be requested. Instead, ask about the funding process by asking how they typically approve new tools for use by the organization and if they have been involved in bringing in new technologies in the past.
By using PRIM and structuring your qualifying questions accordingly, you will develop a repeatable method to qualify prospects. Do not worry that your qualifying process is not perfect; over time you will realize that some questions are not helpful or could use refining. You might also change the number or ordering of questions. How you make those changes is all based on how your discovery calls and meetings go, which is the next topic of this startup founder sales series that I address next week.