My Manufacturing SaaS MVP is nearing completion and I plan to work with a few carefully chosen pilot customers to start. I'm pretty tapped out wrapping up the MVP, so I'm looking for help finding and signing the initial customers.
I've been approached by a company that does outsourcing for lead generation. They propose charging a fee for each qualified lead they bring in ("qualified" per my definition) plus a percentage of any sale they close on my behalf.
Can anyone share their experience with this type of arrangement? Is it worth it? What are fair terms and what's a fair price? Are there other alternatives I should be looking at for lead generation and business development? Thanks!
Unless you know the selling/purchasing process well in your target market, anything you spend will not be valuable. Sales process needs to be developed in 4 steps.
1) Founder sales. You need to validate if your target market cares about your solution and you alone are qualified to do this. You may find your MVP is perfect (unlikely) but there are other considerations to take into account. Get 10 or 20 "sales" not only to show the target will use it, but you also get more depth on the product and where it should be going next.
2) Explorer sales. Once you have developed an understanding of the process, hire an "explorer". Think Davy Crockett or John Fremont. These are sales people who know the objective, but chart the rough sales map of how to get there. They will be the best source of product development needs and further validate your model. You need hardcore, industry experienced, tenacious people. You do not need a VP of Sales at this point. You need one or two of these people who do not expect a fully functional team of others, systems to amplify, or a fully baked product. Expect radical transparency and respond with radical flexibility.
3) SWAT sales. Once the explorers have better developed your process, consider a Director of sales to field a swat team of people who take those learnings and amplify the contacts. They too know there will be unencountered issues and need to be creative in process, but they are well versed in thinking on their feet and being able to respond to the target market barriers.
4) Infantry sales. This is where a lead gen company may fit, or an inhouse/outside sales team fits. The buying process is well developed, the target market likes the product, you understand the barriers and selling/adoption cycles (selling it AND actually using it are very different metrics), and you can then fully know your CAC and LTV. Only then can you forecast the value of a lead, what a valuable lead looks like, and set the engagement metrics an outside team needs to be valuable.
In a past life, I engaged this in the wrong order. We did Founder sales well, skipped the Explorer step, and brought in a SWAT team and an Infantry at the same time. It failed. It was only valuable in that it proved how wrong we had this selling model. When we reset the process in order, we were richly rewarded and the company grew dramatically.
@Dane Madsen gives a good example of sales process. I'm sorry you're tired, but that's the life for the head of a company. It sounds like you may have also skipped a huge step in your product development, because if you're just now worrying about finding more customers, there's a potential a disaster looming.
Marketing strategy should always come before product development. In large part this is because it will define exactly who your future customers are and what they're actually willing to buy. If you had completed this step before you started development, you'd already know who more than your pilot customers who likely tested your product were going to be. Your low-hanging customers should be the easiest to find because of the testing you did with product-market fit. And you already would have tested your value proposition and sales approach.
There is no point to hiring an outside sales force until you have perfected your sales process internally. Anyone outside your company, even if you can teach them your perfected sales process, will always do less well than you will at following that process and winning customers. They have no stake in your business, just a hand in your wallet.
The disadvantage of buying leads is that you learn next to nothing. The process of discovering your own leads, hearing their points of resistance, and and understanding the root of their questions is so valuable I can't imagine wanting to ever hand that over to someone else, especially at the beginning when the company is fragile.
In the same way, it is a mistake to think business development can be handled by an outside agency. No one outside your company can act with the level of authority and intimate knowledge of your business process at the level required to cultivate worthwhile partnerships.
You can save your bacon, but don't try to start selling until you've visited the earlier steps, even if you think your product is ready. It's most likely not as ready as you think, at least not for the market.
And if I'm wrong and you did do all the pre-work on strategy and product-market fit and refining your sales process, then don't turn this over to an agency. Hire your first salesperson and train them. Get sales off your back and give it to someone who can replace you as the primary salesperson.
I will recommend using a Virtual Assistant, or email marketing team with very good reviews and outstanding portfolio. Of course, with a flexible contracts.
Hire a few teams, fire those that are totally useless and keep those that proven results. You can have more control on the quality.
You can ask someone to generate email leads at $1 or under
Ultimately, this is a very low skill set that is laborious.
You can delegate lead generation/ email collection.
Quite frankly, you need time to validate the email and it takes time for responses from the recipients.
You can then personalize and connect with those that reply.
Ultimately, the law of large numbers still applies in sales.
Alternatively, connect to associations & groups that might have the decision makers. (this is free)
I'll second the hire-many-teams concept. Go with three. It's a good round number. I provide outsourcing services with our Doakio team, and I have to say if they are going with the per lead and percentage of closed sales (commissions) then they seem confident in their abilities. This could be a good thing.
But it also means you may be paying more for their services than necessary, if and only if you believe you can find per-hour remote agents that can do as good as them.
I'm convinced that the best way to scale sustainably is with long term relationships. Once their methods stop working for them (after they get the low hanging fruit) they'll could want to leave. So you may lose out on the experience and expertise that remains with you with full time staff.
Moderator... Please delete. Thanks!
I agree with @Dane Madsen's approach.
I learned it the hard way too, but then saw the benefits of doing it the right way.
At the beginning, DO NOT ousource lead generation, you need to do it yourself to make all possible mistakes with those initial customers. This is YOUR learning process, so don't outsource your EARS & EYES. It's like learning to ride a bike, you can't ask someone else to learn it for you...
I can also usuggest a great book for you, that explains this process very well and has done so since many years ago and it's still valid - it's "Crossing the chasm" by Geoffrey Moore.
Go make some mistakes, it'll make you good.