Relationships can actually be dangerous (bad!) for service companies

Some years ago, I’ve been at a conference in Chicago at the HQ of a mostly-ventured-back SaaS product. They’re somewhere around Round C, meaning that eventually they need to start selling/producing/generating their own revenue, or that venture “line of credit” is gonna go away right quick.

And that seemed to be the problem. The sales machine wasn’t quite there.

But if you look at the different boards they had around the office, it certainly looked like guys were selling. One person had done 93 prospect calls — that week! Amazing. A quota board looked robust.

So what was the issue?

The lessons from the kegerator

If you started talking to people, the issue was something all-too-common. One lady actually told me (next to a kegerator, naturally) that sales largely “did their own thing,” meaning they created their own docs, talking points, and messaging instead of using the branded materials. And as long as they were selling, it was tolerated. No processes were in place. Nothing was repeatable.

What was happening in this org is relationship-based selling. For a services company it can work for a few years — somewhere between 3 and 7, usually — but it has no connection to long-term success. When your business is driven by relationship selling, it means every sales-facing employee is selling on their relationships and prior connections, but when they get new prospects, they’re usually selling to keep the relationship “up,” which means they’re saying “yes” a lot more than they’re saying “no.” Now all the people back in the office are burned out making all those “yes” requests work, and sales is still selling on happy hours, golf events, trade shows, steak dinners, and the like.

The bottom falls out. If you hire good relationship guys with big LinkedIn numbers or cell phone banks, awesome at first. But eventually they bring their own relationships, all of whom have their own demands, into your workflow. And if you’re making money, the executives won’t do anything. They won’t look long-term at the potential repercussions. They’ll just rinse and repeat.

At the 3-7 year mark, though, you’ve got this completely unrealistic mosaic of what core-service you do, you’ve got burned out employees, and you’ve got prospects looking at you and trying to figure out what you stand for and then deciding you’re not the perfect match. Your business erodes. The relationships you sold on don’t renew. The offer is a mish-mash. Stuff tanks.

And in the example above, the SaaS product had 32 use cases. Does anything really need 32 use cases? Not really. But in the words of one woman who worked there, “Well, customers coming in from sales needed all these features, so…”

Relationship selling eroded the product and the brand.

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What’s the answer?

The answer is to shift to value-based selling, namely:

  • What’s the problem in the market?
  • What do people need?
  • How are you providing or meeting that need?
  • What’s the next need?
  • How will you skate to that puck?

Value-driven selling creates relationships because people need whatever you have, so the relationship has to form. Relationship selling doesn’t work the other way — it doesn’t create value. The value is in the relationship, and that’s great for a while. But when the product erodes or the connection moves to a different industry, you can’t sell on that. You can always sell on value, however.

See how we help businesses sell on value in the DACH market.

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