Monday, January 30, 2017
I was given early access to a good new business book by Shari Levitin called Heart and Sell: 10...
I was given early access to a good new business book by Shari Levitin called Heart and Sell: 10 Universal Truths Every Salesperson Needs to Know. Shari is an expert in sales strategies, and is a well-known speaker and author on the topic. I thought she did a really good job of highlighting the most important part of sales that most people forget: the emotions behind the sale, and tapping into those emotions with integrity in order to get the sale to close. Shari was kind enough to allow me to share a summary of the 10 universal truths with our readers below. These are truly words each salesperson should live by, in order to be closing more sales, faster.
1. Success starts with the growth equation.
Top salespeople share a willingness to take responsibility for their weaknesses, a deep curiosity about their customers and the world, and a desire for mastery. They commit to using what they’ve learned about their processes to continue improving. When you master this “growth equation” you will improve your sales record.
2. Emotions drive decision-making.
The desire to be loved, to create closeness, look good, feel good, be remembered—even to belong—drives all of our decision-making. Our ability to uncover our customer’s emotional dominant motivators will dictate our success.
3. Sales thrive in structure.
Pilots run through pre-flight checklists. Free-throw shooters develop rituals to help them hit the same shot time and again. Bakers adhere to time-tested recipes. So, why should it be different in sales? Highly successful salespeople have a process they follow and they follow that process every time. It may sound counter-intuitive, but structure creates the freedom to act authentically and to create true connection.
4. In sales, no never means no.
Are you paralyzed by fear of failure? Good. Top salespeople know that the more fear they feel, the more important it is to tackle the fear. What you’re afraid to do, you must do. The question you’re afraid to ask, you must ask. We are talking about “getting out on the skinny branches.” Failure is inevitable. Resilience will drive success, as no never means no.
5. Trust begins with empathy.
Trust is born of empathy, integrity, reliability, and competency. You need all four traits, but without connecting on an empathetic level, you won’t have a chance to demonstrate the other three. Empathy is the first building block of trust. We can’t pretend to have empathy. Empathy is not about shifting the conversation to what you want to say or judging your customer. It’s about being fully engaged and present to someone else’s emotions.
6. Integrity matters.
Once we cultivate true empathy, we find it impossible to lie to or cheat our customers—or anyone, for that matter, including ourselves. The word “sales” comes from the old English word for “give.” When we sell, we must give. We can only maintain trust and enjoy enduring success when we cultivate honorable traits like reliability, competency, and integrity. Eventually, they become part of our character.
7. Anything that can be told can be asked.
When we ask the right questions, we uncover what matters most. “Discovery questions” uncover customers’ needs, direct their thinking down a path we choose, generate curiosity, and ultimately move them to action. These questions build rapport, gain commitment, and help your prospects sell themselves. Well-crafted questions help us make a point loudly, without having to raise our voice. Good questions create change. Great questions can change the world.
8. Emotional commitment precedes economic commitment.
Most salespeople incorrectly assume that they can create a sense of urgency by threatening scarcity or appealing to greed. But if people don’t want what you’re selling, they won’t care if there are only two left or whether you’re throwing something else in. (Anyone want a stagecoach? It’s on sale today only! And I’ll throw in some horseshoes for free!) Engage customers with stories and build urgency by demonstrating how your product connects to precisely what motivates them.
9. Removing resistance takes persistence.
As soon as a prospect displays resistance, most salespeople drop the price, modify the terms, or otherwise change the offer. But the truth is: only when someone is in a receptive emotional state can you close. You need strategies for keeping customers receptive, isolating the toughest customer objections, and uncovering the real and final objection so you can close more deals more
10. Looking for wrongs never makes you right.
Every day, in every encounter, you have a choice. You can look for what’s right about that person or experience—what’s valuable or productive—or you can look for what’s wrong. When you’re interacting with your associates or your customers, don’t look for reasons why they won’t buy. Look instead for reasons why they will buy. Whatever you look for, be certain you’ll find it!
Thanks again, Shari, for sharing this with our readers. And, be sure to check out more details in the book itself. If any questions, feel free to reach out to Shari at her website and follow her on Twitter at: @sharilevitin.
For future posts, please follow me on Twitter at: @georgedeeb.
Tuesday, January 24, 2017
I recently read some research done by Crowdfund Capital Advisors , an authority in the regulati...
I recently read some research done by Crowdfund Capital Advisors, an authority in the regulation crowdfunding space, and co-author of the original JOBS Act in 2012. This report summarizes the volume of activity that happened on the Title III crowdfunding portals regulated by FINRA in 2016. Regulation crowdfunding, which first made it legal for mom-and-pop non-accredited investors to invest in early stage startups, first went live on May 16, 2016, so the below research only reflects partial year results. And, the below does not include activities happening on non-regulated crowdfunding activities operating under the Title II and Title IV platforms, which includes bigger crowdfunding platforms like Angel List, who serve accredited investors with net worths in excess of $1MM. Nor does it include the crowd donations sites like Kickstarter and Indiegogo, where even more money is flowing.
My interpretation was, based on this small Title III sub-segment of the market, still in its infancy, which can be further extrapolated across the broader crowdfunding landscape: money is flowing, startups are growing and jobs are being created, just as originally hoped for when the JOBS Act was originally conceived. To pound that point home, on Kickstarter alone, it has helped almost 119,000 projects raise over $2.8BN since it has launched, and claims its projects created over 300,000 new jobs in 2016 alone.
CCA's Principal Woodie Neiss is a colleague of mine, and he was kind enough to let me share CCA's learnings with all of you below.
21 regulated platforms launch; 1 dies
42% of campaigns succeed
Investors invest $833 per deal, on average
Average funds raised per company is about $227,000
Valuations are in line with VC funded companies at $5.3MM
Creating 2.2 jobs per company in first 90 days
Thanks again, Woodie, for letting me share your research with our readers. Be sure to re-read this old post on The Birth of Crowdfunding Agencies, to learn how to successfully launch a crowdfunding campaign of your own, and take advantage of this great channel for your fund raising needs.
For future posts, please follow me on Twitter at: @georgedeeb
Tuesday, January 17, 2017
I am in investor in the FireStarter Fund, and when I received my investor update from one of our...
I am in investor in the FireStarter Fund, and when I received my investor update from one of our portfolio companies, I nearly fell out of my chair. The company featured was Chicago-based Home Chef, and the company's revenue run rate had increased from $20MM in 2015 to over $200MM in 2016, a whopping 10x increase in one year. It took me about ten seconds to pick up the phone and call their founder and CEO, Pat Vihtelic, to ask him to share his story with all of our Red Rocket readers, which he was kind enough to do in this post.
ABOUT HOME CHEF
Founded in 2013, Home Chef is one of the leading players in the growing home meal delivery kit business. Consumers sign up for a weekly subscription of meal kits to be delivered to their home, and the buyers have all of the ingredients and recipes they need to prepare that meal at home, in less than 30 minutes. They basically have removed the time-consuming need to go shopping for ingredients, and have made it incredibly simple to prepare with pre-portioned ingredients and step-by-step directions. A great solution for time-started families that want a home-cooked meal, but may not otherwise have had the time to pull it all together.
Home Chef is one of many venture capital backed startups that are racing to dominate this space, including industry leading Blue Apron (estimated at over $1 billion dollars in sales) and Hello Fresh (a division of the publicly-traded Rocket Internet, estimated at over $400 million run rate at their U.S. operations). But, what Home Chef has had, from the very beginning, perhaps to a greater extent than their competitors, was a data-driven approach to building their business to ensure their business economics were sound and scalable, before they began to hit the gas with their growth. And, now they are reaping the benefits, as their competitors are still struggling to get their expensive marketing economics to pay back in a timely fashion.
THE CHALLENGES OF METEORIC GROWTH
My first question of Pat was, "how can you reasonably handle 10x revenues in one year, without the wheels of the business falling off?" And, he detailed three areas of his business, to better educate me on how he was able to grow this fast in the first place, and more importantly, how he avoided growing faster than the business could "digest" (pun intended). Those areas were: (i) marketing; (ii) fulfillment; and (iii) staff and culture, which I will detail in the paragraphs below.
MARKETING YOUR WAY TO 10X GROWTH
2013. The company's website launched in September 2013, bootstrap financed by Pat. So, with cash in short supply, it started by getting the product and customer experience right. Where competitors were focused on other gimmicks, like promoting fancy chefs' recipes, for Pat, it all started with what does the customer really want to eat and truly learning their behavior. With a lot of research and testing with his initial customers, he ironed out a winning customer solution to their day-to-day needs And, the research paid off; the company's business started to take off with zero paid marketing spend. In 2013 they were growing 30% month-over-month, driven simply by word-of-mouth referrals from their early adopters who really loved the product.
2014: With that all-important proof-of-concept behind the business, it didn't take long for the venture capitalists to take notice, and Home Chef completed its first rounds of seed capital, closing $500,000 in July 2014 and a $500,000 in November 2014. They used the proceeds from these rounds to prove out their paid marketing plan and economics, testing media buys in the search engines and in social media. It was here they learned their cost of customer acquisition, their best promotional offers (e.g., get $30 of meals for free, if you refer us a friend, who will also be given $30 of free meals), their customer retention rates which drive lifetime customer revenues, which media sites performed better than others and how fast they could grow without hurting their business economics (e.g., no more than 10% new customers a month, relying on 90% returned customers each month). And, they learned they would need to take the "long view" here, as three years of customer revenues would get them a 3x return on their marketing investment, which needed to be paid back in the first 6-9 months. The company ended the year with a $1MM revenue run rate.
2015: Marketing success in 2014 lead to more venture capital attention and monies coming in, raising $10MM in August 2015. This is where they began to pour the gasoline on their marketing fire, accelerating both their customer referral program and their paid marketing efforts, still focused on the search engines and social media (primarily Facebook). They learned social media was the key paid channel to focus on, as the industry was still new and people really weren't looking for "meal kit delivery" keywords yet in the search engines. But, lets not forget, the great product was still driving a ton of free word-of-mouth business, which comprised over 50% of their new customers acquired. The big increase in marketing spend, resulting in the business ending the year with a $20MM revenue run rate (up 20x in one year).
2016: The huge lift in revenues had the venture capitalists frothy with excitement about Home Chef, and the company raised a whopping $40MM in August 2016. Now, the marketing spend was increased to millions of dollars each year and their marketing team grew to 10 people. The company tested new marketing channels to diversify their media mix and learned that customer acquisition costs per user rise by spending more in the same channels without diversifying the media mix, so they needed to turn the screws in terms of adding even more data-driven discipline to their efforts. And, it paid off, as the company ended the year with a $200MM revenue run rate with only a modest impact to their marketing economic efficiency.
SCALING YOUR BACK-END FULFILLMENT TO HANDLE 10X GROWTH
Marketing was only part of the success story here, because what good is bringing in millions of new customers, if your back-end cannot support the growth. The back-end for Home Chef primary means adding new kitchen and warehouse space to process the meal kits being ordered. What started out as a 2,000 square foot test kitchen in Chicago from inception through September 2014, turned into an 8,000 square foot food processing facility in October 2014 and further expanded to a 50,000 square foot facility in July 2015. Yes, that was two moves in just over a year, and all the distraction that comes with that.
The company considered adding new locations in the beginning of their growth, but again, to better control the business, they wanted to fine tune everything in one place first, to get their processes fine-tuned at scale. Then, once they were comfortable they had the right fulfillment model, they began to export that model to new locations, adding a 70,000 square foot facility in California in March 2016 and a 120,000 square foot facility in Georgia in September 2016 (which is currently being expanded to 180,000 square feet).
This growth presented tons of challenges. To preserve their desired process, they relocated key staff members from Chicago to get those new locations off the ground. They needed to convince large landlords that Home Chef was worth backing for the long run, a startup that wasn't going to ultimately flame out. And, in Pat's conservative approach, he would not open up new production facilities until he was 100% sure the sales volume was there to support it, so it had the old facilities running on overdrive, until the new facility could be opened to take the pressure off. Again, all of this expansion--growing to 300,000 square feet processing over 10 million meals a year across three locations--in only three years!!
MAKING SURE 10X GROWTH DOESN'T IMPACT YOUR CULTURE
If you thought growing your production capabilities was hard, imagine having to grow your workforce from zero to over 700 workers during this time, 150 of which in your headquarters. All, in a way that doesn't negatively impact your desired "scrappy startup, customer centric" company culture. Pat attributes his success here to a few things. It was critical to get your initial hires (and subsquent hires) right. Executives that weren't afraid to roll up their sleeves and lead by example. Secondly, deal with growing pains as quickly as you can, so they don't last long. And, thirdly, keep a relatively flat organization, without a lot of layers of middle-management.
It sort of takes your breath away, that you could build a business of this scale in just over three years. And, with the company planning to at least triple revenues in 2017, this train is still just getting started. A tip of my hat to Pat and the entire Home Chef team. Yet another rising star in Chicago's exploding digital tech ecosystem. So, now that we have the blueprint for scalable 10x growth that would have crippled most other businesses, let's do this thing for your businesses!! Thanks again, Pat, for sharing your incredible story. Deep respect for what you have accomplished here, as I truly understand how hard it was to pull off.
For future posts, please follow me on Twitter at: @georgedeeb.
Friday, January 6, 2017
I was recently in a client’s office, and they had an interesting collage of words and images hung...
I was recently in a client’s office, and they had an interesting collage of words and images hung on their wall, trying to summarize the culture they wanted to create for their employees. One section stood out to me. It said “Narrow your say-do gap” next to the word “Commitment.” I thought it was a great way for the client to manage their team’s expectations. And it must be working. The company has a love affair with their leadership team, evidenced by their employees long tenure with the company and the very high reviews of their CEO on Glassdoor. There are some juicy nuggets in here -- something we can all learn as we try to be good leaders with a narrow say-do gap.
Read the rest of this post in Entrepreneur, which I guest authored this week.
For future posts, please follow me on Twitter at: @georgedeeb.
Wednesday, January 4, 2017
When building a business or product offering, it is comparable to building a house. First you l...
When building a business or product offering, it is comparable to building a house. First you lay the foundation, then the rough carpentry, roofing, plumbing, electrical, HVAC, drywall, flooring and finishings, in that order. God forbid you try to install the plumbing after the drywall has gone up, otherwise you will have to rip it all down and start again, at double the cost. And, unless an architect has provided the builder with a clear blue print on what is being built, chaos will surely follow.
But, that only talks about the initial construction. Unlike building a house, a good business or product offering is fluid in its design, and is constantly trying to improve to keep up with its competitors and customers’ needs. Think of it like evolving from version 1.0 to version 2.0 over time, under the mantra: continue to innovate or die a slow death. But, the worst thing you can do, is try to build features of version 2.0 on top of flaws embedded in version 1.0. That is the equivalent of building a house of cards, where the whole thing can topple over with one wrong move.
You wouldn’t continue construction of an addition to your house, if your kitchen was on fire, would you? Of course not. First you would extinguish the fire, repair your kitchen and then get back to building your addition. The same holds true for your business or product line. But, more often than not, I see businesses keep plowing money into new features and functionalities of their product offering, without paying any attention to whether or not the core product is stable and meeting the needs of its stakeholders. Below are a couple case studies I have seen with my clients that help better illustrate this.
Case Study #1: Version 1.0 Keeps Breaking
Nothing will upset a customer or an employee more than a product that doesn’t work as advertised. Especially, if you don’t own up to your mistakes and have a clear plan on how you are going to get it fixed, and fast!! If you are promising to solve painpoints for your users, but the system keeps breaking, all you are doing is upsetting them. Which most likely means, there goes your repeat sale or your frustrated employee right out the door. If your house is on fire, put it out!! The new addition will just have to be delayed. Or, risk the whole house burning to the ground.
Case Study #2: Version 1.0 Not Selling or Meeting Needs
A house on fire can also mean the product works fine, but the users just don’t like it. Maybe it is simply not selling or competitive in the market, or a complicated user interface, or a mismanaged expectation of how the product would actually work compared to what a customer was communicated during the sales process, or a lack of depth in the features or reports that are most important to the users’ needs. Again, time to stop the presses!! You need constant feedback from your internal and external users that everything is meeting their expectations, otherwise you need to fix it first, with a tight partnership between your product developers and your sales team. You can try to put lipstick on a pig, but at the end of the day, it is still a pig destined for the slaughter house.
Case Study #3: Version 1.0 is Breaking the Bank
The last scenario is the technology is working fine and users are happy with it, but it is costing the company of a lot of time or money to operate. Maybe it is small gross profit at the current selling price, or a long onboarding process to educate users how to use the product, or the infrastructure was built on legacy systems that are no longer supported or preferred in the market? If the economics just don’t make sense, it is back to the drawing board to find a better way.
So, the point here is: don’t invest good money on top of a bad base platform. If you have a broken business or product, something is not going right and you need to fix the core first, before trying to pretty it up with additional features and functionality. Yes, that may upset your sales team trying to impress clients with the next “bell and whistle” of a competitive product offering. But, if you don’t fix your foundation first, you risk the whole house falling down. Or, at a minimum, the cost of your addition may double, if you have to build it a second time on a more stable foundation.
For future posts, please follow me on Twitter at: @georgedeeb.