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Starting a business is a challenge even in favorable market conditions, and during an economic downturn it requires extra work. Businesses tend to cut their budgets in trying times, and with it, the likelihood of establishing new partnerships with business-to-business (B2B) software or service providers. That said, some of the most successful B2B companies were launched during crises including Slack, Zoom, and Square.
Unlike business-to-consumer (B2C) customers, who won’t buy anything that isn’t tangible, B2B ventures can pitch products and services that don’t necessarily exist yet, and make good headway with clients. Research from McKinsey shows that, rather than waiting for an economic recovery, B2B companies that act swiftly to capture markets in a crisis are more likely to thrive.
The ability to persuade customers on their future potential is what gives B2B startups more agility to gain momentum despite harsh conditions. Drawing on experiences from B2B founders, here are four tips to launch a B2B company in an economic downturn:
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1. Leverage the online shift in place of in-person meetings.
Social distancing measures may mean that you’re not able to meet potential clients in person. In the B2B space, this can seriously limit your ability to make a positive impression and expand your client base. However, with the massive surge in online activity during the pandemic, there are steps you can take to ensure both you and your brand stay visible from day one.
If you’re dipping your toe into an industry for the first time, harness your community as much as possible. Reputation is important in B2B—it’s the top selling point for customers—so frame your requests appropriately. Posting on LinkedIn or calling your friends or colleagues to ask “can you introduce me to someone at X company because I’m working on X concept and need their input” is always effective, and a discreet way to get a foot in the door with target clients. Generally speaking, it’s easier to get advice than to get someone to sign a contract, so if you start by asking genuine questions, you’re more likely to reach people that could be customers further down the line.
At the same time, seize the online shift and actively look for slots to speak at virtual conferences or podcasts. From March to April, global podcast consumption grew 42 percent, while virtual events have jumped by a massive 1,000 percent. Because of the increase, there is a wider pool of niche themes, so you’re more likely to find opportunities that align with your business. You don’t have to exclusively use these platforms to promote your company, you could use them to position yourself as a thought-leader, gain respect and make connections.
Alternatively, Jeff Wald, founder of Work Market, adds that you should take advantage of company representatives who may have the downtime at the moment. “Walk them through a trial of your product” he says, “this is also a smart way to collect feedback about your offering directly from the people who will have to onboard the teams using it.”
To listen to Jeff Wald and Gabe Zichermann discuss best tips for setting up a B2B business during a downturn, check out the live webinar on 09/16 at 3 p.m. by signing up for a risk-free trial of the SYOB platform.
2. Collect demonstrable customer traction ASAP.
VC rounds in the U.S. have fallen by 44 percent, meanwhile, businesses are turning to zero-based budgets to cut costs in COVID-19. With access to funding becoming narrower and clients having less money to commit to contracts, B2B startups have to revise how they present early signs of growth and secure investment.
Of course, the best scenario is a paying customer, however, not having immediate recurring revenue streams doesn’t automatically inhibit your chances at funding rounds in an economic downturn. Subscribers, trial users, and letters of intent (LOI) could be your strongest resources right now. Wald adds that in the software age, usage is key, too. “If you have a few customers that are using your services every day” he says, “that’s better than tons of customers who don’t use it that often.”
Letters of intent are particularly powerful because they show that your venture has piqued people’s interest, and can help seal the deal when seeking investment from family, friends or fellow founders. For instance, if you have a letter of intent from Disney—even if it’s not due to materialize any time soon—investors will likely place more value in that than a signed contract from a lesser-known company. Moreover, an LOI from Disney makes it more likely that you’ll receive interest from fellow entertainment giants like Sony, Netflix or Amazon, and puts you on an upward trajectory in the eyes of investors.
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3. Bring on a salesperson with a robust network.
Gabe Zichermann, chief executive of Failosophy, recommends that if your company estimates a closing sale will take three months, you need to double it to six months. Sales cycles are always longer than founders first assume, and in an economic downturn, will be even longer. “Recognizing this early on will allow you to estimate and organize better,” Zichermann continues, “in the meantime, a salesperson can help you make progress with prospective clients and bridge the “stranger” gap.”
Selling a brand a new business is an art, and the person responsible for introducing your company to the world has to be compelling. The sales representative you choose has to come with a rolodex of established contacts and have pre-existing relationships in your industry. They should also have a good track record of selling, which they have to be able to talk you through and give solid references to back up their claims. However, if they’re slightly more junior than you would have hoped for, don’t write them off straight away. You can train them up as you go along, so long as they add clear leverage such as being well positioned in certain networks, and having charisma.
Although COVID-19 has cost the equivalent of 400 million jobs worldwide, there is now a much larger range of talent available, including top-tier candidates who were previously unattainable. Many sales representatives from enterprises are looking to transition to startups where they can have a more noticeable impact. In the move, these reps can bring their expertise and impressive rolodex directly to your company. Be aware, however, that these applicants will probably want to be compensated for lower salaries with things like more vacation days, flexible working hours or equity offerings.
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4. Keep filling your funnel.
Most B2B companies don’t take off until they get one recognizable customer who can advocate on their behalf. Nonetheless, you shouldn’t stop adding to your funnel while you search for your golden goose. Especially in the current economic downturn, where 73.9 percent of B2B sales opportunities have decreased, it would be unwise to rest on finding one champion partner.
To find a broad scope of clients, Zichermann recommends starting with big and small companies where the demand is greatest. LinkedIn is the most comprehensive tool to search for customers, and with a relatively cheap premium account, you can email anyone. Other social media like Instagram and Facebook are worthwhile too, because it’s easier to find and communicate with people who are accustomed to getting direct messages.
Once you’re at the stage where you’re having conversations with clients, get comfortable asking “so if we had X, would that be interesting to you?” These types of questions allow you to recognize what the necessary steps are to earn a full commitment from future prospects and to encourage the more undecided ones to make a soft commitment.
Although B2B selling in an economic downturn is even more dependent than usual on a level of confidence from buyers, you still have to meet your deliverables, whatever the market conditions. Securing an initial valuable customer is the primary way to drive your product and open doors to other clients, but you have to be certain that how you are positioning yourself and the brand is realistic and scalable. If you can do this while continuously adding prospects to your pipeline, you’ll be set for long-term success.