Jola Cloud Solutions' Blog

1. Don’t get hung up on inventing something new

How many entrepreneurs have made money by inventing a brand new product or service? You need investment to build prototypes and to protect your invention through patents and copyright. Patenting is difficult, expensive and can take years. All of this assumes that you have invented something people need and will pay for. If they haven’t already realised they have a need, then you must convince them and this takes money.

The most successful entrepreneurs have taken an existing business need and found a way to serve it better or cheaper with a pre-existing technology or set of products and services. 

For example, there are hundreds of millionaires in communications and IT, with companies that did not invent anything. Many of them don’t make products, own any infrastructure or even hold stock.

2. Don’t assume that all sectors are the same

People say ‘stick to what you know’ which is good advice. You need to be passionate about what you do, however if your knowledge or expertise is not specific to a particular industry, you should consider choosing a sector with a high intrinsic value. 

If you look at the price/earning ratios for different sectors you will see that they vary. The p/e ratio of a company is simply the price per share divided by the earnings (profits) per share over a period of time. Stocks and sectors with high ratios tend to be those that the market thinks will grow in the future. As a general rule those sectors that have the potential to positively affect other sectors’ productivity (e.g. software and technology) will have higher p/e ratios. 

This feeds through to the valuation of a company for raising money or disposal since a common method of valuing a business that is not publicly traded is on a multiple of the profit it generates. 

Choose a sector that meets this criteria and you should find it easier to raise money. Also you should get more for your business when you decide to sell it. Think about how your business is positioned right now. For example, the telecom service sector (e.g. phone systems) has a p/e ratio of around 20 but the applications software sector (e.g. the cloud) is up around 60. 

Demand

The global VoIP services market is set to reach £108 billion by 2021, according to a recent report by MarketResearchStore.com. SMEs are turning to trusted advisors, amongst their current suppliers, for help once they have identified a need.

IT and Telecoms companies are looking for reliable suppliers who can provide not just market-leading solutions at the best possible price, but also support to ensure customer requirements are uncovered and addressed to their satisfaction.

Recommended sales approach

Don’t be tempted to reel off all the features. A good place to start is asking questions. What’s their current situation? How do they currently manage calls?

What problem is the customer trying to solve and are they aware of the problem? What is causing them headaches with their current phone system?

What’s the implication? Agree with the customer what the problems and deficiencies of the current situation are really costing the business.

What’s the need pay-off? How valuable would a different solution be to the business? Can this be quantified?

According to the 2016 Cisco Mobile Visual Networking Index, mobile data consumption is to grow sevenfold by 2021. By the end of the forecast period, mobile data is projected to account for 20% of total internet traffic, up from just 8% in 2016.

Smartphones will account for more than 50% of connected devices and the number of smartphones is predicted to rise to 6.2 billion by 2021. Mobile video is to grow 870% making up 78% of total mobile traffic due to the wide adoption of live video, AR and VR. Data networks offloading to wi-fi is also to soar.

Business consumption increases as 4G is being increasingly utilised in areas of slower fixed connectivity and for connected devices nationwide. The challenge for businesses is how to manage the cost.

Unlike FTTC, which is largely unlimited (usually with a fair use policy), mobile data is sold with monthly usage allowances and financial penalties for over-usage. Until recently pricing has been high and there has been no easy management portal.

As speeds increase and prices tumble, mobile data revenues are likely to soar. To allow resellers to manage large estates of mobile data SIMs, Jola has developed Mobile Manager. Mobile Manager handles SIM activations, ceases, suspensions, reports, alerts and bolt-ons.

Start trading before you seek external funding

In 2001 I founded an investment management company and recruited 14 entrepreneurs with time and money to invest. Hundreds of start-ups sent us their business plans and for 60% of them that’s all their business was – an idea and a spreadsheet. We would often ask ourselves “if you cannot persuade family and friends to invest seed money or put in cash yourself to test the concept and financial assumptions, why would we?” Is there a market for this product? Is this the right price? Can I make the revenues, margins and profits in the plan? These are questions you can only really answer once you have started trading.

Don’t just trust 

Don’t put people in a position where they have to make a choice between doing the right thing and their own self-interest. Example: A and B start a business together on the basis of equal shares but legally all the shares belong to A. They are very successful and 5 years later they are offered £20m for the business. A may still give B the £10m but that’s not the point. If you are B and you have let this situation evolve it is your mistake. Don’t simply trust people to avoid confrontation or the legwork to negotiate a proper deal from the outset. 

The first priority of a Director is to do what is right for the business. Don’t put yourself in the position of relying on verbal agreements. Even the most fair-minded and decent of people can be prone to mis-remembering when significant amounts of money are involved. 

This trust principle extends to professionals. Too often we trust doctors, lawyers and accountants because we don’t really understand what they do. We assume that because they have had to go through years of training that they are all equally qualified to advise us. 

Voice and data companies can improve ARPU by supplying new products to loyal customers. Research shows that SMEs prefer to buy from existing suppliers, they trust. Until there is sufficient demand to justify investment in support, billing and marketing, the supplier will often partner with a specialist on an introduction and commission basis. Moving from a dealer to a reseller model provides better control and improved margins, however there are challenges along the way;

1. No Reseller Programme

If your supplier only has a dealer programme you will be forced to find a new supplier if you want to become a reseller. This introduces delay and risk and will ultimately put you in competition with your existing supplier. Before you take on a product as a dealer make sure potential partners offer reseller schemes too. Compare their reseller and dealer pricing.

2. Forecasts, targets and contract terms

Existing suppliers may offer reseller schemes but discourage dealers from becoming resellers through unrealistic targets or onerous contract terms. Read the reseller agreement as well as the dealer contract before you sign and ask to speak to one of their partners that has made the transition.

3. Billing

This can be especially problematic for IT companies that want to start reselling fixed, mobile and hosted telephony products. Alongside monthly service charges they will need to process monthly CDRs (Call Data Records), rating each call type and producing itemised bills and variable invoices. It is difficult and risky to try and adapt existing in-house billing systems and purchasing and managing specialist billing software is not always feasible.

There are some good third-party billing products available, however the set-up fees, monthly standing charge and billing percentages mean the reseller often has to take several orders before the margin covers the monthly cost of billing. Some of the more sophisticated suppliers offer white-label billing for their products and will even bill products and services the reseller buys from other suppliers. This can be a cheaper and less risky alternative.

For coaching to be effective, three things need to be true:

1. There must be a skills gap to coach
2. The coach must be willing and able to close that gap
3. The ‘coachee’ must accept there is a gap and be willing to accept you as a coach

If any one of these is absent the coaching will fail.

In the context of sales coaching:

1. You must be able to accurately define what is missing and the person you are coaching must agree it is missing. Moreover, it must be relevant to achieving the objectives of the job at the time. Role plays are not always popular with salespeople but managed properly they are the only way, besides field accompaniment, to coach sales skills. Keep them to 10 minutes with a tight brief that focusses on the behaviours you want to observe. Video them and review them objectively alongside the salesperson. Start with the positives and avoid judgemental comments that might make them defensive. Try and get them to spot what is happening rather than what is right, wrong, good or bad.

2. For many successful salespeople the next natural step is sales management. Whenever a salesperson approached me to join the management development programme my first question was always “why are you successful?”. If they were unable to dissect their own performance they were unlikely to be able to hold a mirror up to their staff and help them to be better salespeople. The usual answers were “I work hard” and “customers seem to like me”. I would even get “I don’t want to know, in case I jinx myself”. Selling is a learned skill, not an art and not what you might observe on ‘The Apprentice’. You must be able to identify exactly what is happening in any interaction and your main objective must be to make your salespeople better – not to show off your own expertise or close deals for them.

3. I don’t believe in constructive criticism. All criticism is judgemental and damaging to the coaching process. You must analyse what happened objectively and where necessary agree with the salesperson how they could have achieved a different outcome. You need to catch people doing things right because knowing your strengths is often more important than knowing your weaknesses. Unfortunately, some people are just not wired to work this way and your attempts to coach them will probably fail. You will not be able to develop a salesperson if they don’t respect you as a coach or if they are not able or willing to improve.

Last year Jola won the contract to supply our Broadsoft offering to a voice and data company, for them to resell to their customers. We were up against three other suppliers and the process took several months and many meetings. To sell the product he had hired two salespeople from a competitor.

I would guess they were earning around £25k basic plus £25k commission. The second one left last month, six months in, the first lasted only three. Total investment by our partner of around £50,000, plus agency fees.

He had spent months selecting the right supplier but only a couple of hours on the most expensive bit – the salespeople. So how can he prevent this from happening again? Here are a few ideas. 

1. Decide before you start recruiting what skills and experience you need. For example, if you will want them to sell a complex or evolving product then look for people who score high on ability to learn, or already sell the exact product. What behaviours are you testing for? Write them down and think of questions that would elicit positive or negative evidence of this behaviour. If you’re struggling, talk to your best salespeople and ask them what they do that makes them successful. Only the best salespeople will be able to articulate this. Most will say things like “I work hard” and “customers like me”. If they can more forensically describe their successful traits then think about involving them in the process. They might be your next sales manager.

2. You will find a lot of candidates just by mining your network, however if you do use an agency make sure you brief them thoroughly on the profile. Give them feedback on unsuitable candidates that get through and make sure they understand that if they keep doing it (I used to operate three strikes), you will stop using them. Recruiters can be cost effective if used properly, otherwise you might as well just trawl the online job sites yourself.

3. Have a defined process and understand what you are testing for at each stage. I would do the CV interview on the phone (or via the agency), followed by a behavioural interview. If they got through that they would come back and do a role play for which they would be given a brief in advance. The role play should last no more than 10 minutes - make sure they are briefed just to ask questions (no product dumping). This is a vital stage and you will need an assistant (MD, Sales Director, top salesman) to be the buyer, while you observe. You are looking for problem/criteria seeking questions and good testing understanding and active listening behaviour. If all they do is ask fact seeking questions they have underdeveloped sales skills. If you still hire them you are taking a risk that they can learn and your company will need to commit to coach them. The last stage is for them to present their ‘first 100 days’. This has the double benefit of validating their presentation skills and making sure they hit the ground running when they start. Candidates that reach this stage are normally 90% of the way to being offered a job.

4. In the behavioural interview, stick to example-based questions and avoid the hypothetical i.e. ‘give me a recent work example of when you…”, rather than ‘what would you do if…? People that are used to getting through interviews will have pat answers for all your hypothetical questions but the real evidence comes out when they talk about what actually happened. Explain before you start what you are going to do and keep dragging them back to real events. Probe their answers, “what did you say next…?”, “what was the outcome?”, ‘what was your actual role in the sale?”.

5. Talk to someone they have worked for in the past - before you hire them. Ask them for a boss (probably the job before their current one) and a telephone number. These days written references tell you very little and often arrive after the person has already started in the position. You may be surprised how much people will tell you on the phone if you ask the right question. I always found “what areas of coaching do you think I should focus on?’, worked quite well.

Advice given to me by a venture capitalist during my first start-up. If you really do have to raise money from business angels, banks, venture capital companies or private equity then do it long before you start to run out of money. The fundraising process will normally take at least six months so make sure you are not about to go bust just before you close the deal. People who lend money or buy equity in your venture are businesses too and if they see you are desperate you might find the terms of the deal changing – or they might see this as poor management and pull out altogether. Another mistake entrepreneurs make is over-egging the forecast upon which investors are basing their valuations. If you are not making your numbers during the fundraising process you will make your potential investors nervous. Again, they may pull out or change their offer. 

If you can avoid external funding completely I would recommend it or at least until you have a proven business that can stand on its own two feet. Then you are raising money for growth not survival and this puts you in the driving seat with potential investors. If you believe in your business then back it with your own money because if you’re right, anyone buying your equity right at the start is getting a real bargain. In my first start up we funded the business initially by selling equity to friends and family and re-mortgaging our houses. 

A final note on venture capital funds and private equity. Generally I don’t believe in the concept of clever-money. This is where a potential investor professes an expertise in your type of business or industry and attaches a premium to this by way of a lower valuation or monthly charge. Most are not great at running businesses or at least not yours. They are there to provide you with money and help with further fund-raising if needed. They have a seat on your board to protect their investment, so be careful about letting them meddle in your business. Check all the drags, tags, rights and restrictions in the contract and think carefully before you agree to pay any management fees. 

Who are Openreach?

Openreach owns the pipes and cables that connect the majority of homes and businesses in the UK to the national broadband and phone networks. It is owned by BT.

What was the issue?

BT was accused of abusing the monopoly by underinvesting in the broadband infrastructure and charging over the odds for services. There were ongoing calls for the regulator Ofcom to force a split between Openreach and BT.

What happened?

Eventually Ofcom announced that BT would legally separate from its Openreach subsidiary, describing it as a “significant day” for consumers.

Openreach will soon become a distinct company with its own staff and management. Ofcom says the new Openreach will have “its own strategy and a legal purpose to serve all of its customers equally”.