What Makes an Enterprise Sale So Complex?

This article is the result of a collaboration between Brendan McAdams (@BrendanMcAdams) and Sean Murphy (@skmurphy).

An enterprise sale is a significant source of opportunity for startups, but it is a complex undertaking with many moving parts and many people involved.

Closing an enterprise sale is like navigating a maze

What Makes an Enterprise Sale So Complex?

An enterprise sale involves selling a large-scale solution in longer sales cycles to a customer with multiple decision-makers. Unlike transactional sales, complex sales usually involve a strategic partnership between the buyer and vendor. Customer acquisition cost is high, but the rewards are also higher. An enterprise sale is typically characterized by the following attributes:

A number of decision-makers responsible for different aspects of the process from evaluation, through purchase, to value realization by the customer.

Your offering is a complex product that solves a complex problem.
You are co-creating value in the context of an ongoing business relationship.
A long sales cycle, normally at least a few months to the better part of a year.
The customer is as concerned with risk management as price and delivery terms.

An Enterprise Sale Needs a Scorecard to Track Everyone Involved

An enterprise sale is complex because of the sheer number of decision-makers and people who need to be consulted to ensure a good outcome:

Executives
Individual contributors who will use the technology
Purchasing
Legal
Security

To close an enterprise sale, an entrepreneur must convince a majority of the decision-makers rather than just one person. The founder is like a quarterback who must coordinate many conversations and navigate multiple relationships to create a long-term business relationship between buyer and vendor.

As an entrepreneur, you must cultivate a shared understanding of needs and possibilities by all decision-makers and then get a critical mass of decision-makers to agree on the best path forward. Finally, you must drive action. Decisions, no matter how smart, are useless unless they are implemented. Only action — aligned, coordinated action — can deliver breakthrough results.

The founders' goals are normally closely aligned with those of the customer, and if they're not, you don't have a good customer. It’s critical in the initial engagement process that your discovery efforts determine whether or not you have mutually aligned goals. They don't have to overlap completely, but they have to have a high degree of overlap, the more, the better.

Alignment on goals makes the sales process easier. Implementation and onboarding remain a challenge, but they are easier when both parties work toward the same goals.

An enterprise sale relies not only on the talents of an individual founder, but a team from the seller:

Executives.
Application engineers or field sales engineers.
Post-sales support personnel.
Finance for revenue recognition issues.
Legal - often an outside counsel in smaller firms.
Developers.

In the early days of your startup, it may just be you and a cofounder or you and an early employee or two, or you and some outside contractors. In this situation, you will need to wear multiple hats to be able to close a deal. As a founder, you may need to provide pre-sale and post-sale support for the users of your product, to put on your developer hat to assess the technical feasibility of customer requests and to adopt an executive mindset to interact with executives and senior managers at the customer firm. As your startup scales up, you will hand these hats off to others and teach them the right mindset and approach.

You must not view the finish line as the receipt of an initial purchase order but results that demonstrate value and establish an ongoing business relationship.

To be effective, you must map and navigate the interrelationships among the stakeholders in the purchase and rollout processes.This requires strong people skills to be able to foster collaboration and build trust. To be effective at sales, you must advocate for your startup to the customer and advocate for the customer to your team to create a successful shared outcome.

Selling a Complex Product That Solves a Complex Problem

Technology products are often part of the mission-critical infrastructure of most businesses and all enterprise-class businesses. Enterprise customers rely on multiple layers of software products that are a combination of:

Commercially available off-the-shelf (COTS) that may be installed on-premises or accessed as Software as a Service (SaaS).
Custom tools that were either developed in house or by third-party contractors.
Open-source software.
Software that is bundled with or embedded in other products or services that the enterprise purchases.

A new tool added to the complex ecosystem of solutions that an enterprise buyer relies on will need to interface with a rich set of data formats and programmatic interfaces (API).

Enterprise-class technology offers a rich set of functions that can be configured, extended and are often end-user programmable using standard or domain-specific languages. A significant setup effort may be required for the buyer to verify interoperability with other tools in a workflow, and to port existing data and information into the new environment so that your product can understand the specifics of the buyer’s operations and infrastructure.

It can be very difficult to predict the results that a technology product will deliver after configuration and integration into a new environment. A buyer will often invest in a “proof of concept” (POC) effort to assess the viability of the solution. If the POC is successful, it’s often followed by a pilot project that involves a larger team to provide more intensive use and detailed evaluation. The buyer will often do a phased or structured rollout to allow different teams who will rely on the software to verify that it will meet the requirements they specified to the vendor and to validate that any new functionality the software provides meets the needs of the business.

Few tools will be deployed throughout an enterprise. A customer may apply a new tool to problems where it provides strong results and continue to rely on older solutions that are better fit for other needs. They may initiate another round of evaluations for unmet or emerging needs where the roadmaps for the current set of deployed technologies look like they will fall short.

An Enterprise Sale Starts With a Process of Discovery

An entrepreneur must understand the root cause of a critical business issue for the customer, and then estimate the likely impact of adding their product capabilities to the customer’s current solution set. A key outcome of your discovery process is to determine if the problem you're trying to tackle is important enough to justify the investment that you will ask the customer to make.

In the discovery process, you must determine:

What are the root causes of a critical business issue driving the customer to consider new solutions?
Can the product address one or more of these root causes and have a positive impact?
What is the likely impact of adding your product’s capabilities to the customer’s current mix of solutions?
How does this impact compare to other alternatives available to the customer?
Will the results stand out enough for a reasonable chance of selection?
Which customer teams or functions are likely to gain the most advantage or have the least challenge in quickly gaining some advantage from the offering?
Where is the best place to start in the organization to introduce the product?
Where are the best insertion points?

Detailed discovery and diagnosis are critical parts of the early engagement process. You must determine where a change of workflow may be required and get buy-in from all those affected. Introducing a new tool may obsolete an existing role or a substantial portion of the expertise for one or more employees. You should identify those likely to be affected early in an engagement. If retraining is possible, they may see a future for themselves in the customer’s business. If it is not, this is a likely source of objections, if not strong opposition.

An accurate value analysis starts with an understanding of the impact of your technology on the customer’s business. Does it create new revenue opportunities, lower costs, or reduce risk? Some engineers get this backward and believe that value is created in the development process and lost in the transition to use by the customer. An engineering analysis that starts from the customer’s perception of value can offer key insights to an enterprise sale. Mapping the customer’s value creation process can guide the identification of how to create value in the customer’s business. Determining a good insertion point involves substantial discovery efforts. It relies on listening with focused curiosity and a commitment to creating value in the customer’s business by everyone associated with the sales effort.

When a new offering requires a substantial change in workflow to see the full benefit, a prudent startup entrepreneur will define intermediate waypoints where at least some value can be delivered. These waypoints offer a customer proof that they have made a good decision and provide incentives for further process change and investment in the offering. This dynamic of ongoing adjustment drives a “land-and-expand” strategy on the part of the startup in an enterprise sale.

Co-Creating Value in the Context of an Ongoing Business Relationship

Conservative enterprise buyers want proven tools that are low-cost and reliable. They are willing to make small changes in their workflow or even large ones if they face new competition or other business risks that the software will help them address. Technology vendors who serve conservative customers must make their products easy to use and reliable to lower the total cost of ownership.

Pragmatic customers benchmark their performance against similar firms and are willing to make changes in their processes to stay competitive. They want a whole product that provides significant value and will often add customization to increase fitness for use and lower the total cost of ownership. You will need to understand their perspective on what’s missing from the product to make it useful and what features to add to provide significant value over an incumbent solution.

Visionary customers are looking for products that will enable new business opportunities. They are willing to change current business processes and embrace novel workflows and procedures that promise to unlock substantial new value. They will often integrate multiple tools to enable breakthrough performance or capabilities. Visionary customers will teach you new methods and are willing to act as testbeds for new technologies and solutions. Once you have debugged your offering and mastered the new methods, you can sell your product to pragmatic and conservative buyers.

A key part of any enterprise sale is a sustained focus on the customer’s value realization event, which is the first time the customer receives measurable value from the use of your product. Hitting this milestone provides real proof that you have co-created value with the customer and should lead to an ongoing business relationship with the customer.

Decoding the Goals of Different Members on the Customer Evaluation Team

As a founder, your goal is a long-term business relationship that is good for both parties. But different members of the customer evaluation team are rarely aligned on their goals and objectives, and are measured on different aspects of your solution.

A solution that saves money by reducing the employee count in a particular department is likely to be opposed by the department manager. They don’t want to suffer the loss of status and influence accompanying the loss of budget and headcount.

One or more members of the customer evaluation team may be comfortable with, if not delighted by, the current solution. They may have a close relationship with the vendor who provided it. They may have contributed to the design and coding, or they may be genuinely satisfied with the capabilities it provides. Replacing a favored vendor can be a tough sell but convincing a developer that your team has a better solution than one they developed is an even tougher one. One way to determine if they have an open mind is to ask for one or more benchmarks that a replacement tool needs to satisfy to demonstrate better performance or capabilities. Members of the evaluation team who offer realistic tests or criteria anchored in their current needs are more likely to be persuaded by results.

If you are fortunate, you will find someone in the customer’s organizations who will champion the adoption of your product and will coach your team on how to best address the customer’s needs. If this person has a track record of bringing positive change to the company and is viewed as striving to achieve what is best for the company, they can be of great help. If this person is not well respected or viewed as pursuing their own narrow interests, this may trigger doubts and ultimately resistance from the other evaluation team members. Be careful who you allow to champion your cause.

In summary, here are some potential goals and motives for members of the evaluation team who are not in favor of change. Human beings are complex and rarely have a single goal or simple motives, so you will likely see a blend of one or more of these in each member.

The status quo is satisfactory -- don’t break what’s working.
Some improvement may be possible, but not enough to justify the cost of change.
We have a good relationship with the current vendor, don’t make us start over with a new one.
It’s not a good idea to make a change that reduces their headcount or budget.
Is an expert in the status quo and does not want to lose status or perceived expertise.
Believes that your offering lacks one or more key capabilities or that it does not address one or more of the root causes of current problems.
Has a personal dislike for your champion or one or more supporters of your solution.

An Enterprise Sales Takes Seasons to Close

A startup can put 6-12 people around a table and get a decision in 90 minutes. An enterprise firm is not like that. A fast enterprise sale might take only three months, but a six to nine month effort is more common, and nine to 18 months is not uncommon.

The sales effort will involve dozens of meetings between many different players. Finally, the customer may select you, they may select another vendor, they may choose to develop something in-house, or they may decide to live with the status quo. The first outcome is a clear win and the second a clear loss. The next two are also losses. You did not win, but worse than that, your sales effort likely represented wasted effort on your part: the customer was not serious about going outside for a solution. One final outcome is that you withdraw from the evaluation.

A successful entrepreneur invests in detailed discovery and diagnosis efforts early in the sales process with an enterprise prospect. If the prognosis for a win is poor, you can gracefully decommit before investing considerable effort in an opportunity with long odds against you. If you determine that the customer is willing to live with the status quo or is “harvesting feature ideas” in preparation for an internal development effort, withdrawing your product from consideration allows you to focus your efforts on more likely opportunities. A startup has limited resources and can only support so many evaluations in parallel--much less onboarding efforts. You have to be prudent about where you invest time and resources.

Startups can be afraid to decommit, but it’s a smart move when:

You are not able to satisfy the customer’s needs.
The customer does not appear serious or committed to moving beyond their current status quo.
The customer keeps asking questions about your product’s capabilities but does not disclose the details of their problems or needs.

Deciding to decommit after a structured discovery process allows you to focus your efforts on opportunities where you are more likely to win.

A startup can find it hard to persist with the focus necessary to win the first sale in a land-and-expand effort. These interactions with customers, along with the POC and even a pilot project, are auditions for long-term business relationships. A startup must not miss the commitments they make, which means being careful when making commitments, and also not taking shortcuts that can jeopardize the deal or overall relationship.

Here are three examples of shortcuts that are ill-advised:

A customer asks for an enterprise-wide deal without a POC or pilot but at a very low price compared to what you could ask for if you had proven the value to them. You might decide that a small amount of revenue now is better than more revenue six to nine months from now after investing a lot of effort. The risks are twofold. First, you may not get deployed--you have inadvertently sold low-cost shelfware--and are thrown out in a year. This is essentially the same result as the poorly qualified account scenario. Second, you are not thrown out, but there is no upside in the account--and you may have inadvertently set a new floor for a site license.
Early in the sales process, you go to a division manager, business unit general manager, or CEO and short circuit the evaluation process. If they say “yes,” it may not become an actual deployment, or they might do a small rollout that fails. You have not made the necessary discovery effort and have not built the relationships needed at multiple levels for a successful rollout, or they do a small rollout that fails. Take a holistic approach to building business relationships; talk to the relevant senior business leader to verify that you address a critical business issue and align with corporate strategy. But do an in-depth detailed discovery process first and demonstrate results that build trust and goodwill before trying to close a sale.
When a startup is introduced to the relevant senior business leader as the first point of contact, they should first do as much research as they can from public sources--don't waste time in what is a precious conversation. No one wants to be asked questions that could be answered from the public website or the last annual report. Instead of trying to close the deal in the first call, they should understand the leader's perspective on the problem and then ask for an introduction to the employees assigned to work on the problem.

You will need to document each meeting and provide a summary to all attendees and appropriate members of the team who were not present. If you can, debrief immediately after a customer meeting and capture a shared set of preliminary notes. Allow one day to let people reflect and revise the notes before sharing. If there are critical items that require an urgent response, share them immediately. Four to six months into the sales effort, you may need to confirm essential information that the customer shared early or commitments that you made months ago. As the Chinese say, the palest ink is preferable to the best recollection.

You must identify a kill zone where the product brings substantial advantage over incumbent solutions and other alternatives available to the buyer. A small win that can be closed in six months can enable a more extensive relationship down the road. However, it’s costly and demoralizing to come in second after a year and have nothing to show for it. Enterprise purchasing groups bring competitive pressure on their first choice and may provide false encouragement to keep you in the deal. If you don’t see ongoing progress that provides increasing proof of value for this particular customer, the prudent course is to decommit gracefully.

Risk Management

Both the buyer and seller have risks that they must manage. The buyer may need to learn a new tool or change processes. They may need to rely on a new vendor to make additions/enhancements and bug fixes. The vendor needs to diagnose needs and craft a workable solution that creates value for the buyer. Often this requires configuring or modifying the product to create more value for customers.

In a complex sale, the buyer may perceive the purchase to be high-risk, whether due to price or the stakes of making the wrong decision. It often requires a lengthy process of deliberation. The buyer is worried about the following questions:

Will this work for me?
Do I fully understand the technology capabilities available today?
What are the vendor’s support capabilities?
Will the vendor meet the commitments they make?
What happens when there are bugs?
What will happen when new features or enhancements are needed?
How much can the vendor enhance the product?
What do I need to change?
Will the vendor meet their commitments?
What is the onboarding process?
What training is necessary?
How do I ensure buy-in from the users?

Some of these risks can be addressed during POC and pilot. If you are cavalier about your commitments during the sales process, this will increase the buyer's perception of risk. Any enterprise deal requires a careful alignment of incentives so that both parties benefit from "doing the right thing" to support the relationship. A customer who takes a zero-sum perspective and is only focused on "getting the best deal" is unlikely to summon the vendor's best efforts over the long run. A joint review of the last 12-18 months of feature evolution in the product and the features roadmap for the next 6-12 months can clarify what new features are likely to be needed and how likely the vendor will deliver them.

The vendor also has risks they must manage:

Have I diagnosed needs correctly?
Can the buyer implement and make the changes needed to leverage our technology?
Can we craft a workable solution?
How much value can I create for the buyer?
What are the unknowns for interoperating in the buyer’s specific operation?
Is the buyer willing to share in the upside value we create?
Is the buyer willing to help with case studies and testimonials?
How much support and training will be needed?
What new features or enhancements will be required?

An entrepreneur must be skilled in managing and reducing risk for everyone involved in the decision. To be effective at sales, you must advocate for your startup to the customer and advocate for the customer to your team to create a successful shared outcome. During the sales process, an entrepreneur is continually working to knit together business relationships between key members of the customer organization and the startup team so that the relationship functions smoothly, with customer executives and the founders only needed for escalation on critical issues.

Summary

An enterprise sale is a significant source of opportunity for startups, but it is a complex undertaking with many moving parts and many people involved. The founders must discover and diagnose the need, determine that the offering can be configured to create value for the customer, build alignment among decision-makers, explore how to work with the customer to co-create value, manage risk, and lay the groundwork for a long-term relationship.

About Brendan McAdams

Brendan McAdams (@BrendanMcAdams), a sales and marketing professional focused on B2B clients in healthcare. He is the co-founder of Expertscape, the premiere system for identifying and objectively ranking medical expertise by specific topic, condition or diagnosis. Brendan operates a consulting practice that helps healthcare technology companies market and sell to risk-bearing entities like health insurance companies, health systems and large physician groups. He is the author of "Sales Craft: Proven Tips, Tactics and Ideas to Elevate Your Sales."

About Sean Murphy

Sean Murphy (@skmurphy) has been an entrepreneur since he could drive. He founded SKMurphy, Inc. to help bootstrapping entrepreneurs find early customers and early revenue. Prior to that he worked in a variety of roles: software engineer, engineering manager, project manager, business development, product marketing, and customer support. Companies he has worked directly for include Cisco Systems, 3Com, AMD, MMC Networks, and VLSI Technology. He has a BS in Mathematical Sciences and an MS in Engineering-Economic Systems from Stanford University. His most recent book is "Working Capital: It Takes More than Money"

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