Software house growth boosters – specialization, predictable revenue model and more

Michał Słupski in

Blog/Other posts/Software house growth boosters – specialization, predictable revenue model and more

Lately Tomek Karwatka, Co-Founder of Divante, held an interesting event in the global e-commerce software house’s headquarters. While initially I only knew the topic would be software house growth, which might as well have meant generic content, I got served some of the best business advice I’ve heard in a long time.

And not surprisingly – with over 180 people on-board, and income in the order of millions (4,2 mln in 2014), the founders of Divante are the right guys to listen to if you want to grow a software company.

Here’s a revision of the innovational insights from his talk.

Specialization, edge of technology and useful products

Building a software house is a great opportunity for technically skilled people to branch out into the world with their expertise and solutions.

If you know a certain technology (or a few), you can already provide some sort of software dev services and you’re theoretically a part of the market.

But have you ever visualized how long it’s going to take until a larger company takes your chunk of the market and leaves you penniless?

You need to grow your company to avoid it. Several things can help you do it.

One of them is being on the edge of technology. If your team is among a few on the market that work in the newest technologies, customers will be willing to pay a higher margin to work with you.

However there are plenty of profitable software market niches not on the edge of technology, and to find them you need to specialize.

It’s the second thing that allows faster business growth. With the vast, growing number of technologies that are already in-use, focusing on one can be a great idea. B2B markets offers plenty of niche opportunities for specialized software services.

Divante is specialized in e-commerce services. With the strongest skills in a certain domain, you can offer much more to customers, and ask for a better price.

Plenty of service business founders intentionally build startup-like products, because they’re hypothetically easier to sell.

Another thing that can boost your growth, is a kind of “hidden” advantage of a software house. Products come to life organically – not from weird ideas based in who-knows-what merit, but from your customer’s real needs.

In the end, nothing is healthier for business growth than healthy sales.

The crucial part of business growth – sales

You might think that you can’t control your business fully when you do sales. But it’s the other way around – sales help you understand how your business works and grow it in a more organic way.

Most people imagine sales as having to pretend that you’re someone’s friend just to sell them stuff.

Which is not true – respect in business isn’t the same as personal friendship.

The market isn’t a place to make friends, but your business is supposed to provide the best quality software in your niche.

So to sell, you need to let people know that you’re the best.

Letting people know that you’re the best without bragging

Become a challenger to show your mastery in sales discussions.

This idea was defined by Brent Adamson and Matthew C. Dixon , in a book that resulted from an extensive study of sales – Challenger Sale.

The Challenger Sale is a simple framework, where disagreeing and questioning what potential customers say is a way to win negotiations.

This requires knowing what customers need – knowing it better than they do.

For instance, before approaching fashion e-commerce stores, Divante’s team will try to understand what causes success in that particular industry.

Tomek noticed that if a potential client’s team is arguing about his services during negotiations – it usually means they’ll buy.

If they just keep nodding in approval, the deal is probably already lost. That’s because you’re not telling them anything new. To help people make a decision, tell them things they don’t know, and challenge their point of view.

At some point scaling will require you to hire first salespeople. Can that be done without pain?

Hiring salespeople isn’t easier than hiring devs

It isn’t simple. Salespeople need to know what they’re talking about in this industry. But it’s hard to find salespeople with a developer’s background. Look for smart people interested in software development, who are good material for learning sales.

Here are a few things to remember before you hire salespeople:

  1. Don’t make them cold-call – it’ll just be a waste of their time
  2. You should already have a well-defined offer. Young companies often hire a salesperson too early. If you don’t have an offer that you believe in, don’t expect your newly hired salesperson to create a good one.
  3. Salespeople hate artificial targets that aren’t realistically based in their capabilities
  4. Don’t measure sales performance by the number of acquired contacts, or amount of time spent in meetings – find more insightful metrics, like simply ‘deals closed’
  5. Create a system in which salespeople don’t have to care about anything beyond closing a sales lead. Finances and further guidance for the customer should be someone else’s task.

When the time comes to actually decide on whom to hire, here’s what to do:

  1. See who was most prepared – nothing matters more than good preparation in sales
  2. Value domain experience – especially if your software house is specialized, because your salespeople should understand your offer deeply
  3. Value intelligence – because it’s more important than basic ‘closing’ skills which can be taught at a 1hr-long sales seminar
  4. Test them – give them simple tasks and see how they do; the key here is to do it a few times over, to see whether they learn and improve or keep repeating mistakes

Even the best salespeople need proper management. Here’s what they need.

Use the Predictable Revenue model

It’s a model where salespeople have no other goal but closing deals. So potential clients are sent their way to be convinced to sign a deal.

At the core of this model is lead generation. Divante was RightHello’s first-ever customer, and these days they are employing a strategy like ours with our support.

Tomek has an in-house team that targets potential clients using our app, and writes and sends cold email campaigns to them using best cold emailing practices.

Whenever someone responds, it goes straight to a salesperson.

Salespeople only get leads, and their only duty is to get them to sign a deal. This also gives salespeople accountability – if they don’t close deals, then they’re not much good and you should look for better pro’s.

To grow or not to grow

Whether you want your company to be a small dev shop, or a large software house is all up to you. Just do it consciously.

Don’t enter a market niche where you have no skills and growth is necessary to survive if you wish to stay small. Focus on what you do best, specialize, get close to the technological edge. That way, you’ll be able to gradually win over your market, and eventually grow your business organically.

To thrive in that market, you’ll need challengers. Challenging salespeople, that is, whom you’re going to supply with leads and have them analyse needs and offer solutions to get customers to close deals in the predictable revenue model.

Check out how much revenue Divante has generated thanks to RightHello.

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