One of my current clients for Blue Sky Local

If you’ve tried to build one or more businesses, this technique may be useful to you. It may seem counter intuitive to some but it is absolutely the best way to de-risk any start-up business model, but especially web-based business models.

If I could go back and do each of my business ventures over, this is the one thing I would do differently: I would get customers on board (ready to pay or paying upfront) first.

This is because, in part, if you build the product first and sell it to customer second, you’re likely to make more mistakes since the customer (the end-user) is not engaged in the development, thus it is less likely that what is built will meet all of his or her needs. A customer who is on board and paying from the start has a vested interest in making sure your product meets his or her needs.

For example, say I was interested in launching a Groupon copy-cat website for Long Island, NY. With this business model I would talk with local business owners and get at least a few dozen of them on board. To do this I might have to prepare a little slide show presentation (but building the entire service first is NOT essential!).

Simultaneously I would tell friends, family, and strangers through various online and offline means about the concept and convince them to hand over their email address for great deals. After I’d reached a sufficient number of signups for both businesses and customers, THEN I would build the web product and launch because at that point I would know almost certainly that I would be making money right out of the gate.

What if you cannot get customers on board in advance? Then don’t build the business. It’s that simple.

There may be some skeptics out there who might reply to this by paraphrasing what Steve Jobs said, which is sometimes the customer doesn’t know what he or she wants until you build the damn thing and give it to them to try. This is true to an extent, so there will always be some sort of up front investment but it in most cases it will not require that you exceed the scope of creating some design mockups or a short power point (as in the example above).

Businesses fail because they fail to make sales. They fail to make sales because there’s no market for their product.

Sell first, not second.

We all know about the importance of conveying our ideas in effectively, especially in business when it comes to telling prospective customers what it is we’re selling and why they consider buying from us. If you’re like me, you think this is true, but you might be terribly wrong when it comes to implementation.

For example, about a month and a half ago I was out at a small party. There was a laptop that everyone was using and since Blue Sky Local came up in conversation, so I showed the website to a couple of friends. For each person who I showed the website to, he would stare at the site for a minute or two, then look up at me and say, “Ok… neat…” or “Ok, I don’t get it, like… what does your business do?” This should have been a red flag at the time, I rationalized and ignored it for several weeks. Finally, after speaking with an entrepreneur friend of mine last week, Matt Turcotte, I was re-reminded of of this feedback.

Now that I am proposing a redesign of the website (see above), I’ve realized the mistake I’ve made—that the current design and text on the site simply hasn’t conveyed the key points of our service in a simple and succinct manner so that anyone, including my mother (who is definitely not a technology person) or friends (who are not in our target market), will quickly “get it.”

The assumption I’m making here is that if they don’t understand what my business is in 30 seconds or less, how can I expect prospective clients to understand it? It’s a reasonable assumption. If your customers do not easily comprehend what it is you’re selling and why it’s valuable, they are much less likely to buy from you.

My mistake was not keeping this at the fore-front of my mind and not testing the site design more frequently with friends and family members earlier on. In addition, my desire was to convey what was “cool” about our service rather than why it is useful to potential clients.

In Review:

• When designing your website, put aside any personal desire you may have to explain why your product is awesome
• Ask your current customers or users what they find value about the service
• Test understanding of the website’s design with people outside of your target market (this may seem counter intuitive, but it’s important)
• Don’t ignore the feedback you get—take it to heart and translate it into design changes!

How are you going to sell your web-based product or service? It’s a question that all internet entrepreneurs must ask if they are serious about turning their idea into a growing, robust business.

My current start-up, Bluesky Local, which offers a web-based, automated small business marketing service for restaurants and stores, is in the midst of making this important decision.

There are numerous sales methods that could possibly be employed. However in making this decision, it is important to consider how scalable each option is. For the purposes of this blog post, there are two definitions of scalability: labor efficient scalability and cost efficient scalability. First the former, then the latter. Labor efficient scalability requires the least amount of additional physical labor capital for every additional sales lead generated.

Here is a listing of possible sales methods for generating leads among the local business owner community in order of how scalable they are based on labor efficiency (1 is the most scalable).

1. Google Adwords (SEM) – typically one person can do this, regardless of the size of the campaign, and can target anyone searching for anything anywhere in the world.
2. Email Marketing – Reach as many prospects as you wish with a single email marketing message.
3. Search Engine Optimization – This is more time and labor intensive, but usually a single person can do it effectively on an on-going basis.
4. Press – Reach thousands or millions all at once, but continuously getting press can be difficult if you have nothing new and interesting to report. Plus it is difficult to measure results or to target your audience.
5. Twitter – Reach out individually to potential customers by following them and conversing with them.
6. Telemarketing – Call any potential prospect, anywhere in the world, however this can take time and numerous additional employees calling in order to reach a progressively larger number of prospects.
7. Door-to-door sales – Door-to-door sales is the most laborious of all the possible sales methods since it requires physical movement and is constrained by the speed of that movement across a given geographic area.

However, what if you are bootstrapping your start-up and have severe capital constraints? You will need to understand these options in terms of cost efficient scalability. Cost efficient scalability requires that the minimal upfront monetary cost be incurred to the business for each additional lead generated with the most direct and immediate link to a sale. For this we will make assumptions about how labor for each method would be compensated.

1. Telemarketing (Commission-based)
2. Door-to-Door (Commission-based)
3. Email Marketing (Compensate per 1,000 email addresses aggregated)
4. Google Adwords (Pay-per-click; 1 person managing it would be compensated weekly)
5. SEO (Compensate based on # of incoming links, Page Rank improvement, etc.)
6. Twitter (Pay weekly, bonus for sales leads)
7. Press (Pay per published article, based on size / distribution of publication — variable results are likely, may be hard to measure.)

In all honesty, it is difficult to rank the above options because of assumptions that have to be made. Theoretically you could pay for everything on a commission basis, which would be extremely cost efficient though not realistic.

The important point is that the methods that cost more up front and are hard to difficult to link back to sales are at the bottom of the list, while those that are commission-based (compensated only when a sale is made) are at the top of the list. While some at the bottom may produce better results, even in the short term, if lead-time is a factor (the time it takes for a prospect to actually make a purchase), the sales methods at the top can have a cost savings advantage for a cash-strapped enterprise.

Both types of scalable sales definitions considered, what are the Top 3 sales methods for local lead / sales generation?

1. SEO
2. Tele-sales
3. Email Marketing

SEO is like a very slow, more laborious version of Adwords simply because you can get to the top of Google or other search engines for certain keywords, however you have to continue your link building activities once there. It is difficult to test other keyword terms instantly (like you can with Adwords).  I would actually suggest that you do some testing in Adwords first as well as use SEObook’s  Toolbar for FireFox to research in advance the best keywords to optimize for. One other positive aspect to consider though is the fact that customers will see your business listing in organic search results, making them feel less like they are being advertised to, and therefore more likely to buy. By the way, I would include blogging under SEO.

Tele-sales can be almost as effective as generating new conversions as in-person sales, although the major downside is that it requires a lot of following up, hence an extra labor cost. However, if you are able to prove to potential hires that conversion rate they are likely to achieve while working on a commission-basis as well as have a thoughtful sales script and procedure that you can hand off to them, you can be very successful with this method.

Email marketing is a way to reach a large number of customers any where in the world with near zero cost to send the email to each additional recipient. In addition the cost of training team members in collecting email addresses in a systematic way is low.

Our web-based service is unique in that we face the challenge of targeting “offline customers” (local businesses) in a scalable fashion with limited capital at our disposal. The major benefits to employing these methods to generate sales for startups is both cost as well as labor efficient scalability.

Whether your business is similar or different from Bluesky Local it is important that you consider all options in a systematic fashion such as the one listed above.

Please tell me if you think this is dead-on or completely off in the comments below. Thanks for reading!