Daily Archives: May 13, 2024

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 4

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first six (6) of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)
  • Assume that because you could run a Procurement Department that you can run a SaaS company. (Part 3)
  • Assume you know the average process and technology competency in your potential customer base. (Part 3)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next three.

7. Assume that you know the messaging because you received the message.

You know the message you needed to hear, the message that got through to you, and the message that came to you when you had a vision of your future path, but that doesn’t mean you know the message that you need to deliver! There are a few reasons for this:

  • you need to know the standard terminology the big firms are using so you know what terminology you should be using …
  • as well as any adjustments you need to make for the local geography, verticals being targeted, and key companies you want to target …
  • as well as the standard messaging noise you need to cut through …
  • and, most importantly, messaging that will be not only differentiating but meaningful to your customers

And if you don’t know the market, and the messaging currently being used, you won’t be able to get your message right.

8. Assume if you cut the price to get in the door, you can raise it later with an increased value proposition.

Go back to your Procurement days. How often were you willing to accept a price increase that was more than inflation for the same product or platform you bought last year? And be honest in your answer. (Never!).

Furthermore, you know deep down that just adding more functionality is not going to raise the price, as all of your competitors are doing that and it’s a basic market expectation. And while you might be able to charge more when you add new modules, if your first module was 20K/year, you’re not going to all of a sudden get 60K/year for your second module, which is not as extensive or mature as your first module on its launch. While there is a need to be competitive, you still need to price at a point that will be sustainable and support growth, even though it will be hard when you desperately need those early sales.

9. Assume you need a CMO early to get noticed and build demand.

You need leads, but you don’t necessarily need a CMO. In our space, good CMOs are expensive. VERY Expensive. The average CMO in the US is 360K a year (or 30K a month) plus benefits. Then they need a BIG budget to work with, and in-house or outsourced support staff to write the product marketing, run the campaigns, staff the booths at the pricey trade shows they will insist your company be represented at. If you can’t devote at least a Million dollars a year to Marketing, you shouldn’t even think about it. Instead, when you do need to start marketing (which is never as early as you think), use a fractional CMO and/or an expert Marketing Firm. You will still be relatively small and only able to handle so many leads at a time anyway.

You need to invest first in a good salesperson who knows the space and has a lot of connections who can help you find and close those first critical sales at (marquis) reference customers that will help you grow as time goes on. Then you need a good pre-sales person to support her. Then, with those key references, you expand the sales team and when they start to gain traction, and you complete more successful implementations, only then do you look to marketing. Remember the basic formula of Business 101: Profit = Revenue – Expenses, which, for a ProcureTech/FinTech start up equates to Profit = SALES Revenue – DEVELOPMENT Expenses … there’s no marketer in that equation in the early stages.

And while we still have many mistakes to go, we’re past the halfway point, so we’ll stop here for today. Come back for Part 5.