For startups: how to deal with large enterprise customers


When I started Visual Website Optimizer, my sole focus was on selling to small to medium businesses (SMB). However, since last two years, we started getting interest from a lot of enterprise prospects. Of course, if a Fortune 500 company contacts your fledgling startup showing interest to purchase your product, you will be very excited about this mini-validation of your product. However, dealing with large enterprises is a different beast altogether. They don’t work like your rest of your customers and selling them is very different ballgame. So, before opening the champagne bottle to celebrate, you should keep some key points in mind.

How big boys make a purchasing decision

Hell yeah, I'm enterprise!

The single most important point is that most enterprises take ages to make a purchasing decision. They will contact you today, you will happily reply asking if they want a demo/meeting and then they will become radio silent. After days or weeks, they will reply and probably schedule for a call to discuss your product. Sometimes this call is scheduled for the same week but sometimes those big boys can schedule a call 3-6 months ahead (yep, this has happened to us!). The key point to note is that enterprises can be slow in responding (even after showing initial interest) but that shouldn’t make you give up. Use a CRM, follow up regularly and you should be fine.

Assuming you finally get a time for the initial meeting and they are impressed, they will probably ask for a trial or pilot. But, again, no matter how much effort you put into putting together this pilot project proposal, they will remain radio silent for a while until they suddenly get back to you asking for another meeting with their IT team.

Enter the IT team: why and how?

Sorry, you are screwed

You must remember that in enterprises it is never an individual that makes a purchase decision (especially if the deal size is >$1000/month). There are committees, managers and bureaucracies that you need to overcome. Once a specific group (say marketing department, in our case) shows interest and agrees to proceed with the trial/pilot, the IT department gets involved to ascertain everything is okay with your technology and it won’t conflict with their environment. Usually this phase is the quickest but sometimes IT department can raise some special requirements that your generic product may not be able to satisfy. (For example, one such requirement for us was the restriction on number of cookies we can set.). These special requirements may sometimes become a deal-breaker because if the IT says no to a pilot, it doesn’t happen, no matter how motivated other departments are. If you sell sales automation and the sales department is super-excited about it, the deal can still fall through if the IT says no.

However, assuming your product is indeed good, in most cases you will sail through these barrage of questions from IT. This will lead you to a live trial/pilot implementation.

Step towards success: implementing a trial / pilot for the enterprise customer

Hope it flies

Whatever time you budget, the trial takes twice as much time. Big enterprise always have that unknown contingency lurking in the dark. Sometimes their systems aren’t ready, or they don’t have approvals, or the key people are on vacations. Since large enterprises treat trials and pilots as seriously as final implementations, you would need to make a significant investment of your time and effort to get it done. Just like in sales, where you should always be closing, during the trial too, you should always keep trying to get the customer start using it. By themselves, enterprises may get really, really slow at implementing or using pilots/trials.

Procurement: why do they exist?

Puhleez?

Once your trial is completed, and the target customer (which may be an individual or a specific department within the big enterprise) wants to go ahead with your product, there are two ways the final purchase that can happen. If the sale price is low, say less than $1000, an individual generally can make the purchase on his/her personal card and later claim it as an expense from the company. However, if the sale price is high, individuals or departments do not have budgets for it and they have to involve a special kind of department with a very boring name called Procurement Department.

I imagine people working in the procurement departments have a funny job because things they are asked to purchase is not the things they end up using themselves. So you would find that the final stage of selling to an enterprise involves procurement department asking you for a quote and scope of services. Most procurement departments also innocently ask for discount, as if it is a requirement to do the sale. Under no circumstances you should offer any kind of discount to the procurement department because they have absolutely no influence on the purchasing decision. They are just there to facilitate the purchase. So simply tell them that you are not offering any discount, and if they ask for reasons tell them that it is a company policy.

Lawyers and Terms & Conditions

Lawyers, the cute kind

If the procurement department okays your big ticket purchase, don’t get impatient and still don’t open the champagne bottle. When lawyers get involved, the whole initiative can get derailed because of that one specific word you have in your terms. For SaaS and software products, the terms and conditions are generally standard for all the customers. (For example, terms and privacy policy for Visual Website Optimizer is public). However, some large enterprises would have their own “vendor terms” which would be completely different from your standard terms. Now, should you sign a custom terms document with each of the big enterprise customers? Unless you are prepared, I wouldn’t recommend that as it can become a big hassle in the long term. Even if the sale price is high enough to justify detailed negotiations on the terms and conditions, you should always get your lawyer involved. Don’t try to negotiate the legalese yourself because remember you are startup, and the other company is an enterprise. They have a large army of lawyers, you have.. well, only yourself. (Also remember that if your startup raises funding or gets involved in an acquisition, all the documents get scrutinized at the due diligence stage. So don’t sign the “standard” vendor terms document supplied by the enterprise just because it looks harmless)

Closing Thoughts

Sales promises haunt eventually

Selling to enterprises can be fun and for a young company, it is definitely a big achievement. However, following miscellaneous points should still be noted:

  • SLAs (service level agreements): even if you do not guarantee anything to majority of your customers, enterprises would typically demand very specific SLAs for customer support and software uptime. Before promising, make sure you have resources and capabilities to honor that. Do not commit to an SLA just because the sale price is high.
  • Phone Support: enterprises also typically demand phone support. If you are a small startup and founders do support, make sure you are capable of providing phone support even when you are in a meeting, having lunch or partying outside. Phone support is a big commitment, so only make it if you are ready to handle regular calls (because enterprises do love to call for even the tiniest of issues).
  • Discounts: do not give discounts to enterprises. They value the solutions they use and cost is almost always a secondary factor for them. (This is also a big reason to have flexible pricing for enterprises so that a Fortune 500 company pays in thousands of dollars, not $15 that is your standard plan.)
  • Ask for their logo or case study: if you must provide a discount or an additional feature or service, ask them if you can use them as a case study or at least put their logo on your customers page or get a testimonial from them. Always do barter, never provide discounts for free.

Hope you liked this short primer I wrote (based on my experience of selling Visual Website Optimizer to large enterprise customers such as Microsoft, AMD, Economist, GE, etc.) In case you have any specific questions about enterprise selling, please leave a comment. I will be happy to help!

Good luck with your first thousand dollar sale (:

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12 Responses to “For startups: how to deal with large enterprise customers”

  1. Vaibhav Kanwal
    16. August 2012 at 13:48

    Hi Paras

    That’s a very interesting post with lots of good advice.

    Specially, the points on

    - Trials
    - Procurement department & discounts.

    However, I am intrigued to see the post dated 15th August.
    Weren’t you flying kites? Just kidding…

    Thanks for sharing your views and experience with Visual Website Optimiser and congratulations on your recent milestone.

  2. Paras Chopra
    16. August 2012 at 13:56

    @Vaibhav: nope, I wasn’t flying kites (: [Writing is my first love]

  3. Sameer Guglani
    16. August 2012 at 14:01

    Great article paras, we see it all the time that startups get excited by an email from a big client or after the first good meeting. Where as unless you have the money in the bank the deal is not done. Some time even after paying they can stop using from next. Cycle

    As you rightly mentioned first thing to do it to get them to start using it as a pilot or in a small way. That gets the engagement going & if close the deal focus on ensure continous usage from the client. Because if they are not using it effectively the account will get closed after few cycles.

  4. David Guerra Terol
    16. August 2012 at 14:48

    Very interesting post Paras. However, I’m wondering if all those big accounts you’ve closed they came to you or you did the first approach some time. Any advice on how to embrace a Fortune 500 company to have a chat?

  5. Paras Chopra
    16. August 2012 at 14:50

    @David: we never approached any big company. All of them approached us. That’s why content and inbound marketing has worked really well for us. (Maybe will detail that in a separate post)

  6. Daniel
    16. August 2012 at 17:08

    Paras, thanks for the interesting article.

    A couple of follow up questions:

    1. How do you decide on pricing for large enterprise customers?

    2. How much customization of your product would you have to do to get the deal from large enterprise customers?

  7. Krish
    16. August 2012 at 17:22

    Thanks for sharing Paras. Very interesting post for me, with us experiencing a very long sales cycle process – 3.5 months of on-off interactions with various departments of a potential customer. :)

    Since you have a Terms of Service that is publicly available (same case with us), what do you generally provide when they ask for a Terms document to sign?

    Do you just say when you signed-up to use our account, we had this tiny checkbox and by clicking on that you agreed to this policy in our website?

    Have you ever had to create a separate document to print & sign? When I created the proposal and basically said the Terms are in this URL, but I am sure some of these companies will come back to ask for a separate legal doc.

    Cheers,
    Krish.

  8. Paras Chopra
    16. August 2012 at 17:23

    @Daniel: 1. Pricing should go up with volume (and hence value you are providing to the enterprise). And ideally there should not be any upper limit. In our case, we priced by number of visitors tested which is generally very large for large enterprises. Other common way to price is by per user/login.

    2. For SaaS products, I’d push for no customization at all. Instead take feature suggestions from them, and tell them you will consider it in your product roadmap.

  9. sandeep
    18. August 2012 at 17:17

    hi Paras,
    which CRM do you use ? For a fledgling startup, would you recommend the same or some other (simpler ? hosted ?)

    thanks!

  10. Paras Chopra
    18. August 2012 at 20:58

    @Sandeep: we use salesforce, although that is bit complex. For you, you can probably go with highrise.

  11. Satya
    25. August 2012 at 13:32

    We are dealing with 2 enterprise clients and this article is bang on the stages the startup goes through. All phases are well articulated.

    Thanks, Paras for streamlining all thoughts in 1 blog.

  12. Rosh
    30. August 2012 at 20:44

    Thanks for the insights ! Good job.

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