These days, I find myself saying all the time, to companies big and small, “small deals pay bills, big deals drive growth.” 

Want to know perhaps the easiest way to double your revenue or pipeline?  Double your average deal size, whether through more targeted lead generation, higher value-based pricing, bigger packages, premium products, whatever.

One of the best & “healthiest” ways to keep growing revenue is to keep growing your deal sizes bigger – and bigger – and bigger – even 10x+ the average size of what you’re doing now.

What would it take for you to grow revenue by 10x?   To find and work with customers that are worth 10x what you’re doing now?

I give this advice to early stage companies struggling to get to a million dollar run rate, who need a “sanity check”, because they’re chasing after $500 or $1,000 customers…but aren’t doing the funnel math, realizing they may need hundreds or thousands of them to hit their revenue goals!

I give this advice to other companies who are so obsessed with “growing new customers” that they’ve taken their eye off “growing revenue” – which is different than just growing customers!

Actually, I give this advice to pretty much any company 🙂  Except for the top 0.1% of the Apple AppStore, most companies struggle to market and sell lots of small deals, even easy-to-buy things like say, staplers (though stapler companies sell big deals to distrubutors).

For example, even if you sell…

  • Freemium or cheap products…what would companies value enough here to invest in five- or six- or seven-figure annual subscription deals?
  • iPhone apps…is there a way to sell bulk packages to businesses?  Or turn your expertise into consulting projects, or other “small volume, BIG opportunities”?
  • Books, online programs or workshops… how can these lead to five-figure consulting/services…then six-figure…then seven-figure…?
  • Jeans or t-shirts…what kinds of companies would bulk-buy them, or be a great channel to sell lots of them for you?  (For every successful “Threadless”-type t-shirt retailer, there are probably 50 other companies that struggle to profitably sell single tshirts or small items direct.)

I even take my own advice.  I’d bet than in a few years we’ll see our first $1 million+ consulting project(s) here at Predictable Revenue…even if I have no idea what it’ll involve or with what kind of company. 

What I Love About Small Deals

When most people start a business, whether it’s software, a product or services, we all naturally get whatever customers we can start with; this usually means smaller deals, often “free” to a few thousand dollars.  “Small” is a great place to start – it’s easier to get started, learn from and adjust on the fly.

Learning is more important than results (because when you learn you can repeat), so the faster you can get going to learn through doing, the better.

Also, small deals can be a great way to make it easy to get started with a company (whether as a pilot or a small team), as a “prove it” step towards a bigger opportunity.

BUT –

If you’re selling to very small businesses (1 to a few dozen employees), small deals are TOUGH, because working with those kinds of customers is usually hard: they don’t have much money and have a hard time committing the resources necessary to be successful with your product.

Going further…as a rule of thumb, these “very small businesses” tend to be more disorganized, aren’t really sure what they need, are trying to survive rather than grow, buy on price rather than value, often buy impulsively, lack the time, people or money to follow through 100%, attrit faster and can’t pay cash upfront.

Of course you can find exceptions to these rules, and plenty of companies have become profitable and grow targeting these kinds of customers, but it’s when they follow a more “consumer-y” model, with simple-to-understand-buy-and-use products.  You know, like a killer stapler, briefcase or photo-editing app (I’m making these up as examples – if you have better ones, please email me or comment so I can improve this).  

In other words, you need a) takes a crystal clear Ideal Customer Profile, along with a product that b) people love enough to really spread via word of mouth, so that you get a ton of leads for free, and c) is very simple to decide to buy and use, so that it’s mostly self-service selling and service.

If you’re not there or are selling a b2b product or service that requires education, sales &/or service, think “10x”!

What I Love About Big Deals 

As you get off the ground and want to grow faster in a healthy / scalable way (tripling your revenue without tripling your hours or people), one of the best ways to grow is bringing in 10x+ deals.

These bigger deals end up being a lot more profitable for you, your customers understand & get more value from your product, and they are more likely to stick around.

With bigger deals, you will a) make a lot more money with b) less effort / more scalability, and c) customers will be more successful.  If you’re selling to someone who’s close to your “Ideal Customer Profile,” closing a $100,000 deal shouldn’t be too much more work than a $10,000 deal, and may not even take too much longer.  So what if it takes 2-3x the time and effort, if you get 10x the revenue and customers get 10x the value?  It’s worth it!

Don’t be afraid of raising your prices when selling to bigger companies with bigger needs.  Bigger deals can take longer, but it’s worth the wait.

Size of deal doesn’t determine sales cycle length; that’s more related to things like the number of people involved in a buying decision (bigger companies mean more people involved = harder to decide), your ability to message CEOs (because if they want something, they’ll make it happen), clarity of Ideal Customer Profile, your positioning/messaging and ability to sell on value not price.

Also, bigger deals can lead to…

  • Better Service: You can focus your precious, limited Customers Success people & attention on fewer customers, to ensure they get the most value from your product.
  • More Commitment: As long as you’re not selling stuff to people who aren’t a fit or aren’t ready, bigger deals should lead to companies that have more necessity, commitment and resources to get the most from your product.
  • More Cash Upfront: Working with bigger deals often means working with companies that have cash or funding, and who can pay cash upfront for 1-3 year contracts – which is so important for growing businesses!

Combine the best of small & large

I want to be clear: I’m not telling you to give up small deals.  Use small deals to get started, and appreciate them, love them and those customers – but don’t limit yourself to small deals.

Before the internet, businesses ended up focusing either on lots of small, transactional customers, OR on big customers and big deals.  Now, we’re seeing most businesses blending the two cooperatively, building a small business/customer approach alongside a big deals/customer approach.  The trick is doing one before the other, and always keeping them complementary rather having them split your focus.

“Try to catch 2 rabbits at once and you’ll lose them both.”

Ideal Customers = Ones You Can Make Successful

Mark Suster wrote a GREAT article Most Startups Should be Deer Hunters, making analogies between three kinds of customers: rabbits, deer and elephants.

For early stage companies, he says focus on the deer (good-sized deals) and avoid the rabbits (too small) and elephants (very demanding/expensive, HARD to make successful).

As Mark wrote, “It’s tempting on many levels to be an elephant hunter. If you manage to kill an elephant they have so much meat they’ll feed you for a long time. But elephants are hard to catch and take whole teams of people to bring down. They take special tools.  If you’re not successful you may starve.  If you do catch them, it could be even worse.  Avoid elephants in your early stages.”

I don’t care who you are, if you think elephants like Walmart, Microsoft or General Motors are “ideal”, you’re probably wrong.  If you consider how complex & hard it is for them to buy anything, how hard it is to both sell and deliver to them, it’s rare for them to be ideal to anyone!  Don’t get sucked into a black hole if you’re limited on resources.

I know David tackled Goliath, but you don’t live in the myths.  Be smart about the largest deals and companies you can a) realistically close, b) help succeed in a big way, and c) they won’t kill you with expected product requirements or service levels.  Yes, you should push yourselves to get out of your comfort zone…just down get too far outside of it, being aware of the aspects of Ideal customers.

Turning Small Deals Into Big Ones

Small deals can be an important step in a path to a bigger deal – such as when your doing a pilot, trial or “land and expand” approach.

If you’re an early stage company, the idea of small deals turning into big ones is attractive – but it takes experimentation to evolve a proven path that’s predictable (say that three times fast!).

If you’re doing lots of small deals with big companies but nothing’s turning into bigger opportunities, something’s off – it could mean you’re not selling high enough; the product isn’t “valuable enough” or positioned the best way to senior executives  or perhaps you’re just too impatient and the cake is still baking.  Figuring out how to improve this can be as simple as getting your salespeople around a table and asking them about what’s worked and not worked in turning small deals into bigger ones, and coming up with a next plan to try.

For example, you might be rushing to pilot/trial too fast with bigger companies; it might be better to slow down and get more executives bought in before kicking off a trial or paid pilot.

Or, you might be assuming that the small deals at big companies matter.  If a sales rep or sales manager at IBM buys 5 licenses of your stuff, it’s unlikely the VP Sales would know or even care.

In these cases, going “bottoms-up” just takes a long time to bubble up.  You should experiment with accelerating things by using your prospecting team to proactively go into those companies at the highest levels, or go wider to other divisions.

How To Go 10x

Start by asking simple questions like:

  • What would it take for a client to spend 10x with us?
  • What kind of client would need and want a 10x project from us?
  • What would it take for us to make them successful with a 10x project?

Even if you’re not ready to go 10x yet, it’s a useful thought exercise that pushes you to think differently, challenges your assumptions and lead to practical ideas you can implement right away.

Finding those bigger deal customers…

I hate to say it, but most people are “followers,” especially at big companies, and they won’t start buying your stuff until their friends are.  Most likely you’ll gradually grow your deal size over time, step by step.

If you want to try to make big jumps quickly in deal size…doubling, tripling or more – which means “doing something new” – you need early adopters, pre-existing relationships or ‘true believers’.  

For tech companies, the early adopters usually means customers on the east or west coasts (like New York and California) who are technology-minded, or other pockets in metropolitan areas like Chicago, Minneapolis or Austin.

Or, pre-existing relationships and networks can be the best source of bigger deals.

Lastly, usually in your inbound leads you’ll find true believers, passionate champions who run across your stuff and just love it.  These people want to help you succeed, and are passionate enough to think big for their own company and help coach you in selling it to their executives.

Now Ignore Everything I Just Told You

Don’t do something just because I, or am investor, or some bigwig like Marc Benioff, or your brother Bob told you to…always think for yourself, taking ideas and adapting them to your specific situation.

Hey, if you’re selling small deals as transactions and it’s going well, keep at it!   Or perhaps all you have experience in is small deals or more consumer-y customers.  Use your strengths; do more of what is already working.

It’s a LOT easier to grow something that’s already working, than get something working in the first place.

Quick story: a startup hired us with only about six months of cash left, burning $20k+ a month.  They were doing some five-and-six figure enterprise deals, but each one was a long sales cycle and a lot of custom work.  This was the ‘sexier’ part of the business.  They wanted to figure out how we could help them focus and grow this enterprise business, to make it scalable and predictable.

They also had a new little service for companies that was more like a few hundred dollars a month per client. It wasn’t sexy, it was ‘boring’.  But, it was growing organically without much attention; customers ‘got it’, sold themselves and were successful with it mostly on their own.  (Sorry, gotta keep it anonymous for now.)

We said “go for the past of least resistance here, put more attention on the easy, boring product and less on the sexy, arduous one”… and literally within 30 days, they’d doubled or tripled the ‘small deals’ business so easily that they made it to cashflow-positive, totally turning around the financial situation of the company.

Now, they have an ability to at least pay the bills, if not more, and it gives them time to figure out how they want to scale in the future.

When Has Going Bigger Worked For You?

I’d love to hear your story!

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