Most entrepreneurs are creatures of habit, whether they realize it or not. The experiences they gain while battling to understand their market, connect with their customers, and make the sale tend to stick with them over time.
When an entrepreneur finds a formula that works, however, these habits become both a blessing and a curse.
Successful entrepreneurs can easily fall victim to the “illusory superiority complex,” which leads them to believe that their past success in their core business translates seamlessly to other ventures that are not directly connected to their area of expertise.
Of course, it is called the “illusory” superiority complex for a reason. Very rarely does expertise translate as easily as we hope. When entrepreneurs fall into this trap, the results are often embarrassing.
Perhaps the most common scenario in which this holds true is when a company tries to break into a new market. When teams try to apply their existing model to a new market, more often than not it ends in disaster. The reason, of course, is that each market is unique, nuanced, and full of quirks.
Recently, however, BodeTree has successfully expanded into a totally new market: franchising. Here’s how we managed to avoid the common pitfalls and find success.
Partner with someone who knows what they’re doing
The first and most important step we took was to partner with someone from the industry who knew what they were doing. We brought on a good friend who shared decades of experience on both sides of the franchising equation and let him take the lead.
This was easier said than done, of course. As any entrepreneur knows, letting go of the reins can be difficult. However, after years of learning how to work with banks, I knew the value of deep industry knowledge. Our franchising lead knew not only how to talk to people in the franchise market; he knew who to talk to.
As it turns out, selling to franchisors is quite different from selling to banks. Had we pushed forward with our traditional model, there would have been a tremendous cultural mismatch. By letting go of what we were used to and trusting an industry expert, we were able to avoid obvious pitfalls and proceed with confidence.
Find a path to a “frictionless” sale
As any sales professional knows, nothing derails a conversation faster than cultural friction. Put simply; cultural friction occurs when the seller and buyer have starkly different perceptions and expectations of a deal.
A good example would be if you were to walk into a car dealership and demand to rent a new car for a short period. The situation might make perfect sense to you; after all, you’re exchanging monetary value in return for the use of a new car. However, the dealer isn’t prepared to handle such a scenario. They can sell or lease you a car, but they don’t rent them.
As absurd as that example may seem, it’s not that far from what many entrepreneurs try to do. When I first approached a major player in the franchise financing space, I tried to apply the traditional pricing model we use with our banking clients. Much like the car dealer in my example, I was met with blank stares.
As I came to find out, the partner’s business model wasn’t set up for direct fees. Instead, they approach strategic partnerships from a success-based perspective. That required me to come up with a new pricing approach altogether.
In doing so, we were able to reduce cultural friction and get the deal done. Had I stuck to my original pricing model, the deal would have gone nowhere.
Make them an offer they can’t refuse
It has been said that beggars can’t be choosers, and I’ve found that the same principle applies to entrepreneurs entering a new market.
Remember, breaking into a new market is like starting from scratch. Your organization has no track record, and it is incumbent upon you to prove your value to the industry. In other words, don’t get greedy. Now is not the time for a cash grab.
Instead, make your first few partners an offer they simply can’t refuse. By sacrificing short-term gains for long-term relationships, you set yourself up for lasting success.
For BodeTree, that meant aggressive pricing, additional customization, and increased support for early adopters. While we could have likely received more money from these partners, I felt that it was more important to establish strong, positive, and understanding relationships from day one.
The value of having strong references and success stories was far greater than the cash we left on the table.
Breaking into a new market is difficult no matter how you slice it. However, by finding partners who know what they’re doing, reducing cultural friction, and making clients an offer they can’t refuse, you can overcome the pitfalls that derail so many entrepreneurs.
CONTRIBUTOR
Comments