Charlie Goetz, Senior Lecturer in Organization & Management and Distinguished Lecturer in Entrepreneurship at Emory University’s Goizueta Business School, joined The Goizueta Effect Podcast to discuss the world of entrepreneurship, including key advice for success, the psychology of purchasing, and the dreaded cold call. Goetz, a serial entrepreneur and three-time author, has started and built nine new ventures and employed more than 1,000 individuals in industries as diverse as finance, healthcare, broadcasting, sports, real estate, and advertising. In addition to teaching and writing books, Goetz is actively involved in investing in new businesses and sits on a number of boards for both private businesses and not-for-profit organizations. Goetz is also responsible for the development of “Marketnomics”.
Why Businesses Fail
According to data from the Bureau of Labor Statistics, while most small businesses survive the first year, by year 5, about half will have failed. And at year 10, the rate climbs to 70%. The number one reason is lack of sales; running out of money is simply a symptom. Lack of sales can happen for many different reasons, including things like poor product market fit, ineffective marketing, or selling processes. While creating sales on an Excel spreadsheet is easy, many businesses find out later that selling in real life is a lot harder than it is on a computer program.
The “Entrepreneurial Trait”
People who build successful businesses have the ability to pivot when necessary. Most businesses don’t go as planned when starting. This is the beauty of being an entrepreneur. One day, you're doing business one way. The next day, you have changed the business to do something in a totally different way that the market prefers. And sometimes it ends up being a totally new business and a totally different market. Many successful companies have had to pivot multiple times to find just the right product, market, and strategy to be successful.
Why Marketing is Essential for Entrepreneurial Businesses
Entrepreneurial ventures have a lot to overcome, and a very small budget to do it. The average person remembers less than 0.2% of the hundreds of ads they see every day. Every one of these companies has spent valuable time and money crafting their advertising messages and placing them where the market sees them. However, almost all of them have failed in gaining your attention. While large companies can play this game because they have robust marketing budgets and can afford to use the strategy of frequency and reach, small businesses and startups must think differently.
In order for companies to be more effective, first, they need to understand their true cost of acquisition, which is the cost in both marketing and sales dollars spent to obtain a new customer. Many small business owners spend money ineffectively with messages that are minimally impactful and/or sub optimally placed. These practices cause businesses to run out of money because the cost of acquisition is frequently higher than the lifetime value of the average incremental customer. Second, business leaders must craft messages that stand out and are memorable. If your message isn't memorable, they will forget it, and they will forget you when it comes time to buy.
Overcoming Barriers Faced by Entrepreneurs
Small businesses and entrepreneurial ventures have little to no credibility in the market in their early days. Without trust and market awareness, it's difficult to garner the number of customers that a business needs in order to build their reputation and credibility. Without credibility, the cost of acquisition becomes extremely high. But, there are a number of different ways to gain credibility if you don't already have it.
- Build a board of advisers who include people from your industry that prospects already know and trust. In this way, the company can leverage their credibility to the benefit of their business.
- Partner with a larger company where they either sell your product for you or provide you referrals for a commission.
- Get well-known leaders, celebrities, or influencers in the market to promote your company.
- Find leaders in your market and give them your product for free, then solicit them for positive references that you can use to market to your prospects.
The majority of people are followers when it comes to buying something new, so new products in the market fail at a greater rate. So, position your product or business in a way that your product does not look new to the market, as a truly valuable extension to what is already out the market.
The 3 Core Components of a Compelling Value Proposition
- Define the need you are solving.
- Differentiate yourself from competitors.
- Ensure your message is clear and concise.
Large established companies have the marketing budget to create a well-known brand that anchors a specific feeling in prospects’ minds. Lacking this budget, small businesses can start with a well-known brand that recalls a specific image, then differentiate themselves in one way. This one way is what the company does best, and what it believes will attract a certain percentage of that brand's market to try its product. The idea is that prospects will appreciate the company’s similarities to the big company but also value how it’s different.
The number one way that most companies price their product is in relationship to how others in the market price theirs. Entrepreneurs are no different. Frequently, this results in many businesses leaving a lot of money on the table. Price creates a certain perception in the minds of your prospects and customers in the market.
Low price implies good value, but not as good for service. High price is perceived as high quality and good service, and special because it’s exclusive. A price in the middle doesn't stand out and frequently is seen by the consumers as not saying much about the product or service, and in turn, about the buyer who's purchasing these products either. First time entrepreneurs often price their products too low, confident that this will add to its attractiveness, and expect to raise the price later to create a more favorable impression and higher margins.
However, this is a mistake since most CEOs of early-stage entrepreneurial ventures are not confident in their products' perceived values. Low pricing results in lower margins, which makes it difficult to cover future marketing and operating costs. This results in the company never being able to grow sufficiently or later raise prices, as its image has already been created as being a discounter.
Tips for Cold Calls
The best way to make a cold call is to not to make a cold call. Instead, use a series of well-scripted, value-added voicemails. Each voicemail needs to feature a key component of the sales pitch. In cold calling, the relationship is much more important than the product itself in making a sale.
The first voicemail provides prospects with information they can use to do their job better or an interesting fact related to their industry or business that they can tell others so they look good. This should only provide value and introduce you, but should not include a sales pitch.
The second voicemail tells a reference story that they are likely to relate to, and how your product helped another company just like theirs.
The third voicemail provides another solid reference story, this time dropping the name of that well-known company to build credibility.
In the fourth voicemail, explain the implications of the relevant problem on the customers and how the risk of not buying is greater than the risk of buying.
If a fifth voicemail is required, say something funny about the person not calling you back.
A simple tip that can go a long way is to stand up when you call, as it makes your voice sound more authoritative, and you feel more comfortable on the call when you do.