When referrals don't work out
"I don't think you'd be successful with our software...."
This is a newsletter about building a software company, written from the trenches of building one.
I write brief essays to reflect... and to counter all the startup myths and “hacks” peddled by influencers looking to make a quick buck.
This week, I’m answering a reader’s great question: “What do you do when you get a referral to someone who will probably buy, but doesn’t fit your target customer criteria?”
Referrals are great, except when they aren’t
If this newsletter has a theme, it’s that building and growing a B2B SaaS company is complicated and difficult.
Most of my readers are in the pre-$1M ARR stage. You’re clawing to find product-market fit, grow your customer base, and get out of the “thrashing about” phase.
At this stage, when someone reaches out to you and says, “Hey, I have an introduction to someone who might be a good customer for you,” you feel relieved:
Finally, someone is helping me out!
And then you do some research on the potential customer… and they’re way outside your target niche. Maybe you’re selling to fast food franchisees with 1,000-2,000 employees and the introduction is to a retailer with 200,000+ employees.
What do you do?
Copy + Paste
Scenario 1: The “out of left field” intro
There’s a class of potential introductions that is so far outside our current target niche that the conversation wouldn’t be worth having. We sell into hourly workplaces that have high turnover; if someone offered an introduction to a white-collar professional services firm based in Uzbekistan, it would be dumb to have the conversation.
At that stage, I’d say:
I really appreciate the offer to introduce me to UzbekiMcKinsey. Let me hold off on that introduction for now - we’re really trying to focus on fast food franchisees in the US. Do you have any contacts who own 5-10+ restaurants? If so, I’m sure we could help them with hiring - they’re having a really difficult time right now.
Scenario 2: The “can’t serve today but will serve in the future” intro
We’re hoping to expand beyond fast-food franchisees in the coming year, and could feasibly go up-market into enterprise deals with big retailers and/or other SMB verticals like hourly healthcare workplaces.
So… what do we do if someone offers the introduction to a large retailer or to a different SMB vertical?
We’ll almost always accept the introduction and have at least a discovery call to get product and messaging feedback for the new market. This also warms up the relationship for a future sale.
But this scenario needs to be handled delicately:
The person making the introduction needs to understand that you’d love to have a discovery call - BUT that you’re not likely to make the sale right now because you are focused within your current niche. They need to know this prior to making the introduction so they can assess if the introduction is currently worthwhile.
The company being introduced needs to understand that you’re focused in a different niche and probably won’t be able to serve them right now - BUT if they’re interested in talking now you can start considering features that will help serve them in the future.
Some will argue that you should take every conversation and try to confidently sell outside your niche. I think that’s bullshit.
I get more signal from these conversations when being honest that I don’t serve their niche - it reduces the tension during the meeting, enabling you to ask both “stupid” and probing questions like:
“Here’s what we do for this other niche - how could you see it working for you?”
“It sounds like this is something that would be valuable to you. But if I’m going to go back and tell my team we should enter your market, I’d want to know that people in your industry are really serious about this. Based on what we’ve discussed, is this something that matters so much to you that you’d sign a 2-year contract and pay in advance for?”
These questions aren’t stupid or pushy if they come from a place of honest investigation of a new niche. They’ll get you non-BS feedback. And then you can wait and see what happens post-meeting: Do they email you that they are really interested?
If they are really interested and do want to buy, you have three options:
You can offer the product as-is and without guarantee that you’ll build anything specifically for them
If they’re not a game-changing customer and won’t buy until you’ve built certain features, put those features on the right place on your roadmap and keep in touch.
If they ARE a game-changing customer (e.g., Starbucks wants to pilot and potentially buy for all 32,000 locations) and won’t buy until you’ve built certain features, be damn sure that they’re serious and you’re set up for success before de-railing your team and roadmap.
Thanks to the reader who submitted this great question! Reply to this email if you have any questions or topics you’d like me to address in future newsletters.
Next week I’m going to share a product planning exercise that’s been a game-changer for us.