Stop Budgeting For Sales and Marketing

Bootstrapping At Scale

One famous Silicon Valley axiom is that nothing is a better teacher than being cash strapped. And many venture-backed firms who have closed huge rounds have gone on to make massively costly mistakes. That is why we promote strategies that achieve scale and triple digit annual growth with self-funding programs that require very little investment capital.

Sales & Marketing Should Power Themselves

Several of our startup and growth-stage firms come to us after their home-grown sales and marketing strategies have not driven projects returns. Often they plowed large budgets into activities that were for “long-term” goals or with long payback cycles. Simply put, don’t do these. Make it clear that sales and marketing are there to feed the organization, not the other way around.

Don’t Spend Money if The Results Cannot Be Proven

A professor once told me that “strategic” is a management uses when they want to do something that they know will lose money. Internet marketing and direct selling have the advantage of offering lots of data-driven activities. Insist on understanding the marketing pipeline and what the metrics are so you can trace every dollar from initial lead generation activity to receipt of bookings.

Short ROIs are the only ROIs

Digital marketing spend should be able to result in profitable dollars in within 90 days or don’t do those activities. Prioritize scalable, low-cost selling over high cost selling at all turns. Also prioritize scalable solutions wherever possible. Don’t do expensive, outside enterprise selling until you have concluded there really is no other way to grow. one of our clients achieved their first ever profits by cutting outside selling investments and focusing on new digital marketing and inside selling tactics that drove higher volumes of easier to collect subscription sales. They built all this while becoming profitable with relatively little up front incremental investment.

Stay Home First

Human nature means doing what you like and what has succeeded for you in the past. This often leads leaders to emphasize higher cost, slower sales models than  they need to. If you can make money by direct, automated selling through digital marketing then optimize around that and scale as large as you can before looking at other selling models. Look next to inside sales models before looking to outside models. Outside selling is a critical practice for many firms but is typically the slowest to grow with the longest sales cycles and the hardest to scale so do not assume it is your only option.

Beware Outsourcing

There is a time and place where outsourcing can help with scale but never when you are early stage or unprofitable. You must be able to generate leads and close them yourself before you can outsource that to another company. Similarly, indirect selling such as though partners or channels has its place but should be a last resort. Nobody will ever care about your sales growth as much as you do.

Slice data, then slice again

Everyone wants to be data driven, but doing it successfully means slicing data and looking at cohorts while eschewing averages. Averages hide treasure. Encourage large amounts of short, inexpensive tests. It could be that one lead traffic source with one landing page with one call to action with one inside sales strategy and script is massively more profitable than the others. It is not true that you can treat marketing and sales as distinct activities. Leads generated from different lead sources rarely will respond the same to your sales strategy. Assume they will not. Even small changes in copy or call to action can convert different leads or set different expectations that cascade to very different sales experiences. Drill into that and plow your money into that cohort to scale it. This has allowed us to make many, many clients massively profitable on strategies they thought were disproven.

5000 Boomer-Owned Software Businesses to Shut Down By 2021

As a generation of Baby Boomer business owners plan their estates, some in the software industry say that thousands of firms providing the highly-specialized software running many businesses will cease operations or be absorbed by competitors by 2021. This will lead to the largest ever consolidation of business software: the elimination of as many as 100,000 tech jobs and the evaporation of billions of dollars in value from Boomer estates.

Michael Zammuto, CEO of Cloud Commerce Consulting specializing in advising mid-sized software companies, claims “These firms are at a crossroad and, while a few will sell for big dollars, I expect 5,000 will be gone by 2021. Many companies, employees and their customers simply are not prepared.”

Boomers Automate Every Business

Baby boomers are the generation born between WWII and 1964.
Baby boomers are the generation born between WWII and 1964.

Throughout the late 1970s and into the 1980s, the personal computer revolution and access to inexpensive and simpler software programming tools allowed enterprising Baby Boomers to found independent, usually niche or vertical business software and service companies providing the first software to thousands of types of businesses including storage units, produce wholesalers, furniture manufacturers, liquor distributors, call centers, collection agencies, insurance companies, restaurants, and thousands more. These businesses required highly specialized solutions to replace their paper-based processes for every aspect of the business including purchasing, manufacturing, service delivery, customer service and account management. Businesses of all sizes bought their first computers and built their first computer networks, launching a revolution in business productivity.

Young software firms often customized the software for each new customer and structured software licensing deals where large licensing fees are captured up front followed by smaller annual maintenance fees of 10% to 20% of the original licensing costs. Over time, software for even small businesses could grow to include thousands of options and configuration settings, ensuring the sales and setup of the software was a costly and lengthy process. As a result, software companies producing vertical software solutions developed fewer economies of scale than more horizontal software providers such as IBM, or SAP.

Rapid Growth but Little Consolidation

New industries often experience rapid growth in the number of startups followed by similarly rapid consolidation. For example, hundreds of automobile manufacturers were started in a short time span. But, in the 20 years following 1909 more than 200 of them went out of business. This trend eventually left a few huge Detroit behemoths with access to top talent, technology and cash. The software industry grew rapidly throughout the 1980s and 1990s. For reasons that are unique to vertical business software this segment often bucked the traditional patterns.

A similar trend of consolidation did occur in many segments of the tech industry. Computer hardware companies, providers of operating systems and ‘horizontal’ business software like accounting poured hundreds of billions of dollars of sales into IBM, HP, Microsoft, Dell, Cisco, and others providing the platforms for personal computer and internet revolutions. In the 1990s, search engines exploded in number and then consolidated to Google and Bing whose combined market share is reportedly over 95%. Unlike computer hardware, search engines and horizontal software companies, many vertical business software segments didn’t consolidate in the same way.

For many boomer-founders, selling their business is the key to retirement and providing for their families.
For many founders, selling their business is the key to retirement and providing for their families.

The founders of many of these vertical business software companies discovered that it was more difficult to raise growth capital or find strategic buyers. The high degree of customization, often relatively small vertical market sizes and usually aging technology limited their appeal as acquisition targets and their access to the capital markets. Some leaders in the space, often backed by private equity, acquired competitors but their success varied due to the same factors that prevented natural consolidation.

Many firms stayed founder-led (or at least family dominated) to varying degrees of success. Most founders discovered their kids couldn’t or wouldn’t take over the business. Much needed outside management expertise and investment capital went to faster growing horizontal software and internet businesses.

Retirement Delayed

Annual Baby Boomer Retirement Numbers in millions
Annual Baby Boomer Retirement Numbers in millions

Now the one obstacle the founders haven’t been able to avoid is at the door. These founders, with immeasurably valuable experience, are getting old. The oldest boomers are already over 70 with millions more crossing that line every year. Many have stayed vibrant much later than their parents did and are working long after they expected to retire. Their businesses stayed successful enough to keep them engaged but many are still dependent upon their founders’ involvement. Like other Boomers, many are not as financially prepared as they expected due to the 2008 financial crisis and high, long-term health costs eating into their retirement and estate plans.

Large numbers of these firms will not find buyers.  Many will simply cease operations, either de-facto closed or sold at bargain basement prices and absorbed into larger software firms. This will lead to a huge opportunity for those few survivors who can gain market share faster than before and an opening for the horizontal platforms and startups looking to take their places. “The ones who survive are preparing today,” Zammuto says, “Cloud Commerce Consulting has a 90-day transformation process to improve these businesses to make them more attractive to acquirers or improve profits and cash positions so they can survive and thrive.”

Contact Cloud Commerce Consulting For a Free Assessment of your software company