How do departments in a business make a large purchase?
Any stories you know of, of how people in a company make a large purchase?
How does this vary between different companies?
Are there any generalizations for company size?
(ex. a 25 employee company will do things one way, and a 1000 employee company will do things another way)
Ok... For the most of my 35 yr career I have supported sales to medium and large companies in most sectors of the economy. Order size from $50k to $500K.
The answer is.... it depends. But the one thing you have to have is some sort of personal relationship. You are going to find leads via advertising, conventions or word of mouth. The prospects will approach you. They will expect you to explain the product to them and their colleagues in web meetings and/or in person. The sales cycle will be 3-12 months.
Ok thanks.
The original question was based in what the bureaucratic setup was -- for the buying committee -- or person -- who would be deciding for the department which was buying.
But the question can also be what that bureaucratic set up / group / person is looking for when buying.
Anything like a typical bidding structure. Like 3 bids from competing products?
Was there anything like contingency of the product working after time points like 3, 6, 12 months after implementation?
A certain amount of maintenance that was free, then the company would have to pay more?
I'm trying to think of terms which people like -- or make that group more easily buy.
Good questions. My experience is that there needs to be an internal advocate who wants to solve the problem. They will deal with the bureaucracy on your behalf. They will of course talk to competitors so you need to persuade them that yours is the best solution. I wouldn't underestimate personal rapport. If they like you and trust you they can make it happen.
So bidding structure etc is almost irrelevant. You need to connect with a go getter and they will help you. The internal procedures etc don't reveal what is emphasized within each organization. Some organizations use RFPs. Those are low percentage plays and a lot of sales people refuse to do them. They may worth doing at least to understand what people are looking for.
I have never really come across a contingency stipulation. Butt there is a delay between when you invoice, usually when you ship the product, and when they pay - usually 60 to 90 days. So they have the option of refusing payment if they are unhappy. That has happened once or twice out of hundreds of experiences. The more common experience is we would sell a custom piece of software or hardware and then it would take much longer to complete than we estimate. The customer then get delivery six months after they expected but we would have to carry the cash flow for 6 months. The customer would be less than happy but would eventually realize that it couldn't have been done any faster. Often they would become repeat customers..
We always supplied a twelve month no questions asked warranty, where we would fix any problem or return their money. Then charge a support/maintenance fee of 20% of initial purchase price per year. The maintenance contract would be optional. The customers would have the option of paying an hourly rate to fix the problem.
There is a ton of variability between companies and even within companies between departments and teams. As a result, certain types of products are adopted bottoms up and other top down. Depending on your vertical and target buyer both of these strategies can be effective from an acquisition perspective.
If you can share a bit more info about what type of buyer you are targeting and what service you are trying to sell or provide it might easier for the community to give you insight into what the purchasing process might look like.
What is your definition of large?
What is large to an indie hacker is totally different to what is large for even a junior level employee in a large organization.
Estimates: A large company would have 500 employees (100 + million yearly revenue). A medium/small company would have 25 employees or less ( about 10 million yearly revenue).
Was looking for anyone who knew about the internal structure about how a purchase happens. Or variations in a how a purchase happens -- anecdotal info.
Based on that definition, I have not sold much to small/midsize businesses. I have mainly sold to large companies.
I am not sure what question you are trying to answer here, but in the simplest terms, the bigger the amount, the more approvals it has to go through. In big businesses, there is a vast amount of variation in how they make large purchases.
The other thing is, what is large at, say a department level, might not be large at a company level.
Thanks. I was looking for how a purchase is made. When a direct consumer makes a purchase that is known to everyone -- you do it yourself -- or you can imagine it more. But, it's less common to know of the process to buy something new for a business if you don't have ton of experience seeing inside how multiple different businesses go from a sales pitch to a buy.
I'm trying to use that information of how a business goes from pitch to buy -- so the pitch can be framed to over come barriers in the steps from pitch to buy, or know who is the best person to talk to, or making they buy easier to happen ... .