Contents

Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Author’s Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1 Marketing and Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 2 Managing, Governance, and Advisory. . . . . . . . . . . . . 33
Chapter 3 Entrepreneurship on the Fly . . . . . . . . . . . . . . . . . . . . 55
Chapter 4 Keeping the Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
 Acknowledgments
Books like Growing Your Business come from years of collective experi-
ences and discussions. There are many, many people whose wise counsel
and insight I have benefited from and who have directly and indirectly
contributed to this book. I am grateful to all of these people who have
through the years touched my life and my businesses.
I also want to express my sincere gratitude to the people who worked
for, worked with, advised, or invested in my companies. The concept for
this book came as I navigated the entrepreneurial opportunities, bumps,
and challenges. Over the years, many of you also experienced the same
entrepreneurial cycles with me and generously shared your insight, wis-
dom, enthusiasm, professionalism, and above all, friendship. Thank you.
This book would not have emerged in its current form if it weren’t for
the inspiration and input of some wonderful fellow entrepreneurs and
friends. Their stories bring to life much of the lessons of Growing Your
Business and follow in the pages hereafter. All of their personal experi-
ences, attitudes, passions, and enthusiasm highlight what attracts so
many to the intriguing world of entrepreneurship. All of you have been
instrumental as I navigated the gray, fuzzy space between professional
and personal worlds that each of us must come to terms with at various
junctures in our lives.
To my wonderful boys, Shanth, Yash, and Anand, thank you for your
patience in letting me spend the weekends needed to finish this book.
Your contagious giggles, hugs, and antics provided inspiration and clar-
ity at just the right times. To my parents, a most heartfelt thank you for
always being there when it was needed most and embodying the lifelong
values of hard work, passion, kindness, integrity, discipline, and generos-
ity of heart and spirit. For many decades, you have both lived exemplary
lives and you continue to do so.
 Author’s Note
There are a lot of experiences, stories, facts, and opinions in this book. I’d
like to clearly state that the opinions in this book, if not directly attrib-
uted to a fellow entrepreneur, are mine or as a direct result of research I’ve
conducted. I bear full responsibility for any inaccuracies and/or omis-
sions of all that follows in the pages ahead.
I hope that this book provides you with insight and essential informa-
tion on your own entrepreneurial journey. I’d love to hear from fellow
entrepreneurs and those who work in the worlds of entrepreneurship,
including employees, VCs, investors, advisors, and customers. If you’d
like to submit a potential “Tales from the Trenches” for the next edition
or just have an interesting or really great personal story, please send it to
me at spdunung@msn.com. Please note that while I can’t acknowledge
receipt for all stories, no experiences will be used without the sender’s
final permission.
Thank you for making this book part of your entrepreneurial journey!
I hope it provides you the necessary insight as you commence or continue
to navigate the entrepreneurial peaks, valleys, and bumps.
 Introduction
Like many entrepreneurs, when I started my first company, I didn’t know
any other entrepreneurs. My frame of reference was the corporate world,
in which I had cut my professional teeth, so to speak. As I progressed, I
found myself facing all sorts of opportunities and challenges that I would
have been able to navigate much more smoothly had I had the knowledge
I do now. It was not until I was well into operating my second company
that I began to meet fellow entrepreneurs whose companies were at simi-
lar stages of growth. Once we began to share experiences, I realized that I
was not alone and that my experiences were not unique.
One of the most difficult challenges entrepreneurs encounter is the
feeling of aloneness when facing all the business issues of starting, grow-
ing, and running their own company. The reality is that while many of
the challenges that entrepreneurs face are unique to entrepreneurship,
individual entrepreneurs are certainly not alone. Many entrepreneurs feel
as though no one else has made a certain mistake or faced a particular
challenge, when in truth, many have.
After many coffees and cocktails with fellow entrepreneurs, I realized
that there were no sources any of us could turn to to read about “real-life”
experiences. All the books on entrepreneurship were written by journalists
or consultants and lacked a real understanding of what it was like to be
“in the trenches.”
Also, most entrepreneurial books profile only enormously success-
ful entrepreneurs or companies, thereby bypassing much of the com-
mon entrepreneurial experience. Not every company can be a Dell or
Microsoft, yet thousands of entrepreneurs happily achieve a high level
of success far beyond the sole proprietorship stage. My focus is on the
millions of entrepreneurs looking to find success in this range.
As entertaining and inspiring as the rags-to-riches stories may be, it is
important to focus on the opportunities, challenges, mistakes, and bumps
in the road. It’s important to know what the start-up and early years of
highly successful companies were really like on a day-to-day basis. There’s
2 Growing Your Business

a prevalence of public relations–generated images of young entrepreneurs

in garages or dorm rooms, which then fast-forward to a very successful
post-IPO (initial public offering) world. The decade or more in between
is a vague blur and rarely referenced, yet every company and entrepreneur
faces many of the same challenges during those growth years. Even the
most successful entrepreneur experiences bumps in the road and may need
to fold several companies before finding the right “recipe” for success.
Further, the reality is that most entrepreneurs have no guarantee of suc-
cess. Clearly, you feel optimistic about your possibilities or you wouldn’t
be engaged in your current project. However, you can’t know for sure. You
just believe and hope that you’re right. Michael Dell and Bill Gates didn’t
wake up one morning in their early years and know for sure that they
would create multibillion dollar companies within one or two decades.
Few focus on the fact that it’s passion, not a clairvoyant guarantee of suc-
cess, that fuels the entrepreneur on a daily basis.
This is the handbook I wish I’d had when I began my first business.
In it, I’ve tried to incorporate all the knowledge I gleaned from having
had several businesses. Often, the most frustrating quandary for entrepre-
neurs, and for people in general, is that they don’t know what questions to
ask early on, because they don’t know what they don’t know.
In this book, I’ve tried to highlight the range of key issues that you
need to consider every step of the way. Of course, we have all had a little
entrepreneurial optimistic arrogance at one point or another and thought
we could handle everything just fine. As we get more seasoned, we real-
ize that while that may be true in some situations, it would be much less
stressful to be able to anticipate and be prepared for opportunities, chal-
lenges, and bumps in the road.
Entrepreneurship is a spiritual journey where you learn as much about
yourself as you do about your business, products, and customers. What
I hope will make this book useful is that it provides relevant facts while
nourishing the entrepreneur’s spiritual journey.
Those who think entrepreneurship is just hard facts, business, and
dollars and cents have probably never met a real entrepreneur. I am
not just talking about the human side of a company and the problems
it can cause—something all organizations encounter. I am referring to
the intense soul-searching an entrepreneur goes through when asking
 Introduction 3

himself or herself a slew of questions every day while encountering

opportunities and obstacles. It’s about the passion and believing all the
way deep into your gut and soul. For that reason, you’ll find that I’ll
talk at times about the things you’ll need to reflect on at different stages
of the start-up phase.
I was moved to write this book because of my personal experiences.
I’m on my third company as a career entrepreneur. Through all three I’ve
made a good number of mistakes and many smart moves, some as a result
of careful planning and strategy and others from luck and timing. Entre-
preneurship encompasses all of it—the successes, challenges, mistakes,
and comebacks. I wanted to write a book for novices as well as for sea-
soned career entrepreneurs, for companies with revenues of six figures as
well as companies of nine figures. I’ve also written this book for potential
entrepreneurs, for people thinking of starting their own companies, to
help them understand what they may encounter along the way. I have
personally ridden the entrepreneurial roller coaster, and it’s a great ride for
those who are ready for it.
My entrepreneurial experience started quite early in my life. Even as a
child, I was always starting a business of some sort. As I was not content
to have just another lemonade stand, my “business” was a successful little
Sunday-morning camp for neighborhood kids. I charged a mere 50 cents
per child for 2 hours—quite a bargain in today’s terms—and I soon real-
ized I had much to learn about pricing. It was the first of many ideas, and
I gradually learned, as many entrepreneurs do, that it’s a long way from a
great idea to tangible success.
My first company sort of fell into my lap, which is how many entre-
preneurs find their first firm. In my case, my first company was offered
to me by a friend who wanted to move to the new Czech Republic and
needed to “sell” her business, which was in essence one client. I jumped at
the opportunity. I bought the “business” and her fax machine for $500.
The client didn’t make much money, and sales were very low by my heady
expectations. I knew I needed to expand and again “the entrepreneur-
ial opportunity” found me. It was the early 1990s and Asia was starting
to boom. Sensing the opportunity, I expanded into providing companies
with cultural training services and products to enter and operate in the
4 Growing Your Business

Asian market. At the same time, we helped Asian companies learn about
and enter the American market.
We grew quickly until the Asian economic crisis of 1997 started to unravel
our key overseas partners and our sales plateaued. I then realized, along with
some key customers, that taking our training methodology, materials, and
know-how to a technology platform would be highly beneficial for them and
profitable for us. It was the beginning of the dot-com period, and although
we weren’t a dot-com, we certainly rode the early wave.
By this point, after a decade plus in the “culture” business, I was deeply
passionate about the need for great products to help people of all ages
learn about different cultures. I had always wanted to run my own firm,
and I wanted to grow one from a unique idea or vision that I knew was
germinating deep within. This was an approach that worked well for me.
I had discovered a market need, developed ideas, and because of this, my
life’s passion was born.
Despite my enthusiasm and the advantage of external funding, my
second company was a bit ahead of its time and fell victim to the post-
9/11 economic collapse and a disincentivizing capital structure. It’s taken
me until my third company to get the right formula and timing to create
a growing and profitable education company. Through it all, my vision
has stayed fairly consistent, only evolving with market opportunity and
demand. This has enabled me to continue building my knowledge, net-
work, and experience.
Many people are surprised to learn that successful entrepreneurs do
not always have a perfect business plan and marketing and sales strategy
in place before launching their businesses. In fact, many often deviate so
significantly from the original plan that the business is unrecognizable.
Instead, what seems to be the mark of a successful entrepreneur is the abil-
ity to adeptly navigate the daily, weekly, and monthly bumps, twists, and
turns in the life of a young or small company.
We live in a world of instant gratification. People want instant suc-
cess along with everything else. There are no prepackaged sure paths to
successful entrepreneurship. You’ll notice from the title that this book
does not promise a get-rich-quick scheme. This book is about building
growing, sustainable businesses and the experiences that most entrepre-
neurs go through.
 Introduction 5

I’ll relay one of the more sound pieces of advice I have received—start
a business for what you can get out of it this year, not 3 to 5 years down
the road—because you’re not likely to make it to that future point if you
can’t take care of today. Pay yourself a salary and strive for profitability.
If you’re looking for a how-to book with a step-by-step outline for
guaranteed success, don’t look here. You won’t find that in this book. In
fact, you won’t find it anywhere, and you should be wary of those who
promise such formulaic approaches. There is no guaranteed formula
for success. The path to successful entrepreneurship is unique in every
circumstance. The product, the market, and the timing are all unique.
Something that works in one mix may not work in another. What’s simi-
lar is the spirit that bonds entrepreneurs.
I’m not going to suggest that I have all the answers and have figured
out this entrepreneurship thing to a science. What makes a successful
entrepreneur is 50% ingenuity, 50% luck and timing, and 100% hard
work. If you’re quickly doing the math and ready to write to my edi-
tors about a typo, it’s intentional. Entrepreneurship is not an exact sci-
ence, it’s an art. I’ve often heard that luck is defined as preparedness
meets opportunity.
Growing a successful business requires vision and passion. Some have
tried to make it a science, hence the preponderance of venture capital
(VC) incubators, which are insulated breeding labs for taking an idea and
hiring a management team to take the idea and make it an enduring and
growing company. The reality is that these incubators have produced lim-
ited success. They’re missing the key ingredient, the zealous entrepreneur,
who’s convinced that his or her idea is the next best thing to sliced bread
and is ready to go for broke—in some cases literally. Cherry picking a
bunch of successful professionals and asking them to launch a new ven-
ture is like a soda without the fizz. It’s missing the key ingredient—the
entrepreneur’s passion. It’s the passion that helps the entrepreneur keep
the faith during the start-up and the growth phases as well as the difficult
times and eventually successfully navigate the entrepreneurial opportuni-
ties and bumps along the way.
When I decided to write this book, I had some initial qualms. To be
of value, this book needed to be honest, which meant the necessity of
admitting and publicly analyzing both my successes and my failures. The
6 Growing Your Business

Japanese have a cultural concept called honne versus tatemae, which means
real truth as opposed to the “public” truth. I realized that as entrepreneurs
we needed a honne book; in other words, a real truth book. We want to
know what it’s really like to experience the stages of starting and growing
a young company, from developing sales and marketing strategies to man-
aging product, employee, and finance issues, to keeping the faith during
the good and bad times.
When I speak on entrepreneurship, I often find that audiences are
more interested in the challenges, pitfalls, problems, and failures. The suc-
cesses are of course very important, but everyone is willing to share those.
What’s lacking is a candid discussion of entrepreneurship by entrepre-
neurs. We often learn more about business not through the successes, but
through the analysis and soul-searching of failures.
Seasoned entrepreneurs will also find great value in this book. The
presented situations and experiences are real, and most people can relate
to the challenges and opportunities. First time entrepreneurs will certainly
find value as well, but the experiences presented in this book will ring a
bit more true after you’ve started down the entrepreneurial road. In this
book you’ll find real life experiences from entrepreneurs and myself. These
“tales from the trenches” help to illustrate a point in the relevant chapter.
I can’t, despite my best intentions, reduce entrepreneurship to 10 easy
steps as if there were some mechanical formula. Life should be so easy.
We’d have a heck of lot more successful entrepreneurs. This is more about
what to look for along the way. No one can predict his or her path with
any surety; all you can do is prepare for the range of “wild animals” and
“weather conditions.” Pursuing entrepreneurship needn’t be difficult, but
you need to understand that it’s also not formulaic. There is no perfect
business plan, no perfect amount of start-up funding, no perfect organi-
zational structure, and so on. Rather, it’s a combination of what works for
you. Growing a successful company requires that you manage a slew of
issues simultaneously, often with inadequate resources and information.
As you navigate the world of entrepreneurship, this handbook will pro-
vide you with the range of options, experiences, and strategies to help you
successfully grow your company.
 Chapter 1

Marketing and Sales

Marketing and sales are the life source of your company. You can make
the best product or provide the optimal service, but it’s irrelevant if you
can’t sell or your customer won’t buy. Like business plans, marketing
plans evolve with an organization. In this chapter, I’ll review the core
components of marketing and sales and give you things to think about as
your company grows.
Marketing and sales are often mistakenly considered one and the
same, even at the largest and oldest of companies. Marketing designs
strategy and sales implements, but in reality, salespeople gather very valu-
able information that helps fine-tune the strategy, forming a delicate
balance between the two departments. In many organizations, there’s a
struggle between marketing and sales as to which directs which. If you
work to coordinate these areas in a complementary way, you’re likely to
have a more successful strategy, and more importantly, you’ll be able to
adjust your strategy quickly in response to market conditions.
Many entrepreneurs are actually quite good at some aspects of mar-
keting and sales, usually as early promoters of the venture, as it takes a
bit of sales to get a company off the ground. It’s the sales vocabulary that
sometimes confuses people. As with most industries, the marketing, sales,
and advertising world has its own lingo. Don’t let the lingo trip you up.
Focus instead on the concepts’ objectives.
Many companies err because they don’t fine-tune their marketing
strategy enough. Plan to visit your strategy at least quarterly. Monitor
sales, customer feedback, and industry trends. If you do this frequently
enough, you’re less likely to be surprised by any industry changes and
more likely to be able to incorporate new information steadily.
8 Growing Your Business

Integrated Growth Strategies

Before you develop your marketing and sales plan, you need to be sure
there really is a market for what you are making and selling. Companies
of all sizes routinely forget to verify the market before they launch mar-
keting campaigns. When sales are below expectations, they reassess the
plan, not whether their product or service actually has a market. Once
you have market verification, you can begin to develop an appropriate
marketing and sales plan.
The most fundamental question to answer is “What problem am
I solving with this service/product?” If you cannot answer that ques-
tion in a way that compels customers to say “I’ll buy it,” friends to say
“cool,” or investors to say “tell me more,” then perhaps rethinking the
concept is in order.
Assuming you have studied the opportunity and believe you have
something unique, market size becomes another consideration. Are there
enough buyers in your market? How big is your industry category, and
how much potential overall money is available to buy products or services
like yours? If you’re offering a very niche product, you may need to take
into account that you will only be able to grow to a certain size, even if all
the stars and moons line up.

Market Research
Today, the Internet provides a rich and free source of market research. It
should be one of the first places you go to find industry data, competitive
information, corporate name availability, and marketing opportunities
such as trade show listings.
An essential part of any marketing or sales plan is the research phase.
A lot of entrepreneurs use the media to follow trends. The media can be a
useful source—to an extent. Don’t let your use of the media replace more
specialized research. Try to find out as much as possible about the writer
or lead researcher. Most are professional writers and might not necessar-
ily have enough experience in your industry to interpret market-specific
information accurately. Further, there are very few writers or reporters
who have formal business training or experience. This doesn’t mean that
you should dismiss traditional business publications and newspapers, but
 Marketing and Sales 9

rather that you should utilize the facts to make your own conclusions
rather than blindly adopt the reasoning of the published word.
Gathering information from these types of sources is called secondary
research. It’s critical to take the time to find out about the competitive
landscape and market potential before spending a lot of time, energy, and
money chasing the wrong idea. You can access a wide base of resources,
publications, and potential customers. Verify and evaluate the credibility
of lesser-known sources. Otherwise, you may get incorrect information.
It helps if you can verify information obtained online with an off-line
source, such as an industry expert.
Despite the utility of secondary research, you will still need primary
research to help build out your offering and to set the course for how
you’re going to market your product. Primary research’s fundamental role
is to provide feedback specific to your product or service. It can be as
informal as interviewing people familiar with the industry or as formal as
hiring a professional research firm to conduct sophisticated studies with
quantifiable results.
More structured interviews with potential customers can also be
useful. It’s amazing how many companies do not take this critical step.
Understanding the pain, buying preference, and motivational behavior of
this audience makes all the difference in knowing whether your product
meets their needs.
Companies that need direct customer input find focus groups useful.
Utilizing focus groups is part of an overall marketing strategy, and you
need to be clear on the profile of the participants as well as the objectives
for each group. You should use experienced focus group leaders to facili-
tate these meetings.

Developing a Marketing and Sales Plan

Going through the marketing and sales planning process enables you to
focus on how you’ll reach your customer and complete the sale. If appro-
priate, you’ll be able to prepare for a repeat sale—preparation that is criti-
cal for ongoing sustainability.
The plan is simply the document that will state the strategy and allow
you to track it. In the business plan, you’ll include macro-level parts of
10 Growing Your Business

your marketing and sales strategy. In the marketing plan, you add the
details. Both marketing and sales have several key factors to focus on.
We’ll start by looking at marketing first.

Marketing
There are several key areas that you’ll need to focus on as you plan your
marketing strategy:

• Product or service
• Target market
• Pricing
• Distribution
• Building a brand
• Advertising and promotions

Product or Service

Your business plan will include an in-depth description of your product

or service. Use your marketing plan to expand the description to include
uniqueness, service options, warranties, and other features and benefits.
By understanding your core target market, you’ll be able to refine your
description even further.

What’s Your Unique Selling Position?

It’s essential to have a unique selling position (USP). For some compa-
nies, it’s the uniqueness of their product. For others, it’s their low price,
and for others, it might be their distribution. By distribution, I am refer-
ring to how a customer can obtain the product or service. Where or how
can they buy it? Is it exclusively or readily available? Often a USP is a
combination of factors, as markets do not remain static but are constantly
changing. A product that is new and unique today may have many com-
petitors within 6 to 24 months, especially if it’s successful. Its USP may
initially be that it is new and unique. Over time, the USP may evolve to
be new product versions or price or both.
 Marketing and Sales 11

The importance of articulating a USP cannot be understated. It is the

most important sentence you say about your company. Some call it the
“elevator pitch,” based on the concept that if someone on an elevator asks
you what your company does, you have only the time between the tenth
floor and ground floor to say something compelling, so that by the time
you get off, the rider is saying “tell me more.”
Putting your pitch down on paper is critical to the process of develop-
ing a compelling USP. Your pitch should be no more than two sentences
and should capture the imagination of the listener while explaining the
need you are meeting in your particular market. Working with your team
on this can be a very enlightening experience. Don’t be surprised to find
it a very difficult task. However, once you have reached consensus, you’ll
find you’ve created a clear vision for the company that others can now
execute.

Features and Benefits

You’ll need to be clear not only about how your product will work or
how a service will be delivered, but if you intend to provide additional
features and benefits. There’s an added cost to such things as providing
warranties and customer service, and you’ll need to account for those in
your budget.
You’ll also need to think about when you need to have a new product
version, based on industry standards. Your product or service will con-
tinue to evolve over time, particularly as you respond to competitive pres-
sures and market demand. You may offer new features or service features,
like warranties and customer support. All of these help determine the
value for your product or service.
If your core offering is based on price value, you need to be confident
that your competitors can’t (not just won’t, but actually can’t) match you
while you grow to critical mass. Your competitors won’t be able to match
you if you have a new technology that allows you to build more cheaply.
You need to plan for how much time it will take to build that critical
market share. You’re best off if you can add to the lowest cost feature by
adding a nonmonetary value such as a service feature.
12 Growing Your Business

Target Market
Knowing your target market is critical. Many businesspeople confuse
buyers with users and market to the user and not the buyer. Who is your
customer and who’s your user? In some cases, they are one and the same,
but other times they’re different. You’ll need to know the demographics
of both of them.
Understand how your buyers decide to “buy.” What influences their
decision? Are they motivated by low cost, high quality, easy access, or the
prestige of a brand? Often, they are motivated by a combination of these
factors. It’s important to monitor all these influences, because they are
likely to change over time in order of importance.
Talk to your customer and your potential customer as early as you
can. Create informal focus groups to test and use your products. If you
can, reach out to potential competitors, partners, industry experts, and
so on. Their input is essential in growing a company. It’s also helpful to
talk to potential advisors and even venture capitalists (VCs), as everyone
has a piece of wisdom to share, much of which could be quite valuable.

Trade Shows
A trade show offers a great opportunity to learn more about your target
market as well as the market in general. You’ll be able to see how your
likely competition “speaks” to your target customer. You can also learn a
great deal about the nuances of the industry. You do not need to exhibit
to attend a trade show. Many offer a day’s pass for a fee and occasionally
require some proof of industry activity. In many cases, that proof is as
simple as a business card with the company name, address, and Web site.
Industry association Web sites are a great way to find potential com-
petitors. Lists of trade show exhibitors can also direct you to the same
type of information.
In these days of trade show overkill, the best way to find the most pro-
ductive trade shows is to find out which ones competitors and customers
attend. One or two key shows are all that you need. You can search online
by your market or industry association. You can also find trade shows by
searching on the Web site of your city’s or another major city’s conven-
tion center. The bigger the trade show, the more expansive its range of
 Marketing and Sales 13

exhibitors and customers. However, keep in mind that trade shows are
an industry and business in themselves. Be wary of hard sells to exhibit
or attend.
Many trade shows also provide a forum for continuing education or
training for professionals. If you’re looking to influence doctors, then
attending a conference or trade show on medicine will likely put you near
your target market. If you’re interested in selling companywide solutions,
you need to be sure that decision makers attend the show and not just
junior staff who may be doing course work.

Price

Pricing your product or service is always tricky. If you have established

competitors, then there are some industry benchmarks. But your USP
may suggest that there is the opportunity to challenge the industry pric-
ing, either at higher or lower levels. Make sure to account for customer
service and related expenses when determining your price. Many entre-
preneurs don’t realize the cost of these features and then are faced with
cash flow challenges.
There are many books and articles on how to approach pricing—
some theoretical and some practical. While pricing is industry and mar-
ket specific, there are two basic ways to approach pricing. You may want
to read a marketing reference book or access resources, particularly if you
don’t have a business background. Business educations, no matter how
stellar, are rarely enough to navigate the world of entrepreneurship—you
need the real-world experience to completely understand how to apply
your education.
The first pricing approach is based on cost plus a margin. This
basically determines your cost per unit and then adds a margin that is
appropriate for your industry. Obviously, you want to maximize sales
revenue, but you should focus on profitability or margins, which refers
to the revenues or sales minus the actual or direct cost of making your
product or providing your service. For your reference, indirect costs
are all the expenses you incur that are not directly related to actually
making the product or providing the service. Indirect expenses include
14 Growing Your Business

all overhead costs such as office rent, office administrative costs, and
professional expenses for lawyers and accountants.
The risk for new companies in using cost-based pricing is under-
estimating their costs. Just about all entrepreneurial ventures under-
estimate their costs. Even the most established and largest companies
routinely under budget for product development. One option is to pro-
vide a margin for unanticipated costs, but realistically, your figures may
not take everything into account. It’s not uncommon to be over budget
by more than 50%.
The second approach prices according to what the market will pay
for your product or service. Take a look at competitors’ pricing. If you
believe that your product’s USP puts it in a new pricing category, take
a look at some possible comparables and estimate what mark up you
think the market will pay for the unique new features.
The first step in the market-based pricing approach is to make sure
you can profitably make the product for that price. You need to not
just break even, but to be profitable with a clear and healthy margin.
This is where it’s important to understand industry benchmarks. Some
industries have margins less than 50% and others have margins around
90%. Larger margins provide more room for indirect costs and a solid
net income. Service-related businesses where labor costs are high tend
to have lower margins.
Your customers will not pay more for a product or service unless
they clearly understand the perceived benefit or extra feature. Also,
pricing yourself too far below the market may call into question issues
of quality or service. If a lower price is part of your USP, you need
to clearly communicate that in your marketing efforts. When you do
your budgeting, look at your margins to make sure they are competi-
tive with your industry. Your long-term viability depends on this factor,
especially if your competitors are more profitable and will have more to
invest in marketing or product development.
If your product or service is completely new to market, you may
want to look at similar products or services, although not necessarily
competitors. For example, for a new drink with no perceived direct
competitors, you will do well to research pricing and margins of
other soft drinks and fruit drinks. You may be able to charge more,
 Marketing and Sales 15

as Starbucks has demonstrated, but your customer must clearly under-

stand and value the perceived features and benefits. In Starbucks’ case,
the taste and variety of the coffee, along with the comfortable ambi-
ance, allowed the company to charge more for a cup of coffee and led
the company to success.
In practice, most companies will use both approaches, cost plus a
margin and market-based pricing, to come up with one or more price
points. You can then use industry benchmarks and market feedback to
finalize the price. Always aim for the highest price the market can bear.
It’s relatively easier to lower your price than to increase it for the same
product or service. Companies that are able to increase their pricing
beyond the basic inflation percentages usually have to offer new fea-
tures or benefits. You don’t usually have to justify a price decrease.
Some companies also conduct price tests before finalizing a particu-
lar price. You may want to use this option if the industry benchmarks
and market demand are not clear. You can do a “limited run” and offer
your product at select price points. You can even try different price
points to test small market samples. This test-pricing approach has been
used successfully for products offered through catalogs or direct mail.
Companies print limited catalogs or direct mailers with different prices
and mail them to different target audiences. This method is increas-
ingly less common as a result of the Internet, where it’s much harder to
control which target audiences have access to which price points.
If you decide to test pricing, have a clear strategy in place and be in
direct communication with your customers. This is, of course, easier
to do with smaller groups of customers. Sales may vary for a variety of
reasons aside from pricing, and you need to be in touch with your cus-
tomers to understand what is impacting their buying decisions.
For service firms or custom projects, many firms use a cost multiple
to determine the price they should charge a customer. To obtain the
multiple, companies look at the indirect costs and spread them over
the projected revenues for the year. Many firms use cost multiples of
between two and three times.
For example, if a project will cost $1,000 in direct costs, most likely
labor related, it would be multiplied by a cost factor of, say, 2.5 to
determine the final fee that the customer should be charged; $2,500
16 Growing Your Business

in this case. The cost multiple ensures that the indirect costs are spread
over all the projects. Some service industries can get away with higher
multiples by increasing the gross margin. If you’re faced with lower
multiples, you may want to assess the pricing and analyze your venture
and the industry overall, as you’re in a low-margin business.

Distribution
Determining the optimal distribution strategy will help you determine
your sales strategy. Will you sell to your customer directly or through
resellers or both? Learning what is typical for your industry will help
you understand your customers’ expectations. You don’t want to spend
unnecessary and extra marketing expense to educate your customers on
how to find your products or service if they already know where to look
for your competitors.
You may also have more than one market for your product or ser-
vice, and each market may be accessed by a different distribution chan-
nel. For example, you may sell through retail stores as well as through
value-added resellers who will sell your products along with their
other products.
How your customers obtain your product or service is a critical
issue. You can have a great product, but if your customers can’t find
it or you can’t get it in front of your customers, there’s no sale. This is
particularly relevant in the retail industry. Retail distribution is chal-
lenging because shelf space is often controlled by large companies.
In the retail world, you’re “selling and marketing” to the distributor,
retail buyer, or both as well as to your end user and store customers.
Communicating with all these groups may require several different
communication strategies. You’ll need to determine how best to forge
essential partnerships.
For example, let’s say that you have a great new take on an old clas-
sic: chocolate chip cookies. Your product’s USP is that it’s chewier and
tastier than other store-bought cookies. You’d love to be on the shelves
of giant national supermarkets like those found in Wal-Mart, but those
shelves are often controlled by large product companies, many of which
are likely to see you as a tiny competitor. It could take quite a while to
 Marketing and Sales 17

get on the shelves of Wal-Mart or a major grocery chain. Your better

option in the early stages of your company may be to focus on gour-
met food stores, where new, high-quality products may find earlier and
easier reception from both the store and customers.
Companies also consider direct mail or catalogs. Both options have
been successful and there are pros and cons to each. More recently,
the Internet enabled many companies to reach potential customers
directly. In each of these three options there is a cost to acquiring each
customer. “Acquisition cost” refers to the money it takes to get each
customer. It includes purchasing names from a database, mailing costs
if it’s direct mail or catalog, and Web advertising or similar promo-
tional costs. You’ll need to assess these costs as you evaluate the optimal
distribution channels.
Remember that each channel does have a cost, even if it may not
be readily evident. For example, if you act as a wholesaler and sell to
resellers or buyers, your costs will include sales support staff, marketing
materials, and trade shows. We’ll cover developing sales teams later in
this chapter.
Some businesses sell into channels at a low margin because the vol-
ume of their sale compensates for the margin or because the exposure
enhances their overall brand. This is often the case for product compa-
nies that sell through Wal-Mart. The mass retailer has a reputation and
history of squeezing manufacturers’ margins. Some have even claimed
that they sell at a loss in this channel. However, for most, the benefit is
clear. The potential volume is one of the largest and provides exposure
to the widest customer base. This is an example of the types of pros and
cons of pricing in different channels that you’ll need to review. There
is no correct way to arrive at a price for your product. The strategy you
decide to employ depends on your company, the stage of your com-
pany, and your overall marketing and sales strategy.
18 Growing Your Business

Building a Brand
Many people share the misconception that a brand is a company’s logo.
While the logo is a visual “expression” of the brand, it is not the brand.
A brand is the entire package. It is everything about your company.
It is how people perceive your offering and the experience they would
have if they should choose to select your product or service.
If you are Apple, your brand represents youthful, cool, and cutting-
edge technologies and consumer electronics products. And yes, the
Apple logo reflects that image as well. If you are Starbucks, your brand
represents community, comfort, and enlightenment while enjoying
unusual (and expensive) coffee or tea drinks.
On the other hand, if you are the Wall Street Journal, you are seri-
ous, astute, and rich with knowledge, connections, and quality business
news coverage. You are the source for savvy business people who want to
be “in the know” about important business events and experiences.
One of the first exercises a good marketing firm should do is help
you define your brand personality. This definition should then drive
how you market yourself, how you create your business environment,
the kinds of personalities you hire, and the way you interact with your
customers and partners.
One of the first expressions you’ll develop from this base is your
corporate name and logo. Think about what would have happened if
Google had named itself Knowledge Vault. The name Knowledge Vault
conveys a very different feeling, doesn’t it? Next imagine how the logo
would have looked if it was designed around the name and brand per-
sonality of Knowledge Vault. Of course, the name Knowledge Vault
conveys the company’s purpose a lot faster than the name Google.
Remember that anytime you do something different and bold like this,
you must be prepared to invest heavily in its initial marketing.

Advertising and Promotion

There are many ways to promote your company and products. To
decide which medium is best, talk with your market and find out how
your potential customers tend to receive information. Do they read
magazines? If so, which ones? Do they use the Web to find resources?
 Marketing and Sales 19

What sites do they like? Do they go to trade shows? Which ones? Is

direct mail or telemarketing more effective?
Determining the best course of promotional investment will depend
on many variables such as the following:

• Is this a business-to-consumer offering or a business-to-business

offering?
• How big is the target market, and how dispersed is it? In other
words, is this a nationwide market or a zip code market?
• How long is a typical sales cycle? One week? One year?
• What’s the average price tab? $10 or $1 million?

These types of questions drive the type of promotion you will need and
the dollar amount required to penetrate and motivate your target market.
The bigger the ticket, the longer the sales cycle, and the more complex
the offering, the more expensive and complex the marketing campaigns
will need to be.
As you grow and expand, you’re likely to consider different types of
creative strategies to get your customers to buy your products. Advertis-
ing and promotions strategy is a core part of your marketing plan. This
section should include the general strategy as well as the detailed action
items used, for example, if your strategy is to use trade publications to
advertise and promote. For each targeted publication, the specifics may
include the following:

• Core message for the publication

• Timetable for each advertisement or editorial—issue release
date as well as deadline for the ad or editorial submission
• Copy for advertisement and creative elements
• Evaluation for publication—what are the expectations for
the publication, and how will you determine if it is success-
ful in reaching your target buyer or influencer? For example,
you may measure the hits to your Web site or phone calls
for information.
20 Growing Your Business

Using Professional Resources

There are as many types of marketing service firms as there are mediums
to use. There are strategic marketing consultants, independent graphic
design and writing freelancers, integrated marketing firms, advertising
agencies, public relations (PR) agencies, direct-marketing firms, telemar-
keting firms, event planners, and specialty advertising/promotion firms.
It can get quite overwhelming when you are trying to figure out how best
to take your offering to market.
Let’s discuss the roles as well as pros and cons of each type of
organization.

• Strategic marketing consultants. These resources can take the

form of independent contractors, boutique firms, or large,
top-tier firms like the McKinsey or Boston Consulting groups.
Their role is to help the executive management team determine
the best course of action to obtain optimum growth potential.
They may be engaged to validate a strategy, determine merg-
ers and acquisitions (M&A) prospects, build pricing models,
determine product viability, or create the 1- and 5-year strate-
gic plans, either for fund-raising or for organic growth. You can
usually work with these types of firms on either a project basis
or a retainer.
• Independent contractors or boutique firms. These companies
usually charge on a day-rate basis of anywhere between $1,200
and $3,000. Large firms can often have a minimum-size
engagement of around $50,000 to $100,000 per month.
• Freelancers. On the other side of the spectrum are freelance
graphic designers and writers. These people are a wonderful
resource if you have already established your strategic plan and
developed your value proposition. They are looking for very
specific instructions as to what you want, so the more vague
you are, the more likely you will be to have several rounds
before you are satisfied. These people tend to work out of their
homes and can be extremely creative but not necessarily fabu-
lous business thinkers. Their rates will be somewhere between
$45 and $150 per hour.
 Marketing and Sales 21

• Integrated marketing firms. These firms have a holistic approach

to marketing. They have built in-house teams, strategic alli-
ances, or both with people who have experience delivering all
aspects of the marketing mix. They tend to look at the market
challenge through a more collaborative, cohesive lens, under-
standing the functions and timing of each medium. These
firms tend to be smaller in size with a more boutique feel.
You may find they have certain areas of expertise such as B2B
(business to business) versus B2C (business to consumer) or are
industry-specific with a focus on technology, law firms, health
care, and so on. You can usually work with these types of firms
on either a project basis or a retainer.
• Specialty firms (advertising, PR, direct marketing, etc.). These
firms contain experts in their fields. They have built a business
doing their “thing” very well and can apply a wealth of experi-
ence in their particular medium to your business challenge.
They can charge based on a project or retainer basis. (More on
advertising and PR firms coming up in the chapter.)

For companies whose products are best sold via direct marketing, find-
ing this type of expertise is also important. True direct-marketing firms
know all the postal rules, have fulfillment warehouses established, and use
sophisticated software systems to personalize and distribute the informa-
tion, whether in a letter form or in a three-dimensional kit. They should
also own or have resources for list procurement, one of the most funda-
mental aspects to a successful direct marketing campaign.
The pro of using any of these types of specialty firms should be obvi-
ous. If you pick the right one, they should produce fabulous results. The
con is that it will take more money and more management to oversee
a disperse group of providers. It can be done quite effectively, but you
will probably need to assign a full-time marketing executive to manage
these resources and to make sure they are all on the same message and
brand strategy.
22 Growing Your Business

Project Basis Versus Retainer

Unless you provide services on these models, it is often confusing and
intimidating to discuss the best type of payment program with a poten-
tial marketing partner. Here’s how a project basis works within the firm:
all work is tracked on a time basis, usually captured in 15-minute incre-
ments, like law and accounting firms use. Projects are estimated based
on the detailed specs established, and time is factored by individuals
required to complete the task. If the specs change, expect the price to
change as well. The pros to this type of arrangement are that you only
pay for the work you have authorized and that the work has a beginning
and an end. The con is that the firm does not function as a strategic
partner but only as a vendor, as they are not compensated to play any
other role.
Retainers, on the other hand, are fixed monthly fees spread across
a 12-month period. These fees are mutually established and should
be assigned to specific tasks and individuals. The pros of this type of
arrangement are that it gives you total flexibility to change priorities
and allows the firm’s leaders to fully engage in helping market your
company. The con is that if you are not working with an ethical firm,
time can be padded and wasted, putting more pressure on you to
manage the details.

Advertising Firms
Knowing when to hire an outside ad firm can be a tricky decision. The
right time could depend on your marketing and sales experience as well
as your overall entrepreneurial experience launching new companies,
products, and services.
In the early days, it’s highly unlikely that you will need a large ad
budget, let alone an ad firm. Your advertising and promotions need
to be targeted and results driven. Given that most start-ups and early-
stage companies have modest budgets, you may get better results by
hiring a part-time advertising consultant to come in house and develop
and implement initiatives. Most ad firms use a retainer-based business
model and assume advertising budgets that far exceed those of most
young companies. You’ll end up spending more money to train a junior
 Marketing and Sales 23

person in the ad firm and are likely to find that many of the best ad
strategies come from your own employees, who are closer to both the
products and the customers.
As you grow, you’ll need to consider advertising and promotions a
core part of your strategy. Most companies start with limited print or
radio advertising or with direct promotions such as coupons, discounts,
and other incentives, as these advertising strategies tend to be the most
cost effective. You should plan to use an advertising consultant or a
smaller ad firm to develop and implement this phase of your strategy.
Your network and colleagues can help you find credible professionals.
Additionally, take a look to see which agencies are creating campaigns
that you feel are effective. Just keep in mind that any advertising and
promotions strategy will need to be constantly reassessed and revised to
meet changes in your marketing and overall business strategy.
Hiring an advertising firm makes sense when you are ready to con-
duct a major launch, whether on a local or a national basis. These firms’
expertise is coming up with campaign “concepts” that best articulate
your value proposition while motivating your audience to take some
sort of action. You should have multiple concepts to choose from, each
a distinct representation of your brand strategy. Traditional ad agencies
get compensated in two ways: creative concepting and production and
media planning and buying. Depending on the size of an ad budget,
some firms will bundle the creative campaign work into the 15% com-
mission fee they get for placing the spots. For this, we’re probably talk-
ing media buys in the millions of dollars. The smaller the firm and the
buy, the more likely you are to work on a project basis.

Public Relations
Public relations efforts can be a very cost-effective way to com-
municate with your target market. While it’s often lumped in with
advertising, it’s a separate strategy and requires dedicated effort to be
effective. In essence, PR is when you can get media attention for your
product, service, or company through nonpaid opportunities. There
are many publicists in the market, some with firms and others who
operate independently.
24 Growing Your Business

If you believe you would be best served conducting an aggressive

PR campaign, then hiring a specialist in this area makes great sense.
He or she should have a Rolodex full of media contacts that cover your
industry. A great PR person has built his or her reputation over years
of cultivating relationships. This greatly enhances their value and effec-
tiveness and should be appropriately compensated. If you can afford it,
be sure to request senior-level talent on your account. Some firms will
delegate media “pitching” to junior staff, which can damage your com-
pany’s image. PR firms almost always only work on retainers, as they are
providing a pure service that cannot be taken back or held up if a client
doesn’t pay its invoice. Therefore, these firms will usually expect to be
paid upfront for the services they are providing.
PR is a great way for a young company with a unique new product
to make the news on television, radio, or in print. This is, in essence,
free advertising, although you may not always be able to control the
message. Large companies routinely focus on promoting their image by
supporting worthy charities and other causes. This in turn reinforces
their brand and indirectly encourages customers to buy the company’s
products and services.

Finding a Good Firm

Whether you are looking for a strategic marketing consultant, an ad
agency, a PR agency or a direct-mail house, the best way to find a
resource is to ask others who they recommend. Talk to other business
owners, call the chamber of commerce, research companies you admire
and call them, use search engines, and read marketing magazines.
Before you call any of them, determine your business objective, and
establish your budget. If you want to learn how to work with different
types of firms, ask to meet with a principal, and tell her or him what
you are trying to accomplish.
Once you’ve established the direction you want to go, get a list of
no more than eight firms to send a request for proposal (RFP). Provide
them with a high-level background on your company and your business
goals. Come up with a list of questions that are important to you.
 Marketing and Sales 25

For example, you might want to know the following:

• The firm’s background

• Types of clients and examples of work and results
• Bios of account members
• In-house or alliance relationships
• Average size of engagement

Review the responses and look for sloppy work, typos, and unanswered
questions. Toss those immediately. Narrow your list to four contenders,
and ask them to give a formal presentation. Set up 2 days of presentations
in which you’ll have two presentations per day: one in the morning and
one in the afternoon. Make sure the executives and decision makers are
all available. Ask them to give a capabilities presentation and to provide
some initial thoughts on how they may approach your engagement.
Do not ask for or be swayed by “spec” creative work. If you are seeing
ad concepts before there’s been any kind of strategic dialogue or knowl-
edge transfer, you are getting pretty pictures, not business-building and
thoughtful marketing.
After you have seen your four presentations, narrow the field to two
and go visit their offices. Ask to meet the team that will be assigned to
your account. Take a tour. Does it look like a creative, organized environ-
ment or a sloppy, disheveled heap of stuff? Do the people have the appro-
priate appearance and “bright eyes?”
Call references and determine how they plan to kick off the relation-
ship. Be prepared to tell the firms your budget early in the process. Don’t
do the “you tell me” routine. Any firm worth its reputation will give you
everything it can for the dollars you have to spend. If they know what
you have available, you won’t get ideas you can’t afford. If they don’t think
you’ve budgeted enough to accomplish your business goals, you should
be told and a win-win solution established.

Guerilla Marketing
Guerilla marketing is a popular concept often associated with low-budget,
early-stage companies. It can be quite successful depending on your
26 Growing Your Business

product or service. There isn’t one clear set of guerilla strategies. Rather,
the term “guerilla marketing” refers to any low-cost approach. PR, for
example, can be an effective guerilla marketing strategy if you manage to
get noted in a magazine or on the news.
Companies are increasingly using the Internet to market their prod-
ucts and services. For example, we sell our products through resellers. On
a regular basis (weekly, monthly, or quarterly, depending on the reseller),
we create an e-mail that has some interesting information (for value) as
well as limited product information. It’s usually in an engaging format
with graphics and links to more resources on our site. We customize our
e-mail for each reseller by adding their logo and contact information.
In essence, we have created a marketing tool that is turnkey. We send it
to our primary marketing contact at each reseller, who in turn sends it to
their entire e-mail customer distribution.
Just remember that guerilla marketing is a catchall phrase that encour-
ages entrepreneurs and their teams to get creative on a cost-effective
basis.

Developing a Sales Strategy

One of the first things you’ll need to focus on in your planning is deter-
mining what kind of sales organization you’ll need to develop. Different
products and services require different selling solutions.
Identifying your optimal distribution strategy will help determine the
type of sales organization you use. How and where do customers find
and purchase your products and services? Your sales strategy will need
to be suited for your distribution strategy. In my first company, we sold
directly to corporations. As a result, our efforts were limited by the num-
ber of calls and meetings we could complete on a daily basis. My second
and third companies operated in multiple industries. We determined that
the optimal selling strategy was to align with partners and distributors
in each market. Our products were complementary and provided a new
revenue source for our partners, who didn’t incur any product develop-
ment costs. The advantage to this strategy is that you have many more
sales people “selling your products,” but you don’t incur the cost of build-
ing a sales organization. The challenge is that your partners are likely to
 Marketing and Sales 27

be selling multiple products: theirs, yours, and others. As a result, selling

your products may not always be their priority. One option is to partner
with your resellers and distributors to incentivize their sales team with
contests, bonuses, and promotions.
Every sale strategy has its pros and cons, and you’ll need to analyze
them thoroughly before deciding on one. Competitor structures and
strategies can also provide insight on what’s likely to be successful for a
specific industry.
As you develop your sales strategy, you’ll need to focus on the follow-
ing key areas:

• Building the optimal sales organization

• Developing sales forecasts and pipelines
• Managing your customers and your customer diversification

Building the Optimal Sales Organization

Building a sales organization takes time, and your strategy will need to
account for the evolving structure. In the beginning, you’re likely to have
a key role in sales, and most successful entrepreneurs maintain an active
involvement in the sales process even when they hire a senior team. This
is one of the best ways to monitor issues and trends within your market
and with your clients and sales team.

Hiring Salespeople

Most entrepreneurs will candidly tell you that it is difficult to hire good
salespeople. Lots of people will tell you they are great salespeople, and
most will be quite convincing as they should be. But the key issue is
whether or not they can sell your product or service. Do they understand
your buyer? Do they know potential buyers and have an industry net-
work? This is particularly useful for corporate sales. Do they have expe-
rience with similar sales and cycles? Someone who sells office products
is probably not going to be able to transition easily to selling complex
software on a corporate-wide solution. The size of the sale, the length
28 Growing Your Business

of the cycle, and ability to deal with the level of decision makers are all
different.
One strategy that’s used by many companies is hiring salespeople from
their likely competitors. These candidates understand the industry, know
the buyers and influencers, and are likely to produce results more quickly.
Having said that, they are also likely to be more expensive and may have
signed noncompete contracts with former employers. In any interview
process, be sure to ask if the candidate has signed a noncompete with his
or her current or former employers. If so, ask for a copy so you can prop-
erly determine the person’s ability to be effective in your organization.
Monitor your sales team’s results daily. There’s no substitute for know-
ing what’s going on with your market and customers. Daily monitoring
helps you evaluate your team’s performance better and also track changes
in customer preferences. Use daily call sheets that note how many calls
a salesperson made and to whom and the status of the call. Be prepared
to spot-check names and numbers as there are unscrupulous salespeople
who list friends or fake contacts in order to fill their sheet. Review phone
bills as well to make sure calls are really being made.
When you sell to corporations and institutions, you’ll need to under-
stand how decisions are made and the budget cycles. In many cases, when
you’re selling to large companies, your user is often different than the
final person who says yea or nay. However, you may have to first market
to the user and get acceptance and the sale before selling the “value” all
over again to a purchasing department. Again, the size of the sale will
dictate the height of the hurdles.

Tales From the Trenches: Building a Direct Sales Force

Liz Elting, president and founder of TransPerfect, built a sales organiza-
tion from scratch. She and her partner, the company’s first salespeople,
determined early on that they needed to have their own in-house sales
team to be most successful. Rather than hiring seasoned and expensive
salespeople, she opted to hire young graduates who showed promise. By
investing in sales training and coaching over the course of the hire’s first
year, she was able to groom a successful sales team. The sales training
enabled the company to make sure that each new salesperson understood
 Marketing and Sales 29

the company’s products, capabilities, and unique entrepreneurial culture,

as well as position in the marketplace.
Early on, the company’s low starting salaries resulted in turnover,
which was a challenge, although a manageable one. In this case, Liz
saw the benefits of the lower cost and the ability to train new candi-
dates directly as outweighing the turnover challenge. Additionally, over
time, Liz realized that much of the turnover came from young hires
who came to TransPerfect directly out of college with no other corpo-
rate work experience. As a result, the company now seeks to balance its
new hires to ensure that more have previous work experience. Further,
as the company grew and earned an industry reputation as the largest
privately held language services company in the world, it has become
easier to hire more qualified and experienced candidates.
In the early days, all new sales hires received a draw against their
commission for a year or more as appropriate for their sales territory.
This draw was intentionally low and has remained around $25,000 to
$40,000 based on the new hire’s experience. The commissions are paid
at 9% of the sale. As a result, the intent is to motivate the salesperson
to quickly exceed their draw. Of course, there’s frequent oversight to
see if goals are being met and to assess any shortfalls. If a salesperson
is unable to exceed his or her draw over time, then it’s likely they are
not a good fit with the firm. However, if someone is doing all the right
things, the company will continue to work with him or her with a con-
tinued focus on results. In addition to high commissions, salespeople
are incentivized by bonuses, vacations, and other perks. For example, in
the early days when she had only 26 employees and a banner year, Liz
took the entire team to the Bahamas as a reward for the year’s growth
and profitability.
Managers are also incentivized with a bonus based on the revenues
and profitability of his or her team. Additionally, as a market differ-
entiator, even project and quality managers on the production side
receive bonuses based on similar models. This strategy helps align
everyone in delivering the best-quality services to the customer in the
most cost-effective manner.
In training and motivating the sales team, Liz’s company has pre-
ferred to promote from within, a strategy that has worked well. The
30 Growing Your Business

company works hard to develop its team and twice a year holds training
sessions, one in the company’s New York offices and one at an off-site
location. The overall sales strategy has clearly worked, as TransPerfect
reached more than $200 million in sales in its 19th year of operations
and has more than 57 offices around the world.

Developing Sales Forecasts and Customer Pipeline

There are essentially two ways to develop sales projections for a new ven-
ture. The first is to use industry comparables, and the second is to esti-
mate based on market size and share.
Industry comparables are most useful if you can successfully adjust
for critical variables including the age and size of the firm, size of the
sales team, and marketing budget. For example, a company that projects
that it can sell the same number of units in its first year of operations as
its competitor, which has more than two decades in the market place, is
likely to fall short.
The market share approach is similar and focuses on achieving grad-
ual market share over 3 to 5 years. For example, if the total market for the
product is $1 billion and you target achieving a market share of 1% in 3
to 5 years, then your projections would gradually build to those levels.
The challenge with these forecasting approaches is that while the rev-
enue projections may seem doable, most entrepreneurs underestimate the
cost it requires to achieve those sales. If you have 2 salespeople and your
closest competitor has 10 salespeople, as well as a healthy marketing bud-
get, you can easily begin to see why achieving the same results would be
very difficult, if not impossible.
In developing your forecasts and sales strategy, it’s very helpful to
determine the sales revenue per employee or per salesperson. It should
be consistent with the industry and your goal should be to increase it.
As a general rule, if your firm tends to have higher-paid employees, it
should have higher revenue per employee number. Achieving $100,000
to $200,000 in revenues per employee is common. Well-run and very
profitable companies may have even more than $500,000 in revenues per
employee. This number is important to monitor because it will help you
realize when you have too many people on staff, with diminishing returns
 Marketing and Sales 31

to revenues and possibly the bottom line. If the number decreases and
revenues increase, then your team may not be as productive as you think,
and you need to look at everyone’s functions more closely. Your goal is
for both revenues and the number to increase, although the latter may be
more incremental in growth rate.

Managing Your Customers and Diversification

Plan early on how you will diversify your customer base, whether by
adjusting the ratio of large and small customers or by reaching out to new
industries. Be careful to ensure that one company or industry’s problems
won’t adversely affect your firm. This customer diversification should be a
core part of your early sales and marketing strategy.
Do a periodic credit check on all major customers, vendors, or sup-
pliers. This will help you adjust your policies—particularly your payment
policies—if their ratings are poor or change over time. If your business
relies on several large customers, or if you sell through a few large dis-
tributors or retailers, keep abreast of how their businesses are performing
and talk to their employees if you can. Their financial health will directly
impact yours.
Many young companies are so happy to have customers that they don’t
bother to see how much each customer is costing them. Managing your
customers requires customer service and marketing. Some customers can
become so time consuming that you may be spending a disproportionate
amount of resources servicing just one or two. Monitor how much time
and money it takes to maintain a customer relationship. If you’re spend-
ing 70% of your time tending to the business demands and needs of a
customer who accounts for only 5% of revenues, you get the picture—
something is wrong. You don’t necessarily need to get rid of the customer,
although some companies choose to do so, but rather you may discreetly
shift resources and diplomatically realign the customer’s expectations of
what level of customer attention is acceptable for both.
Effective marketing and sales strategies evolve throughout the growth
of your company. Paying close and frequent attention to these evolving
strategies will help to ensure your long-term success.