Monetizing relationships...

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One of the paradoxes of marketing and sales is "monetizing relationships."

We typically hate to be sold. The harder the sell, the more we hate it. However, we typically like to buy. Any person who has had an experience of spending their own money knows this. Many of us have been blessed to be able to buy something from someone we found ourselves liking.

This is no accident.

On the other side of that transaction, the sales person has to build trust, rapport, peer-to-peer credibility, some level of personal connection. An emotional connection. A relationship, if you like. That goes triple for the B2B complex sale, where a company is buying big-ticket, high-risk items from another company. (I believe that it's also true in many other types of sales where the stakes are much lower.)

We who are selling stuff want people who are in the market to buy to be confiding their problems to us. Unless they trust us to let us in on those problems and help them solve those problems, nothing is going to get bought. At least not from us.

Why would a buyer trust me [a marketer, sales person, company PR representative, executive leader, etc]? Because he or she believes at some level I am willing and able to act in their interests as well as, and possibly even counter to my own (at least in the short term). There's some human vulnerability going on. They tell me what's really going on, and I tell them what I really can and can't do to address their situation. Because we have a relationship.

Now, in addition to all of this, the sales person is also on the hook to monetize that relationship.

How can I maintain your trust (which implies vulnerability) and still do things that move you toward buying something from my company (which implies control)?

If you've ever wondered why so many startups fail, it's because selling is a lot harder than it looks. Most startups are not run by people who can sell. And sales (including repeat business from happy customers) are what keep companies in business.

If you ever wondered why great sales people make a lot of money, it's because the ability to monetize a relationship is worth a lot of money.

Respectfully disagreeing with Seth Godin on equity

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Seth Godin just gave some really out of the box advice on how to structure equity in a new company.

It's actually great advice, but I disagree with his claim that his method offers a better way to value the company.

Here's why: just as Seth points out that we don't know what the company's going to be worth in 18 months, we probably don't know what it's going to do, how it's going to make money, what market forces we're going to have to address, nor how we'll address them during the next 18 months.

We have a plan. If we're really smart and sophisticated, we have a Plan B and a Plan C and so on.

But it's even harder to say "here's what this task list will be worth in 18 months" than it is to say "here's what this company is going to be worth in 18 months." Both are equally dependent on the same unknown variables in an uncertain future.

What's really valuable about Seth's advice is the brass-tacks conversations you have to have about expectations and the implementation roadmap if you take his advice. It's a lot easier to dream together than to figure out how to work together. Better to figure that out now, not months from now.

Spending lots of upfront time hashing out the roadmap should make the equity conversation a lot simpler. We should come away from that conversation with a clearer sense of shared vision, what everyone's got to do toward it, and to what extent we trust each other to do what we say.

But I don't think that actually structuring the equity in the manner Seth suggests has any more value than 50/50, 49/51, the % of startup capital each put in, the % of decision responsibility you expect to share, whatever motivates and satisfies your partners and stakeholders.