1. The Entrepreneurial Selling Process Bill Collins 10/24/2015Bill Collins EFP Caltech1

2. 10/24/20152 Exercise Elevator Pitch

3. Selling Process Phases  Phase I – “Education Phase”  Set your success pattern  “Invent” your customer  Establish “Lead” customers  Phase II – Volume Sales  Repeat your success pattern  “Mass produce” your customer  Establish predictable sales funnel 10/24/2015Bill Collins EFP Caltech3

4. Selling Process Phases  Phase I – “Education Phase”  Set your success pattern  “Invent” your customer  Establish “Lead” customers  Phase II – Volume Sales  Repeat your success pattern  “Mass produce” your customer  Establish predictable sales funnel 10/24/2015Bill Collins EFP Caltech4

5. Quiz: Why do Fish School? 10/24/2015Bill Collins EFP Caltech5

6. Adoption Challenge 10/24/2015Bill Collins EFP Caltech6 Potential Customers You You are faced with a host of valid initial customers – how do you proceed? Neutrogena Darigold Foster Farms Kroger Texaco Chevron Exxon Kelloggs Pepsi Nestle Merck Amgen General Mills Vigilistics

7. Phase I Overview 10/24/2015Bill Collins EFP Caltech7 Education Potential Customers You In Phase I, you pick out a few reference-able customers of the same type to win Education intensive – both directions Make “alterations” to fit Allows “characterization” of sale

8. Phase I Overview 10/24/2015Bill Collins EFP Caltech8 Education Potential Customers In Phase I, you pick out a few reference-able customers of the same type to win Education intensive – both directions Make “alterations” to fit Allows “characterization” of sale Kroger Foster Farms Darigold Vigilistics

9. Portfolio Examples CompanySolutionMkt OptionsChoice/Lead Cust VigilisticsMfg SW Dairy, Food, Pharma, Oil/Gas Dairy/Kroger, Foster, Darigold iRiseInt’net SW Finance, Health, Retail, Gov’t Finance/Schwab, VISA, First Am Title, Wells Case StackOuts Logist Consumer Pkg, Food, Furniture, Electronics Consumer pkg goods/Lea & Perrins, Hansens, Celestial 10/24/2015Bill Collins EFP Caltech9

10. Phase II Overview 10/24/2015Bill Collins EFP Caltech10 Education Recognition In Phase II, you the leverage lead customers to help similar ones recognize the value, rapidly adopt Establish repeatable process Make revenue predictable UDA Swiss Valley Nestle Dean Foods

11. Momentum 10/24/2015Bill Collins EFP Caltech11 Education Recognition Additional types then require less education and have faster recognition based on initial success NestleNeutrogena

12. Alternate Approach 10/24/2015Bill Collins EFP Caltech12 Education…. Recognition Addressing multiple types at the beginning May feel faster, but is actually slower Education spread too thin Longer for specific types to recognize Recognition still tends to be by one type at a time Education….

13. Process Benefits  Phase I enables market recognition  Enable market analysts to position you  Enable target company interest in you  Enable funding community to put a value on you  Phase II enables predictability  Financial risk reduced Return on assets can be projected Operational investments scale an established model  Solidify your value to funding community, acquirers Equity, debt, purchase 10/24/2015Bill Collins EFP Caltech13

14. When Should I Start Selling My Solution and Who Should Sell It? The Short Answers….. Now and You! 10/24/2015Bill Collins EFP Caltech14

15. Lead Customer Pre-Requisites 1.Reference-ability to rest of target market 2.Location allowing intensive interaction 3.Looking for competitive advantage 4.Have both pain that can’t be solved by others and a specific compelling project or event necessitating solution 5.Sponsorship from customer manager(s) that control priorities and budgets 6.Willingness to engage a start-up company (this is by definition a small percentage) 10/24/2015Bill Collins EFP Caltech15

16. Ways To Reach Initial Customer Most success comes through relationships In order of effectiveness…… 1. Customer helps found company/is early investor 2. Founder/CEO/CXO has relationship already 3. Engage established partner(s) with privileged access 4. Engage established sales person with privileged access 5. Leverage referral from close mutual associate 6. Leverage referral from distant mutual associate 7. Cold call 10/24/2015Bill Collins EFP Caltech16

17. When is Phase I Complete?  When you have a credible answer to: “What have you done successfully for someone just like me?”  Complete ~ 5 sales.  Make ~ 5 installations, demonstrate value.  Know why they bought it.  Get at least 2 to be references for value.  Be ready to deliver in production form. 10/24/2015Bill Collins EFP Caltech17

18. Phase II  Establish, characterize sales funnel  Stages of sale, Cycle-time, Attrition, Resources required, Selling costs  Use funnel to establish revenue plan  Assign quota by resource building blocks  Assume productivity & price changes, lead-times  Measure and drive key metrics  Tailored to your business  Get a professional to run this  Different from a Phase I activity 10/24/2015Bill Collins EFP Caltech18

19. Example Funnel/Pipeline 10/24/2015Bill Collins EFP Caltech19 Target/Prospect Lead Qualified Lead Present Propose Close 100 4 weeks 25 15 10 4 Suspects 50 4 weeks 2 weeks 3 weeks 2 weeks 13 weeks total

20. Funnel Definitions 10/24/2015Bill Collins EFP Caltech20 ItemDefinition Suspect All possible customers who could use solution Target/Prospect Actively addressing to find potential pain, project & fit Lead Established, identified potential project & fit, working to identify opportunity: intent to buy, budget, decision maker, timing, competition Qualified Lead Opportunity confirmed, working to get invitation to present solution to decision maker Present Presentation made, working to get an invitation to formally quote/propose Propose Formal quote/proposal submitted, working to close Close You’ve got the business!

21. Example Metrics  Choose the ones most important to your situation, such as:  Number of opportunities in each stage  Hot list of accounts at proposal stage  Close ratio  Time to qualify leads  Performance to quota  Actual ASP of deals closed 10/24/2015Bill Collins EFP Caltech21

22. Channels “Channels are NOT customers, they help you reach your customer” 10/24/2015Bill Collins EFP Caltech22

23. Why Are There Channels? “Channels enable quality sales time with the customer” 10/24/2015Bill Collins EFP Caltech23

24. Channel Comparison 10/24/2015Bill Collins EFP Caltech24 CHANNELREACH REQUIRED CAN SUPPORT FIXED COST EDUCATION NEEDED BEST FIT Direct Sales: Push LHH Big ticket items, heavy support, concentrated base VAR’s: Push LLH Mid-sized sales, heavy support, concentrated base Agents/reps: Push MLM Mid-sized sales, heavy support, mid-dispersed base Distributors / brokers:Push MLM Mid/small sales, mid-support, dispersed base Telesales: Push MML Small-sized sales, light support, dispersed base Consumer retail / dealer: Pull HLL Small-sized sales, light support, dispersed base TV / mail: Pull HHL Small-sized sales, no support, dispersed base Internet: Pull HLL Small-sized sales, light/no support, dispersed base, for customers who target you

25. Using Multiple Channels # Of Customers 10/24/2015Bill Collins EFP Caltech25 Gp A Customer Group C Group B Ch C Ch B Channel A $ Per Customer  You will typically end up using multiple channels  “One size” usually does not fit all

26. Sales Plan “Building Blocks” 10/24/2015Bill Collins EFP Caltech26 QuotasQ1Q2Q3Q4Y1Y2 Ch. 1 “Direct” 22441220 Price $200K $300K $275K$300K Channel #1 Sales $400K $1.2M $2.9M$6M Ch. 2 “Reseller” 44662040 Price $150K $200K $175K$200K Channel #2 Sales $600K $1.2M $3.6M$8M Total $ Sales $1M $2.4M $6M$14M

27. Attracting & Motivating Sales Forces  Great salespeople / channel companies are looking for two things:  A great solution to sale  High variable compensation  Sales people / channel companies are highly motivated by contests 10/24/2015Bill Collins EFP Caltech27

28. Top Sales People 10/24/2015Bill Collins EFP Caltech28 SalesmanAct.jpg

29. Hiring Top Sales People  Top Sales people have common traits:  Have professional & personal relationships with your specific target customers  Each market has a “club” – they are in the club  Consistent high achievers to quota  Consistently number one or close to it  Consistently highly paid  Hire these people - pay a premium if required  Particularly for your early sales team  They are well worth the money!! 10/24/2015Bill Collins EFP Caltech29

30. 10/24/201530 Summary  Your business model must be:  Acceptable to your customers  Able to provide recurring sales.  Able to deliver more for less while generating profitable growth.  Your pricing must:  Have a credible reconciliation to value  Get early validation from lead customers.  Create excitement for both your customers and investors.

31. 10/24/201531 Q&A

32. 10/24/201532 Business Models

33. 10/24/201533  Business Model as defined here is your structure for receiving compensation.  Your choice of business model is a critical consideration for your company.  It is also a critical point of review by prospective financiers. Business Models

34. 10/24/201534 1.How will you charge for your solution? 2.What makes your customers excited about your price/structure now? Differences? 3.How will you generate recurring sales from your customers (printers versus ink)? 4.How will you deliver continuously increasing value over time? 5.How can you extend your model to enable continuous cash flow, profits growth? Biz Models – Basic Questions

35. 10/24/201535 Set A Value Roadmap  You must plan to increase your value each year  Cost-performance improvement curve is inexorable  Stems from human expectations model – continuously expect more for less. Each industry has it’s norms.  Productivity improvements enable price reductions  Additional features enable stable or higher prices Slower = margin loss Faster = margin gain Expectation Cost versus performance

36. 10/24/201536  Whether your model is selling “cell phones” or “minutes” you need a roadmap.  Cell phones: Started out expensive, got cheap, then were given away to get the minutes, now need to be combined with cameras and PDA’s to have value……  Minutes: Started out expensive per unit, got cheaper, went to lump sum, then needed lots of additions just to keep the lump sum, eventually are basically free…. Industry Case

37. 10/24/201537 Portfolio Examples CompanySolutionBiz ModelExtensions Cloud Cover Music Streaming music & ads for retail Subscription by month, plus a one- time ad set up fee Call waiting, additional custom ads, premium music mix, related retail services LuximLamp Charge per unitIncrease lumens, lumens per watt/cost Case StackOutsourced Logistics Charge by transaction, sw free Increase functionality, continuously decrease transp & wareh costs Zero Gravity Weightless Flight Charge by flightAdd to experience, eventually into space

38. 10/24/201538 1.What gross margin can you generate? 1.Primary indicator of value 2.Needs to support your overhead 3.Needs to allow room for partners/customers to make money. 2.How do you generate positive cash flow? 1.Payment terms with suppliers and customers – bias these in your favor 2.Working capital needs - minimize 3.Understand who is paying the cost of money Models – Vertical/Horizontal

39. 10/24/201539 Pricing

40. 10/24/201540  Always price to value  Approaches:  Price to payback  Rule of thumb – 6 months to 1 year  Price to displace existing solutions on cost basis  Rule of thumb – 30% net savings or more  Price to displace existing solutions on performance basis  Rule of thumb – hard to get customers to pay more  Price to protect against indirect competition  Rule of thumb – highest price that allows end solution to stay attractive versus alternative approaches Pricing Fundamentals

41. 10/24/201541  Know your value  What is the current solution?  What money do you save/increase versus this?  How easy/hard to change: time, cost, behavior, risk?  Do customers agree with your assessment?  Know your cost  What can you provide it for? Now and over time?  What does it cost to implement?  Be confident in your value  It WILL sell If credible/consistent with rules of thumb Value Pricing

42. 10/24/201542 Portfolio Examples CompanySolutionPriced Per Justification VigilisticsEnt’prise SWMonth Payback – productivity LuximLamp Displace based on perf Case StackOuts LogisticsTransactio n Displace based on cost Zero GWeightless FltFlight Attr vs indirect comp

43. 10/24/201543  Price  Performance  Quality  Lead-time  **RISK/PRESTIGE PERCEPTION** Value Factors

44. 10/24/201544  CRITICAL validators of value, ROI, price  Set future “success pattern”  Lower risk/increase prestige of solution  Eventually you want to become a “safe bet.”  Lead customers must pay for solution  Not credible otherwise – others WILL ask  Can receive a favorable deal, not too much  Best to pay full price, get other benefits  Make sure they’re willing to brag about it!! Lead Customer Pricing

45. 10/24/201545 Does your pricing excite both your customers and investors at the same time? The Pricing Acid Test

46. Summary  The two-phase selling process drives a successful business  Set the pattern, repeat the pattern  It all starts by choosing similar customers  The key factors are education & recognition  Phase I enables recognition, Phase II predictability  Phase II is for “mass producing” customers  Top Sales people:  Want superior solution, high variable comp  Know your customers, have the track record  Pay them the money – they’re worth it! 10/24/2015Bill Collins EFP Caltech46

47. 10/24/201547 Q&A