As entrepreneurs, we’re meeting new people and companies every day, helping each other out in any way we can.  Over time, we’ve met a few new startups that plan on targeting enterprise companies and thinking that they’re going to see a sweet payday in six months or less.  Last Month Dharmesh Shah wrote a post on his OnStartups blog titled, “Advice On Partnering With The Big and Powerful: Don’t”.  As someone that has worked for three very large companies, I want to contribute to the community and offer some advice on selling to them.

 

If you’re looking at selling software/hosted software to a large company with the hopes of a big payday in the near future, don’t. 

 

As Dharmesh said in his post, there are always exceptions. But for the most part, selling software to a large enterprise is a long and painful process that will make you think twice as to why you did it.

 

To cut down on argument and focus on the situation, let’s make some assumptions that are optimistic towards making the sale;

1.      Everyone that works at Big Company is professional, honest, and knows what they’re doing.

2.      The people you’ve talked to LOVE your product and want it today.

 

Who Do You Need To Impress?

You’re a startup.  You’re quick and nimble.  When a decision needs to be made, you get the team together, make a decision, and take action.  That’s not the case at Big Company.  Here are the usual players involved on their side.

1.      The Business/IT person that wants your product

2.      The Application Support person that will implement your product

3.      The IT infrastructure person that will implement the hardware your product is installed on (if needed)

4.      The Vendor Management person that will evaluate your company and product

5.      The Legal person that will negotiate the contract for your product

6.      The IT/Operational Risk person that will evaluate your product and it’s implementation for potential risk to Big Company

 

Sometimes there’s even a Procurement group that’s separate from the Vendor Management group but we’ll assume that’s not the case here.  We’ll also assume that the IT groups that implement your product will be the ones to support it.  Many times, that is not the case and that Support group gets a say on your product as well.  To help your initiative further, we’ll say that each person you interact with in these respective groups is a decision maker and you don’t need to meet with their management after the first “screening” meeting with them.  If all of this happens, buy a lottery ticket.

 

Is the Money There?

The Business person really loves your product.  They want it.  Heck, they NEED it.  And Big Company is huge.  They’ve got billions of dollars.  While that’s all true that doesn’t mean the group you’re dealing with does.  Here are some good questions to ask towards the beginning of the cycle once you know they’re interested.  Do they already have a budget to buy your product?  Is the funding going to come from a project?  Is that project already funded?  Is it a solid or a nice-to-have project?  The latter are the first to go when budgets are cut?

 

How Bad is The Bureaucracy?

The bigger the company, the more red tape.  This pretty much always holds true. 

 

The Business person likes your product and has money. Depending on the company, they either then contact Vendor Management or IT to get things moving.  Know that almost always, IT software and hardware support are two different groups entirely and can have different reasons for liking or not liking your product.  At some point, either an IT or Operational Risk/Audit team is brought in to review your product and how it will be used at Big Company.  This is extremely painful in the Financial and Insurance industries because the risk and regulatory responsibilities are much higher. (With the current financial news right now, you’d never guess it but it’s true.)  If all goes well, it then goes to Legal to work out the contract.  Don’t assume that your first draft will make it.

 

As all of these people have a lot going on and they each have their own metrics that determine their bonus, know that this process will happen over months, not weeks.  There’s also a good chance that there are politics or not-so-happy past experiences between at least two of the groups involved and that will not help things move any faster.

 

Is There Change In The Air?

Everyone likes your product and you’re slowly making your way by jumping through each hoop.  Weeks and months are going by but things are progressing.  However, now it’s 2009 and there’s a recession.  Nothing makes big companies feel like they’re addressing a major financial crisis like reorgs!  Reorganization is usually the first call in every executive manager’s playbook.  The longer time goes on, the bigger the chance that the people you’ve worked with or the project your product was tied to will change.  What then?  Sometimes it means you start all over again from square one.  Sometimes it means you almost had the contract signed and the whole thing gets cancelled due to budget constraints.

 

Congrats, You’ve Got the Deal!  Please Submit Your Invoice Through The Appropriate Channel.

You stuck it out and you got the deal.  Congrats!  It took some time but you made it. Know that almost every large company has an invoice system for paying vendors and this automated system usually routes your invoice through to multiple people/groups depending on how much your product is or how much the project that funded the purchase of your product is.  This takes at least a few weeks to a few months and chances are you will have to call a few times before you receive your payment.

 

I did not write this post to emphatically say don’t sell to large companies.  The goal of this post is to give those entrepreneurs that haven’t dealt with large companies an idea as to how things usually work so that you can plan accordingly and succeed in your business.  If you’ve got a great idea, go for it.  Just make sure that you’re funded appropriately and you’re not planning any on needing any revenue in the short term.

 

Best of luck!