Daily Archives: May 15, 2024

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 5

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 nine (9) 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)
  • Assume that you know the messaging because you received the message. (Part 4)
  • Assume if you cut the price to get in the door, you can raise it later. (Part 4)
  • Assume you need a CMO early to get noticed and build demand. (Part 4)

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

10. Assume that becoming an “influencer” or “thought leader” on LinkedIn will replace proper lead-generation!

If you pay attention to LinkedIn, you’ll see that the strategy of a number of founders is to post daily, if not twice daily, content in the form of short segments, videos, articles, and write paper excerpts in an effort to establish themselves as a thought leader under the assumption that will bring their start up more leads.

There are many flaws with this assumption:

  • just because you establish credibility doesn’t mean that it transfers to your company — you’re establishing credibility in yourself, so unless you are marketing yourself as a speaker, consultant, or potential employee, your effort is likely not achieving the goal you think it is
  • the credibility you are building will hit a substantial amount of your target customers — depending on the stories you choose to tell, how you choose to tell them, who your network is, and who they share it with, the people you reach may be a very small set of your target customer base (or at least the target customer base you should be trying to serve)
  • you’re getting enough of your unique product messaging through — often the content that attracts the most attention is the content with the least unique or valuable information about the product or platform you are trying to sell

Putting this all together, while you can generate interest in you, unless you can get those potential users to come and talk to you at a (pricey) trade show or local association event, where you can then talk about your product, the return on this effort is quite low, if there is any noticeable return at all. Furthermore, this still doesn’t address the most important assumption:

  • that doing this is a good use of your time

Presumably you are the only one who knows what the tech needs to do and how it needs to do it, the only one who understands key parts of the service that are required, the only one that has an idea on what is missing in the message, and, hopefully, the only one who can do one of the key CXO jobs at your company well. While someone needs to do the LinkedIn etc. marketing and influencing, it’s likely not a good use of your time when, especially in the early days when you need to work closely and consistently with product, marketing, sales, and the rest of the management team.

(Of course, this entire mistake assumes you are starting a SaaS company, as per the premise of this series. If you are starting a consulting company, then, yes, you need credibility and this could be a great use of your time.)

11. Assume that you need AI or that jumping on the Gen-AI bandwagon will save you.

Our last bonus best practice was don’t mention AI until asked. Not even once. Not even if you are using proper AI. Many people are starting to realize the huge disconnect between the marketing hype, especially around Gen-AI, and the reality that, for the majority of problems it just doesn’t work, and sometimes you’re lucky if just doesn’t work is the outcome as it has been found that Gen-AI is gender/race-biased, hallucinatory (which should be no surprise as Gen standars for Generative which literally means make sh!t up), harmful/hateful, murderous, thieving, and sometimes even contains unknown sleeper behaviour that won’t materialize until months or years into the future.

Your customers are looking for solutions, not buzzwords. If AI is part of that solution, great. If it’s not, also great. At the end of the day, they want to solve their problems and see a solution that solves their problem. And while the cool factor will make it easier to open the door, it won’t help you make the sale if it doesn’t solve the organization’s core problems.

12. Assume that you can get a great salesperson or grow your sales team (primarily) on commission.

While it’s true a top sales person will work commission only in a large software vendor who will give the sales person a 30% commission on every sale, that’s only true for a large vendor. This is because, in tech, a sale takes the same amount of time and effort whether it is a seven-figure (1,000,000) enterprise sale or a five figure (50,000) single module sale. And if a salesperson can only expect to close 4 deals a year because of the effort involved (and the typical success rate of 33%), that means the sales person would make at most 60K in commission at your company (if you gave them the same percentage, and less if you didn’t), and they probably couldn’t live off of that. And why would they want to when they could go to a big company and make 20 times that?

If you want a good sales person, you’re going to have to pay a VP level salary in the first couple of years because they know they’re not going to see much commission. The only way they’ll take less is if they see a bright future for your company, did very well at their last few jobs, can afford to make less for a couple of years, AND you give them a sizeable percentage of your company so they can make up their lack of pay on the back end when the company starts growing and you get a big valuation on an investment of acquisition down the road.

And while we still have a few mistakes to go, we’ll end here for today and then conclude our initial series in Part 6.