Conference season is kicking off, meaning you’ll be hearing lots of sales pitches from all kinds of technology companies. This is not just about finding a needle in a haystack, it’s about figuring out how best to sift through all hay, straw, and needles.
During my six years working at a local media company, I have evaluated hundreds of products. Sometimes I picked the right one the first time out, other times, we’ve gone back to the drawing board, so to speak.
Here’s the process I’ve used:
Step 1: Put technology companies into two buckets – Want/Have and Interesting.
- Want/Have: I have a clear understanding of the product value and the business model, and can explain what it does or how it works to the executive team and sales leadership. It could be as simple as, ‘we sell ads on it’ or ‘we use it to send offers to our audience.’
- Interesting: I may not be able to understand how we generate money or the product value. This might be the fault of the vendor, it might be a bad idea, or it might be too outside the box for me.
Step 2: Figure out the product components to see how much value is being added by the product.
Many ad technology companies do not have a proprietary technology, platform or product. Instead, they improve the efficiency or profitability of existing products. With this in mind, it is important to evaluate both the revenue potential as well as the time saved or profit.
For example, a paid search platform buys ads on Facebook, Google and Bing. Why do I need a platform? What parts of Facebook, Google and Bing does it simplify or streamline so I can offer these products more efficiently (and profitably)? Will I be able to increase the revenue or reduce operation expenses?
Step 3: Evaluate the product value, cost and price relative to the technology maturity of current and target clients.
This is likely the most challenging part of the evaluation as it can be tough to grasp of what clients will want next year or the year after.
The chart below categorizes technology products for small businesses. Each product category sits across a minimum annual budget for advertising and marketing. Products are further grouped by the broader category, while colors identify the typical goal for the product.
Essentials – Many essentials are a one time expense (e.g., photos, videos, branding, collateral, point of sale system). Essentials such as website hosting and domain name are relatively inexpensive.
Revenue and Profit – Need for these products often overlap and are highly dependent on industry. Call tracking and scheduling platforms will be more important to appointment-based businesses, while coupons might be more valuable to retail.
Efficiency – As companies spend more on advertising and marketing, they usually become more focused on the efficiency of their advertising and marketing dollars. These are the shiny objects that require the most effort, the highest budgets, and sometimes the longest time-frame to show ROI. Commitment in terms of time and personnel is key here.
Step 4: Assess and compare.
In general, steps one to three can be completed before the vendor sends a proposal or pricing, and often before the demo.
For products your team wants or already has (if you are looking for a replacement), the assessment can be done several ways. For this, we have put together a one-page form to help you get started.
Even if you have an official process and multi-sheet Excel workbook to analyze new products, this form will help you think through how you will work with the vendor. If your company does not have a process, do a quick check of the revenue potential and cost before bringing the product to the finance department. Put together a few quick scenarios – assume that you sell only sell one, thx at 10 percent of your current customers buy, and 50 percent of your current customers buy. Don’t forget to include sales commissions, fulfillment and reporting costs.
Rules for working with early stage start-ups
Sometimes you find a company that is really interesting, but it’s brand new. They’ve raised a little bit of money and have a brilliant idea. But, will the idea succeed? Here are some rules I try to follow when evaluating an early stage start-up.
- Don’t ask for a free license. I have been offered products to use for free or as a free trial. If I plan to make serious money over any period of time, I want support and product updates. Both cost money and I would rather pay and be part of the story to investors than get it for free and have the company go out of business. You are much more valuable as a paying customer.
- Do more than ‘be available for feedback.’ Proactively send concerns and issues from your team. If a feature is not working or a link is broken, send it immediately – do not wait for the monthly call.
- Help them understand your customer and your business model. Do not assume they understand your billing cycle or your unique order entry process.
- Be a case study or a reference. No technology product is perfect. Remember, Gmail was in beta for six years!