Finding your first customer

Focus on finding your first customer.

1

Success is just a matter of attitude.
Darcy E. Gibbons.

2

Champions aren't made in gyms. Champions are made from
something they have deep inside them -- a desire, a dream, and a
vision. They have to have last-minute stamina, they have to be a
little faster, and they have to have the skill and the will.

But the will must be stronger than the skill.

Muhammad Ali

3

You will never do anything in this world without courage. It
is the greatest quality of the mind next to honor

James L. Allen

4

Never before in the history of the world has the potential to do
extraordinary things been this big for the smallest of teams

5

First, You're Probably Asking Yourself: "Why Should I Listen To Him?

That's a fair question. Why Would You Listen To Me?
.

6

My background:

Been in high tech industry since 1961

Held positions of: Salesman, Sales Manager, Vice-president Sales,
Vice-president Marketing, Executive Vice president Sales and
Marketing, President/CEO.

Been a partner/founder with 12 companies that received over
50% international revenue 8 of which successfully went public
or were sold/merged.

7

Been president of Jerry R. Mitchell and Associates since
1985

Described in Fortune Magazine November 1997 as serial
entrepreneur.

8

In my consulting business I have developed for many clients
very successful international channels of distribution.

Have provided strategic guidance for my clients that enabled
them to increase their business through the acquisition of
companies servicing different markets.

9

Been part of several successful management teams that took an
idea and built a solid company that raised venture capital and eventually
went public or were sold to a much larger company. I have walked
the path many of you are walking today.

10

President of The Midwest Entrepreneurs Forum since its
formation

Publisher of Bootstrapping newsletter

Former advisory board member of DePaul Universities Coleman
Entrepreneurship Center

Am also Chairman of Modularis Inc. http://www.modularis.com.

11

What does it take to start and succeed in business?

12

That's a question I am always asked by entrepreneurs/startups and
.
by owners of existing businesses that aren't living up to the owners'
dreams.

Although there is no one answer that fits all businesses, there are a
number of practices followed by successful, happy business owners.
No matter what you sell, you'll be ahead of the game if you listen carefully
to what I have to say.

13

The advice always given to those wishing to start their business is find
a need and build a product/service that fills the need. Always
remember you must be able to find customers willing to pay more for your
products or services then their cost.

14

As you begin your quest to start or grow your business always
remember that if you do not enjoy the business you have chosen
to build, it will eventually fail. You must believe that the
product/service you are going to offer will be an improvement to existing
competitors or it will not be successful.

15

Remember that there are 600,000 new ventures created in the U.S.
every year.

16

Small Business owners are those individuals who are the explorers
and pioneers of the business community. They break new ground
and find new approaches to challenges. No two days are alike. It
takes flexibility, imagination and a sense of fun, but for those of us
who love to be where the action is, this is an exciting place to be!

17

I am confident that I can give entrepreneurs/small businesses a set of skills
and tools that will make them more successful. I have developed
a program focused on the launch and management of new ventures,
blending the academic tools required to develop and operate an
entrepreneurial business with practical approaches to making such a
business financially successful and internationally competitive.

18

I believe that your investment in your education should reward you in
the future. .

19

Becoming an entrepreneur means more than just getting an idea
and finding the financing to do it. Running a business on your own
requires skill and knowledge. The question is what skills and
knowledge?

20

Do you really need an MBA? Stories abound about entrepreneurs
who have set up and run a business without a college degree,
some without even finishing high school. Are they the exception
or is being an entrepreneur an art that you either have or don't have?

21

Many successful entrepreneurs didn't start out at the top. They encountered
plenty of setbacks along the way, both personal and professional. But what
finally set them apart were sheer determination and a will to persevere. All
these top performers have something else in common: They said "Yes, I can" to
themselves over and over in spite of the obstacles life threw their way

22

The biggest mistake I see first time entrepreneurs make is that they spend
too much money.

They rent an office or retail location, pay big incorporation fees, hire
employees, and build an expensive website (just to name a few). And all
before they’ve earned their first dollar!

23

Each month their cash reserves get lower and lower while they struggle
to make sales to cover their expenses. Eventually the fledgling business
dies with no cash flow, leaving the owner hurt emotionally and financially.

24

Luckily, it is possible (and actually quite simple) to start up a business
without spending a dime. The beauty of using this method is that you can
test out a new business idea quickly and with zero risk. And instead of
spending time negotiating leases or dealing with employees, you can spend
100% of your time on the most important thing: making that first sale!

25

The first thing you’ve got to do is get past the idea of spending. Work out
of your home or Starbucks on nights and weekends. Instead of hiring
employees just get started with what you can do yourself, or ask friends
for help.

26

You can spend money on all that stuff once you are bringing in revenue!

Don’t spend a single red cent that isn’t absolutely required when
launching a new business! See if your idea works first, and then spend
AFTER you’ve made your first sale!

27

I’ve always assumed that one of the best ways to build a business is to
build it around what you love to do.

28

How many of you can't wait to get up in the morning to rush out and
sell something?

29

Fact is, most people have a negative perception of selling. They
associate selling with a negative connotation of manipulative and
aggressive tactics.

A career in sales is something you hope your brother-in-law (who hasn't
had a steady job in five years) wouldn't even consider doing.

30

Sales and marketing are like two brothers. Everyone knows they are different, but
people often call them by the wrong name

31

What is the difference between marketing and sales?

32

I'm continually perplexed why so many marketing people
believe selling is beneath them, and consequently, that
professional salespeople aren't their equals. In my experience,
many marketing departments believe they're on the
sophisticated side of the business and have an array of facts
and figures, statistics and benchmarks they use to support
their position. I've never understood this.

33

For example, several years ago I was the keynote speaker
at a function for the one of my clients. Sales and marketing
were lumped together in this association - as they are in many
companies- thus all of their salespeople were called "marketing"
people. The company did this because of the negative perceptions
many people held about salespeople. I thought this was nuts. But
how many other companies do the same? How many actual
"salespeople" do you encounter?

34

If you're like me, you more frequently encounter business
development managers, account executives, marketing
representatives, customer solution specialists, etc. All of
these titles are trying to mask what these people are tasked
to do: sell the company's products and services. Isn't the fact
that a company tries to hide the true intent and/or position of
its sales staff as deceptive as a dishonest salesperson?

35

I'd say this company's mandated deception does more to put
prospects on the defensive than the few dishonest salespeople
they might meet. But even more unfortunately, this deception
only magnifies and perpetuates the negative perceptions people
have of salespeople, which is exactly what these companies are
hoping their creative titles will avoid.

36

Perhaps by blurring the line between marketing and selling, these
companies believe prospects will be more receptive to their
product or service. However, I believe it only adds to the confusion.

37

Perhaps that is why I meet few people who truly understand the
fundamental difference between sales and marketing. So lets get
clear on both. At the most basic level, marketing is everything
that makes the phone ring, while selling is actually collecting
the money

38

In a broad sense, marketing is everything that affects company
profitability. Advertising, public relations, sales and actual product
marketing are all under this umbrella. Many companies are
themselves confused by this inherent difference, thus they often
combine sales and marketing (product) together.

39

This is a mistake as a company's sales and marketing staff must
work together while remaining separate entities to maximize
effectiveness. Why is this so important? I believe there are three
primary reasons.

40

First. A company's sales activity is the only activity that directly
generates revenues. (I'm referring to professional, business-to-
business sales and big ticket consumer items such as homes,
vehicles, boats, etc.)

41

Marketing may "push" prospects to buy, but salespeople "pull"
them to customer status. And regardless of how clever a
marketing campaign is, it will never be as effective as possible
without the proper sales approach. This requires both the sales
and marketing departments to be working jointly for the end
result: increased sales.

42

"Selling" or making sales consists of interpersonal interaction, the
one-on-one meetings, telephone calls and networking that you
engage in with prospects and customers.

The term "marketing" encompasses programs businesses use to
reach and persuade prospects, including advertising, public
relations, direct mail and more

43

Did you know it takes approximately eight contacts or more with
a single prospect before the average sale is closed? That's because
prospects normally move through the sales cycle from cold to warm,
and then finally hot where they're ready to "close" and become
clients or customers.

44

Entrepreneurs often get into trouble by choosing only those
tactics with which they're most comfortable.

For example, someone who is inherently shy may forgo important
sales tactics, such as networking, and rely solely on impersonal
marketing programs.

45

On the other hand, a more outgoing entrepreneur may spend
countless hours making cold contacts at networking functions
but fail to move prospects through the sales cycle due to lack
of ongoing marketing support.

46

To avoid this trap, divide your prospect database into cold, warm
and hot prospects. Then, impartially identify the best tactics for
reaching and motivating each group.

Sales tactics that help you reach out to cold prospects include
networking, cold-calling and trade show participation, while cold
marketing tactics are advertising, public relations, direct mail,
seminars, special promotions and having a Web site

47

To reach warm prospects using sales tactics, your business may
rely on follow-up calls, meetings, sales letters and literature,
e-mail or more networking.

48

"If a young man tells his date she's intelligent, looks lovely, and is a great
conversationalist, he's saying the right things to the right person and that's
marketing.

If the young man tells his date how handsome, smart and successful he is --
that's advertising.

If someone else tells the young woman how handsome, smart and
successful her date is -- that's public relations.

If the young mans date tells him how handsome, smart, and successful he is
and asks him for another date she's been closed by him”

49

As you see in my explanation above it takes multiple contacts
using both sales and marketing to move the prospect from one
level to the next. That is why it is import that you develop a
process that combines both sales and marketing. This will enable
you to reach prospects at all three levels; cold, warm, and hot.
It's all about balance.

50

Rather than avoid vital tactics with which you're less comfortable,
such as cold-calling or public relations, take the opportunity to
brush up on your skills or bring in the proper talent by teaming
or partnering, subcontracting, or hiring.

51

Start by choosing two sales and two marketing tactics, and plot
all the activities it will take to carry them out. The key is to be
realistic and not go overboard. It's important to create a sales
and marketing plan that includes a combination of tactics you
can engage in year-round to support the growth of your business.

52

Fundamentally, marketing lowers the cost of getting your message
to prospects by publishing a fairly generic message in bulk.

Sales increases the effectiveness by arranging for a sales person
to engage a prospect interactively.

53

"Selling ourselves" to others is the unselfish reaching out to other people, to
show them how we can help them.”

54

Most deals, particularly those involving large contracts or
expensive capital equipment, are based almost entirely on the
quality of the face-to-face interaction with the client. It's these
personality factors that can swing the deal in favor of one
company rather than another. There's a subtle difference between
marketing and sales, of course, though in many companies the
functions overlap and are performed by the same group.

55

Winners are persistent. Selling or running a business for a living
requires a tremendous amount of persistence. Obstacles
loom in front of us on a regular basis. But it’s what you do
when faced with these barriers that will determine your level
of success. I believe that a person will face the most challenging
obstacle just before they achieve their goal. The most successful
people in any industry have learned to face the obstacles that get
in their way. They look for new solutions. They are tenacious. They
refuse to give up.

56

" Tonight’s program reminds me of an occurrence that happened at
one of my companies

There was always friendly competition between sales and marketing
departments even though both departments reported to me.

We had an annual picnic where all employees and their families
were welcome.

The marketing department thought it would be exciting to challenge
the sales department to a base ball game at this picnic.

The sales staff whipped the marketing department soundly.

57

To show just how the marketing department earns their keep, they
posted this memo on the bulletin board after the game:

"The Marketing Department is pleased to announce that for the
2005 Softball Season, we came in 2nd place, having lost but one
game all year.”

“The Sales Department, however, had a rather dismal season,
winning only one game.”

58

We all have what it takes to become successful.

Are you ready to make it happen?

59

Sales come first and marketing comes second. A common mistake made by many
entrepreneurs is that marketing (and investing heavily in it) will solve all your sales
problems. This is not true, entrepreneurs risk spending far too much on marketing,
developing attractive brochures and leaflets when what they need to be doing is
going out and selling.

61

Invest what you can afford to in marketing, but, it should only be money you can
afford to lose. I recommend businesses concentrate their efforts on spreading the
word of mouth marketing and stimulating the networking effect. I know successful
companies who spend nothing on marketing and solely rely on the word of mouth
network.

62

When you’re trying to grow your business always start with ‘can we double sales?’
If an important customer happily says ‘yes, we’ll order twice as much’, it’s worth
asking yourself the question: “Do I have the capability to provide them with double?”
Maybe you can’t because you don’t have the capacity, or perhaps the resources or
the market isn’t there, but you’ll find out quickly.

63

Your first paying customer is not going to be a stranger. It has to be someone who
is ready to bet their job to trust you personally to go up to his/her boss to justify
spending real money on a non-existent or brand new company that has no
guarantees of survival next year.

64

Just remembering that you are dealing with real people, with real jobs will give
you perspective in getting ready to network and sell your idea to your first
customer.

65

Find advisors along the way who can guide you through the process. These can be
strangers. Successful entrepreneurs who have sold their companies and are working
in a large company are ideal people who are likely to understand your position and
will help you.

66

You just need that one person who you can trust. If you truly believe you have this
great idea to change the world, be proud of asking people to be part of it.

67

When you find the right person you can ask them to be your advisor. Find out the
best mode of communication that works for them and stay in touch. Take their advice
and move ahead on next steps and keep them posted on your learning and progress.

68

If your personalities do not work out, tell them politely and drop them. It’s common
to learn after your networking round that this advisor was not the best advisor for
the long-term. So, don't make commitments of payments or add their names to your
business plan too soon. Treat them as a new friend and keep them posted and take
it from there.

69

Who is your customer?

70

A popular and critical question posed to business
owners and entrepreneurs by lenders and investors is

"Who is your customer?"

71

It's such a simple question, yet the inability to answer it has possibly caused
more going out of business' sales than any other.

72

Because many business owners place too much emphasis on their products and
services, and too little on what the customer truly wants and needs.

You may have a great product, with more neat gadgets, features, and benefits that
your competition offers, but does your customer care?

And how do you know they care?

73

Why can failing to answer such a simple question have such a devastating
impact on your business?

74

The first place to start is by defining exactly who would be interested in buying your
product or service.

This is your target market, defined as the group of the population sharing a
common set of traits, which distinguish them from everyone else.

75

One example, a children's clothing store located in the mall might have a customer
profile like this:

Children between the ages of 3 to 8 years old, 65% female and 35% male, located
within 10 miles of the mall, and whose parents earn over $50,000 a year.

These characteristics define a target market - and a central set of characteristics
for potential customers for children's clothing.

76

If you're in the start-up phase, your target market may be less tangible than
the target market for a company with years of operational history
and customer files.

But as you gain experience running your business, and you maintain
accurate records of who actually purchases your product or service, your
understanding of your ideal customer will improve.

77

So why focus on your target customer?

78

First, if you don't understand who they are, how can you tailor your product or
service to best meet their needs?

One key to business success is the ability to provide products and services that meet
the needs and wants of your customers. If your customers want to purchase red
shoes, and all you sell are blue shoes, how many do you suspect you will sell?

If your customer believes that the speed of your service is more important than its
than its quality, isn't that information you need to know?

79

Secondly, when you understand who your customers is, you can determine with
more accuracy which marketing mediums and channels will be most effective in
reaching them.

If your potential customer only watches national stations, and you advertise on a
local station, your marketing efforts will be unsuccessful.

The more narrowly you can define your customer, the more focused your marketing
efforts become, and the more your marketing dollars will work for you.

80

For example, if you want to sell independent software developers a product, then
advertising in a software industry magazine is a far more effective use of $10,000
than placing an ad in the Sunday Tribune.

This doesn't mean that your customer won't read the Sunday Tribune, just that you
won't be advertising to all the millions of people who clearly have no interest in your
product.

81

Once you determine who your customer is, it's important to identify the size of
your customer base. Is it large or is it small?

82

If it's too large, consider narrowing it down and focusing on a particular niche.

Trying to reach and sell a large target market is difficult and costly, especially if
it's populated by well-financed competitors who will force you to incur significant
costs to achieve a sizable market share.

83

If it’s too small, will you be able to capture enough customers to make a sufficient
profit?

84

Once you define your customer, and determine their total numbers in the
population, it's a good idea to research the trends of your market.

85

Over the next few years, what growth rate can be expected for your target market?

What changes are taking place in the makeup of your market, and how will they
change in the future?

How are, and how will, customers change their use of your product or service?

86

Effectively identifying your potential customer base helps to drive overall
marketing and sales strategies.

87

The world of metrics can be confusing for people new to these concepts. To
better understand metrics and how they work, several terms must be defined:
measurements, metrics and benchmarks.

88

Measurements are the raw outcome of a quantification process, such
as a company's numbers, ratios and percentages.

89

Metrics are the standards for measurement, providing target values that
a company must achieve to reach a certain level of success.

90

Benchmarks are the very best measurements to aspire to, the standard by
which all others are measured. Companies that set benchmarks in their
industries are the ones often lauded in "Top Ten" and "Most Admired" lists
and articles.

91

A good example of a marketing benchmark can be traced back to the early 1990s.

Over a decade ago, a market research firm conducted a customer satisfaction
research study for the personal computing industry. They spoke to customers
who rated the companies in the industry, which resulted in a measurement ranging
on a scale from one to nine. They learned that 84 percent of users who rated their
satisfaction as a seven, eight, or nine would consider the same brand for their
next purchase. Achieving a seven, eight, or nine became the metric that
companies wanted to aim for. The benchmark was to attain a nine.

92

In order to fully capitalize on the benefits of metrics, companies should consider
establishing a continuous process where metrics are collected, analyzed, and
reported on a regular basis. Over time, metrics can reveal valuable information
about which marketing tactics are most effective, what types of prospects are most
likely to buy, which customers are most profitable, and how the market in general
develops over time.

93

Metrics are a part of our everyday lives --- from our heart rate, to our bank
balances; from our weight to the gas mileage on our cars.

If we don't pay attention to these numbers, we create the risk for a heart attack,
being overdrawn, or running out of gas.

The same is true in the business environment. If a company doesn't identify and
track important performance measures, its risk is increased.

94

Metrics provide a means to assess progress; they provide valuable data
points against which the marketing organization can track its progress.

Metrics demonstrate accountability and allow marketers to better know,
act upon, align their efforts and reduce their market exposure.

Metrics enable the marketing organization to truly serve as the
"eyes and ears" of the company.

95

Market Share

Every firm should be concerned about its share of the markets and market
segments in which it competes. By share we mean the percentage of market
unit volume or dollar value held by a company as a proportion of total market size.

96

Market share is merely the proportion of total market or industry sales made by one
of the competing companies. Market share may be expressed either in unit sales or
dollar values:

Total company sales (units or dollars)
Market Share = _____________________________
Total industry sales (units or dollars)

97

Methods of Measurement

The two primary groups you can interview or survey to make the market share
measurement are:

Competitors
Customers

98

I feel the most reliable, accurate, and fast approach is to base market
share measurements on competitive interviews. It is reliable and accurate
because it is possible to interview 100 percent of the population of
competitors. It is fast because there are about 25 competitors in the
typical market. The range typically is between five and 100.

99

I recommend that this measurement be done by completing competitive interviews
over the telephone. Some of the key questions that should be asked are:

What were your unit shipments in 200X/200Y?
What were your sales in U.S. dollars?
What do you believe your market share is?
What do your believe your key competitors' market shares are?
What do you believe the total market size is?
Which companies are gaining market share and which are losing market share?
What is the price of your product?

100

Obviously, many competitors will not answer all of these questions posed in this
manner and this order. You can improve your response rate by blending them
into a very free-form and smooth conversation and by sharing information with
the interviewee. For example, tell the interviewee what one of the key
competitors feels about their company or its sales. This usually gets them involved.

101

It is also important to build a verification process into your interviewing strategy.
Some of your respondents will be stumped. They will not know the correct
answers, or may not tell the truth. A verification strategy will help eliminate
these problems.

102

A verification strategy entails interviewing multiple people in the same organization
to cross check sales figures, and by asking competitors their opinions about the
accuracy of the responses received. You should also then multiply the average
price of the unit by the unit sales to see if it matches the dollar sales given in the
interview.

103

From the sales figures and the total market size, you can calculate market share.

Market Share of Company 'X' = Sales of Company 'X'
_________________
Total Market Size

104

The other group you can interview or survey to make a market share
calculation is the customer group. You can do this by a telephone survey,
a mail survey, or trade show interviews.

105

The two basic types of marketing research are quantitative and qualitative.

Quantitative research answers questions that start with "how many" or "how much".

Qualitative research addresses issues that deal with "why" or "how Quantitative
research usually involves surveys while qualitative studies rely on observation or
unstructured conversations with customers.

106

Where can I get help for marketing research projects?

When researching your business idea, it is important to do as thorough a search for
information as is possible. It is also recommended to do as much of it as you can on
your own.

This will help you know the market for your idea better, and can help to keep the
costs down at the start.

107

Some Places to start your research.

Factiva
LexisNexis
Business Source Premier
ProQuest Direct
Thomson Research

108

Factiva is an online database designed to allow access to business and financial
information. This service covers publicly and privately held companies, industries, the
stock market and the economy. Coverage is domestic and international. Current stock
quotes, full-text newspaper, wire, and magazine articles, and company profiles can be
located via a user-friendly web interface.

109

LexisNexis provides access to full-text articles from thousands of newspapers and
magazines worldwide. Full-text SEC filings are available. Many local and most national
& international newspapers are included. Extensive coverage of the accounting, tax,
and legal literature

110

Business Source Premier The Business Source Premier database is a
comprehensive, business periodical database that includes scholarly journals and
business periodicals covering topics such as management, economics, finance,
accounting, international business and much more. It contains content from full
text sources ranging from general business periodicals such as Business Week,
Forbes, Fortune, American Banker, etc. to academic journals such as Harvard
Business Review, Journal of Management, Academy of Management Review, Review
of Economics & Statistics, etc. It provides cumulative indexing and abstracts for
4362 business journals (3228 peer-reviewed) and cumulative full text for 3428
journals (2568 peer-reviewed).

111

This database also includes Country Monitor and Industry Yearbook Reports from
WEFA, 35 country reports from the Economist Intelligence Unit (EIU) and Wall Street
Words. The peer-reviewed full text content in Business Source Premier is unmatched,
and full text back files are available for many journals back to 1990. Additionally,
Business Source Premier includes embedded images for many of the full text journals.

112

ProQuest Direct is a web-based service . ProQuest Direct indexes articles from over
1,000 business and general publications. This database covers a range of subjects
from company information to marketing and management trends.

113

Thomson Research provides web-based access to complete SEC filings for U.S. and
international companies. Real-time and historical EDGAR filings. Full-text articles and
summaries from the trade press, newspapers, wire stories and newsletters worldwide.

114

Journals/Newspapers Business Internet Index

115

Review
Market Analysis
Who is your customer?
Knowledge of the customer enables you to determine the market size and what
determines their buying decision. It provides information that will assist in choosing a
location, determining product or services to be offered, establishing pricing and
planning a selling strategy.

116

Key issues to consider are:
Who will buy your product? Primary and secondary target groups.
Where does the buyer live and what is their profile?
What factors influence the decision to buy?
Who is involved in the purchase decision?
How often will buyers buy?
Where do they buy, when and how much do they buy?
What are the buyer's preferences and needs?
Are customers loyal? Can long term relationships be built?

117

What product or service are you selling?
An important aspect of market analysis is to ensure that the product or
service meets the market (customer) needs. Product or service focus must
be the customer.

118

Issues to address are:
Specifications of all your products and or services and key features relative to what
prospective buyers in your target market are saying they need.
Comparison with competitors and how customers perceive your product relative to
others available.
What are the current trends, what stage of maturity is the product life cycle at?
What regulations apply to your product or service?
What packaging is required?

119

Who is your competition?
Are there competitors that exist now and what new competitors are likely to enter
the market? How will your product or service compare and what is the probable
reaction of your competitors once you enter the market?

120

Issues to consider are:
Who are your major competitors?
What share of the market do they have?
What are their strengths and weaknesses (e.g. quality, price, service, payment
terms, location, reputation, etc.)?
How do you compare to your competitors and how will they react to your entry into
the market?
What factors are there that could increase or reduce your competition?

121

What is the difference between marketing and sales?

122

Finding your first customer

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