People often start businesses from a product and operations point of view. While it might make sense to start with what you know, it creates a big problem later.
People often start with the following:
- This is what we offer
- This is what it will cost
- This is how many we can produce
- Here is how we’ll operate
- Here are our budget and projections
You can see, the focus is internal. The internal focus often results in order of operation challenges that cost you vital time and money. This waste can be avoided by starting with sales and marketing planning.
Why Start With Marketing?
It’s not that your products, operations and expenses aren’t important. They are. The problem is you need to figure out what clients want, what you’re up against competitively, and how much it will cost you to acquire new clients.
If you can’t figure out how to sell and make a profit, none of the product or operational details will matter. Worse yet, your sales and marketing research might dramatically alter your direction and your operations planning.
Sales and Marketing Are Not an Afterthought
So many startup business plans trivialize sales and marketing. Then they allocate 8% or some made-up number to their budget for marketing and assume they’ll make sales. You might as well say, “Then a miracle occurs and customers show up”.
Business plans often include a list of target marketing tactics, but that is the extent of their planning. There’s no sales and marketing process mapping, and no sales forecast models. The process maps and conversion assumption drive your sales forecasts. They are one of the most important elements in your business plan. Too often the forecasts are complete works of fiction, with nothing to support the projections.
What’s the Alternative?
You start your business planning with your target customers and your competitors. Then you figure out how you’re going to sell whatever you have planned. I’m not talking about making a list of marketing tactics. I’m talking about mapping out your sales and marketing process in detail. What are the steps, conversion assumptions, and accumulated costs at each stage in the selling system? Then you build a preliminary forecast model to test the economic viability of your plan.
Key Questions to Answer Include:
- Who specifically are your target clients?
- Why will people buy from you versus your competitors?
- How are your competitors marketing and selling?
- Which sales channels will you use and what are their forecasted costs of sale?
- What cost of sale or client acquisition costs can you bear?
- What’s your value ladder and forecasted customer lifetime value?
- Given your cost structure, can you make any money?
- Are your forecasted returns worth the investment risk?
Seriously, who cares how good the product is if you can’t sell it or make a profit?
The Startup Path to Avoid
As a marketing consultant, I see all kinds of startups. The ones that bother me are the ones who’ve spent $50K, $100K or $1M+ dollars getting their operations set up, before getting around to sales and marketing planning. By the time they get around to it, they’ve burned through their startup capital. They’re often so far down an unsustainable path, they can’t recover. They end up walking away from their investments because they avoided what they did not understand; marketing, sales planning and forecast modelling.
Don’t do it. No matter how unfamiliar you are with sales and marketing. No matter how much you hate spreadsheets, focus your efforts on modelling the sales and marketing process first.
It’s Not About Perfect Numbers
Your goal is not to figure everything out in excruciating detail with 100% confidence. Your goal is to figure out what you’re going to do. Then uncover fundamental problems quickly before you waste a bunch of time and money on things with no chance of success.
The goal is to start with your customer and your competitors. Then work your way through the customer’s purchase path, their decision process, and how much it will cost you to drive sales. You want to iterate through a bunch of scenarios as quickly as possible. Eliminate the unworkable options and determine what is worth investing in and perfecting. Once your sales and marketing math holds up, you can return to your products and operations planning.
Key Ideas to Consider
- Your business is not about you. Your business is about why people buy from you, so start with them.
- Your business is also about the margin you earn from sales and your customer’s lifetime value.
Think about it, there’s no business without customers, sales and profits.
What to Do First
Get ahead of the problem. Let your customer-focus direct your new business development efforts. No matter how uncomfortable this makes you or how unfamiliar the territory, start your business with your customers and your ROI in mind.
If you’re not sure where to begin, we’ve prepared a series of free marketing eBooks to help you get started. We’ve also written a book specifically for startups and small business owners to help demystify the sales and marketing process. It’s called Mastering Marketing: Leading A Journey Of Becoming. We hope you take advantage of the resources and avoid the most common traps.