As a serial entrepreneur and growth consultant at Red Rocket, I have encountered hundreds of companies and some of the common pitfalls they run into related to sales. I’ve seen the impact those pitfalls have on effectively growing these businesses long term.
Related: The 10 Biggest Mistakes in Sales
1. Dependence on one industry
Sometimes an entrepreneur has no choice. If he has a car-parts manufacturing business, for instance, he is pretty much tied to the ebbs and flows of the automotive industry (which is highly cyclical and tied to the health of the overall economy). But he (or she) should aspire to have a mix of customers across many industries. That way, if the economy negatively impacts his industry, it does not take his entire business down with it. I have seen a lot of companies watch their revenues get cut in half overnight, based on some unforeseen economic event (e.g., 9/11 in 2001, the mortgage crisis in 2008). Don’t let your business be one of them.
2. Dependence on one customer
As with the pitfall described above, you want to avoid dependence on any specific customer; you never want to have all your eggs in one basket. In a perfect world, no one customer should represent more than 10 percent of your overall revenues. That way, if you lose that customer, you are putting only 10 percent of your revenues at risk. Too many times I have seen companies living dangerously close to the edge, with more than half of their revenues at risk with just one customer. You lose that customer, you lose your business. And that is not a good situation to be in.
3. Not recognizing that not all customers are good customers
Too often, a startup is so desperate for revenues that its owners will take them from wherever they can get them. They’ll do this even if they are going outside of their “comfort zone” in terms of what is a perfect fit for their business. That is a recipe for long-term disaster. Engaging with customers that do not fit squarely into your core competencies puts both the company and the customer into a bad position. This might entail taking on a project that is too difficult to fulfill or working with a customer who is never satisfied and has you constantly spinning your wheels. Walking away from a customer or project that is not the right fit is always acceptable. Don’t get so seduced by near-term revenue that you lose sight of long-term fulfillment costs, resulting in heartache.
4. Customized sales
Where you can, it is always best to “productize” your business. You want your sales team perfectly trained on those products, and your operations team fine-tuned for fulfilling those sales. The reason: Nothing causes more chaos in a business than custom sales requests. The sales team is unsure whether the company can fulfill them, which slows them down. The technology team needs to squeeze in time for custom development, slowing their work on your product road map. And your operations team is not sure how to fulfill the custom deal, slowing them down. Certainly, custom sales are sometimes okay, if the product being customized was already in your long-term product road map, so that you are merely accelerating it for a paying customer. Sometimes if a big client requires a custom sales request, you need to protect the relationship. But as a rule, "custom” is a bad word in sales. So make sure you understand how best to productize your business.
5. Using your clients as guinea pigs
If you are not sure your product or service will be successfully delivered and have a high probability of success, do not sell it. Period. Instead, make sure you have done a proper quality assessment of the product, on your own, before pushing it live into a client deliverable. The worst thing you can do is use your clients as guinea pigs, to test out your products, unless those clients understand and are fine with being used in a test-pilot situation. Because when things do not deliver as planned, you will have soured the relationship, and most likely, lost a customer. Not to mention the negative feedback that that customer may spread to other, prospective clients calling for references.
So, when looking to close your near-term sales opportunities, keep these pitfalls in mind. Remember: You don’t want to be paying down the road for costly mistakes you make today.