In this episode, you’ll hear expert sales advice from a successful entrepreneur who’s started multiple businesses from scratch. Steli Efti explains how to sell, and what steps he takes when launching a brand new company (without using his name or network).
listen to this episode
- How to think about your customer before you start a business
- Why Steli recommends you sell a service before building a product
- When potential customer interviews become a waste of time
- The framework for effective customer development conversations
- How to reprogram your mind and see failure as progression
- Why you will never become immune to hearing the word “no”
- The exact process Steli tried to cold call startups (without using his name or network)
- How to generate revenue quickly with services
Louis: Bonjour, bonjour! And welcome to another episode of EveryoneHatesMarketers.com, the marketing podcast for marketers, funders, and tech people who are sick of shady, aggressive marketing. I’m your host, Louis Grenier.In today’s episode, you will learn how a successful entrepreneur who started businesses multiple times, his first one since he was 17, would start all over again. If he had to do so anonymously, and with other conditions attached.
My guest today has been an entrepreneur since he’s 17, as I mentioned. He’s been recommended by 106 for sales on LinkedIn, so I guess it’s quite a big deal. It’s quite a big deal. He’s a Y Combinator alumni, podcaster at Startup Chat with Hiten Shah.
He’s an author of six books on startups and sale, and he’s the CEO of Close.IO, which is a software tool to help you to close more deals. I’m very happy to have Steli Efti on board, welcome.
Steli: Thank you so much for having me.
Louis: Let’s get on with what I introduced in the introduction, right? So this is a question I ask a few times to a few guests that I know could answer, because they have some experience with that. Let’s take the scenario of you to have all the knowledge that you have right now, obviously.
But you have nothing else apart from that and $1,000 to play with, and your challenge is to create a business and make around $10K in the next six months or so. You can’t really use your network. You have to start from scratch all over again, but you have all the knowledge that you’ve got from all of your past experiences. How would you go about it, starting from obviously step one?
Steli: Interesting question. Well first, I would not consider the $1,000 to be meaningful. There was actually even an experiment, probably you know already about this. But if not, there was a business class at Stanford that was doing an experiment that was putting students together in teams, giving them a certain amount of money.
I don’t know, let’s say it’s $1,000. Giving them a week to make as much profit and revenue out of that as possible. And one of the findings, there were a lot of interesting findings to that experiment, but one of the more profound findings was that the team that realized that the money was a limitation, and not really an enabling factor, was the team that made the most money.
So most teams took that money, whatever it was, I don’t remember, $100, $200, $500, and they’re like, “Well, what can we buy with this and then sell? What kind of marketing could we buy or ads with that money?”
They were very kind of limited by that resource of money, versus the team that actually crushed it and won, looked at that money and said, “Let’s not worry about the money. What is anything and everything we could do as a service? Because building a product in a week is going to be tough, that can get us the most amount of money.”
So to me, I would look at the $1000 and I would just put them aside. Maybe I’ll use it, maybe not, but I don’t worry about what I can do with that money. It’s meaningless.
If I have a short period of time, it actually doesn’t matter if I have short or a long period of time. I would start with asking myself who is the type of customer I want to serve. Who is a customer that I deeply care about, that I want to learn about, that I would be excited and passionate to solve problems for?
So it starts always with a customer. Then once I’ve identified who’s the customer I really want to do something for, let’s say I have no ideas. All I would do is I would try to reach out to as many of them as possible, in my area probably, and in the early age just meet with them and either ask very open-ended questions.
If I have some kind of a sense of direction what I want to help them make more money, or save money. I want to help them with some area of a problem that I have expertise in. I would just talk to these people, try to identify more, learn more.
Then, at some point, I would try to come up with a service solution, something I could do using my brainpower and the brainpower of other people, before I would ever consider building a product.
I would meet with lots of people, I would ask, learn as much as I can. I would start offering them a service that I charge for and would generate money, and hopefully generate more learning, build more relationships, a customer base. Eventually, that leads to a product that’s awesome. If it doesn’t, it doesn’t. But that would be kind of my very high-level playbook for this.
Louis: Let’s deep dive into this playbook, and thanks for mentioning this research. I hadn’t heard of it and I’m going to try to find it so we can include that in the show notes in EveryoneHatesMarketers.com.
So let’s go back to the first step. You said I’ll first, start with the customers. I would pick the customers I would want to serve, which makes a lot of sense. But how do you go about picking a group of customers? What criteria do you use and how do you go about it?
Steli: It depends. It’s different for everybody. For me, I like to have a competitive unfair advantage, and I like to have a good life. So if you take those two things and you overlap them, oftentimes this leads to I should solve problems for people that are as similar to me as possible.
Ideally, I solve a problem for myself and then I would ask, are there many people that are similar to me or like me that I could go and serve. That’s the reason why I’m in the business that I am, right?
I’m serving mostly entrepreneurs, technology people, and salespeople — because sales and entrepreneurship has been my thing. Technology startups have been my thing for a long time, so that’s kind of who I am. That’s who my friends are, and that’s the audience that I kind of know better than any other audience.
Ideally, you start with yourself. If you don’t, if you have never worked, you’re 12 years old, still I would ask myself what do I like, and are there other 12-year-olds that like the same shit. But let’s say for whatever reason, you’re the type of person that nobody’s like you, and you don’t want to serve yourself, you don’t want to serve people like you.
You just want to, I don’t know, make as much money as possible. You ask yourself who’s a good customer that has lots of money and is willing to give it to me. Even then, if it’s not me, I would ask myself who is the nearest person to me that I can learn a lot about.
I would ask myself: Who are the people in my family? What jobs do they have? What expertise do they have? Who are my friends? Who are my neighbors? Who are the people in my close proximity that I could reach out to learn more about?
So if everybody in my family — and everybody in my close proximity — they’re all plumbers. Then I would be like well, maybe I can do something with plumbers. Maybe I should talk to them and see what kind of products do they use, what services do they use, where they spend the most money at, and see if I can do something for these types of people.
Versus saying everybody in my family is a plumber. I know nothing, and I don’t want to do anything for myself, but I’ve seen a bunch of movies and I read three blog posts. And CTO’s probably have a lot of money and Fortune 500 companies. Let me go and build a service or a product.
Let me put together a website or landing page. Start spending ad dollars or writing cold emails, to a group of people I have no proximity to, no connection to, have no understanding about, know nothing. Even that can work, but playing the lottery can work as well. It would definitely not be my route.
Louis: That’s something we’ve discussed with the author of The Mom Test. I don’t know if you’ve heard of this book.
Steli: I’ve heard of the book. I haven’t read it myself but I’ve heard about the book, yeah.
Louis: The guy behind it is called Rob Fitzpatrick, and he told something quite similar about the fact that it adds, I don’t know where he came up with this number, maybe from his own head. But I remember it adds two to three years to your venture to find success if you start with a group of customers you’re not familiar with.
Okay, that may be a very arbitrary number, but I think joins what you just said right now. So you would start with not only the group of people you like to hang out with, or that you admire, but also the ones that are the closest to you, right? And it’s the intersection of the two, right?
Steli: Yeah, for me it’s the intersection of the two because I want to live a good life. Some people that are very business minded, they go who gives a shit if I like these people? I could hate these people, but if they have a lot of money and I have an easy way to get it out of their pockets and into mine, then that’s the market I should go after.
That’s only cool. I’m not saying that’s not a good way. There’s lots of business people that have made a ton of money serving customers they don’t really like that much, and it’s just not for me. That’s not what I would do, because my business is a really big part of my life.
My customers are a very big part of my life, so if I don’t like them, that brings down the quality of my life dramatically. It also inherits me to be as creative as possible and as effective as possible. Because if I like my customers, I’m just going to be a lot more passionate about solving their problems.
Some people are passionate about money. Some people, their talent is making money. They just have that in their genes. They just know how to turn every penny around and make two pennies out of it.
And that’s kind of what their love is about and what they’re passionate about, and what they create, but that’s not me. I’ve made a lot of money in my life, but I need to be passionate about the people I’m solving things for to be really creative and effective.
Louis: I find it difficult because I’m quite similar as you. Not in terms of the money I’ve made, but more in terms of the fact that I have customers that I feel I’m close to, that I’ll enjoy. It sounds difficult for me to comprehend how you can do business in the long term, and be successful in the long term like for 20, 30, 40 years, with a type of customer you fucking hate.
Steli: I think that most people can’t. I think more people are like you and me, that aren’t. But I do think there’s a small expectation to this rule. I don’t envy these people. Those are not the type of people I think live a great life.
I don’t really know, but there is a small group, a very small group in the business world, that have success in the definition of money. Just pure how much money is on their bank account. Not how big their impact is.
Not how much value they’ve created in the world, not how happy they are, fulfilled inside. Only bank account numbers. There are some people that their talent, their passion is money and making money, and it’s nothing else.
There have been some people that I think have proven over 10, 20, 30 years that they keep on making money this way. But it’s not the type of people that I think most entrepreneurs admire. It’s not the type of people that I hear good things about in terms of their personal lives and the types of humans they are.
But I do think they exist. I just think it’s so rare for people to be so obsessed and so passionate about just making money at all costs, that are so smart and shrewd that they’re able to do this for a very long time.
Most people that get hooked on just money and nothing else, they might see short term success, but they disappear. Very few that are actually able to sustain that. But I know some examples, but it’s not many, and it’s definitely not people that I admire or that I would like to emulate.
Louis: Right. I think we can consider that if you’re listening to this episode right now, you’re more the type that studies rather that Steli is, rather than what Steli described. So anything else, before we move on to the next step? You talked about when it comes to identify the right customers or have a group of customers you really, truly enjoy working with.
Steli: No. I think some important pointers here are that when you try to serve people, you cannot be fully selfish. It has to be a give and take. I think many entrepreneurs in the early days, it’s a very selfish endeavor in the sense that you want to start a business, and you want to make money.
You want to be successful. You want to get recognition and you want to stop working at a job you hate. It’s all about you, right, and that’s normal and fair. But once you go out and you start trying to get intimate with your customers, generate customer insights, and truly get to a level of understanding to be able to serve them well. This cannot be a purely selfish endeavor anymore.
I see all the time where young entrepreneurs go and they meet with potential customers. Those conversations are a waste of time because the conversation is so selfish. And they ask questions but they don’t really want to hear the answers. They already have an idea in their mind, and all they want to do is just validate themselves as being right.
They’re so rushed to go through the questions to pretend they’ve done customer development, and to pretend they’ve done all the right things when they weren’t really there. Their mind wasn’t really fully there, curious, truly caring about the answers that the person has. The life the person lives, the challenges they have.
They’re just there to check off on a list, “I’ve done 10 customer interviews. I’m ready to start my business.” It’s not about the customer interviews. It’s not about how many meetings you booked. It’s not about even asking the question. All of this is meaningless if you don’t care, right? All of this is meaningless, just a charade.
We’ve all been in conversations like this where somebody’s asking us questions, and we can sense that our answers are irrelevant to that person. They just want to get to the next question and the next question. And then they just want to get to their pitch, or the thing they wanted to tell us all the way.
Nothing sucks more than that. It’s a waste of time. I’m sitting here, I’m trying to give you an honest answer, and I can tell you’re not listening. You’re not paying attention. So if you do this, if you pick a customer that you care about, if you go to meet with as many as possible, to learn as much as possible, you need to give a shit.
You need to care. You need to truly want to listen, and learn before you want to talk and teach. Before you jump into your pitch about your vision and what you want to do, you need to really care about listening to them. It’s not complicated, but that’s the thing everybody trips over that I see. That does this wrong. So I wanted to highlight it.
Louis: Yeah, thanks for ranting about it. I completely agree. Something that I say often is when you talk to customers, especially at first, try to act like a journalist instead of a salesperson. It’s more like be very curious as you said.
Ask questions, be genuinely curious, and have a conversation. Not a fucking I ask a question, they give me an answer, I don’t care about the answer, I move on to the next question. And so I completely get you. Now we are going to move to step two of what you mentioned. Let’s say we have, you mentioned plumbers as a fictional group of customer. Let’s just go for that for the sake of it.
Louis: Let’s say we know that plumbers is a thing. We have a family in the business, successful business and all of that. We have access to a lot of plumbers. All our association around it. Then you mention a very important point, which is the customer development side, which is asking questions, discovering what they struggle with, and all of that. How do you go about this step, especially when you get started?
Steli: Sometimes people will have a hypothesis. They’ll have some kind of an idea or something that made them even in the first place consider wanting to be entrepreneurs and starting something. Sometimes, they won’t. If you don’t, it’s actually easier.
All you have to do is just say well, let me learn as much as possible about how a plumber operates. How a plumbing business operates, how they make their money. How do they charge? How quickly do they get that money? What are some of their struggles?
As you try to just understand what the plumbing business is, right? Maybe an approach, a framework that can be useful and practical is to talk to these people as if you wanted to start a plumbing business in a month, and you’re interning.
You’re trying to learn as much as possible because you’re going to become a plumber too. But you want to start a plumbing business. Let me say that, not become a plumber. So it’s not about the technical skill of the plumbing, but it’s about the business of running a plumbing business.
How does a plumber get customers? How does a plumber charge for things? How does a plumber get paid and how quickly? How does a plumber employee people? What equipment does a plumber have to have, and what kind of fixed costs versus variable costs are there?
How does a plumber compete? There’s lots of other plumbers. How does this work? Competition. The market. All that. Is there a difference between plumbing businesses that serve the end consumers versus serving businesses?
Try to learn as much as possible. Try to pick out — or maybe even start with a question if you don’t know any better. I wanted to start a plumbing business just like you, in a year or two, what are some of the surprising things? Things that I wouldn’t know in the beginning that will surprise me or that might create problems for me after doing this for a few months?
What are kind of the big mistakes everybody does that goes into the plumbing business? What are some of the things that suck about running a plumbing business? What do you hate about the business? What’s the biggest challenge? What is the most awesome thing about it?
Just learning more about the business side and trying to identify both trying to understand the context within the plumbing business operates. But also then more concretely trying to understand what are the challenges and the opportunities?
Where the things that are really good and really bad? And trying to see why are these things good or bad? What solutions do plumbers typically tend to try to fix these problems? What has never worked? What has worked sometimes?
If you’re in technology, you might start looking at obviously opportunities to save. Are there things that are like 30 years outdated in business practice in a plumbing business that many other small businesses have adopted new technology to improve? To automate, to save money or to make more money — that there might be a blind spot there still in the plumbing space?
Just trying to learn more about the business in general so you have some high-level context, and then go very specific in trying to understand challenges, frustrations, problems in that business as well as the things that are really good.
Where do they make their most money? What is the easiest thing to do? What are the things they really like? To see both of these sides and ask yourself is there a way to make the good things even better, or to make the things that suck, suck a little less.
Louis: I like this approach very much, because I think it prevents you from overthinking this customer development and instead trying to be just curious. I expect that if you’re just being genuinely curious about the business, without necessarily asking the questions you want to ask which is what is your biggest challenge in a business, they will share that with you. Naturally, after a few minutes of conversation.
Louis: That’s usually what the conversation starts to lead into, right?
Steli Yeah, and you know if you use the framework that I used in the very beginning where you’re framing it as if I started a business like yours, what advice would you give me? What are the problems that nobody understands that’s outside of the business? What are the challenges?
Two, three years from now, what are going to be my problems then? People will open up and give you gold. They’ll give you really, really amazing answers and insights. If you frame the conversation as, “Hello, I want to be an entrepreneur. I’m starting a business in a month. I’m building a software product for you. What software product would you like to buy?” That’s going to be a useless conversation usually.
Because now you’ve framed it so narrowly that this person knows nothing about startup software company. And now the person’s like well I don’t know Facebook for plumbers, doesn’t make sense. They’ll try to please you and give you what they think you want.
Which is now they’re going to be trying to give you software ideas, which they shouldn’t be in the business of because if they were great at coming up with software ideas, they would be running a software business.
If you frame it like that because you want to look good, again, it’s an ego thing. Well, I’m an entrepreneur. I’m starting a technology company. Why is this useful for this person or for this conversation?
The goal of the conversation for you is just to learn more, so you could say, “Hey, I’m thinking about entering the plumbing business or servicing the plumbing industry. I just want to learn as much as possible. You’ve been in this business for such a long time. Can I just buy you lunch, dinner, drinks, coffee, whatever, and for 20 minutes just get your advice? Just treat you like an advisor.”
People love to give advice. And if you don’t frame it, they’ll give you great advice. If you frame it too narrowly, they’ll give you shitty advice. Even worse, if you come with an idea to them, and all you’re trying to do is make them tell you that your idea is great, they’re going to give you that.
Life is too short not to argue with some young kid that wants to start a thing. I’m going to be like, “That’s my idea. Is it great?” And the person is going to go, “Yeah, I don’t know. Not sure, but sure.”
Then, the entrepreneur, because we have confirmation bias. We want to believe, we’re going to be like, “Yeah, I had a great customer interview today. I’ve done so much customer development. All the plumbers tell me my idea is great.”
Then when you ping the founder a little bit deeper and go why did they say it’s great? What exactly did they say? how much money would they pay you to be your first customer? They didn’t ask any of these difficult questions. They just presented the idea with a lot of enthusiasm, the other person to be nice said, “Yeah, that kind of sounds good.”
And then they go, “Well, check. I did customer development. I validated my idea. There’s a big market. Let me go and spend a year of my life and lots of money to build this thing,” It’s way, way too early.
So these conversations, you need to be curious, but framing them in the right way will empower that person to give you good information. Versus you strangle them in a situation that’s so limited that they’re giving you bad information.
Louis: People are usually afraid of doing exactly what you described. Oh, I’m going to talk to a stranger. They’re afraid of rejection. They’re afraid of people saying no. What do you say to that? How do you go about contacting your first people?
Even if you’ve been a marketer for 20 years you want to start your first business. You might be scared of getting in touch with people. What do you say to them?
Steli: Well, first of all, welcome to the club. Everybody’s afraid of rejection. There’s obviously different levels of that fear, but I’ve still yet to meet a person that doesn’t care about rejection at all. Fearing rejection is normal, but you have to get over yourself.
If you can’t, congratulations. You just learned a really valuable lesson which is entrepreneurship isn’t for you. If you want to be an entrepreneur, you’re going to have to suck it up and do things that are not glamorous, not nice, and don’t feel good.
It’s just part of the deal. If you learn to do that, you have a chance of success. If you don’t, don’t go into entrepreneurship. Just find a really great job and work with somebody else.
Now, when it comes to more practical, “Okay, I’m willing to overcome my fear, but how do I do it?” I’ll say two things. One, I’ll give you a simple hack, and then two, I’ll tell you. When we started Close, we actually started with a services idea. I did exactly what you described.
I reached out to companies, without using my name, without using my network, and I’ll tell you a little bit about that in a second. But the hack is this. Instead of focusing on success, you need to reprogram your mind and see failure as progression.
So what do I mean by that? Instead of saying, “I need to book five meetings with potential customers,” and then every time you email somebody, or you ping them on LinkedIn, or you cold call somebody and they say no.
Or they don’t respond to you, you feel like, “Oh shit, I spent another day. I sent this week, five days in a row, I sent 10 emails every day. Nobody has responded. This will never work.” And then every day feels worse, and worse, and worse, and now you’re in this terrible emotional place.
Instead of doing that, you reverse the game. And you go, “Alright. I want to have five successful meetings. How many do I think I have to contact to get five people to agree to say yes?” Let’s say I have no experience, so let’s just take the typical example of 10%.
Let’s just say worse case, I might have to ping 50 people to get five people to meet with me. Alright, so then what I would tell you, is I would say, “Well, let’s maybe what you do is you take a piece of paper. You put 45 little boxes on that piece of paper. Every time you ping somebody, you email somebody, you call somebody. And they either say no or they ignore you, you just check off that box and you go alright, one more rejection on my way to success.”
I know I’m probably going to have to get 45 people to ignore me or say no to get five people to say yes. Now, every time somebody says no, I’m checking a box off. And I see that I’m progressing and I’m moving towards my ultimate goal.
Once I get 45 no’s, more than likely going to have a few yes’s accomplished. That’s the nice little hack. So that every time somebody says no it still feels bad, but you also feel like you’re progressing. Versus if you just focus on success, every time somebody says no, you feel like you’re being thrown back further, further, and further. Eventually, you feel like this will never work. Does that make sense?
Louis: That makes lots of sense and I love it. I think from experience, what happens after a while is you get immune to people saying no. It’s almost like you don’t give a shit anymore. They so no, it’s fine, you move on. At the small scale. I used to do that.
When I started my consulting business a few years ago, I did that. At first, it was painful, and then after a few days, it wasn’t that much. Now I do it for the podcast, I invite guests, and now I really couldn’t care less anymore if someone says no. I just move on, right?
I think this is kind of the system that you need to put in place in your brain, which is it’s normal that people say no. They might be in a bad mood. They might have family situation. They might be too business. They just might not give a shit. And that’s cool, that’s fine, but there will be people who do give a shit.
Steli: I think you’re absolutely right. It’s like building a muscle. But the thing is, you will never get immune to all no’s. What I’m saying is, let’s say if I start a podcast for instance, and I reach out to people. In the beginning, it feels terrible.
At some point, I get more and more guests, I get some momentum, and now I’ve more experienced. Now, I know how to deal with the rejection on that level. But if I try to raise a million for more startup and I get a rejection from a VC, that might still be devastating.
Because I don’t get a no from a VC 10 times a day, so that muscle hasn’t been built. No matter where you are in life, there should be some kind of an ask that if you did it and somebody said no, it would bother you because it’s a big deal for you.
If it doesn’t, and I’m like people think I’m a sales thought leader, and I’ve been rejected I don’t know how many times, but many. Way more than the average person, for sure. But the more successful I become, the harder it is for me to keep my rejection muscle active. Because now I can lean back.
All kinds of opportunities, customers, and invitations for all kinds of things come to me. Which is beautiful. But it can also lead to atrophy in the sense that a lot of successful people. They work really hard to get to that success, and then they stop pushing themselves out their comfort zone to keep getting rejected.
So you have to keep working that muscle to keep it alive. But I like your point, which is very true. If you do a certain activity every day and you get rejected, at some point, you just get used to it. You get over it, and it’s not that big of a deal anymore. For sure.
Louis: Then you wanted to talk about this, the way you did this exact same thing when you started your business.
Steli: Because we honestly started the business the way that you described in some ways. So when we started this company, originally, we’ve gone through three changes basically. Originally, we started as a completely different business.
Then we pivoted to a services company that was helping startups that had raised a series A. We were helping them hire lots of salespeople and scale sales campaigns for them. So that was a services company. We built the software internally first. We never intended to sell the software, and eventually, the software became really good.
We launched the CRM software Close as a separate little business. That grew so fast that we shut down the services business and we fully focused on the software. But when we made the first big change from idea A to idea B, and idea B was an outsourced sales team on demand for startups.
We did not want the world to know that we’re thinking about pivoting and that our original startup idea was struggling. We just had raised some money. We kept getting great press, and everybody thought we’re killing it, and we knew that idea didn’t work. We had discovered shit, it worked really well the first few months, and it’s not working anymore.
When we were considering to pivot or change what we were doing. We had this idea for an outsourced sales team on demand company, we didn’t want everybody to know about this. So what did we do?
We said you know what, instead of wasting a ton of time coming up with the brand, logo, putting a website together, announcing to investors we’re thinking about changing this, doing customer research and all that.
Let’s just take two weeks and do some really hardcore exploration, and then step back and see if we still want to consider this or not. What we did was we generated a list of companies that had just raised a series A that were B2B, and that we didn’t know.
We didn’t want people who knew us to know about this, so we picked companies that we had no connections to. Then I said let me just start cold calling these people. Telling them about the idea, pitching them, and let them educate us about this idea.
Let me throw out different numbers on how much we would charge. I’ll experiment. In every conversation, I’ll try something new and I’ll see what they tell me. I’ll ask questions, I’ll experiment with this, let’s see what happens, and I’m going to use a fake name. So instead of being Steli Efti, I was Steve Eli.
Steli: For two weeks, we said let’s cold call companies for two weeks. Let’s get an education, and then if we can get one company to think or consider about doing this, maybe there’s something to it. Because we thought we’re going to tell these companies that we don’t have a website.
They’re talking to Steve Eli that doesn’t exist online. We have no references or recommendations, and we want them to pay us thousands of dollars. And have them give us the job to talk to their customers and close their deals for them. That’s a big ask. We thought there would probably be a lot of resistance to that, and that’s what we did.
I started cold calling startups every day for two weeks, pitching them on this idea. Not talking to people I know, not using my name, not using my network. And within two weeks, we had seven companies that wanted to pay us money.
We thought, oh shit, if we can get seven companies from just cold calling without having any recognition, we might be on to something big. We might be onto something real. I just wanted to tie into that. That this is the way I started this very company. I didn’t use my name, didn’t use my network. I used my skills, but I didn’t use any of that to get started.
Louis: So the question was on point. Because you had the experience of doing exactly that, which exactly the scenario of the question, which is nice. Tell me more about the way you cold call those companies.
How did you go about presenting yourself? Did you use the method you described earlier, which is more like of a journalist or a curious person rather than someone trying to sell something? How did you go about it?
Steli: It was not quite that because we had an idea. I didn’t come into the conversation with like, “I don’t know what I want to do. I know I want to start a business. This is a group I care about.” I didn’t start off the conversation with that open minded. I didn’t.
We had an idea we wanted to see if this was a good one. And if companies would want to pay money and purchase this. What I did was very simple. I would call these companies because it’s a skill that I was very good at, I was good at cold calling. I’m good at sales.
So we used that skill. But my script followed a very simple logic. The principles behind it can be applied in person conversations and in all kinds of other scenarios. My hypothesis was if we find these phone numbers and we call these startups, they might pick up. Because startups at that time, this is a bunch of years ago.
In Silicon Valley, I’m partially to blame for why a lot of startups have become a lot better at selling and building sales teams. But in 2010 and 2011 when I was coming up in the Valley, no startup wanted to build the sales team.
No startup wanted to have anything to do with sales. Everybody wanted to just build a product that sells itself. Viral was the big thing. User-generated content was the big thing. How can we launch these apps that just like grow on their own?
Marketing was something alright, if we have to do marketing, we have to do marketing. But nobody was thinking about hiring salespeople. Me and my company, we’ve played a big role in changing that culture in Silicone Valley. Teaching startups how to hire sales and why it’s important, why it’s useful. Back then, nobody wanted to do that.
These startups are small. They’re not getting a lot of cold calls, and I thought probably even going to get people to pick up the phone.
If they do though, they’re not used to this so they’re probably going to ask themselves, “This is a number I don’t recognize. Who the hell is this? What does this person want from me? Why should I believe this person? What do I do next? And is this a fucking sales call?”
That’s always a question. I knew that when people pick up, they hear a voice that they’ve never heard. From a number they’ve never seen. Getting a call that is not on their calendar. They want to know what the fuck is going on here. Who is this, is this a sales call, how do get off the call? That’s kind of the mindset of the person I’m reaching.
I need to address these things. I need to calm this person down. I would just call these people and say, “Hey. My name is Steve Eli. You’ve never heard of me before. I run a startup close by. What we’re doing today, what I’m doing is I’m calling a few companies in the area to see if they might be a good fit for a beta program that we’re planning to do.”
Now, this was my first sentence. This first sentence didn’t convince anybody of nothing. The only thing this did, made somebody go, “Oh. Some founder somewhere close by doing a beta program?” The next question is what the fuck is it? What is the beta program? What is the startup?
But at this point, I’ve already established a little bit of rapport. I’m speaking calmly and confidently with a smile on my face, but I also use words like I’m a founder. I’m local, I’m calling startups in the area, and I’m trying to figure out a beta program. I’m using all this language that makes somebody feel like well it’s probably another founder.
They’re like alright, I’ll listen for one more sentence, but what the fuck is this? My very next sentence would be, “What we do in a sentence,” I would start at with that because that signals to the listener chill, this is only going to take a sentence.
Because if I just launch into my pitch, the person’s going to go oh shit, this is a sales call, why did I let this person talk? Oh my God. I’m going to miss my appointment. This is terrible. Now they’re not listening. They’re in their head. They’re thinking oh shit, this person is pitching me.
But if I say, “What we do in a sentence,” is I’m telling this person’s ears and brain to relax, just pay attention for one more sentence before you make a decision what to do here. I would say, “What we do, in a sentence, is we help B2B startups with a sales team on demand, helping them scale their sales with a sales team on demand. Does that in general sound interesting to you?”
At that point, when I ask, now I explained to you who I am and why I’m similar to you. And I’m close to you in proximity. I explain to you in one sentence what we do. Now I know you’re making a decision if this is good, bad, or whatever. So I need to empower you to tell me this.
I’m not going to shy away from it. I’m going to say, “Does this in general sound interesting to you?” At that point, it didn’t honestly matter what they said. Somebody said yes, I’d go, “Oo, awesome. Tell me about your sales process.”
If somebody said, “Maybe,” I would say, “Interesting. Tell me more about your sales process.” When somebody said, “No, this is absolutely not interesting to me,” I would say, “Wow. Tell me more about your sales process.”
At that point, I honestly didn’t take them that seriously. It’s not that I never cared. It’s just that I knew at this point, it’s too early for them to really make an educated decision. They don’t know enough. I don’t know enough for us to make a decision at this point.
But I do know that they want to make a decision at this point, that they have a thought in their mind. Yes, no, I don’t care, and I need them to say it, to get it out of their system. Because if they say it, they can keep engaging in the conversation.
Their mind is open to listen. If I don’t let them say it, as I speak, they think, “It’s not interesting. It’s not interesting. It’s not interesting. How do I get off this call? How do I get off this call? How do I get off this call?” And I can’t really get to them. I can’t really have a conversation.
That was really the beginning. Then I had a few questions to them. Tell me about your sales process. You guys raised some money — do you have salespeople? How do you do this? How do you acquire customers? Where do you get leads from? What’s challenging right now? What are your next goals?
I would just engage in conversation. Some people would very openly engage and share. We would discuss it. We’ll find out no, this will never work with us or what they do doesn’t really work for what we want, or they’re not really ready for whatever reason.
Some people would give me some information and then push back, “Well, I want to hang up. Maybe send me more information.” There’s ways to deal with all of this. But at the very end, if I had a positive conversation with somebody, and if there was some indication that maybe this could work.
They have the money, the type of customer they sell to brings enough money in where building a sales team could really make sense. The way they generate leads makes sense, and they’re currently don’t have a sales team and thinking about hiring some people but they’re not sure about the timeline.
If a bunch of criteria worked, then I would do just a soft pitch. And go, “Hey, let’s run through a few things. Number one, we will only be able to give you one sales person to begin with, and that’s because we don’t have an army of salespeople yet.”
So I’m like, you need to know about this. Only one salesperson. “The beta program starts in four weeks, so you would have to be ready by then to work with us, and it’s going to cost you.” At the beginning, I would just pull things out of my ass. This is going to cost you whatever, $10,000 a month, $5000, $100 a day, whatever.
I tried a few things. “Does that in general work for you? Do you think a month from now, if we do a few calls, we talk to a few decision makers, you’d be ready to rock and roll with us, having just one salesperson is okay, and this price point is okay?”
And if that seemed possible, then I would just go into asking them, “What will it take for us to get this deal done? Who needs to be involved? What are the next steps?” Well, maybe I need to talk to my co-founders. “Cool, what do we do next? Well, let’s jump on another call.”
Okay, we talk on another call. Do you think, well what else would we have to prepare and work on before we can start working together? Well, I don’t know about X, Y, and Z. I would try to get a sense for the objections, the problems, the road map from here to a closed deal.
That’s it. That was the call. Some people never picked up the phone. Some people hung up in the middle of my sentence, in the middle of my hello. Some people screamed at me they don’t want to answer my questions, and some people engaged with me.
It was enough people engaging with me, being curious about this. Feeling a big enough pain or seeing a big enough opportunity, they wanted to give us money and be like yeah, shit, let’s try this. I’m not sure if this is going to work, but sounds very cool and I want to try it with my company.
Louis: Roughly, how many calls did you make to end up with seven?
Steli: I wish I know the real number. I think, by approximation, I did about 50 a day. So what is this? 50 times 10, it’s 500 calls.
Louis: A bit more than like 1.5% from cold call to a solid lead. That’s not too bad, right?
Steli: That’s fantastic, actually. If you can start cold calling people. Again you don’t have a website, you don’t have a name, you don’t have any credentials, nothing I can look up, and you can convince companies to pay you thousands of dollars starting in two or three weeks.
And give you a very sensitive part of their business. Which is give you their sales, like tell you, “You go call customers from our company, represent our brand, our company to these prospects. Pitch them, sell them, close them, and then we onboard them with our technology.”
That’s a big ask. If you can get that many companies to agree in that short period of time, with that little to work with, that’s a pretty strong indicator that you’re on to something.
Loui: Absolutely, because I had forgotten you didn’t say who you were. You didn’t mention anything, so that’s a pretty good number for sure.
Thanks for getting a mini master class on cold calling in the middle of this big question that I asked 40 minutes ago. But I want to go back to this question because you said a third thing at the start, and it was super interesting.
You said I wouldn’t start a software business, I would start a service business. I would sell my brain power and other people’s brain power. I wouldn’t sell a tool. Tell me more about this idea and why you said that.
Steli: The reason I like to start services business and then potentially evolve it into a software business has many reasons attached to it. Number one, when you do a services business, you typically can start charging hefty amounts of money much earlier.
It’s very hard to scale a services business, but if you told me to launch a software company that within four weeks makes $20,000 with their first client, I would tell you I don’t know how to do this. I find this impossible to do, from nothing to like $20K in like four weeks, impossible.
If you told me to do this in services, I’d tell you it’s easy. The easiest thing ever. I need one or two consulting or coaching clients, and I can charge a lot of money. Maybe $20K is a number that’s too high for some people.
Even if it’s like you need to earn $3-4 K to be able to pay your bills. Being able to generate $3 or $4K in kind of service is much easier than getting to $3 or $4K in software. Because software — no matter how quickly you do it — it’s going to take you three, four months to build an MVP.
Let’s say three months. You launch an MVP, SaaS revenue. You’re not going to instantly get thousands and thousands usually. These very quick businesses, it might take them another three, four, five months to get to 4K MMR. In monthly subscription revenue.
In total, you might have to spend six to nine months in a software business to get to that point. In a services business, you could get there in three to six weeks. I think from a cash flow perspective, it’s great because you can generate revenue very quickly. You can acquire customers much quicker because you don’t need the lead up time of building the software.
Obviously, you have to have some kind of expertise. Something that you can service them with. If you know nothing, if you have zero skills, then you have a problem. Assuming that you know some things, whatever that is, and have some skills that are marketable.
What I love about this is it generates a revenue instantly. You can start getting really intimate with a customer, start building a customer base very quickly, and start learning a lot about those customers and a lot about the problems they have.
If they’re willing to pay you to do something manual for them, you’ll learn a lot about how much value that manual work creates for them. You’ll learn a lot about that opportunity. You will learn a lot about how hard or easy it is to do marketing. Or to do sales and acquire more of these types of customers.
You’re building a customer base, you’re building a reputation. You’re building skills on how to do marketing and sales for those types of customers, and you’re building knowledge. You really try to understand how they operate, how they pay.
You understand if you’re servicing them, what they’re willing to pay money for and there’s a big opportunity that some of the things that you do manually. You could create software around and then just sell the software. You can make that a fairly smooth transition.
That’s why I really like the idea of starting in the services side of things. I especially like that idea if you have no idea what product you want to build. If you have no idea what product you want to build, you can pick a customer and just learn as much as possible about them.
Start telling them that you’re going to help them for whatever it is, $50 an hour, $100 an hour, $1000 a month. Whatever the hell it is you want to charge, and see what they’re willing to pay for or not pay for. How easy it is to convince them to become customers.
You can start servicing them, and then you can wait for the software ideas or the product ideas to pop up over time as you learn more and more about them. I think it’s just a very smart way to go about things.
With that being said, there’s always exceptions. If you’re an amazing developer, you might just be better off building things. Launching them in the wild and seeing what sticks, because you can launch five MVPs in five weeks.
Because this is you’re just an amazing creator of software. Versus going out there and meeting people and becoming a consultant or a coach. Maybe that’s just not your thing. But most people that are probably going to listen to this podcast are not hardcore developers, I would assume.
For people that are not software geniuses, starting in services and eventually developing a product is a much saner route to me to success.
Louis: It reminds me of the story behind Basecamp, the project management software.
Louis: They started this way. I think Teamwork.com, which is another project management software did the same thing. They had a digital agency. They turned that into software.
Steli: MailChimp. I could give you 100 examples off the top of my head. There’s many companies that started that way. But, caveat, some companies start that way and they’re so eager to become a product company or a software company. That again, they don’t take the necessary steps and the necessary order.
They’re like, I’m running an agency. But agency sucks, services business suck, and they don’t scale. And I want to build a billion dollar business so we’re doing a product. We’ve talked to a few customers and this is my idea and we’re just building it.
They are rushing to the I just want to run a product company or software company. Those cases don’t succeed. Although again, from the outside, they seem, “Oh, they started as a services business and then they pivoted product. Why did they fail when Steli said this is a good model?”
Because they didn’t do it the right way, but there’s hundreds of amazing companies that started and succeed exactly the way we laid it out, absolutely.
Louis: I like the way you approach all of that stuff. I know there’s one question that comes back, listeners ask me often, is I don’t know exactly what my strengths are. That question is really saying I feel like a fraud, or I have this imposter syndrome kicking in all the time.
I want someone else to tell me that I’m good at something because I’m not too sure that I am. How would you recommend someone to find out what they should sell about themselves, what they are good at, to others and feel confident about it?
Steli: That’s a big question, right? I don’t know dude. I think that imposter syndrome, any reasonable human being that’s somewhat intelligent should have moments where they’re like I don’t fucking know what I’m doing here.
I think people think I know what I’m doing, but I really don’t. But then the more successful you become, the more you realize nobody fucking knows what they’re doing. Nobody. Not a single fucking human. All of us, we’re all winging it.
To varying degrees, but we’re all just winging it as good as we can. Some people better than others, but nobody really knows everything or is like an expert. We’re humans. We’re fundamentally flawed.
Again, once you have a little bit of success. Or you’re in some sort of a position, your expectation of what a person knows and is capable of in that position is always an unrealistic expectation. You think a millionaire knows everything about business. And no, they don’t.
Or a CEO, or a founder, or a VC. There’s these things we glorify these roles or these positions in life, and then when we get to the position, we realize shit, man, even when you sold your company for $200 million, you still don’t fucking know what you’re doing.
Your next business doesn’t work, and you don’t have all the answers. Wow, even when you’re not an investor yourself, investors don’t know what the fuck they’re doing.
They have some experience, but just because I’m writing checks doesn’t mean I’m not as smart and capable as I thought these people are. Now that I’m friends with them, I realize these people are amazing, but they’re all human with flaws.
I think imposter syndrome is a normal thing to go through. But being in a position where you say I don’t know what I’m good at, nobody’s ever told me what I’m good at, so how do I find out? I find that to be a bizarre situation.
More often than not, what I encounter are people that are really good at something that they don’t value. I’m really good at one thing, but I really want to be really good at something else.
I say I don’t know what I’m good at because I secretly really want to be … like when I first arrived in Silicon Valley 14 years ago, I wanted to be a product visionary, technology visionary. That was kind of my I saw Steve Jobs and a bunch of other people.
I’m like I have to be like that. Black turtlenecks and product visionary is what I need to be. But it took me a while to realize I’m not a product visionary. I’m not a technology visionary.
I am amazing in certain things, and I’m very average in other things. And I need to learn how to be an amazing founder using my strengths — and not try to be somebody else. Most of us, it takes us a lot of time not to be self-aware.
I think people struggle a lot more with self-acceptance than with self-awareness. So most of us, we do know our strengths but we think our strengths are meaningless. Yeah, everybody tells me I’m nice but nice is worthless.
Everybody tells me whatever, I’m a hard worker, but I really want people to tell me I’m a genius and really smart or creative. Nobody tells me I’m creative. Everybody tells me how hard I work, but I really want to be creative. I find that that is a big issue. People are not accepting what their true strengths are and then building on them, versus not having any knowledge.
If you truly have no knowledge what your strengths are, I would just tell you to ask people to give you honest feedback. Like people you trust that are going to be honest with you. Just go to your friends and say, this is a good exercise for anybody by the way.
I do this every year, and every time I’m surprised because I’ll send an email to a bunch of friends and then I’ll go, “Hey. What is some honest, hard feedback about me that you haven’t had a chance to share with me, but you’re thought a number of times? What’s something about me that really annoys you? What is a weakness I have that you think I don’t know about or that I’m hiding from my friends and family, from the world?”
Asking some really uncomfortable questions like that will get you to, if you ask the right people, will give those people the permission to tell you. So if you don’t know about your strengths, you can just go to some people you trust that are going to be honest.
Not just nice to you, and just go, “Hey. I’ve tried to figure out in the last few months what my strengths are. I’m struggling. I don’t know what I’m really good at. I’m asking you, have you seen if somebody asks you what I’m good at, what would your answer be, honestly? What are my weaknesses? What are my strengths?”
Another way to get to this — and this is a tip I learned from Hiten Shah, my podcast co-host at The Startup Chat. Another way sometimes to figure this out, instead of just asking yourself what am I good or bad at, because good and bad is so subjective, is just ask yourself what gives me energy?
What do I like doing? What truly, not what do I think other people like when I’m doing them, but what are the things that when I do them, they give me energy? What are the things that when I’m doing them, they cost me energy?
If you had asked me that question in my early years in the valley, working on product and technology and software, it was costing me energy. It was taking a lot of effort and energy. I was exhausted after these types of activities, but there were other things I was doing that was giving me energy.
Teaching others. Sharing my knowledge. Storytelling. Creating content. Writing blog posts. These things made me come alive, made me energized. They didn’t cost me energy. So that might be a little hack to throw out there, but just ask people for feedback.
If you don’t know, ask yourself if you really don’t know or if you’re just not willing to accept who you truly are and what your strengths and weaknesses are. Maybe another way to ask that question is to just ask yourself what gives me energy and what costs me energy, and maybe that illuminates an answer.
Louis: That’s the answer I was expecting, man. Very insightful. Thanks so much for sharing. Those questions are gold. Yeah, this is critical. Ask other people. Thanks so much for sharing, and thanks also for sharing all your step by step with me, from one question 50 minutes ago.
I think listeners learned a lot from you today. So what are the top three resources you would recommend our listeners to check out? It could be a podcast, a book, a community, whatever it is.
Steli: Okay, I’ll do two things. One selfish thing and one selfless thing, right?
Louis: Yeah, please.
Steli: You should go to TheStartupChat.com. If you like some of the things that I shared, my co-host is much smarter, much wiser than I am. So check out TheStartupChat.com, our podcast. Maybe you want to subscribe to it if you enjoy podcasts, and then send me an email Steli@close.io. S-T-E-L-I at C-L-O-S-E.I-O.
Just in the subject just put in “bundle motherfucker” and I’ll send you a link that gets you all my books. Everything I’ve written, all my content, nicely structured, for free in one beautiful link. I definitely think that my content is really, really strong in some of these areas, so check that out.
The other advice that I’ll give on this as a resource is a little bit unconventional, but I find it and lots of people have told me that it’s been very useful and helpful to them, so here goes. My advice is instead of giving you one more book to read, or one more online website to create an account, spend hours and hours with, what I’ll tell you is to do something else.
I love books, so my recommendation to people is to revisit an old book. Two old books, one you hated and one you loved. I find that most people, they’re always looking for a new book to read, but one thing people don’t do enough is re-read a book.
One thing I’ve realized doing this many, many times is that a book is not a static experience. When I read a book, it’s partially the words on that page, and it’s partially who I am at that very moment, and it’s a dance between the two that make the experience.
As I’m changing as a human being, the book is changing. The things I take away from the book is completely changing. So I found that some books I’ve read seven times, and even at the seventh time when I thought I knew everything about it, there’s pages in there that I’m like I could swear that these pages were not in this book two years ago when I read it.
I would put a lot of money on this, and I’m obviously wrong. Why? Because today, the person I am today, is noticing and reading these pages differently than the person I was two, three years ago. Pick a book you really love and you haven’t read in five years.
Pick it up again, or buy it again and read it again. See if it’s a completely different experience and gives you another wealth of knowledge and stimulus. The same thing for book you hated. Take a book you tried to read five years ago that lots of people like, and that you just didn’t like, and maybe you stopped in the middle of it. Give it another go today and see if it’s a different experience. It might be.
Louis: That’s why I’m watching The Office maybe 20 times, 50 times, just hoping to get something every time. But seriously though, that’s a great tip as well. I’ve never heard that before. Thanks for being so generous with your answers today. Thanks for your energy as well. I think listeners really liked it. Steli, once again, thank you so much.
Steli: Thank you.