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01/27/2021

It’s Not All About Ads

What are critical elements and considerations while founding a start-up?

Stephan Schubert - January 27, 2021

Tips for practitioners

-Best Practice-

The most suitable sales strategy is not always obvious, even if the product is good. For instance, when setting up Onvista, we thought we could sell financialinformation, stock prices, and so on directly to the customers via a subscription. This assumption proved to be wrong because people would not pay for this kind of service. Instead, we managed to generate revenues in another way. We as the founders placed ads and partnerships on our website. Additionally, email addresses that we received through registrations turned out to be a valuable currency in the future. What is more, an entirely new sales market emerged that was not originally envisaged for the start-up. Banks were interested in buying Onvista’s programs (B2B) in order to offer these financial services to customers on their own websites. This was a hidden opportunity because the sales strategy suddenly changed from a B2C to a B2B approach.

B2C versus B2B 

There is a fundamental difference between selling B2C or B2B for companies and new startups. B2C sales mainly focus on a larger group of consumers who in many cases cannot be approached in person. Because total earnings are often lower than in B2B sales, revenues need to be achieved through greater sales volumes. Conversely, B2B sales are often directed at only a small number of firms or service providers with which the startup founders are in direct contact. As a result, total earnings generated from large customers tend to be higher. I believe that an individually tailored sales strategy and direct contact to the companies are crucial in that respect. Start-ups have to raise awareness for their products by directly approaching companies that would otherwise not even know that the product exists, let alone search for it actively. That being so, a unique sales strategy is much more important than performance marketing. Six out of ten start-up failures are related to sales issues.

Right place, right time

Anyone who can generate customer demand for a product without advertising can count themselves very lucky. In terms of sales, they simply need to be in the right place at the right time. On the other hand, products that consumers do not yet know about have to be advertised, presented, or explained. This “push” approach is becoming less popular these days, but it is often more successful. Addressing customers individually makes them more inclined to buy the product because performance marketing only works if consumers are actively looking out for a product.

My experience shows that huge marketing budgets do not guarantee a company’s success. It is more about the intelligent use of the resources. Even though it is still easy to attract capital in some sectors, start-ups should be cautious about growth at any cost. Well-implemented and controlled growth often produces rapid, greater success while being less capital-intensive. Moreover, start-ups need to have a well-balanced blend of employees. Extroverts, for instance, are often useful when it comes to sales – and that is something that is difficult to learn.

Tips for practitioners

  • Do not just rely on Performance Marketing! The path to success is composed of a well-working sales department and a successful selling strategy.
  • Make up your mind in advance if you would like to engage in B2B or B2C business! Should one of them not work maybe the other one is still an option.
  • Take care of a personal address in B2B sales! Firms that do not know your product obviously cannot demand it. Explain your products to the customer.
  • While founding a start-up, assemble a team of diverse characters! This may provide synergies because not every trait of character can be learned.

Author

Stephan Schubert

Stephan Schubert is entrepreneur, angel investor, and one of WHU’s most prominent alumni. He concluded his studies at WHU with a diploma in 1994. After that, he started his career with McKinsey. In 1998, he founded Onvista, Germany’s first online portal for top information on financial markets and tools for analysis. Later on, the company was sold to Société Générale. Schubert founded three more companies and exited all of them successfully: Ligatus, IS Teledata, and Finanzen 100. Today he is one of Germany’s most active, experienced, and best-connected angel investors.

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