[HN Gopher] Ask HN: As a Founder, is this business model compell...
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Ask HN: As a Founder, is this business model compelling?
I recently launched an independent sales agency specializing in
early-stage startups. My model is adapted from my experience as an
independent manufacturer's rep. for electric utility products used
to transmit power from generation to end-users. In an overly
simplistic summary, I am offering to work with companies under a
performance-based contract that requires payment only when
something is sold. It is backed by an agreement that is cancelable,
with a 30-day written notice, if I don't produce the agreed upon
performance metrics. The macro trends that make me think this is an
interesting approach in today's environment are as follows: 1.
Higher interest rates and less availability to capital is making
seed funding harder to secure 2. Investors are aligning with more
efficient and cost-conscious startups 3. Runway and cashflow are
more important than ever because funding rounds are taking longer
So, do you think this is an interesting approach or am I missing
something? As an aside, I have been a long time reader of HN and I
am so grateful for the interesting, intelligent, and thought
provoking comments. Thank you in advance for any you may offer to
my post!
Author : salestoscale
Score : 29 points
Date : 2025-04-04 16:15 UTC (6 hours ago)
| bradley13 wrote:
| FWIW, many years ago I started a little tech company. I was
| convinced that we had a compelling product, and we had some
| initial customers - franchises of a large, worldwide
| organization. It would be easy to springboard to more and more
| franchises, before even looking elsewhere for customers.
|
| Turns out that I hate sales. Not coincdentally, I'm also not much
| good at it. We talked to some marketing agencies, but all of them
| wanted flat fees, and _none_ of them would consider "performance
| based" payment.
|
| So, yeah. I wish someone like you had existed at the time.
| codegeek wrote:
| It doesn't work that way unfortunately. The founder(s) have to
| sell initially because you know your product the best. No
| external sales person can come and suddenly get all these
| sales. You may hate sales but if you want to start a business,
| you are the best salesperson for your product/service.
|
| There is no magic wand to this. You just learn sales by doing.
| I am a nerd myself but when I started my company, I
| automatically started selling which is mostly just trying to
| talk to potential customers and understanding if your product
| can solve their problems. Only you know that best in early
| days.
| ipaddr wrote:
| Or hire someone who can sell.
|
| The reason why many sell themselves is because it's cheaper.
| The founder knowing the product the best is true but trying
| to be a world class seller is best left to those who can be a
| world class seller which many founders fail at.
| soared wrote:
| Marketing agencies don't do sales, so that makes sense. You can
| get performance marketing agencies to do cost per lead / cost
| per acquisition goals, but that's all through
| search/social/organic/etc and not actually closing or calling
| leads.
| skeptrune wrote:
| This business model is always compelling, but you have to be
| extremely selective with which customers you decide to take on.
| pickle-wizard wrote:
| About 10 years ago I worked for a startup that used a sales
| agency. Unfortunately it did not go well, in the nearly 3 years I
| was there they never made a single sale.
|
| They didn't understand our product and had no desire to
| understand our product. I advocated to end the contract with
| them, but management refused.
|
| So I think I would want some verbiage in the contract that says I
| can just walk away if I don't think it is working out. I
| understand you need to protect your interest too, but I wouldn't
| want to get strung along by someone who is just not willing to
| put in the work.
| alwa wrote:
| Would OP's proposed performance-based contract, where they're
| only paid when the sale goes through, align their interests
| with yours better than the status quo model you describe here?
| svnt wrote:
| No, because of the second-order dynamics:
|
| OP will have multiple clients. OP's sales employees will get
| to choose which things to sell.
|
| OP's customer still has to do a lot of work to bring OP's
| salespeople up to speed at all, and even more if they want to
| be successful/"compete" with OP's other customers for OP's
| salespeoples' attention/effort.
|
| It can be a good business model for OP if he can get it, but
| as has been mentioned elsewhere seasoned potential customers
| will not, and should not generally, bite.
|
| The downside for OP is once the sales process starts working,
| his customer grows, probably hires in-house sales staff,
| trains them off OP's work, and cuts his contract, so he is
| always having to work to bring in new.
| abxyz wrote:
| There's an entire industry of "closers" (and the natural
| companion, people selling courses on how to build an agency of
| closers). Pitches like "we place closers into your business and
| guarantee they close business or you pay us nothing" are the
| standard. The reason this business model is not as good as it
| seems is that the incentives aren't aligned, these closers don't
| care about the business, so they'll sell to bad clients to hit
| their targets. You can definitely be successful doing this (so
| don't be discouraged, if you do it well you'll stand out) but
| you're competing with an ocean of trash that so many businesses /
| startups have been burned by and/or are apprehensive of. "high
| ticket closer" is the phrase you can google for to find examples.
|
| edit:
| https://www.reddit.com/r/sales/comments/146gjwu/what_the_hel...
| jocaal wrote:
| There is no way to know if a business model is compelling. There
| have been many business models that didn't make sense to most
| people, yet yielded good businesses. If you believe there is
| potential, you as entrepreneur can take the risk in trying it out
| and potentially reach success. If you end up trying, I hope you
| succeed in your endeavours.
| nickdothutton wrote:
| This business model was quite popular and successful in the 90s
| in the UK when early stage US tech firms wanted to come to Europe
| without having an office or perm hires. Those working in it that
| I knew were highly capable. Most of them went on to be hired by
| the client once enough business had been built in the geography.
| They would typically become EMEA VP Sales for said clients.
| Netscreen among others started this way in EMEA.
| notahacker wrote:
| You're also going to have to take into account whether it's
| compelling for _you_ , considering the non-zero risk of devoting
| a lot of time to businesses with limited product-market fit.
| That's obviously less risky if you're sticking with markets you
| know well, or if you end up with a massive portfolio of products
| so you can switch to pitching something else as soon as you see
| the customer's eyes roll...
|
| There's an adverse selection problem where the businesses that
| aren't market ready are the ones most likely to be intrigued by
| the idea of someone who isn't an employee and doesn't cost
| anything doing their sales for them.
| rwallace wrote:
| I think it's an interesting approach. With, yes, caveats as
| people have pointed out, but there are caveats to everything, and
| this approach removes a huge barrier to 'try them and see'. If
| you want to talk specifics, contact info is in my profile.
| brudgers wrote:
| Outsourcing sales means not talking to potential customers. So it
| is psychologically more attractive than rejection.
|
| Outsourcing sales to a person with competing incentives is even
| worse...by competing incentives, if you have ten clients for your
| service one of them is easiest to sell. Nine of them are not the
| easiest.
|
| Good luck.
| soared wrote:
| The cost of onboarding a sales person (you) seems high for a
| maybe-functional part time employee. For you, learning enough
| about countless products sounds challenging.
| edoceo wrote:
| My startups get 4 of these pitches a week. All performance based.
| All with amazing claims of close rates - for lines of business
| that are completely unrelated to mine.
|
| The investor side of me thinks the founders should be doing early
| sales. I don't agree that capital is any harder to raise. IMHO
| market turmoil is good for angel/seed as those with means are
| looking for alternatives.
| Rodeoclash wrote:
| This exactly. People are already trying to do this and judging
| by the sales techniques they use to approach me (spam emails) I
| don't want anything to do with them!
| cj wrote:
| This sounds like the "affiliate marketing" business model (earn a
| commission when you sell someone's thing). That business model is
| definitely alive and well!
|
| I might have tried a service like you're proposing when our
| company was very small.
|
| Now that it's bigger, we have revenue goals that we need to hit,
| and I wouldn't want to hire someone for free to help hit
| important KPIs. If a larger company does engage with this model,
| it would probably be to supplement an existing revenue stream I
| would imagine.
|
| I think the biggest risk with the model you're proposing is that
| it's more appealing to small companies who are more likely to not
| have reached PMF yet, and therefore have products that are more
| difficult for you to sell compared to more established companies.
| FloorEgg wrote:
| You are missing something really really important.
|
| Most startups don't have product market fit. Further, most
| startups make things no one wants. The product might sound good
| to you and you will think "oh I can sell this", but you will work
| your ass off for no results.
|
| They you may go back to the client and say "Hey the market
| doesn't want your product, they want this instead". Now you are
| doing free market research for them, and most likely, they won't
| listen to you anyways.
|
| You may think "okay I need to be good at identifying startups
| struggling to sell who have products people want" and then you
| may realize there's a whole industry of VCs trying to do this,
| that mostly suck at it.
|
| I think you'll find that young companies with products people
| want who are struggling to sell is extremely rare.
|
| There's a reason the business model your suggesting isn't more
| prevalent with startups, and it's because sales skills matter far
| less than market fit.
| FloorEgg wrote:
| Also, the model you're suggesting is really common for well
| established products with product market fit. Insurance sales,
| Tupperware, Cutco, lots of other examples...
|
| If you're really drawn to this model, just beware the MLM ones
| where you have to pay first to sell the product.
| warthog wrote:
| I launched and shut down a sales tech startup. This was the
| exact experience we had with earlier stage companies,
| particularly startups that do not have product market fit
| freedomben wrote:
| This is a great point, and really meshes with my experience as
| well. We've had some great salespeople but deficiencies in the
| product (mainly lack of certain enterprisey features) made it
| very hard to sell. They worked their asses off and closed
| almost no deals. And our product was good and _really close_ to
| what the market wanted. Contrast that with most startups which
| not only have to convince you to open your wallet but also to
| do so for a solution to a problem you don 't currently have (or
| at least, don't know you have).
|
| If you have an excellent sense for products then the model
| might work, but I've seen some of the smartest people I've ever
| met walk right into a wall, even when doing everything they can
| to reach/verify the fit. It's an incredibly hard problem
| sam0x17 wrote:
| > You are missing something really really important.
|
| > Most startups don't have product market fit. Further, most
| startups make things no one wants. The product might sound good
| to you and you will think "oh I can sell this", but you will
| work your ass off for no results.
|
| For these exact reasons, this same business model would
| probably work really well if you were instead connecting pre-
| seed / seed round startups with VCs who commit to a round
| instead of customers lol
| faramarz wrote:
| agree and great comment.
|
| maybe they should focus on. growth stage startups? frankly,
| even incumbant who are perpetually trying to play catchup and
| are more startup like in their core teams via transformation
| maturity and have what startups don't have, market fit and deep
| pockets.
|
| target the enterprise b2b orgs in private equity portfolios.
| pj_mukh wrote:
| To add to this:
|
| Most _good_ founders (regardless of market fit) should be
| figuring out sales engines themselves. Especially the first
| version.
|
| I would not invest in a company where the founder is trying to
| offload sales. Precisely because, as mentioned, sales, market
| fit and product are so deeply interlinked.
| atonse wrote:
| Yup. As a founder who outsourced sales early, I have big
| regrets because it always ended up being me actually making
| the sales with my network and ability to understand the
| market.
|
| So the regret comes from wasting a lot of money. Always do
| your own sales first.
| vessenes wrote:
| Every model has a hard part. Yours is this: you need to be able
| to rapidly assess which products are easy to close before the
| startup knows it.
|
| If you have the taste to find that sweet spot you'll do great.
| That said, this level of taste is most often deployed alongside
| venture capital where you'll work less and make way more.
|
| If your taste isn't good then you should build a highly effective
| cheap rapid assessment tool out of your business so that the tool
| can tell you what's good fast. Which is a thing many venture
| firms do or have tried to do, for obvious reasons.
|
| Upshot: sure, give it a try. I suggest you negotiate for some
| options along with your cash comp for being 'free', because even
| a great venture portfolio hits like 1 in 20.
| nitwit005 wrote:
| If you can assess which are likely to sell, you may as well
| just invest in them instead.
| ipaddr wrote:
| They are with time.
| owebmaster wrote:
| or vibe code it
| rorylaitila wrote:
| Early stage startups, no. They don't typically know what to sell,
| how to sell, or who to sell it to. Many failed founder sales
| efforts start out with wishful thinking "I just need to find
| someone to help me sell." Pre PMF founders will drive you crazy
| with their naive sales/product decisions.
|
| However, for a company with PMF, if you have industry
| connections, and can help them get a short term boost of deal
| flow, I could see that being very attractive.
|
| Helping first time founders setup any sales process at all can
| also be viable. You help them refine their closing process, hire
| on their team, and then move on.
| apparent wrote:
| This could work if you have a rolodex you can monetize in a
| particular market. It could also work if you are amazing at sales
| and can identify which startups have PMF, so you work with just
| those. However, startups with PMF are rolling a stone down a
| hill, so generally wouldn't need the help you could provide.
| Amir6 wrote:
| There are many positive and negative sides to this but I'm
| willing to give it a try. Reach out if you're looking for a small
| pilot customer. Contact info in bio.
| inopinatus wrote:
| Saving a penny to outsource external sales that'll be out of the
| product management loop during early stage, just isn't
| compelling, sorry. To my ears it sounds more likely an agility
| drag than anything.
|
| It might work for a product that's already found a segment and is
| looking for new markets.
| misiti3780 wrote:
| I'm potentially interested in this service, do you have a
| website?
| zupa-hu wrote:
| Hey! I'm the founder of an early stage startup. The product was
| long in the making, about to release v2 and I planned to do sales
| myself.
|
| I've played with the idea of this model myself, in the sense that
| it would be an interesting value-creating service. I'm open and
| also skeptical.
|
| 1) My product is software, you were in hardware. 2) Do you have a
| large existing rolodex? 3) How many startups do you plan on
| representing? 4) Where are you from & where are you located?
|
| I'm not shy of talking to people. The biggest help for me would
| be prospecting and qualifying.
|
| I'm in a rush, please reach out! Email in profile.
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