Kijana Woodard

Software Minimalism

Selling Value for Money

Thursday, May 20, 2010

One recurrent theme in business is the disconnect between the “product team” and the Sales/Marketing team. I’ve repeatedly seen product teams working long hours to make insane deadlines because the Sales team has undersold their value.

Sane rules of sales go out the window when it comes to selling software, and probably any kind of service business that primarily involves brain work like advertising or design.

The salesperson goes out and makes a deal in which the customer gets 100 hours worth of value for 40 hours worth of dollars. The salesperson celebrates another successful closing and moves on.

Congratulations, you’ve just brought the business one step closer to bankruptcy.

Worse still, management will look at the situation and thinks the salesperson is great because they brought in revenue and the product team is terrible because they are complaining about doing a little work.

I suppose the idea is that an FTE is “free” after 40 hours so it’s a good deal. “We’ll make Joe FTE work 100 hours in one week and the customer gets the project on budget. Win-Win.” Except Joe is talented and has options. If Joe walks, how much does it cost to recruit and train a new Joe. How’s the deal looking now?

Worse yet, the business missed out on 60 hours worth of revenue. Not only have you lost money now, you’ve also told the market that your services aren’t worth much. Often the idea of the first deal is that “next time” we’ll make up for it. Good luck selling 100 hours of work for 160 hours of revenue. More likely, the customer will balk and point out that last time “it only cost 40 hours”, so they probably won’t even want to pay 100 hours.

Whoops. Your business is now in a death spiral.

And yet, for real goods, it’s so much more obvious this is a bad deal. I could be the #1 Lexus salesman in the country if I sold any vehicle for $20,000. That will never happen because the sales manager won’t approve the deal.

I wish more managers would veto bad deals in service based companies.

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