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The Sales Strategy Shift Most Founders Miss · Sales Against the Odds

• [00:00:00] Dave Parker: From a storytelling perspective, I’ll give you the easiest way. It’s like feature, feature, feature, feature and then no benefits is typical. What I would really rather have you tell me the story of is what’s my customer’s day in the life before my product and what’s their day in the life after my product? If you get lost in the feature benefit, what’s a benefit? What’s a feature? All those things are confusing. Simplify and make your true north here. What’s the day in the life of the customer? Before my product and after my product. [00:00:26] Lee Brumbaugh: There’s no silver bullet in sales, but on Sales Against The Odds, we’re here to give you the best shot at building a sales infrastructure that helps you scale. I’m your host, Lee Brumbaugh. Welcome to Sales Against The Odds. Joining me today, I’m very excited for the guest we have — Dave Parker, serial entrepreneur, investor, former CEO of Entrepreneurs Organization, and author based in Seattle, Washington. Dave, thanks for joining us today. [00:00:58] Dave Parker: Thanks for having me. This is great. [00:00:59] Lee Brumbaugh: So Dave, I was really excited to have you on the show. Obviously, you’ve done so much work leading Entrepreneurs Organization, but also in the world of smaller companies, startups, and growth. You’ve had real-world application helping startups grow and find their product-market fit. So talk to me just a little bit about how you got started. Your company’s helped hundreds of startups define their growth strategy. How did you get into that? What got you started? [00:01:27] Dave Parker: It’s kind of a funny backstory. So I did my first startup in 1998 and sold it in 2002. So if you remember that season, it was the tech bubble. Some would say we’re in a different bubble right now with AI, but that’s a different topic for a different day. I built that first company, and I had a CEO group that I was part of. It wasn’t EO, wasn’t YPO — it wasn’t because we were an innovation economy company, not a services business, and we clearly weren’t big enough and hadn’t hit over a million dollars in revenue as a startup, but we had raised money and the company grew from zero to 32 million in sales in four years. And so we were a very fast-growth company. What I discovered was there wasn’t a lot of support organizationally for companies like that. You had venture capital, but VCs don’t really support other than money. They say they do, but it’s very rare. So most of the support you get from that is here’s a check and don’t lose it. So one of the things I discovered through the process was how do you build a community, especially in your home city — for me, Seattle — and really around the ecosystem of supporting other startup founders. And then when I sold that company, I took a little bit of time off and went back and said, hey, how do we build a better ecosystem here? So I’ve kind of been working on the Seattle ecosystem for startups and the startup community for the last 20-plus years. And what’s funny about it now too, Lee, is a lot of the same questions people are asking today are the questions we asked 15 and 20 years ago. It’s a little frustrating, like, oh my God, we’ve asked that question, and yet because it’s a new crop of people, the answer is, oh, we should do this. And we’re like, oh, we tried that — it didn’t work, right? So a lot of time spent in ecosystem development, ecosystem building that then got me into Startup Weekend events back in the late 2008-ish, 2009-ish. And I ended up joining that organization, which was a nonprofit. They had basically created a movement around Startup Weekend events. And for those people who don’t remember Startup Weekend, it was — you’d come on Friday, you’d say, hey, my name’s Dave, here’s my idea, join my team. And by Sunday night, you would launch a demo in front of a group of investors or entrepreneurs and you’d get feedback. They were doing 550 events when I joined them, and we ended up doing 1,725 events in the trailing 12 months after we sold it to Techstars. So there was a unique opportunity there that was really fueled by the tech people who came out of the Great Recession going, I need to do something new. So the growth you saw from Founder Institute, YC, Techstars were all about the same season — 2008–2011 sort of timeframe — and really it was a reaction to, hey, coming out of this Great Recession, how do we help more startups get going and help entrepreneurs go after their own dream and vision? Didn’t realize it at the time; I just kind of walked into a movement, which was great. I don’t take credit for the movement, by the way — Mark and the team did that. I just helped scale some stuff, and we ended up selling it to Techstars. [00:04:24] Lee Brumbaugh: So you’re going through this bootcamp and they’re coming up with their go-to-market strategy, it’s all in this consolidated window. What are some of the biggest areas where you’re like, “Oh, this person gets it”? Again, we’ve got a lot of people listening today who are thinking, “Do I have the right go-to-market strategy? Would I pass the test?” What stood out as — this entrepreneur gets it, or doesn’t get it? [00:04:49] Dave Parker: Actually, Mark just ran a new AI edition of Startup Weekend in Colorado last weekend, and I was talking with him about it because in the earlier seasons of Startup Weekend, there were a lot of very technical people — deep technical people — and what you saw consistently was that building a team mattered. Storytelling matters a lot. Does the customer understand your story? Even if you build something deeply technical but you can’t sell it — that’s the reason why 92% of startups fail. The founders end up building stuff people don’t want or won’t pay for, which, by the way, is the same thing. If the customer doesn’t pay for it, it doesn’t matter how great the technical thing is. So storytelling — does the customer understand what you’re doing? Can you explain it to them — that matters. And then the people dynamics are really important. Can you riff on and develop an idea and do it quickly? So with AI, obviously, you can do that a lot faster. And having been on the venture capital side, what you would see is people would come and say, “Hey, I have this idea,” and I’d say, “Oh, like so-and-so?” And they’d go, “Who’s that?” And I’d say, “They’re like what you’re doing, but they’ve raised $40 million already.” And in my world of innovation economy companies versus the SMB side, if somebody’s raised $40 million, the venture world is winner-take-most. It’s not winner-take-all necessarily, but it is winner-take-most. And if they’ve effectively sucked the oxygen out of the room by raising $40 million, you’re not going to be a third or fourth player there. A lot of that has to do with the fact that many startup founders come across an idea, and their idea is so precious to them that they don’t do the research to look for competition. It feels like a threat, and people will say, “Oh, well, you’re being critical, my baby’s ugly,” and I’m like, “I just have to go do the research.” And now, in the AI world, the answer is, oh my God, this is so much easier to do a market map and tell me who’s been funded and who they’re funded by. Just ask ChatGPT to act like an analyst for a venture capital fund and you’re going to get so much better data than we could get. [00:06:54] Lee Brumbaugh: Different world out there for sure. I want to go back to the point you made around storytelling. I see that so often. I’ve done a lot of work myself in Houston with the Texas Medical Center accelerator program — great organization. You get digital startups, digital device companies that come through on the healthcare side, and so many times I’m talking with the founders and they’re like, “Well, we’ve got to build a team of five salespeople.” And I’ll say, “Have you gone out and actually executed sales?” Then I’ll have them talk to me about their messaging and, like you said, their story, and it’s all features and benefits. It’s not telling the story of how you really solve for the problems. You go back to that StoryBrand-type concept. When you think about founder-led sales and how they start and ramp, talk to me about what you’ve seen from those entrepreneurs that get it — that do tell the right story, that are able to go out early and find their customer base and then be able to expand there. I guess what I’m asking is — what’s doing it right and what’s doing it the wrong way? [00:07:55] Dave Parker: Yeah, so one of the common misconceptions I think, especially of deeply technical founders is I have a product and I just need to hire a sales person. If you can’t be the first person who sells the product, you can’t hire somebody to sell your product. So let that sink in for a minute. If you’re like, but Dave, you’re wrong. I’m like, again, 92% of starters fail. There’s a reason for that. There’s math behind this. So if you can’t sell the first product, nobody else is going to be able to do it. So from a storytelling perspective, you have to, I’ll give you the easiest way to your point. It’s like feature, feature, feature, feature and then no benefits is typical where what I would really rather have you tell me the story of is what’s my customer’s day in the life before my product and what’s their day in the life after my product? [00:08:42] Dave Parker: So if you get lost in the feature benefit, what’s a benefit? What’s a feature? All those things are confusing, simplify and make your true north here. What’s the day in the life of the customer? Before my product and after my, so today I have a deeply technical product that does workflows in a healthcare environment and involves medical devices. Well, there’s things that happen upstream before your product and there’s things that happen downstream after your product. So in that context today, you go through these six steps in the process, then you define this thing and then you pick that thing and then you’re basically saying there’s 16 steps in the process today. And we take those 16 steps down to four. The concept there is Clayton Christensen talked about the jobs to be done framework and his point on that, and if you kind of net it all out is if you look at the cost and you analyze the cost of what the customer’s doing today and you take $10,000 out of that cost, you’re not going to say to the customer, Hey, give me $10,000. You’re going to say to that customer, Hey, we’re going to save you $10,000, but it’s going to cost you $2,500 because generally you can get between 20 and 35% of that cost recovery back into your pricing, which gets us into a separate topic on pricing, which we won’t have time to cover today, but I’m super nerdy about revenue models and pricing, but telling the story of what the customer’s life is like today before your product and after your product, that’s where I’d start because that’s really your true north. And then you have something that salespeople can say like, oh, okay, if Dave can sell it and Dave’s not a good salesperson, he’s very super technical and probably a little too geeky, I’m going to take this story from Dave and then I’m going to bring Dave in to close the sale initially because in the early stage, the customer wants to meet the founder, the technologist or the person behind it. And then at some point when you start to get more at scale and you have more than one salesperson, then it really is less and less dependent on you being involved with the sales process and more about how do you scale it. [00:10:40] Lee Brumbaugh: So much of what we do at Sales Xceleration in our advisor community is building that sales process. And so many times the founder gets in and they’re like, all right, now I’ve scaled, I know I can sell it. We’ve got kind of a story, I’m out of it right now. I’ve got five sales reps, account managers. But there is so much as your point to be able to bring in that founder and really to insert members of the team. When you look at a sales process, when you’ve got a smaller organization, as that sale goes through the life cycle from start to finish, who in the organization needs to be helping guide it? So if it’s an operational area, when does operations up, when it’s a C-suite closing deal, when is the founder and the CEO brought in? Because I think there is a lot of value there, but so many times those founders think, well now we’ve got to this, we’ve got this runway, I’m just going to focus on visionary ideas and not be still face of the company. And that’s such a miss, right? [00:11:28] Dave Parker: I was separate into two different groups. So you have people who predominantly sell services and people who predominantly sell product. [00:11:34] Lee Brumbaugh: Elaborate on that for me. I know we talked about in the past there’s a big difference there. We’ve had both. [00:11:39] Dave Parker: There is, and I think that one of the things that hasn’t happened in the market, there’s a lot of great resources around scaling up. Vern Hardish who founded EO, wrote a book about scaling up. There’s a book called Scaling Up Faster. There’s tons of resources around now AI and scaling up, but I’ll give you a parallel analogy. So when I wrote the book, a third of the book is about revenue models and pricing and those things, and it really is how do startups make money? And the idea here is your product, I hope your product is unique. If you’re in the services business, your product is never unique. People are buying product from somebody else. This question is will they buy it from you? So that’s the service sector. And by the way, service sector involves as I add new customers, I add more people. [00:12:22] Dave Parker: And in the services business, I don’t make money when I sleep right? In the product business, I get up in the morning, I’m like, how much did we sell overnight? The answer is, I’m making money when I sleep. And if I do subscription businesses, I have annual recurring revenue versus transactional revenue. So there’s 14 revenue models used in technology, things from commerce to services to subscription and metered services like web services as a metered service. I have a base level subscription and the more I use, the more I pay. And for a lot of companies, they see their Amazon bill go up and they’re like, oh my Amazon’s bills. If your product is priced and your Amazon bill is going up because usage is going up, it should be an early indication of future growth If your product is priced, if it’s not priced right, then you’re going to be freaking out because it’s cutting into your margins. [00:13:13] Dave Parker: So we tracked 2,654 companies through a five-year longitudinal study. Partially it took me so long to write the book, but we went out and looked at how do they make money. So that gave us the 14 revenue models and we basically looked at all 2,600 websites. And then we also looked at the ones who died, the companies who failed. And all these companies by the way, had raised a seed round of funding. We had some level of success to tell the story, to get to a seed round of funding. And then what we saw, we don’t know this causality, but correlation wise, what was interesting is of the ones who failed, we went back and looked at the Wayback machine, which is the internet archive on all those companies, and we discovered that 92% of them had two things in common, no pricing on the website and no call to action. So if you were fortunate enough to get somebody to come visit your website, you didn’t ask them to do anything, book a demo, download a white paper, you asked them to do nothing and compounding that there was no price. And a lot of founders are like, well, my price is going to be wrong. Yes, your price is going to be wrong and then you will change it. [00:14:22] Lee Brumbaugh: And I talked to so many founder CEOs, it’s like, well, if the price is out there when my competition can get it, I’m like, okay, well then make sure you’re winning. The other thing is a lot of times you’re looking at enterprise type models or growth, then you say, here’s our starting point. But if you don’t have clear direction, welcome to tiered [00:14:40] Dave Parker: Pricing. [00:14:40] Lee Brumbaugh: Yeah, absolutely. [00:14:41] Dave Parker: It’s three or four tiered pricing the features, and you have time-based trials versus again B2B versus B2C here as well. So my point, you end up categorizing things and saying, in the services business, here’s how we think about services growth. People are buying your services. If you’re an accounting firm, I’m already buying tax services from somebody. The question is, will I buy them from you? So that’s one value proposition. So you have to map your ideal customer profile to your value proposition, to your sales process. Now it gets more complex for a product company because in a product company, I’m shipping my beta version today as a founder, I see the future of what the product’s going to be and all the great features it’s going to have, and sometimes they have difficulty separating out actual from forecast. Part of the way founders live in that a little bit of delusion, and by the way, I am one, so I’m not calling other people delusional. [00:15:36] Dave Parker: I’m just saying I’m occasionally delusional. I love the product ideas I create. It doesn’t mean they’re always ready. So the thing I have to be able to map to my sales process is I have an ideal customer profile. I now have a product roadmap, and now I have different pricing than it will be pricing later. Because in the services business, I have typical time and materials bill rate and pay rate, and there’s market ranges that are acceptable there. On the product side, I could be all over the map. I could be free. I could be free for the first 90 days. I could be an annual contract, I could be a multi-year contract. So there’s a whole lot more complexity on the product side of the business. So for your listeners, if you’re in the services business, congratulations, it’s simpler. You have to map my ideal customer profile to my value proposition, to my sales process. If I’m in the product business, I have to layer on some things. I have an ideal customer profile today based on the product roadmap and tomorrow, which by the way changes prices because my ideal customer profile may change. [00:16:38] Lee Brumbaugh: Ideal customer profile. I know we get in our business sales, but ideal customer file. [00:16:42] Dave Parker: Yeah, ideal customer profile is your ICP. And one of the things you see typically with this one, especially with early stage startup founders and it’s deeply technical ones, will be like we’re building a platform. And I’m like, no, you’re not. You’re building a product, product first, platform second, because what happens with the platform thing? Really platform is a technical code for we don’t know who our customer is. It could be anybody, right? And the answer is if it’s everybody, you’re in trouble. You don’t have enough money to go after everybody. You only have enough money to go after a very narrow customer niche. So I would rather as an investor and helping somebody with the early stage stuff, I’d rather say, I’d rather you narrowly cast your ideal customer profile and get super specific to who they are and then look for market adjacencies. And if you find out that customer profile is the wrong customer profile, change it. [00:17:33] Dave Parker: But don’t say we have 16 customer profiles, right? Because the answer is you will never be focused. I’ll give you a couple examples. One of the startup studios here in Seattle, they were coming to us for funding and they had seven customers. It’s great. Well there are seven customers from the portfolio of this other big venture capital fund and there were seven companies that weren’t alike at all. And I’m like, I don’t even know what to do with that. Because the answer is where do you have conviction? Where will you go deep in this customer segment? How can you charge them more money? And it was like seven random customers and you’re like, I don’t even know. You can’t build a sales process around seven different ideal customer profiles unless you have seven different vertical market reps and you can’t afford to do that when you’re a small company. [00:18:17] Dave Parker: Product companies versus services companies have a different level of complexity. I think services companies have it better in the sales process. I’d say it’s more complex than the people side because as you scale the business, you have to scale with people versus product. And the challenge there is in the early stage you run into the small business dilemma, which is if I get one new customer, it’s not really great. I really need three new customers. If I have three new customers, I can hire another person to deliver, but if I get one new customer, it means I’m not going to get to my kid’s soccer game on Saturday. [00:18:50] Lee Brumbaugh: And so much of that too is around the diligence. I think too, I mean with the Sales Xceleration, somebody, look, there are companies now out there, we’ve got more advanced that they do a decent job of setting their ICP defining and starting value proposition, putting that in the sales process. But then you hire that first sales rep and their second sales rep and well, I want to go here, it’s outside of our ICP, but that’s okay because we can sell something. But then it kills your margins, it kills your time, the energy, I mean you have to stay laser focused. [00:19:17] Dave Parker: Again, another product company, when they first launched, they decided they had a specific ideal customer profile and two years in they’re like that customers we sold to originally are not the customers we’re selling to today. And now I either have to keep the old product up or I have to shut off all those old customers, which is painful because those are customers that I knew their name, I recognized their voice, I was the one who sold them as the founder. But when you look at how you’re going to scale the organization, you have to do things that scale. Everything can’t be a bespoke to one-off. Let me jump forward. For the listeners benefit, one of the things I think about a lot is enterprise value. How are we driving the enterprise value of the company? So if you have seven different ideal customer profiles and you did a profitability analysis on them, you would come back and say, these two profiles are our most profitable customers. [00:20:11] Dave Parker: And you’re like, yeah, but it’s revenue. And the answer is, but not all revenue is good revenue if your cost to support the customer is off, if your cost to acquire the customer is off in the venture business. And the thing that I think scales as we think about it is I have this concept of lifetime value and customer acquisition costs. So I’ve got CAC to LTV, so how much does it cost me to acquire a customer and what’s that lifetime value of the customer? What’s that customer worth? In a B2B state, it should be kind of a five to one or better in a B2C business to consumer tends to be more transaction. So I have to have a 10 to one ratio or an eight to one ratio. So if I spend a hundred dollars to acquire a customer, I need to get $800 in revenue because that lifetime value is likely to be shorter. Where in B2B, it tends to be multiple years. [00:21:06] Lee Brumbaugh: Most companies don’t have the bandwidth to build a high functioning sales department to allow them to meet the revenue targets with Sales Xceleration. They don’t have to. Our experienced fractional sales leaders consult and implement your sales strategy, infrastructure management and team development, discover how we deploy these proven sales solutions to address your sales challenges. By going to our website, filling out the contact form, we’d love to hear from you. So your first book is Trajectory Startup Ideation, the Market Fit, so talk, we’ll go back to that, like for you to recap the biggest moments you got out of that book and then where the second book is going, but just want to make sure we get that out for the audience. A great book. So [00:21:50] Dave Parker: The second book is Trajectory Scale Up, and it was really focused on the product side of scaling up. So again, the complexity goes up. I’ve got to do a product roadmap and give you an example. If you’re building an enterprise product that takes three or four years to build and you need revenue in the short term, the answer is I have to really bring down the product scope to deliver value for a customer today that can give me revenue so they can continue to build a product with cash, not just with venture capital because that model doesn’t work anymore, right? No one’s going to be like, here’s $5 million, good luck. The number of early stage rounds is now staged to go hit milestones and deliverables. And if you’re a founder who can only look three years out and say, well, in three years we’ll be able to sell the product, the answer is what are you going to do for revenue between now and three years? [00:22:36] Dave Parker: Because that’s going to be critical in your funding path. So it’s really focused on that. And then the thing I’m excited about Lee, is I didn’t write the book two years ago. The world has changed with ai. So one of the things we’re doing in this one is really focusing on how AI impacts each of those phases. I’ll give you an example. So we have a buddy, Elaine came up with this framework, he’s super engineer, it’s TA mechanic, pioneer square Labs, TA has this ITI list, which is important things I’m not doing yet. And the reason is because us as founders, we’re always like, I love my ideas. So my team wants to get focused in and deliver and stay focused and I keep coming up with new ideas. My team’s frustrated. They don’t know if this new idea is something we’re actually going to go do, or if it’s just Dave thinking, insert your name here. [00:23:24] Dave Parker: If you’re the visionary founder and then the founder gets frustrated like, well, I’ve been clear. And the answer is, well, you have been clear on some things, but you’ve been riffing and brainstorming on the other things. So the concept of the IT attendee list and it attendee is just one section of it, but it’s like I need to have a place on my quarterly board planning document where I’m really just saying, this is a great idea. I don’t want to lose it, but I’m not going to work on it now in this quarter and I’m not going to work on next quarter. And honestly, I may not work on it until next year. And that’s okay. [00:23:56] Lee Brumbaugh: For the many companies that are in the s and B world that are, you’re an EOS company, it’s your long-term rocks, right? You’re moving it over and capturing it there and keeping it. [00:24:04] Dave Parker: That’s really the starting point of good congratulations. You’ve got all these brilliant ideas, but you need a place to park them so that you don’t feel like you’re losing. And by the way, when you’re a venture backed company, you’re going to have, your board is going to have new ideas for you. It’s the same way. And sometimes there’s pressure to feel like, well, the board wants me to go do this, and the answer is no. The board was just brainstorming with you as well. So you have to be very clear around do these things make it in my product roadmap or not. [00:24:31] Lee Brumbaugh: Yeah, absolutely. Good rock setting, good goal setting is critical. It’s easy as you come into this founder, you had a great idea, now you’ve got 10 ideas in which ones can you execute upon. I want to go back to obviously a lot of with Sales Xceleration, our advisor community takes a lot of companies that were in the startup phase and what we find a lot of times is again, they go back to they set a good starting ICP, they set their value proposition, it’s rolling into at least a starting sales process, but they think, well now I’ve done it, I’m done with it, right? So it’s going back and saying, you’re right. How do you learn from So much of the work we do though is our advisor community will go in and work with the founder and CEO and they’ll say, well, we did that ICP. And you’ll say, well, it was three years ago and is it still working? Is it still the right customer base? And what are you doing top of the funnel to solve for that? And they’re having challenges and parts of the funnel because they haven’t gone back to what they originally did. So how do you see it, make sure it stays relevant? What do the best founders do of spot checking that, of making sure that the proof points are still relevant? [00:25:34] Dave Parker: I’ll give you the answer in a context of what I think about is our pricing committee. So first off, lemme give you a little bit of what I wish I had been slightly clearer about in book One was this concept of product market fit in the product world and the venture world is people are like, oh, we’ll know it when we see it, which is super not helpful for a VC to tell you that it’s a founder. And the thing I love about product market fit having, so I did the book and then we came out during the pandemic, which is hard to do book tours. So I ended up doing tons of seminars and webinars and trips to the Middle East and working with accelerators worldwide. And what I came away with really is product market fit is really just, it’s math. It’s five things. [00:26:13] Dave Parker: There’s four trends that should be trending upward and one trend that should be trending down for the listeners, here it is. Here’s the five. This is super important by the way, by themselves, they may be a vanity metric is the traffic at the top of my website going up again, could be vanity if I’m buying traffic one month and shutting it off the next month. The trend question is if you have a large product that if you’re in a sales driven high price point, my sales team is going to go make sales calls and the people are going to come visit the website to validate what the salespeople told them. You’re not going to be doing inbound marketing if you’re selling $250,000 sales engagements, but I’m still looking at the trend. Google analytics free tool, you can go use that. So what’s the trend on traffic? So traffic then should convert to leads back to that call to action problem. [00:27:01] Lee Brumbaugh: We went past that earlier, but again for those listening we could pull up Dave, we pull up 10 websites right now and two to three of them would have a good call to action. It seems so simplistic. [00:27:12] Dave Parker: You need a call to action on every page, every page. The only reason the website exists is to get people to say, I want to try your thing. So traffic converts to leads and you’re looking every month. How’s that percentage though? Traffic’s going up, lead percentage should be trending up. Customer count is a percentage of leads. How many customers are we closing? Now you may have a six month sales cycle in the early days or a 12 month sales cycle if you’re doing something to big in the enterprise space, but I’m looking longitudinally traffic leads customer count. Next one is average revenue per contract or average revenue per customer, depending off your B2B or B2C. So a CV is another way. Annual contract value is another way to look at it. So those four things should be trending up. My traffic should be trending in the right direction. [00:27:58] Dave Parker: My percentage of leads should be stair stepping. Its way up. My customer count is a percentage of those leads and then my annual contract value or how much I’m charging those customers on a contract. So it reflects your ability to sell a higher price point, but it also, if you’re doing product, it also says, is my product getting better? And the last one is my sales cycle and my sales cycle should be coming down. So four things trending up, one thing trending down, if you think about those five items, it’s the magic of compound interest. For a small business, you have product market fit, congratulations. One or two of those things, it’s trending, that’s great, but it’s not product market fit, right? In a services segment, the question is are we having enough leads at the top of the funnel to talk to the businesses that are a qualified ideal customer profile? And then how do we make it easy for the customer to buy? [00:28:52] Dave Parker: Can I give ‘em a trial? I’m not a fan of discounting. I come from the sales world, so I never believe in discounting, but I am looking for ways make it to take friction out of the process. So keep in mind 14 revenue models, we break down, only one of them introduces friction to their customer and it’s the gaming one. So if you guys have played Candy Crush, it’s the only business in the world, the gaming business, not Candy Crush, where we introduce friction, we make it harder for the customer to do business with us. That’s the only one. All the rest of them, we’re trying to take friction out of the process. We’re trying to make it simpler. So what we’re trying to do from the business perspective is make it simpler for the customer to do business with us. And that’s part of looking at the sales process at the front end, but it’s also looking at the service process in the backend. So if you have customer success reps, I would put ’em as part of the sales process part of your retention and long-term. [00:29:45] Lee Brumbaugh: Value. So much what we do at Sales Xceleration, we actually have an area within what we call our building the framework. And so when you look at it, it’s obviously all the seats, but who is touching the sales process? Where do they fit in? And the biggest gap that we see is you do all this work as you alluded to, of getting a good call to action getting customer, and then it’s how do we create that friction point comes back in because again, we’re calling, it’s like, well, I’m going to set you up with somebody and then they’ll talk to you two days later and maybe they’ll give you pricing. And so we’re not meeting our customers where they want to be. And all the work you do on that front end is lost by not having a good sales process that ties together and you do it. We [00:30:23] Dave Parker: Then look at every six months as a pricing committee and that pricing committee is like, what’s happening with the market conditions? Is our customer reacting or is our competitors reacting to what we’re doing or not? Are we losing deals or winning deals? And it’s just something as the founder, I would put on your calendar every six months and just step back away from the weeds of the business and look at a bigger picture and say, is our product meeting the customer needs? What are those five things doing? Is the traffic going up? Is you’re going to look at ‘em every month, but from a pricing perspective, there are chances where you can raise prices. Price gouging aside, that’s not what I’m talking about. We’ve gone through a bunch of that from a market perspective over the last couple of years, but in general, there’s chances the product gets better, your efficiency gets better. [00:31:13] Dave Parker: There are chances to raise prices, and what we saw in the data from the 2,600 companies was most companies did not raise their prices in the first three years. So instead they took dilution in the form of equity investment for most of them where if you’d raise your prices, you as the founders would have more equity at the end of the enterprise value equation because when you go to sell the company, ultimately that’s why I’m so focused on enterprise value these days is like are you increasing the enterprise value of your company or not? That’s really the bellwether of success. [00:31:43] Lee Brumbaugh: Yeah, so Dave, you’re working with these startup type companies, they’re doing the right things at the onset and the company is growing, CEO founders wearing more hats now all of a sudden there’s a lot of complexity. You’ve got hr, you’ve got accounting, you’ve got a lot of different areas that are coming in. That’s where I know with Sales Xceleration we see that’s where we get involved quite a bit coming out of this, where do you see as far as that messy middle, we call it that area of now we’ve worked with a company like yourself to get the right framework, but how do they stay current? Endless plug here on the Sales Xceleration side, but I know that’s a lot where we work. Where do you see they fall down in that message manual and specifically tie it back into from a sales perspective? [00:32:24] Dave Parker: Well, so I’ve invested in maybe 80 companies. I’m loathed to replace A CEO unless I really have to. I’ve only done it a couple times as a board member. So the big question there for you is the founder owner is are you scaling with the business or not? And it’s a hard one, right? Like I am doing great. I mean the business is growing, I’m doing great, but you end up becoming the roadblock in the business without somebody holding up a mirror to you going like, Hey, have you thought about would you consider this? And that’s why entrepreneur support organizations, whether it’s E-O-Y-P-O or Vistage is that you end up with a peer or a professional around you that they’re just speaking to their experience, right? They’re not trying to answer the question for you. So having somebody who’s an outsider who can give you that feedback, especially if you’re seeing the thing stall or the growth not happening the way you want it to happen, I’d be a little introspective first and say, am I getting in the way? [00:33:23] Dave Parker: Now in business we call ‘em professional coaches and outside that world we call ‘em therapists. The point of it is still the same. You need a coach, right? As founders, we come from being so scrappy that we don’t want to spend money on anything, and that’s always a challenge and we’ll just go figure it out and we’ll go into founder mode and we take pride in the founder mode and I’m okay with that. I get that. At the same time, if it’s not in your core expertise, that’s a problem. So I’m a pretty good product guy at this point, but I’m not a developer. I was always slow. I’m more technical than a lot of CEOs, but I’m not a generative AI guy. So I know the problem I’m trying to solve, but I don’t know the technology I’m going to use. The same is true on the sales side. [00:34:05] Dave Parker: Generative AI is going to change, go to market so fast and so much that if you’re not actually doing that work working with AI all the time, the answer is you’re going to get lapped. And the good news is you can jump back in and jump two generations or three generations. That’s the good news. The bad news is you’re still going to get lapped. It’s a scary time or it’s an exciting time. I think of it as an exciting time. It feels like looking at my first Netscape browser and going like, this changes everything. So I would just say you have to figure out where you’re investing as a CEO to stay at the front edge. You don’t have to be at the bleeding edge, but you should be a little on the front edge of this curve. Your competitors are going to be. [00:34:50] Lee Brumbaugh: Yeah, we’re doing so much on our end with obviously we’ve got a lot of productivity partners with Sales Xceleration, and when you look at it from an AI perspective, we talk so much today about your ICP, your value proposition. Our goal is to help you stay ahead from that perspective. So when you’re looking at your IACP, you can use AI to enhance it so much to define your customers. We’ve got a suite of tools that we use that help from that perspective, but it still doesn’t take out so much of what we talked about as well as the human touch, the CEO still being led on these large deals, still telling a story, still losing friction points. How do you pair, it’s pairing the AI tools that we have to make you more efficient in all the basics that we’ve talked about today. [00:35:29] Dave Parker: There’s no killer app yet. We’re still talking about stuff that has an amazing amount of potential and is making incredibly fast changes, but no one’s figured it out yet, and that’s exciting. As an entrepreneur. [00:35:45] Lee Brumbaugh: We talked a little bit about, I mean, with your time as CEO of entrepreneurs, and I’ve done a lot with that group, we do a lot. Our advisors are great resource for Vistage, EO, YPO, we, our advisor community helps so much with those types of companies. When you were with eo, what’s the biggest company you saw this EO is a lot of $3 million companies. They’ve grown, but they’re trying to take next levels of growth. What’s the biggest thing that you saw EO companies struggle with? Anything that jumped out to you that you helped them solve for that they got out of that community? [00:36:17] Dave Parker: EO is in 87 countries and 20,000 members, so you have very wide range of business types. So third generation businesses in Southeast Asia to first generation founders, but typically they think they have in common is that they’re the business owner. I always looked at it as if I put my Amex down, it’s not an expense for the company, it’s part of my dividend that I’m not paying myself. That’s the big difference between EO and the other groups. When you think about scaling, the big questions are, there’s lots of uncertainty right now in the market and there’s times to take market share and there’s times to be cautious and you just have to have a good read on the market. And I think having the perspective that outsiders, there’s a ton of people who sell to EO and YPO and Vistage companies because it’s an entire market unto itself. [00:37:04] Dave Parker: What I discovered was it was really a different market than the market I had come from though I would say we’re all entrepreneurs and in the same tribe in one way, but we’re really different entrepreneurs because the innovation economy companies have a whole different pressure to grow fast where the services businesses are, a question of how fast I want to grow is really gated by my own personal motivation and skillset and where I want to invest. I’m choosing where to invest, and I may be taking cash off the table as part of my dividend so I may not be investing in the same way. So you have a wide range of founders with expectations of what they want to do. As soon as you take outside capital from a third party, you now share their objectives. So it’s not about what vacation am I going to take with my spouse this year, perhaps to be my business partner and my LLC, right? [00:37:57] Dave Parker: You’re now focused on do we share the same return and objectives that our investors share? You do compromise your vision when you take third party capital, if that’s what you decide to do. And I think it really comes down to when I look at what you guys deliver for those businesses, it really comes down to what’s the business objective that you are as the founder and as the owner trying to deliver. A lot of those businesses have a lifestyle goal and they’re never going to exit. A lot of those businesses are in a real conundrum right now, which is we’re in this largest wealth transfer in the history of the world as boomers exit their businesses and they haven’t put in scalable processes and people and the business is dependent on them. And I’ve done over 20 transactions and one of the common things there is sit down with the founder and they’re like, well, I did this and I did that. [00:38:50] Dave Parker: And I’m like, no, I want you to say my team did this and my team did that, and I put these people in place to scale, so it’s less dependent on me because otherwise your buyer’s going to look at you and say like, oh, well, we don’t want you to leave. And you’re like, no, I just want to sell the company and leave. And the answer is no, but you did that and you did this. So I think it’s an interesting time. People are like, well, I want to sell it to my employees. The problem is your employees don’t have any money. So unless you’ve been incredibly generous with your compensation, which means you’re probably not taking as many vacations as you could, and it’s not a criticism, it’s just like selling to your kids one in the west. Your kids may not want it. [00:39:29] Dave Parker: And two, the question is, do they have the money to buy it? Then if they don’t, they’re going to use your money to buy it anyway. So on the merger and acquisition side, it’s a super interesting time to be in that side of the business. Historically, I’d spent about eight years, 10 years doing venture and m and a work. It’s an interesting time. It’ll be there. But I would say, look for the areas you can scale. Look for the areas that don’t require you to be in the business, because at some point you’re going to want to exit the business. Life happens. All kinds of things happen, and for a lot of us as founders, that’s hard because our significance is tied up into what our job title is. [00:40:07] Lee Brumbaugh: It’s your baby, it’s part of your life. So I think good points I took out is find the right partner. When you’re looking at that, especially that onset investment, we’ve talked so much today about getting it right at the beginning, setting your ICP, your value prop, finding the right people that’s support and growing. And the big thing that I took away too, and I just came from Chicago and talking with a bunch of PE companies on the side, we have our PE team, and it’s kind of like you said, it alluded to earlier, when you’re looking at that next level, it’s not the, it’s if you are the business, if you don’t have a repeatable process, if you don’t have a pipeline that has everything built around it, your multiplier’s not going to be there. You’re not going to have a business that can thrive without you, and that’s your goal as the entrepreneur is to get to that part where the business continue to grow with your vision, but not necessarily your doing of everything. [00:40:58] Dave Parker: You have to decide to scale the business at some point. And I think if you put the right team around you, the answer is you can do that. By the way, the value multiple on the enterprise value goes way up when it’s less dependent on you. [00:41:12] Lee Brumbaugh: And that’s so much what we do is helping with that scale, that strategy, that’s the execution, that management side, right people, right strategy, right process helps. What you do is from taking the startup to the next phase and then Sales Xceleration, we take that next path. So Dave, this has been excellent today. Thank you so much for all you’ve done. Excited to get your next book again, so much that you’ve done in the community, it’s great to have a resource for the startup side on the growth and excited for all you’ve done for growing IT in Seattle and growing it nationally. So this has been Sales Against the Odds. Thank you everybody for joining us. Again, our goal is to bring on not only sales thought leaders, but general business leaders like Dave that can help you grow and expand your business. Thanks Dave for joining us. You’ve been listening to Sales Against the Odds. Be sure to hit that follow button so you never miss an episode. And if you want more resources on scaling sales, check out our website Sales Xceleration.com.