Some VC’s are known to ask the question “Why is now the best time for your idea / startup / venture to succeed”?
That question is indicative of the key underlying themes of successful venture funded companies – they have to grow extremely fast in a very short period of time (3-5 years), unlike other businesses which take 7-10 years. That helps drive valuations of early stage startups higher quickly and soon.
The question also forces you to think about why a customer would buy or pay or use your product now, versus stall and not have a large reason to buy.
This is what most of us in sales call a “compelling event“. A compelling event is a forcing function that has a hard date for your customer to buy by.
If your customer does not buy from you by that day, really bad things happen – for example Sarbanes Oxley law required you to report certain items of your company or you would face stiff fines. Or your customer has an upcoming product launch within the next 2 months and they need to get a logo, website and social presences up and running.
There are some natural forcing functions, such as year end, quarter end, new product launches, regulatory deadlines, obsolescence of an existing solution or their current vendor withdrawing support for their current product.
In many cases, customers dont have forcing functions. They may not have them because the problem you are trying to solve is not a visible pain for them. It may be latent, so they dont even know that if they solve this problem they will benefit otherwise.
So, if your customer does not have a compelling event, or forcing function, can one be created?
Here are 3 techniques that I have used to create a forcing function:
1. Create competition by the date: This works best when you are trying to raise money, sell your startup or when you have something to sell that is produced in limited quantities. For example, if you have an event space or a training event and there are limited seats, you can let your customer know that their competitors might get the product which leaves them behind.
When does it backfire? When you truly have no competitors lined up, and claim to have them, and your customer calls your buff, you are left without a deal and an artificial deadline that passed. You leave the opportunity with no deal and also a customer who knows you are now possibly desperate.
2. Show the paucity of resources: This works best when you are selling consulting or services. If a client is taking too long to let you know if they can start a services engagement, some sales people let them know that the resources they want will no longer be available if the customer does not make a decision by a certain date.
When does it backfire? When the customer believes that resources and people are “replaceable” and so they can make do with any resource not just the person they want on the project.
3. Offer time-bound discounts: This is the most used and abused technique by software sales people. Offering a discount by end of the month or quarter (or any other time they are measured) helps the customer understand that if they dont sign up by that period, the offer is no longer valid and the negotiation process and sales process begins again.
When does it backfire? In most cases. Truly. This is what happens, when most sales people try to set discounts by their defined time schedule. The deadline passes, the customer does not buy and the sales person sets a new artificial deadline. Meaning, the discount is now valid for the next quarter, month or week.
Forcing functions or compelling events are rare. So if you have one at your disposal, use them to the fullest. Else, find another way to get time on your side, since the customer has the money.