Surviving Entrepreneurship: Is that Early Sales Win a False Positive in Disguise?

Mike Smerklo
July 15, 2022
August 29, 2022

Every entrepreneur dreams of this day:

“We just won the Dell account! This deal is close to $500k in ARR and will bring us close to $1m in ARR. The entire team is celebrating – it is a game-changer for the entire company.” – Startup Founder

When it FINALLY happens, it is a truly levitating experience. Days, weeks, months and years of hard work lead up to this big moment. This big sales win shows that your crazy idea might not just have been so crazy after all. It kick starts your entrepreneur’s mind into imagining: 

Just how much is going to change and how much easier selling your solution will be from now on thanks to this big, early win.   

Finally…finally…finally…you’ve achieved what those lame venture capitalists kept calling “product-market fit.” 

It is all going to be downhill sledding from here.

Time to celebrate? Absolutely. Get out the champagne, grab your team, take a group photo, kick your feet up on your desk and let it sink in. You did it!

With this big, early win, you wonder: maybe it’s time to change expectations (for the positive) about future sales, rapid growth and more big customer wins?

Entrepreneur, not so fast….

Unfortunately, once you have come back to earth, the hard cold reality is this: you (as the entrepreneur) must now consider what I call the “False Positives” of your first major sales win.  

A false positive in the science community is defined as a test result which incorrectly indicates that a particular condition or attribute is present.” For startups trying to crack into a market and learn to sell a product or solution, the same definition can be applied to the first few major sales wins.

Yes, absolutely these early wins are tremendous accomplishments. But the real question is whether they are truly repeatable – can you and your team repeat it again and again with less effort each time – or does the win represent a false positive? This question is critical. The answer will direct your time, attention and effort in a way that can make or break your ability to scale your business.

Yes, it is really that important!

So after the champagne is gone, the team has gone home and you have given yourself some time to relax and unwind, you must ask a few questions about the big win. The answers will help determine your next best course of future action: 

  1. How many people in the company were involved in the sales process? (Typical start-up answer: “just about everyone”)
  2. How involved was the Founder/CEO? (Typical start-up answer: “involved in every part of the sales process”)
  3. If there was a salesperson involved in the big win, how many resources did she utilize to close the big deal? (Typical start-up answer: “all of them”)
  4. For the team involved in the deal, how many of them were deeply involved in founding the company and therefore did NOT need training? (Typical start-up answer: “all of them”)
  5. Did the customer buy a standard off-the-shelf version of your software, or were they promised lots of custom enhancements? (Typical start-up answer: “lots of custom enhancements”)

If you answered the “typical start-up answer” to any of the questions above, you should be concerned about a false positive. 

But here’s the good news: just about every startup experiences similar false positives. The even better news is that, unlike a scientific test, there is a clear playbook to reduce the impact of the false positive. The key is to evaluate your big, early win ASAP. 

Here’s how the early sales win story typically goes:

In the early days of attempting to establish product/market fit (a fancy way to say someone wants to buy what you are selling), a startup must do everything possible to get that first big win. The entire company (even if only a few people) will do whatever it takes to make that happen and bring every resource possible to the fight. 

Great founders are heavily involved in early wins. They call upon Board members, friends, network connections or anybody anywhere who can help make the win happen.  

Sales professionals are granted unlimited access to company resources and the entire team works tirelessly to help. 

Last but not least, because the team is small, just about everyone involved knows the solution or offering cold. In short, all hands on deck do whatever they have to get the “big first win.”

In many cases, this win is a false positive. But why? Because every aspect listed above is really, really hard (maybe impossible) to replicate at scale. 

The company will grow, resources will get constrained, new team members will join and the “all hands on deck” will turn to “the sales team needs to close more deals” or “sales doesn’t understand the product” or maybe even “sales doesn’t know how to sell the product.”

Instead of that outcome, here’s what you want:

You want to continue to grow your startup, but you need to grow differently as you scale. You simply can’t afford to have every big sales win happen the way the first few happened. It is imperative to think quickly about your big, early wins as false positives and then, just as quickly, figure out what to do about it.

This is not bad news. Actually, it’s quite the opposite. You may have false positives hiding out in your early sales wins, but you’ve got proof that someone wants your solution. You are no longer that crazy person with that silly idea. You have achieved the first evidence of product-market fit.

Looking ahead, you’re also learning invaluable information that will help you avoid becoming the next one-it wonder. 

In fact, the false positive might just hold the secret to your success….if you take the time to see it for what it is (and isn’t).

Here are some questions to ask:

  1. Which custom features would serve other customers in the market? Customer-specific features aren’t all bad – that’s how you learn what capabilities customers really need.  But it’s critical to determine which ones should become part of the core product and which ones are one-offs that should be avoided in the future.
  2. What part of the big win can be replicated without a lot of effort? Things like the solution offering, pitch materials, pricing tools, contracts or clear evidence of your value proposition are easy to scale and replicate.
  3. What relationships were critical in the sales process? This is a hard one, but figuring out who the critical decision-makers were and what relationship was required will help you think about future sales relationships and resources to construct. This will help you determine key go-to-market aspects such as buyer personas, ideal customer profile and other scalable processes.
  4. What critical knowledge was required for your team to possess? Make a long list of key requirements. This repository of knowledge can start to serve as your training materials for current and future team members.
  5. What aspects of the Founder’s persona were essential for the sale? Was it expertise, relationship, industry experience, connections or even the CEO/ Founder title? Break this down and start to consider how this can be scaled by hiring, training, knowledge sharing or sales pipeline and buyers journey processes.
  6. What customer gates were critical to advancing the sale? A “gate” is some customer checkpoint you have to pass before the deal can close. An example would be a technology audit by the IT organization, a review of your privacy policy by the legal department, or a presentation to an executive committee. Often these gates will be common across customers and therefore can be proactively added to your sales and marketing processes.

Next, after you do this exercise, take a break. Remember the big win (and don’t forget to make sure the customer actually gets all those things you promised them in the sales process). Take a moment to recognize that you have some time to figure this out.

The first step is to analyze the process clinically and recognize the risk of the false positive. If you do that, you’re already ahead. Too many startups sputter out after one or two big wins and never really figure out why they couldn’t scale the business or repeat that big win. Take the time to examine the process and recognize where false positives (or non-scalable) factors were at play in your big, early wins. Then start to build a plan that takes into account what needs to be replicated – team, knowledge, relationships, processes – you will be well on your way to the next phase of growth.

Author’s Note: A very special thank you to CPO and Co-founder of First Dollar Colin Anawaty and Scott Abel from NCV's Expert Network for their insights and input in this blog post!
Mike Smerklo

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Co-Founder and Managing Director

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