Research explores the characteristics of “responsive entrepreneurs.”Who Starts Companies When Opportunity Suddenly Strikes?
The Project Twins
I know an entrepreneur who built a hugely successful mobile-marketing company, starting out in the early 2000s until he sold it for a good deal of money in the mid-’00s.
The first few years of his business were in that dark era before smartphones were invented, but the idea was for advertisers to use his platform to get their messages on to people’s phones. He spent a lot of his energy trying to persuade big brands and big advertising agencies to sign up for his service.
One of his board members happened to know the executive chairman of a large US media group, and was able to help the entrepreneur secure a meeting with him to pitch his startup. This was a huge opportunity, but our entrepreneur was confident rather than nervous. First, this was not his first startup. He already had a few successful new ventures behind him. He knew his skills: he was a good salesperson, and a good entrepreneur. Secondly, he knew he had to do his homework. He prepared more diligently than he had for any other meeting. He had the most impressive slide deck known to PowerPoint, with every imaginable chart and data point for whatever questions the executive might ask.
He flew to New York, made his way to the company’s headquarters, and was whisked up to a beautiful office with an impressive view. He recalls that even the coffee he was served was remarkably good. The executive chairman came in and the two of them started chatting. The entrepreneur got into his slide deck, and the executive appeared to be lapping it up. He was listening intently, smiling and nodding enthusiastically. After about 20 minutes, the executive, by now visibly animated and excited, interrupted the entrepreneur’s presentation. “So tell me,” he said, “how big is your fleet?”
The entrepreneur looked back at him blankly, so the executive tried to rephrase his question. “How many trucks do you have?” he asked.
Suddenly, the entrepreneur came to a horrible realization. He had spent the whole time talking about mobile marketing. To the entrepreneur, that meant digital mobile marketing on phones. To the executive, “mobile marketing” meant advertising trucks driving around the streets.
It’s probably not unfair to say that our entrepreneur wasn’t as good a salesperson as he thought he was. Faced with a terrific opportunity, he had made at least two elementary selling mistakes.
First, he made a fundamental assumption that turned out to be faulty: that the executive would understand that “mobile” meant mobile phones. This may well have resulted from what social scientists term “the curse of knowledge.” The entrepreneur was immersed in the world of digital mobile. The idea that another person, particularly a senior executive in a media company, would interpret the word “mobile” differently probably never crossed the entrepreneur’s mind. This phenomenon is common among entrepreneurs. Effective salespeople have a balance of knowledge, discipline, and skill. Entrepreneurs tend to have a lot more knowledge than they possess discipline and skill—even,
as our story shows, among those who have a good track record starting new ventures.
Many entrepreneurs resist the idea that they should do the selling themselves. One reason may be that a sales role seems much less glamorous than other kinds of corporate leadership.
The second mistake was that the entrepreneur was telling rather than asking. Effective sales depends on asking good questions. Rather than jumping into his pitch, he should have asked the executive, “How do you think about mobile marketing?” “What challenges have you faced in this area?” This sort of approach might have made the meeting more productive, even if he didn’t have time to go through his entire carefully crafted slide deck.
The broader lesson is that honing your sales skills is essential to being an entrepreneur. I’m biased—I teach sales skills—but to my mind, effective sales is an undervalued component of a successful startup. In my MBA class, I show students a sample business plan that dedicates just two pages out of more than 44 to sales. And yet this is exactly the area that sinks most of the 80 percent of startups that fail, according to Bruce Cleveland and Wildcat Venture Partners, in their book, Traversing the Traction Gap.
The four myths of entrepreneurial selling
In the startup world, we talk about the importance of creating strong business plans, building a team with industry experience, and tapping into big markets. All of these are important, but we undervalue what is really the most important thing: selling the product. As a result, we do a disservice to the entrepreneurial world by not giving startups the right priorities for success. Entrepreneurs often think that if they have a truly great product, sales will take care of itself—as they say: build a better mousetrap, and they will beat a path to your door. I think of this as the first great myth of entrepreneurial selling. In reality, if people don’t know about it, they can’t and won’t buy it. Selling helps to bridge that information gap.
Selling successfully is, of course, important for any business, but it is especially the case for startups. The data suggest that the smaller a company, the more focused it needs to be on the sales process. Yet, companies often downgrade sales in the structure of the organization: frequently the head of sales reports to the head of marketing, as if generating revenue were a subset of brand building. This, for me, is the second great myth about selling.
One common startup mistake is that new entrepreneurs often think they can hire a salesperson to solve the problem, and effectively make up for their lack of sales skills by delegating better. A startup isn’t doing well, so it hires one person, whose job it is to drive all the revenues. This is the third great myth about entrepreneurial selling: that a founder can simply pay a sales professional to take care of the top line.
This is the wrong way of thinking about it. Selling should be at the core of the business from the outset. Entrepreneurs have many constituents: investors, employees, channel partners, customers, media, analysts, and suppliers. Particularly for a new venture, the entrepreneur’s job is to convince each constituency to buy into the idea. This is especially true in an early-stage venture, where the sales prospects, messaging, references, positioning, and process have not yet been developed. The entrepreneur’s vision is critical to helping establish these things as well as to overcoming early objections. Moreover, in the early days, the venture doesn’t even exist. Investors and analysts need to be persuaded that the idea is viable and will produce profit. Partners and suppliers have to be convinced to work with a new entity. Employees must be induced to leave their steady, well-paying, lower-risk jobs to work for less money and less job security. Customers need to see enough value in the product or service to use it and pay for it, and trust that the team will deliver. All these involve selling the idea in a way that will motivate and move people.
With thought and practice, any founder can become her venture’s most effective salesperson.
An entrepreneur, then, sells in 360°. The idea that sales is a separate skill from entrepreneurship is, therefore, nonsensical. Effective entrepreneurs don’t hire the best early salespeople; they are the best early salespeople.
Yet many entrepreneurs resist the idea that they should do the selling themselves. One reason may be that a sales role seems much less glamorous than other kinds of corporate leadership. Another, related reason may be because many people associate the sales process with the caricature of the used-car salesman—a pushy, aggressive, duplicitous character solely focused on closing deals and screwing customers for every last penny.
In reality, sales is nothing like that, and there is nothing dirty or demeaning about showing customers the value of a service or product and asking them to pay for it if they agree that it is valuable. Sales is really just another word for persuasion.
A similar misconception is the fourth great myth about entrepreneurial selling: the notion that you are either born a salesperson or not. This approach holds that successful salespeople are glad-handing, extroverted, and gregarious, and that introverts are not good at sales.
Having taught all sorts of entrepreneurs how to sell for many years, I know that not to be true. With thought and practice, any founder can become her venture’s most effective salesperson. What entrepreneurs need to understand and master are the two distinct parts to successful selling: the process and the methodology.
By process, I mean the set of definable stages or measurable gates that define the steps to complete a sale. Think of companies’ sales pipelines or sales funnels and how they measure progress: what percentage of opportunities end in a closed sale, what percentage of leads result in an opportunity, and that kind of thing.
The process is important, but what’s even more important is the methodology, which is about how you can convince someone to bet his career on your product. This involves honing a set of learned behaviors and skills, used in a nonlinear, dynamic way to make decisions and take actions to support and execute the sales process.
In practical terms, this includes developing skills such as listening versus telling. It means qualifying leads and asking good questions that waste neither the entrepreneur’s nor the potential customer’s time. It means asking thoughtful questions that gain influence and reveal unusual information. It means learning how to earn the right to ask these discovery questions. It means using stories to communicate. It means improving presentation skills and framing the pitch better.
Having the self-discipline to practice skills such as listening is critically important in the early days of a business. Often companies project that their product will work for a certain target group, yet customers emerge from a completely different world, perhaps using the product in ways the founders never thought about. This is where asking good questions and listening create value for the startup, and can help win trust among potential customers.
These were, of course, the fundamental skills that the entrepreneur whose story we began with, who is usually a great salesperson and listener, forgot in his conversation with the media executive. A light bulb went off for him after the meeting—beyond the reminder to make sure he follows the sales skills he knows. He realized that his startup was directing its sales efforts at the wrong audience. His business was just another new, unproven channel for the big brands and media groups to allocate a portion of their existing advertising budget. And they had to be willing to give up spending somewhere else to spend with him. In contrast, in his meetings with mobile carriers, he discovered that his platform offered them a potential large, new source of revenue. Once he pivoted the business to sell his platform to the carriers who benefited most from his growth, instead of to advertisers and brands, revenues took off.
By recognizing that he needed to use more of his basic sales skills, the entrepreneur plotted a path to success. There’s a profound lesson here for all aspiring founders.
Michael D. Alter is clinical professor of entrepreneurship at Chicago Booth.
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