The psychology of Sales: How to sell your startup
After long hours spent in building your startup, you are at a point where people are showing interest and you can look for an exit opportunity. Maybe you want to sell your complete startup to someone or perhaps you only want to sell some stake in the business for getting growth money. Either way, in simple terms, you are at a point where you need to sell your product.
Now, assuming you have achieved some success in your startup, you might say that you already are a master salesman – you have sold your product (or service) to thousands of customers. Surely, this can’t be that different. Well, right and wrong. At the base, all sales are similar in the way they proceed – but selling your own startup is much different, not only due to the technical aspects but also due to the psychological aspects.
In order to achieve the best results in the sale, it’s important to keep in mind a few tips.
Is your startup growing exponentially? If not can you show the possibility for such growth?
This is where selling your startup differs fundamentally from selling a product or service. Not everything is tangible – and infact what is tangible might not be favourable. An overwhelming proportion of startups take investment when they are incurring losses – this loss is true and a demonstrable fact. What you have to sell is a) A proper reason for these losses (most likely growth) and b) A future where these losses will pave the way for enormous profits. The possibility of that future is where your valuation lies.
Who is the team and is the business transferable
People in general tend to go with what they think requires less effort and buyers (or accelerators/VCs) are no exception to that rule. If you want to sell your complete business to someone, this point assumes even more importance. Are the skills required to sell this business transferable? If what is truly setting the business apart are your own unique skills, then selling becomes difficult. Since, even with the current success, without you it will not be sustainable. Something that you need to show your buyers is that they can quickly get a hang of the idea and that it can run smoothly without you. If the idea or the functioning of the business looks unnecessarily complex, then buyers will most likely pass it by.
If you are in such situation where your skills are critical for business success, you need to devise a way to transfer this knowledge or train people or perhaps form a consulting arrangement. Whatever method makes sense, in the end you have to anticipate this question.
Don’t be defensive. Instead, focus on what solution you are providing.
An important tip to keep in mind is that every valuable startup needs to service a need. Sometime needs are in effect created by startups and then serviced – for example both Facebook and Twitter made daily social interaction a need and then provided themselves as the prominent solution. Be crystal clear on the solution that you are providing and then conceptualise your business meetings around this exact solution.
Too often, you would find in meetings that founders and not able to articulate the need or the problem, and the tone turns from enthusiastic to defensive. In all likelihood, the meeting would go downhill from that point. Always be clear on the solution that you are providing. The below video demonstrates this pretty well – and also to note, the founder in question took the lessons very well and learnt from the incident. (Link)
Show confidence, beware of arrogance
The ideal thing is to find a balance between coming off as insecure or desperate to make a sale and coming off as being too arrogant and blind to one’s faults. Ofcourse, this is easier said than done – but this thin line is what you must aim for.
It’s obvious why you shouldn’t come off as desperate – it can give the impression that your product has a low value and puts you in an inferior position in relation to the buyer. However, arrogance can also give the wrong impression, suggesting that your business might have flaws you won’t acknowledge and also simply putting buyers off. Often, decisions have a lot to do with our personal likes and dislikes, so it’s important to give a good impression.
It is amazing how often people underestimate the importance of preparation. In order to make a sale, you need to know everything there is to know and that you can find out. The industry, competitors, your own team, employees – the moment you come across as someone who does not have answers to obvious questions – people will start doubting your own ability. You need to be able to answer the buyer’s questions and offer alternatives. This will show that the startup was designed by someone who knows what they’re doing, so it reflects positively on the business.
You should give your idea time and get ready to sell it. Sometimes, the planning stage can take up to a year, but if you use this time wisely and prepare, it will not be a waste, since it will give you a chance to prepare yourself and your idea for the world out there.
You need to show that you are confident in yourself and your product, but open to a constructive discussion. Confidence shows respect for yourself and for your buyer. Finally, it allows you to make a business deal as equals, leaving both parties satisfied.[These tips were contributed by a Psychology Student]