<p>You know the deal:</p> <ol> <li>Sally gets new idea.</li> <li>Sally gets funding.</li> <li>Sally spends 100% of $$ developing idea.</li> <li>Sally runs out of cash.</li> <li>Sally goes bankrupt.</li> </ol> <p>Boo.</p> <h2>Where should you spend your startup cash?</h2> <p>Unless you've already built a magnificent-recurring-client base who's ready to buy from you tomorrow, do this: <span class="highlight">Focus a humongous chunk of your initial capital (and time!) into: </span></p> <h2><strong>Sales!</strong></h2> <p><br /> At the end of the day, banks, investors, and potential prospects will bail you if you're generating heaps of customers -- but need more money to develop your products/offerings to serve those customers.</p> <h2>Why Sales</h2> <p>Here's why:</p> <ol> <li>Sales generates cash.</li> <li>Cash is your lifeblood. It gives your company working capital to live.</li> <li>Without cash, you'll have no business.</li> </ol> <p><span class="highlight"><strong>The biggest destroyer of new businesses is a lack of cash.</strong></span> Why? Entrepreneurs unfortunately get the mistaken notion that:</p> <ol> <li>"Marketing is easy."</li> <li>"Sales is a piece of cake."</li> <li>"That's why we look down on salespeople for a reason."</li> </ol> <p>They think customers will eventually come knocking. <span class="highlight">Then, after finishing their products/storefronts/teams/etc., they can't "frickin' find customers AT ALL".</span> So, they attribute their downfalls to "bad luck" -- instead of the bigger culprit: <span class="highlight"><strong>Their sales/marketing skills suck.</strong></span></p> <h2>How Important is Sales?</h2> <p>Peep this:</p> <ol> <li><span class="highlight">Great sales without great products have built billion-dollar businesses (i.e. glance at the Fortune 500).</span></li> <li>Shabby sales with great products have destroyed businesses (i.e. no one knew how great they were to begin with).</li> </ol> <p><span class="highlight"><strong>The Reality:</strong> You can have a bad product with great sales (i.e. repeatable and foreseeable customer transactions), and still establish your company for years to come.</span> It's frickin' hard doing the vice-versa. How do you get out of that startup stage and establish your company? Hint: It's not through perfecting every inch of your product.</p> <h2><strong>Sidebar:</strong> Sell First, Build Second</h2> <p><span class="highlight">Sure, it's a controversial approach -- but hey, it's the best strategy we know to conserve cash for the smartest investments (i.e. spending resources of products you know for sure will give you a positive return).</span></p> <h2>So, How Much Should You Budget on Sales?</h2> <p>Pop-Quiz! Your sales budget should be:</p> <ul> <li>a) 10%</li> <li>b) 20%</li> <li>c) &gt;55%</li> </ul> <p>What'd be the smart answer?</p> <ul> <li> c) &gt;55%!</li> </ul> <p><span class="highlight">Of course, every business is different, but we think budgeting at least more than half of your total budget on sales serves as a good rule of thumb.</span> SalesForce.com, makers of CRM software, budgets about 70% of their total budget on sales. (They're pouring millions-by-@#$%-millions into their software, so imagine the magnitude of their sales budget.)</p> <h2><span style="font-weight: bold">Handy Tip:</span> How to Budget Your Sales</h2> <p>How do you spend your "sales" budget wisely? That's an article in itself, but here's the gist:</p> <ol> <li><span class="highlight">Don't put everything into one pot.</span></li> <li>Test and experiment with different marketing channels to see what works best for your particular product(s) -- using very little cash for each to allow for more future experiments.</li> <li><span class="highlight">Pour more into those that succeed, and less into those that fail.</span></li> </ol> <p><strong>Rinse and repeat.</strong> (Marketing channel examples: direct marketing, advertisements, AdWords, calling prospects cold, flyers, networking, PR, speaking, hiring a sales consultant, yadda, yadda, yadda)</p> <h3>Running shabby ROI campaigns?</h3> <p>Don't fret:</p> <ol> <li><span class="highlight">Analyze how you can cut costs with your better-performing campaigns.</span> (You usually can -- by a lot; eventually, you'll gradually find a way to optimize your ROIs for each channel.)</li> <li>Simultaneously, experiment with other marketing channels as well.</li> </ol> <p>Once you generate good globs of customers knocking on your doors, you'll free yourself to perfect your products to rock the world.</p> <h2>Sales = Muy Importante</h2> <p>&nbsp;</p> 2008-01-13T19:34:00-08:00 true 598 how-to-budget-your-startup 0 2009-11-06T21:45:46-08:00