Some years ago, I wrote about the challenges of finding others to do your sales for you (see https://www.telekta.com/blog/2009/10/practical-sales-outsourcing)This past year, I have found myself more involved with startups and identified an additional insight that all experienced startup professionals agree on, but most technology-based new startup founders miss.
Startups might be able to outsource engineering and operations (not without difficulty), but they should not even think of outsourcing initial sales for at least three reason: Continue reading...
A better way to value technology license product company value
In the famous book Rich Dad Poor Dad, Robert Kiyosaki redefined the accounting term "asset" to mean something you own that generates money. Using his definition, the house you live in may be an asset for accountants, but an expense according to him (and now me). I found this redefinition very useful in my personal life and then soon found myself trying to redefine asset as I looked at evaluating company value for purposes of company merger or payout.
Using a Kawasaki-esque, practical approach, we see that the the Intellectual Property (IP or source code) is only valuable if and when people buy licenses. Moreover, existing license sales are only valuable if the licenses can be sold at a profit and the number of customers is only valuable if they are receptive to buy more licenses or support. Given this, how can we measure the value of the asset in a meaningful way?
I have never been impressed with any company evaluation equation in the technology sector nor have I found accounting standards good arbiters of success. However, in the case of mature mode, enterprise class software, I believe there is a simple measurement of one single value that defines the value of the asset in the same intuitive and useful way as Kawasaki. That single measurement: Total value of list license price under an active maintenance contract (LLPUAC) is directly proportional to company value and that two different companies (in the same sector) could be directly compared by looking at the ratios of their LLPUAC values to determine the ratio of their relative company value. I believe that this one single measurement encompass nearly everything likely to be important about a company (or product) value in this category. This means that lines of code, annual revenue, human capital, brand equity, cost of sales, and other common measures are irrelevant once you have LLPUAC. My reasoning: Continue reading...
How-to Guide (suitable when your offering is big, complex, and expensive)
I love doing discovery phase interviews and have always been particularly good at them. They reward those that think quick on their feet and have a broad education and business knowledge. For me it is improvisational theater meets MBA case study review-- great fun. In a recent startup incubator program, I made an attempt to describe the process I use so that others could try on their own....
Step one of any product launch, business expansion initiative, or startup is best described by Steve Blank as “Discovery”.: “validating whether they are solving a meaningful problem and whether anybody would hypothetically be interested in their solution” Technical people, especially, struggle with this phase (partially because they think they already know the answer and partially because they are often poor collaborative listeners) Continue reading...
When selling services to other companies, you need to re-consider your key website messages.
Recently I came across a »corner case« of web site design. Two clients were providing services to other businesses (B2B), but in entirely different industries. Both struggled to create websites and key clients gave negative indications. The problem and the solution for both was the same....
Let's imagine a simple outsourcing relationship to better understand the problem. Outsourcing is likely to be promoted based on a critical knowledge, price, location, language, or other advantage that the supplier ("SmallCorp") has over their client's ("BigCorp") internal resources. However, BigCorp is selling to their customer's with a message that they are uniquely qualified to solve a specific problem. The SmallCorp's message, if ever exposed, is completely incompatible with their cleint (BigCorp's) message. In an age where nearly anyone is potentially exposed to end customer-facing communications, it is high risk that an outsourced person could expose his name to an end client. Once exposed, social networks (linkedin, facebook,etc) quickly expose SmallCorp – including which company this person works for and what “priorities” his company has. The result—client message collision.
With salesmen, you pay for results through commission. What is there to manage?
I made the transition to management while an engineer. At that same time, my main outside activity, sailboat racing, also made a transition from racing crew with a small role to starting my boat and taking on captain responsibilities. With both, I made lots of mistakes. Later, I started to educate myself in less damaging ways through reading and classes. One surprise, was that the problems I was facing on the job, were nearly the same that I was facing with my unpaid racing crew, and even more remarkable was that the management books would often describe the techniques that I discovered through painful trial and error. Engineers and volunteer sailors are difficult groups of people to manage effectively, but far easier, in my experience, than managing salesmen.
We pay salesmen almost exclusively based on results (not effort), yet they do not control markets, don't make the products they sell, and have few control points within the customer. Continue reading...
