Rein in customer expectations, or they could sink your business.
The corporate world spends millions of dollars each year training salespeople to close, as though asking for a deal involves some esoteric skill. What a waste. Closing is the natural outcome of a sales process done well. When a series of great questions produces a great proposal, the conversation proceeds automatically to, "Are you ready to move forward?"
If the answer is yes, then the final step is to re-set expectations. Here, the entrepreneurial process veers dramatically from corporate selling. Large organizations can usually absorb unrealistic customer expectations. Small organizations can't, and failing a big account with influence in its industry can kill a startup.
In the early days of one consulting firm, the founders signed a contract with a large software company that gave the customer unlimited consulting under the guise of a $40,000 subscription agreement. Already the customer had eaten up more than $250,000 in valuable research time: far more than the contract was worth. Worse, the talent devoted to this one client prevented the firm from developing more scalable products across its whole client base, which was necessary to attain higher per-customer margins and become cash-flow positive. While the software client example was extreme, a high percentage of the company's contracts were unprofitable. Failure to meet their demands kept renewal rates south of 55 percent.
The founders ran into trouble when they oversold, a common temptation for entrepreneurs. "This request is part of our ultimate vision, so we'll just build it now for this client," their thinking went. But early customers are meant to get startups moving in the right direction, not lift a foot to their backs and give them a mighty shove.
In this case, the re-setting of expectations occurred after the contract was already in force. The chief commercial officer was able, after some very difficult negotiations, to renew the software company deal on terms that reflected what the company could profitably deliver. With the founders' support, she standardized offerings and terms and instituted rigorous contract-management review. The result was 100 percent growth and an uptick in renewals to more than 75 percent the following year.
Re-setting expectations is so important that many successful entrepreneurs actually document in their proposals those things that are not included. There can be no room for interpretation: both sides must agree on exactly what will happen going forward. At the very least, the entrepreneur should make sure he is working with expectations he can meet. Ideally, he will find himself working with expectations on which he can over-deliver. With the seller and customer on the same page, the deal is done.