Enterprise sales war stories: The profitable distraction trap
I recently spoke at Alchemist Accelerator (video of the talk coming soon). Afterwards, a founder approached me with a specific challenge: they had a highly technical product and no customers yet.
However, they did have the opportunity to build a tiny product for an enterprise prospect and would get paid $25k. “Should we do this or not?”, he asked me.
If you're ever in a similar situation, you might find their story insightful.
They’ve been trying to sell to the enterprise for several months. They recruited an internal champion at one large enterprise company: an IT Manager who loved their product.
Lots of buying signals from him.
Finally a strong invitation: “You guys should fly over here for a meeting with the purchasing department to make this deal happen!”
The whole team got on a plane. Ready to crush that meeting.
Ten minutes after entering the conference room, they realized that only one person was actually enthusiastic about this deal: the IT Manager. The other executives involved talked about maybe doing a pilot someday. A real deal was miles and miles away.
This was more of a first "get to know each other" meeting. While the IT Manager wanted to make the deal happen, he didn’t wield the power to push it through.
Disappointed, the team of founders flew back.
The IT Manager felt horrible. He wanted to somehow make it up to the founders and told them: “I still have a bit of a budget left over for this fiscal year, and I have to spend it before the end of this month. If you can build a 'mini product' for me, I can hand this over to you for $25k.”
This tiny product he wanted was a small job. While this was not really something they wanted to do and was not on their core product roadmap, it seemed easy enough to execute and would bring them "their first paying customer". One of the founders asked me "Should we pursue this or not?"
My answer? “Do you still believe in this IT Manager? Do you trust in his ability to communicate well within his own organization and get the deal done?”
His answer was no.
“Then find someone who can manage the process better.”
He agreed. But what about this tiny little product they could sell him in the meanwhile? Should he get this small "win" as a way to get to the larger deal later on? I didn't think so. But why?
Three reasons why it's dangerous to fall for the profitable distraction trap
It would distract them from their core product. Even though they might estimate the mini product to take just three weeks of work, it’s notoriously hard to predict these things accurately. It could easily escalate into a three month project and throw their original timeline and core focus off.
It would weaken their follow-up negotiations. They were in a position of strength. Their internal champion was feeling obligated to them because he made them fly all the way for nothing. Taking the deal would have shifted that dynamic back in his favor. If they had told him no on the other hand, they would have demonstrated strength. They wouldn't be willing to change their entire product roadmap and plans every day just based on what one potential customer wanted.
Leveraging a deal like this and calling it your “first customer” would be unwise. Any potential customer or investor would want to inquire and talk to your "first customer" if you brought them up as a reference. If it was a customer for a totally unrelated product which had nothing to do with the core vision you were pitching, it would be worth less then nothing. It would actually make you look really bad.
How do you decline a "generous" deal like that while still maintaining a good relationship with your internal champion? Easily. Try saying something like this:
“We would love to help you but this is not part of our product roadmap in the short-term. Let’s keep in touch, and after summer when your organization is ready let’s make the original deal happen.
We appreciate that you want to support us in the short-term and think there is a way to make that happen.
Who do you know in other organizations that might benefit from our solution? Who in your circle of friends and peers should know we exist?
Connecting us to these people would be the most valuable thing you could do for us right now!”
This response demonstrates focus while still allowing the relationship to grow. By persistently asking for referrals, you make sure to feed your funnel with warm leads and build up your enterprise pipeline.
Listen to this interview for more details on the profitable distraction trap: