More startups are using established distributors as an important marketing channel. This can be a win for both sides. Established companies often want to add more to the basket of what they sell to their customers to increase revenues as well as deepen customer relationships. And they are more willing these days to include goods and services from startups, often because it helps them appear innovative. Startups want access to lots of customers and to minimize their sales and marketing expenses, and are happy to yield the wholesale margin to a distribution partner.
A further bonus is those distribution partners might invest in or acquire the startup once the new product becomes a hit. Many established companies have established venture funds in recent years. Many know they need to source much of their innovation from the outside.
Building effective distribution partnerships is a combination of marketing and sales skills. Companies that consider distribution partners as like a commissioned salesperson, sometimes referred to as “coin operated”, rarely succeed. Instead it is vital that companies consider both how to sell-to (making it worthwhile for the distribution partner) and how to sell-through (showing partners how to sell to their customers).
Success comes from pitching the deal well to the optimum distribution partners, negotiating the best agreement, then putting in the time and effort to make the partnership a success.
Read MoreOne of the most challenging areas for startups, especially business-to-business companies, is how to price their products or services. Everyone wants to win some early revenues to show investors, but no one wants to leave (too much) money on the table. There is no magic formula for pricing. I have though discovered some principles that can guide the process.
No pricing strategy completely survives the first contact with enterprise customers. There will always be surprises. Price has to make sense to both sides. It is usually best practice to take the winding path to arriving at a price, rather than putting a price on the table right up front. It can help to do trial closes with different pricing elements, such as asking “if we did this deal do you have a view on what quantity you would purchase in the first year?” or “does your organization prefer to do long-term contracts with ceilings for annual price increases, or do you prefer to renegotiate annual contracts?”
Pricing involves much more than the dollar amount the customer pays. Unlike for consumer goods enterprise sales usually have many more variables to work with, including: volumes, minimum quantities, annual price escalations, level of service provided, customization, integration, payment terms, quality or performance guarantees, and many more.
Read MoreMany subscription services attempt to build their business by offering a Freemium Model, which means offering a free service to basic users while hoping a good share of users will upgrade to a premium plan and start paying for the service. The keys to success for this model are to maximize the conversion rate of customers who will pay, while keeping the free version attractive enough for customers to sample the service.
Companies experience a wide range of conversion rates, from Spotify’s amazing 27% to a more typical range of 1% to 4%. The conversion rate is a big driver of profitability, and finding a way to move from 1% to 2% is doubling the success.
The key is to design the model into the product rather than making it an afterthought. Think hard about how you will give your free users a great experience while educating and tantalizing them about what more they could get by paying the premium.
Read MoreYou have a great new business idea, you have built the minimal viable product (MVP), you have some initial revenues -- and now you want to raise some angel funding. What do you do next? Before you reach out and apply to every angel group in town, consider the following.
1. Determine how much you need to raise and the milestones you will hit
Founders “sell” milestones to investors and leave it to investors to ask themselves two questions: 1. Will this team hit these milestones with this amount of capital raised? 2. If they hit the milestones will they be attractive to the next round of investors?
Be cautious about how much money you ask for in this round. Ask for only enough to prove the next level of market and product traction, building in a bit of a contingency. If you shoot too high you may have to score with multiple angel groups, spend the next six months fundraising, and risking having to return the money if you do not complete the round.
2. Create your elevator pitch
Write a 30 second pitch that you could deliver in a ride in the elevator, with no props. Try it out on people and refine it until it is just right. This pitch could be your outline for your pitch deck, which avoids the common problem of including slides in a deck just because the writer already had some great graphics
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