Most startups start with the focus on serving small and medium business but sometimes large enterprise takes a peek and express some interest.
Now comes the temptation for the founders. Converting a big account means less strain on small revenues and brand association to market.
While it is natural for entrepreneurs to be optimistic, here are some inputs for you to consider before taking this option further
Who Expressed Interest?
Enterprises have a ton of hirarchy.
CEO expressing interest is very different from a line manager showing interest.
It is not only the hirarchy, peer groups in some of the hirarchy would also be a stakeholder. Be clear on this so that you can guage the level of interest and chances of conversion accordingly.
Why the Interest?
What was the reason for the interest. Looking at the reason could indicate the level of seriousness for the product.
Some reasons that indicate low level interest
You guys have interesting technology
Always wanted to encourage startups
Good to be talking with enthusiastic founders
Some reasons where the need could be real
This solution might save lot of manual work
We were looking for solutions for this specific problem
We are looking at solutions that can generate additional revenue
Unless the real interest is not known it is better to take things with bit of a salt.
What Do They Want
The downside of dealing with large enterprises is they are in a position to demand lot of things upfront before even considering it as a formal proposal.
So, be clear on the immediate ask. It could be a presentation or it could be a working implementation of features specific to them. It could be anything inbetween.
How much is it going to cost?
If you decide to pursue this oppurtunity, you need to be clear on the direct and indirect costs. While the benefits may look like you can forgo any cost, spending sometime on this would give you a better understanding on the effort you might end up spening.
- What deviation does it take from the current road map?
- How many resources would be working on this?
- What travel and other expenses you need to think about?
- How much time is needed for developing the initial ask?
Do you have an exit strategy
Sometimes the proposal goes into a limbo. The deal is not rejected neither there is progress. When this happens do you sunk cost fallacy, we would like to continue putting time and effort.
While being optimistic, having a clear exit atleast from the startup side would help not investing further. Being clear that further effort would need some response from the enterprise can be a gating process.
Are you relying on this deal?
Again, sometimes circumstances make founders overly depend on a deal working out. When that happens all rationality is thrown out of the window. All other activities are put on hold and all the effort is focussed on the deal.
Have someone unbiased from your team to assess the deal progress. Otherwise you might get hopeful without concrete data.
Can the current show go on?
It is important to have someone take care of existing business and immediate issues.
The enterprise has only expressed interest. The deal can happen down th line or may not. This needs to be clearly understood. Under no circumstances the current work should get impacted.
This decision must be consciously taken and some responsibilities can be delegated if you are going to be focussed on the new prospect.
Is the deal profitable or not?
Even if the deal is made and you catch the big fish, the prices should make the deal profitable. Relying on brand compensating the price never works out.
Also enterprises are in a position to negotiate more, it becomes very important for you to work out the economics before considering their offer. If the bottom line is negative, then it is not a good deal afterall.
What additional effort you need if the deal work outs
Serving a large customer is very different from serving smaller ones. Here you need to consider what is the baggage that comes along with the deal.
- Account Anchor
- Additional Eng and Support Teams
- Additional instances
- New Features
- Integration with existing software
Bottomline
Always know the time, effort and costs that comes along with large customers. It is not a free ticket to big bucks.
Take a calculated effort and be okay to walk away if it overshoots your runway.