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Comment by oretoz | Hacker News Reader

I still haven't got my head around the 'growth' thing is how is it applicable to software/hardware startups that are NOT developing products for mass market.

For example, if someone in telecom industry creates a product that can only be sold to operators. The time it takes to convert an engagement can be upwards of 6 months. In such cases, what would be a good growth metric with which to measure your progress?

Now, we can chose not to call such companies startups but that doesn't solve the problem.

I am sure there are many knowledgeable people on this thread who can provide some insights here. Any pointers to read will also help.

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What you are describing is enterprise sales. I co-founded one of those. Early traction is easy to spot:

- at first, you can barely get first meetings with any potential customers. You track how many companies even agreed to meet with you once.

- a few months in, you get your hopes up (incorrectly - usually). A few companies you met are talking about doing an evaluation of your product.

- another few months go by, just one of all your contacts moved to do an evaluation, but then they postponed their purchasing decision to the next fiscal year.

- still no revenue, but now you have a funnel: x prospects in first meeting, y prospects in second meeting, z prospects in eval, 0 prospects have bought. Keep tracking those numbers and the trend will be clear.

I've been a manager working for telco companies so I know a bit about it. Usually the backlog is a good metric but it works from when you have already sold the product. Usually to assess what happens before the sales team is asked to assess the probability of closing the deal and discount the deal size by that probability. An increase of the scope (and of the total value) or of the probability to close the deal represents your metric. It is not very scientific but could be made pretty accurate. E.g: you know the price of your product and how much you are willing to give a discount in order to close the deal. Also, even if negotiation, especially with big companies, could be unpredictable, it is usually done in steps and each steps closer means an higher chance of success. A possible sequence of steps is: - RFI received. - RFI answered. - Q&A and first meeting - Follows Up - RFP received - RFP answered - First round of Q&A/meetings - Short Listed - Second round of Q&A/meetings - Product demo - Final negotiation (usually price and conditions) This is the process for RFI, there's a different one (and a little bit more complex) for "cold calls" that probably is more applicable to startups. Obviously some steps are optional and the names could changes but this is how it works. Just a final note, though. If you are a startup in B2B avoid, at the beginning at least, big corporation as client if you can. They have a huge negotiation power, they will drive down your price like crazy and being your biggest client they will use their force to ask you a lot of extra work than the one negotiated. You will end up loosing a lot of money on the deal and also you will have little ability to follows other deals. Yes, they are useful to qualify for other clients and if you lock them in they could be quite profitable, but unless you have deep pocket they will crash your company.

Thanks for the detailed answer. I suppose tracking stages of sales pipeline is a good metric as you and several others have mentioned. Much better than being completely in dark.

Also by 'backlog', I assume you meant product backlog (e.g. features remaining) or something in the sales funnel?

While tracking the sales funnel is great to use as an indicator of progress, it is not great as a decision-making heuristic internally (e.g. for product features) as pg mentions in his essay 'Startup=Growth'. I suppose product backlog is a good metric for such cases.

Tldr; use sales funnel to track business side and feature backlog internally.

Because of the faster feedback cycles, the web/mobile app world can use the same metric to track internal and external progress.

What do you mean by backlog depends a lot on what you are selling: - If it is software, usually you sells it in stage or you have to deliver customization/integration at a later stage: - If it is SaaS is like before but you have also the following months of license (they usually ask for a minimum guaranteed lifetime for the SaaS); - If it is hardware for internal use usually it is installed in stage, so you could have your sales spread over few months/years. - If it is something they resell, you will have the projection of sales. _ If it is a service, you have the service not yet delivered as backlog. Obviously they can cancel when they want, but it is still your backlog until you deliver it or it is cancelled.

Its very different as you mention. "Growth" in the sense that its talked about here only really applies to products with many feedback cycles where iteration is possible (not hardware). For products with longer sales cycles its generally based on more traditional sales metrics, measuring where people are in your sales funnel and conversion between sales funnel steps.

backlog (can be applied to sales & implementation pipelines)

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