103: How to Get a New Product’s First B2B Sales

Product Startup
103: How to Get a New Product’s First B2B Sales
With Patrick Daly, Author & Product Entrepreneur

00:00 | Kevin Mako (KM): Hello product innovators. Today, we learn how to get new business-to-business sales for your product from an author and serial medical product entrepreneur.

00:10 | Voice-over: You’re listening to the Product Startup podcast. The show that helps bring your product idea to life, by chatting with successful inventors, product developers, manufacturers, and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves. We’re taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America’s leading experts on hardware development for small product businesses. Now, on to the show.

00:46 | KM: Welcome back everyone. Today, I’m very excited to introduce Patrick Daly to the show. Patrick is the author of the book, Just Start Up. He’s built over 20 products from invention idea to market over the past 25 years.

00:58 | KM: Today, Patrick is going to share some valuable knowledge on how inventors, startups, and small manufacturers can get their first product sold by selling directly to other businesses, such as wholesalers, retailers, distributors, or other brands.

01:08 | KM: And then how to accelerate your ongoing product development sales through those channels. Now, on to the episode. Hey Patrick, welcome to the show. 

01:16 | Patrick Daly (PD): Thanks Kevin.

01:16 | KM: Excited to have you on today to talk about selling B2B. It’s a very important subject and something that really all product entrepreneurs should be thinking about when they’re launching or scaling their product as a major option for sales and distribution. I understand recently you just drove coast to coast.

01:32 | PD: I did. Yeah, I’ve been in Canada. It’s great to be here today and to chat with you about B2B, but all aspects I think of innovation and business. It’s something that I’ve been doing for 25 years. I left Ireland in 2018, was down in Barbados for a couple of weeks for some vitamin D and some sunshine.

01:46 | PD: And I met a Canadian couple down there. And they said, you what if you’re going to resettle anywhere you should think about Canada. So I said, I will. And I flew up to Montreal. I went from +35 degrees to -15 in a day on this integrated scale. But it was great.

02:01 | PD: And then I said, if I’m going to live in this country, I want to see it. So I jumped in a car and I drove from Halifax to Hope in BC. It took me 3½  weeks over 10,000 km. But it was a great journey and I had a good time. It’s a huge country. Coming from Ireland, as I said, Ireland is like 300 miles high and 170 miles wide, so that was done in the first couple of hours of my journey.

02:20 | KM: Yeah, I drove across Ireland once, it took me a day and a half with hotel stays in amongst there. So…

02:25 | PD: There you go.

02:26 | KM: Yeah, I hear you. Now look, this is kind of a testament to your personality because you started out as a young entrepreneur. You’re a classic major product entrepreneur success story. Done over 20 products over your career, many of them are number one in your industry. How did it all start? And how did you get to where you’re today?

02:42 | PD: So I was around engineering from a very young age. Engineering and product development and those kinds of discussions were in our house when we were growing up. And I wanted to test my own kind of business development approach, and well the entrepreneurship side was in me.

02:55 | PD: So when I was 14 years old, I got a food van and started selling burgers and fries for my summer holiday down the beach in Southern Ireland. And I did well. I met a lot of people. What I keep saying is that I met a lot of hangry people. So five o’clock in the evening, people are coming along.

03:08 | PD: They’re hungry. They’re angry. They want their food. But what it did was it gave me a great introduction to entrepreneurship and how to take something from nothing to something, I guess. And that was really important. Then I went to Germany when I was 18, again a last-minute decision.

03:22 | PD: I just flew to Germany. I said I wanted to see Europe. I wanted to travel. And I stayed there for two years. I worked with engineering companies. Some contracts with companies like BMW, so great engineering introduction along the way.

03:36 | PD: I came back to Ireland then I joined a company that was Seattle based, but they had their European division in Cork in Ireland. And I worked with them for five years. Within that five-year timeframe, I developed a bunch of products.

03:49 | PD: One of which was a unit that was incorporated into an aircraft seat to reduce pressure and assist circulation. And therefore assist in the prevention of DVT or deep vein thrombosis on long haul flights particularly. So that was a great introduction to that engineering. Aerospace engineering is a highly regulated zone, obviously.

04:10 | PD: So did a lot of learning there as well. And then a director of nursing in a hospital, a large hospital, came to me. I was telling her about the aircraft seating product. And she said, if you can take that pressure reducing aspect and put it into a mattress product for hospitals and give us a product that A, is pressure reducing, B, it obviously is comfortable for the patient, easy to use, and is not too expensive, then we’ll take it. 

04:37 | PD: So, like six months later, I had the idea. I formed bits and pieces of my experience. And I kind of said, if I put this jigsaw of technology together, it should be a product. We launched it a year later and that was the pressure ease product. Within the following year, and within the year thereafter, we had the number one selling product in the market. We supplied 60, 70% of hospitals in Ireland.

05:01 | PD: Started selling in the UK. Started selling in Germany. So it did really well. And part of that whole experience was all around the innovative thinking aspect of things. Because if I was to wear a kind of hat it’s about innovation on all aspects, not only on the engineering side but also on the connection of engineering. And sales are the various bits of the business that are necessary to hit success.

05:27 | KM: That’s amazing. Quite a success story. And of course, that kick-started you off to do many more products, both in direct selling in the B2B avenue, but also in licensing. Today, talking about B2B, business to business sales, this is talking about selling to the wholesalers, distributors, retailers possibly even other companies in your space or whatnot.

05:45 | KM: How do you get started with selling your product? Let’s say, you have your product ready to go, or you’re near ready to go, and you’re looking to now sell. First and foremost, why is B2B important? And then second, how do you start selling in that market?

05:58 | PD: That’s a great question because there are two aspects of it, knowing that your product will fit, first of all. So do your research. Get the questions asked at the very beginning. Irrespective of whether you’re a startup or whether you’re a lone entrepreneur or whether you’re in a very large company, I would ask those kinds of questions.

06:17 | PD: And you’re kind of sanity checking your idea, sanity checking the fit of your product. Because I think, well, the same that I came up with, but maybe I heard it about 10 years ago, somebody said to me, there’s a huge gap in that market.

06:31 | PD: My response was, but is there a market in that gap? Is there an actual commercial opportunity for that product? And I kind of put that hat on when I’m looking at something. To answer your question about the specifics of starting B2B sales, for me, the best way to do that is kind of traditional.

06:47 | PD: But it’s pick up the phone to people and ask them questions. If they’re opinion leaders or if they’re knowledgeable, or if they know their industries, they’d happily share that information with you. So look through your contact list. Look through your LinkedIn network.

07:01 | PD: Make contact with people you know already. Because people who you know, and people who you trust and they trust you, they will get you up that learning curve an awful lot faster. Because it’s a reference factor, it’s a reference value that you’re going to get.

07:15 | PD: And that endorsement will open doors to let’s say higher-level decision-makers. And those higher-level decision-makers at the B2B level could be your customers and will most likely be your customers when you finished developing that product. Because they have a degree then, I guess, involvement from the very outset.

07:31 | PD: And keep them informed. If it takes you two years to develop your product, give them a call every three months. And say, hey, this is where we’re at. Any kind of nudges or steers on how we can improve this? And they kind of are de facto owners of the idea to some degree. Obviously, they’re not factual owners, but you are the owner.

07:51 | PD: But at least you’re getting input from seriously knowledgeable, experienced people. When you launch your product, you’re going to have your shortlist of target customers. And tell them we’re ready to go. Give them a kind of preview. This is a sneak preview of my launch.

08:07 | PD: This is where I’m going. In some cases, you’ll find that the bigger companies, if you’re an early-stage entrepreneur, or if you’re a startup, they won’t want to let you outside the exclusive zone. They’ll say we’ll take that technology. And that’s a great way to launch.

08:21 | PD: Just be careful when you’re doing it, that you don’t lock your technology in a box. And this is a key aspect as well. If you want to commercialize, and you want to get a maximum dime for your buck and maximum return on investment, just make sure you’re not locked in one zone that you cannot get out of, and this is key.

08:37 | PD: Exit clauses are important. In licensing, for example, Kevin, you mentioned licensing. This is a great model if you’re a lone entrepreneur or if you’re an early-stage startup. Just make sure that you’re not locked in a zone. That you have an exit, a way of getting out if sales aren’t hit.

08:52 | PD: For example, you put in a sales quota, you put in a sales target. If’s that’s not hit within a reasonable amount of time you need to be able to walk away. You need to be able to exit your technology from that arrangement.

09:03 | KM: Exclusivity is a great topic. I’m glad you brought that up because it’s one of those things that we see with a lot of entrepreneurs, especially when we’re developing these products. And eventually, some great company says, look, we’ll take it on. We want an exclusive deal. But the devil’s in the details.

09:17 | KM: And there are two things that we’re always looking for. One of them that you mentioned is the sales quota. So if you are going to offer somebody exclusive rights to sell your product, make sure that you have that quota baked in there. Possibly, even have it further baked into your protection.

09:32 | KM: Like maybe they own certain geography or a certain type of customer whatnot. So you’re only boxing it in within maybe one particular industry. But then also box in the timeframe. So if you’re going to hit a sales quote, of course, well, is it within a year or three years? Or is there a growth curve or whatever else in there?

09:48 | KM: Really important to have those things understood and not get too caught up with the excitement of having an exclusive deal on your table. The other thing that I really think is important as well is in terms of using your network to start.

10:02 | KM: And I don’t want listeners out there to be afraid of that concept. And as well, one of the pushbacks that we see when we talk about using your network is, well, I don’t know anybody who’s a buyer at Walmart as an example. Well, you may not necessarily need to.

10:15 | KM: What you need to do is look through your LinkedIn list or your contact list and just find somebody who may know somebody. Or may know somebody who knows someone that knows someone.

10:24 | PD: Absolutely. Just make sure they’re complementary and not competing. Any contact that you make, you just don’t want to prematurely disclose your invention, your idea, your innovation. Just make sure that you know that these people are objective not bias.

10:38 | PD: Now, some people in the industry are broad-minded enough to say, look, I’m kind of quasi competing. But I’m still happy to give you information because industries need to develop. It’s not just specific companies. We need to develop industries. We need to develop sectors.

10:54 | PD: So if somebody calls me and if they say, look, I’m thinking of a product that is slightly on the verge of competing with you, I’m not going to put the phone down. I’m just going to say, okay, well don’t tell me too much unless you want to sign an NDA. But tell me what you think you can share at this stage, and I’ll happily give you my feedback.

11:11 | PD:  I have no problem with that because if we make a bigger pie, i.e. we make a bigger industry, then we all share. And I think that’s a  key element there as well. So, but in the early stages, particularly if you are running on a kind of limited fund yourself, be cautious and be careful about what you let out there.

11:29 | KM: Especially prepatent that’s important.

11:30 | PD: Hundred percent. Yeah. This premature disclosure of the invention will just completely jeopardize and undermine your patent application. So if you are, and if you have to disclose information, make sure you’ve got a watertight NDA. Or just be circumspect and be cautious about what you put out there.

11:46 | KM: Yep. That’s great advice. Now, in terms of selling B2B, one of the things that startups are afraid of is that, well, I’m new. I’m nervous because I’m competing against all these major players. Now, obviously, anyone who’s listening to this podcast generally has an idea that is of some advantage.

12:02 | KM: You’ve created some sort of invention that has some sort of benefit out there. It’s a market gap that you’re filling. Hopefully, as you said, there’s a market in that gap. But also that it’s something that is proprietary and unique.

12:16 | KM: Or it provides some sort of value, additional value than what’s on the market. I love one of the analogies that you talked about with me earlier, which is the speedboat versus supertankers. And I think that gives a lot of comfort to early-stage companies when they’re pitching in the B2B market. Can you walk through that model?

12:32 | PD: Sure. Absolutely. And I’ve been kind of keeping that model and keeping that focus for a number of years. And last year when I had taken the foot off the gas a little bit, this is going to sound contradictory, but I wrote a book when I was traveling around. 

12:44 | PD: And that book is Just Start Up. It’s a guide to building a startup. And one of the chapters in that talks about speed, and it talks about the speed of a startup. One of our key advantages as startups when starting in and out is speed. Because the supertanker is a huge company that has systems, processes, procedures.

13:00 | PD: And if I’m a startup, then I can pretty much make decisions on the ground there and then. And okay, I’ll talk to a couple of people around me and say, is this good to go? Or you’re sitting around the table as a kind of small team you say, are we good with this? Has everybody ticked all the boxes?

13:16 | PD: And then go. That level of speed you can do something in six months that’ll probably take a much larger company two years. So if you get that product established, don’t be fixated or don’t be focused on timeframes, just get the product done. Get it right. Get all the boxes ticked.

13:32 | PD: And when you have that package ready, and this is a B2B licensing element in here as well, those larger companies are continually looking for acquisitions. They’re continually looking for licensing plays.

13:42 | PD: Because if I’m the CEO or CFO or CTO of a large company, I’m going to think, okay, it’s going to take me two years to get that done. It’s going to take me 50 million. I’m going to have to get systems from all over the world or all over North America to get involved and talk to each other, et cetera.

13:58 | PD: That’s the slow-moving element of product development within large organizations. They’re not all the same. Some large companies have honed a system. But I still think that our startup advantage or any startup’s advantage is speed. 

14:42 | PD: And how many users are there? And does it meet the statistical requirement for confidence, et cetera? And so if you take a wellness device, and you’re able to retain the data from that device, then you have short-circuited the whole development process.

14:12 | PD: If you put something in front of them and say, this is my offering. It’s either patent pending or it’s secured. Make sure you secure the IP. Put something very concise together because for decision-makers in those big companies time is of the essence. You have to do it quickly.

14:27 | PD: Put in front of them as a one-page and just say, look, this is what I’ve got. Are you interested in licensing this? And that could be your way to launch through at least one channel. Going back to the points that we talked about in terms of locking into exclusivity as well Kevin. You made some great points there as well.

14:42 | PD: But I think the key aspect is to never lose your own identity in that arrangement because you may have to relaunch a year later if it didn’t work out when you’re licensing your product. If you relaunch and you’re completely anonymous, unknown, then it’ll look like you are copying the product that they’ve tried to launch.

15:02 | PD: So you need to keep some level of sub-identity that is out there. Even if it’s a social media presence, you need to retain that level of identity, if you can. Sometimes the licensee company will say to you, okay, well, if the check is big enough, then you completely stay in the background.

15:21 | PD: And that’s a call that you have to make from a commercial perspective. But if you think this has mileage and if there’s any nervousness whatsoever that the licensing arrangement that you’re going to go into is somewhat fragile, make sure you have that exit clause. And allow yourself to have a springboard when you do come out of that.

15:36 | KM: An exit clause is just simply fair. It’s just making sure that both sides are living up to their end of the bargain, right? So you shouldn’t feel like as a startup that you’re being unreasonable to them because they are pitching you, that they’re going to do great things with your product.

15:51 | KM: So, as such, you need to hold them to a certain threshold. At least the minimum bar that you are comfortable with to scale your business. But I love your comment about identity. And it’s something that, as you said, can be very easy to do just on social media or whatnot. But of course, that has to be baked into your agreement as well.

16:07 | KM: If it is an exclusive deal and you’re white labeling it to them, meaning you are providing the technology, they’re putting their brand on it. They may not let you do that. So you have to be sure that you’ve got the legal structure in place. So you’re allowed to have an identity.

16:20 | KM: And obviously you want to be on good terms with that company that’s promoting your product, whether it be white-labeled or whether it be your brand on it. Ideally, if you can get a deal where there’s exclusivity, you’ve got great terms and it’s your brand on it, then you kind of win in all worlds. But again, all that’s built into the negotiation as you’re

16:35 | PD: Exactly. Or if you can take the white-label route, and if you can get a white label and then start marketing your own brand…

16:41 | KM: Yes.

16:42 | PD: …that’s the win-win scenario. So you’ve got your own straight channel into the market. You’ve also got the white-label channel. Margins can be pretty okay in that you can get a healthy margin, but what you’re getting is consistency. You’re getting consistency through that channel.

16:59 | PD: Whereas, when you’re marketing your own product, there’s always uncertainty. You don’t know how it’s going to go. When I’m planning something out and I’m projecting, I’ll project the expected scenario, the best-case scenario and the worst-case scenario.

17:11 | PD: And that’ll be a range of expectations. I put my numbers into that model. And I’m going to say to myself, okay, if sales are 50% less than we expect, is there going to be a lot of red ink over my PNL and balance sheet? Am I going to be losing money? And who’s going to fund that? And how are we going to fund that?

17:28 | PD: If it’s going to be super popular and I’ve exceeded all expectations, again, how are we going to fund that? Because you need working capital. So think laterally when you’re doing that. But going back to the point of white labeling, combined with direct branding, that is a win-win scenario if you can get it done.

17:47 | PD: And multiple white-label channels, ultimately, with your own brand behind it, would be great. For example, you could say this is ABC product, and it could be ABC inside or powered by ABC on four or five levels. But you could have the ABC direct top-line brand under your own name.

18:09 | PD: And that will give you real value. Because at some stage then if you’re thinking of building that startup, let’s say it’s an early-stage company again because I’ve been around startups for 20 plus years now. So I actually love the space, even though it’s tough. It’s sometimes tough. It’s very rewarding when things go right.

18:24 | PD: It’s very tough when it goes wrong. Any entrepreneur who has been in startup for the number of years that I’ve been in there if they tell you it’s been an easy route, no problems, that’s just not right. But for me, I think I’d look at it and say, where do I want to be? Do I want to keep this as a profit generator?

18:45 | PD: Or do I want to build it, scale it, and sell it as a trade sale, a company or technology, a technology IP technology bubble basket? I can take that out. So really kind of map out where you think you want to be in three to five years. And then map your strategy of commercialization.

19:02 | PD: B2B in that space is a very lucrative area, it’s constant. Keep a good relationship with your customers, with your B2B customers. Make sure everybody’s happy. Talk to them fairly frequently without overdoing it. If they need anything, responsiveness is key. Make sure that they know what you want and have a kind of win-win association with them. And that’s a formula that I’ve found to be really successful.

19:27 | KM: That’s really a winning touch. Much appreciated for you mentioning all those things. A couple of things that really resonate with me there is, first of all, your communication with your buyers and your roadmap, and those two go together.

19:37 | KM: It really becomes important as you’re considering how your brand is going to expand. And as an inventor, innovator, product manager, designer, whatever position you’re in or multiple hats that you’re in, the one thing that you have to realize in the startup mode is that you’re somebody who comes up with innovative ideas.

19:55 | KM: Especially if you start having success with your product, you’re a visionary. And as a visionary, you need to believe in yourself that you will likely come up with a new vision in the future. Especially if, as you mentioned Patrick, you’re talking regularly with your customers.

20:12 | KM: Because not only are you a visionary, but if you’re communicating a lot with your customers, they will start telling you what your product’s doing wrong. How could it be improved? Maybe another product that you could work on. So as you’re planning your brand out, as you mentioned, three to five years out one of the things that you want to really be thinking of is how do you actually scale your offering?

20:28 | KM: How do you come up with your next product? How do you come up with maybe a better version of your product? Or even a cheaper version of your product for a different audience or a different region. A big part comes down to your vision but in combination with listening to your customers on a regular basis.

20:43 | PD: Absolutely. And I’ll give you an actual example of that. About 10 years ago, I developed a topper for medical purpose, a sleep topper. And it was designed, again, to prevent pressure ulcers and have comfort. But I placed an infection control feature into that product.

20:58 | PD: And I said, look, when I launched it at that time, I spoke to the clinical people and they said, yeah, it’s great. It does the job that we wanted to do. But I said the infection control aspect, I think is going to be probably its biggest selling point.

21:11 | PD: We launched it eight years ago and it’s been licensed ever since. And then two years ago, I got a call from one of the people that I was probably annoying about the infection control factor, and she was a director of nursing. She said there’s something coming around the corner an infectious disease.

21:25 | PD: And she said, we found that you’re product, the infection control aspect, I know you’re going to say I was right. You were right, and all that kind of thing. At the end of the day, she said, this function that you put into the product is really patient-friendly, user-friendly, and infection control friendly.

21:46 | PD: The product itself is like a 2½ layer. It’s on top of an existing mattress, and it’s fully sealed. So you can actually disinfect the topper on the hospital bed so that you don’t have to send it outside for specialized decontamination. It’s a wipe down scenario, washed down under typical cleaning protocols for a hospital.

22:02 | PD: So then I thought, okay, well, and we’re talking about technology roadmaps and next iterations and evolution of technology or evolution of a product. I talked to the people around me. And I said, look, I think if we take this from medical now and put it into a home and hotel and hospitality because everybody’s super conscious about hygiene assurance now in the home or hotel setting.

22:27 | PD: Traditionally, when we sleep on a mattress surface, we can’t open it up and clean the interior unless you’re getting some kind of specialized company to decontaminate or disinfect the product. So what we’ve done is we’ve taken the proven topper SIM care and put it inside a mattress structure for home and for hotels.

22:44 | PD: So you zip off the top layer of the cover, launder it, standard laundering washing machine, every day, domestic washing machine. And then you wipe down the interior core. So you’ve got a hygienically assured sleep surface. And the other aspect of that is I know I’m selling my product a little bit here now, so forgive me.

23:02 | PD: But I think that what I want to get across is that sometimes by evolution or by my markets evolving or the environmental situation changing a product becomes more specific. And if you can think about the long road when you’re launching say, right, I’ve got the product a here today, but there could be product B and there could be product C.

23:24 | PD: And as you said Kevin, visionary is the aspect of it. When I listen to customers and I kind of take bits and pieces of that information, I envision what the roadmap for the technology is going to be. How long is it going to last? Is it going to be like a five-year window that this expires that we get to this product adoption curve?

23:40 | PD: And then we get to maturity and decline? Or is it going to last longer? And if so, how important is the existing product in our overall product mix? And do we need to look at replacing it in three years time or adding on to it in three years time or evolving it out?

23:57 | PD: Jumping back to the point about the infection control aspect of the sleep surface, on average, we sleep 6½ hours out of 24 on a surface that we traditionally, and typically couldn’t actually get in to clean thoroughly. So, for us, and we’re talking about innovation, but sometimes innovation is very much about logic.

24:19 | PD: And when I speak to customers I’d say to a customer, so tell me the pros and cons of the competing products, what works and what doesn’t work? And they’ll give me the specifics. But I walk away and I think. Like it’s playing in my head for a while and I’m saying, okay, in between those lines, there’s a message.

24:37 | PD: And that’s the grasping or gathering of the idea of the innovation of the opportunity. So that’s a big, long way of saying that, the evolution of technology and mapping a technology roadmap to fit both the commercial and the functional and the technical requirements or all of the above, that’s really important. 

24:59 | PD: And for me, it’s a formula that I’ve relied on. And thankfully it’s been largely successful.

25:06 | KM: That’s such a powerful example. And it comes back to the analogy you said on speedboat versus tanker ship. If you’re planning ahead and you’re listening to your customers and you start to see, like you said, reading between the lines of what their pain points are, what the opportunities are that they’re presenting, you can move your speedboat quick.

25:28 | KM: You can adapt your product and find that niche. And go after it aggressively before the big corporate folks’ product developers even started finishing up their planning for it. You’re already moving. You’re developing, you’re modifying, you’re getting your manufacturing set up. And you’re a proven example of that.

25:47 | KM: So as soon as COVID hit, you were able to take your technology, listen to your customers, modify it, and create a hugely successful new, entire vertical out of the technology that you had already developed. That was already part of that roadmap you’d built-in. So it’s an amazing story. Patrick, I really appreciate you jumping on a call to share all these words of wisdom today with us. Much appreciated.

26:07 | PD: Pleasure.

26:08 | KM: And we’ll talk soon.

26:09 | PD: Absolutely. Great. So, a pleasure to talk today. And to anyone who’s listening, good luck out there. And I hope this is helpful today.

26:16 | KM: Thanks again. Take care.

26:18 | Voice-over: Thanks for tuning in to this episode of the Product Startup podcast. The show that teaches you what it really takes to bring your product to market and turn it into a big success. This podcast series is brought to you by MAKO Design + Invent, the original and leading firm in North America to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product business clients. If you’re looking for product development help on your invention, head over to makodesign.com. That’s M-A-K-O design.com, for a free consultation from one of MAKO Design’s, four design studios from coast to coast. Thanks for listening and see you next time.