How to Sell Vertical-Specific Software Into Your Industry

At this point, you have a product you believe in; one designed to solve a real pain point. As we have just discussed, your product/market fit needs to be rigorously examined to set your company on a high-growth trajectory. Thus, selling to anyone who will buy your product is not a sufficient sales strategy. This approach spreads your company too thin across potential markets and prevents you from fully and efficiently tapping into any one or two specific ones. Worse still, the iterative cycle of sales and customer feedback informing product development cannot work when you are spread thin. Instead, thoughtfully identifying a specific market segment, or vertical, for your company to exploit is a much more efficient and effective sales strategy. There are several benefits to creating a vertical-specific product offering:

1. Quality Revenue: by pursuing a vertical in which your product is truly capable of solving the pain points of your customers, you earn revenue you can count on over the long term. Developing your product to answer the pain points of a

specific vertical makes your product truly indispensable to your customer and reduces churn.

1. Expertise: limiting your company to one or two specific verticals allows your team to dive deep into a narrow issue, understand it thoroughly and then address it fully and effectively. The company can develop a deep understanding of a customer's pain points, their sources and how to fix them.
2. Reputation: with the expertise your company has honed, you can earn the reputation as a thought leader in that industry. Over time, a reputation such as this gives your company the advantage of possible virality and pricing power.
3. Sales Efficiency: instead of casting a wide net, your sales team will be able to address a focused, targeted group of potential customers you know benefit from your product. This makes the sales process run more smoothly and allows the sales team to maintain direction and gain momentum. Your sales team will maximize sales efficiency by developing a repeatable sales process and selling to prospective clients most likely to purchase, thus reducing acquisition costs. Bringing on customers who are the best fit for your product earns you higher quality revenue that has lower churn and greater upsell potential.
4. Product Efficiency: focusing on a tight vertical enables the iterative feedback loop that turns customer feedback into a competitive moat to hone your product. The opposite, however, results in an enormous amount of technical debt as the fixed costs of competing in a particular vertical start to compound and eventually crush your business.

The impact: Identifying the best vertical for your company will impact the activities of all areas of your company: development, sales, marketing, and executive. It allows your company to pursue a deep understanding of a particular niche, make a significant impact for your customers in that area and establish a defensible market position in your vertical. Your team will need to revisit this discussion regularly to ensure correct vertical identification and to explore new opportunities for growth within the vertical and in new

The goal: Identify one or two verticals in which your product is most adept at solving a customer's pain

How can Golden Section Assist?

Steps

1. Prepare by inviting players who have a deep knowledge of internal operations (i.e. Head of Sales, Head of Development, Head of Marketing, Executive team) and external factors (i.e. client-facing sales team, industry experts, etc.) Ask each person to come prepared with their thoughts on the possible verticals for your company and major market trends. Make sure someone (if not everyone) in the room has personal and direct experience with the customer issues being addressed.
2. Meeting 1: Vision and Delegation
   • Share company's overall goal and objectives in the mid and long term, painting the picture for where the company is going and what is most important to it.
   • Set vision and objectives for vertical identification process.
   • Identify 4-5 potential product/market combinations for exploration.
   • Assign research to appropriate player.
   • Data will be both qualitative and quantitative.
   • Qualitative: ask those responsible for researching qualitative factors to report back pertinent information that will allow the team to assimilate the positive and negative information to assign a rating to that factor. Remind team that interviews (customer, expert salespeople, etc.) are a great source of information.
   • Quantitative: for current product metrics, use your CRM to isolate opportunity data from the past year. Many market opportunity numbers can found through the Bureau of Labor Statistics.
   • Set deadline for data collection.
3. Meeting 2: Scorecard Creation
   • Assimilate data.
   • Discuss factors as a team to assign a point value for each factor.
   • Allow the person responsible for researching that factor to present the data.
   • Allow team discussion to assimilate and refine that information. Set an expectation that data will be thoroughly discussed. It is important for the team to play "devil's advocate" during this time. While optimism regarding a particular vertical may lead discussions, to have a full picture of each factor, risks and counterpoints need to be fully explored. There is a time for optimism and excitement, but this is not it.
   • As a team, assign a value to that factor, with 1 being the weakest, or a liability to your company, and 5 being the strongest, or an asset to your company.
   • Sum the factor totals to create a scorecard for each of your possible verticals. The vertical with the lowest value will likely be the weakest option and the vertical with the highest value will likely be your company's strongest option.
   • Add a variable for the number of factors that must go well and the probability of success; pick high probability, low complexity verticals.
4. Meeting 3: Gut Check and Planning
   • After a period to process the findings in Meeting 2, reconvene to discuss the findings.
   • Do the top one or two verticals sit well with the team?
   • How do market trends play with these top verticals? Does the vertical play well with future developments and trends in this field?
   • In a post-mortem review of your company, what would be the reason this vertical failed?
   • Choose one or two verticals for your company to align itself with.
   • Brainstorm how the company can shift to align itself in the chosen verticals and the order of operations to accomplish this.
5. Ongoing questions:
   • How can we improve our position within this vertical?
   • Operational Improvements:
6. What do others do better than us?
7. Why do we lose sales?
8. What expertise / credentials do we need to develop?
   • Product improvements:
9. Are we solving for the right pain points? Is there a more foundational problem we're not addressing?
10. Can we address the pain point in a better way?
11. Can we address the pain point more completely? Are there additional, related pain points we could also be solving?
12. What do our customers want to do with our product they can't do now?

Troubleshooting

If you're struggling to identify potential verticals, think of different markets or customer profiles that experience the pain that your product solves. Your potential verticals may be in different industries or demographic categories. Now is the time to explore all prospects and not be limited in thought.

If you're struggling to provide enough meaningful metric data for potential verticals, use the alternate metric strength section instead. With the section, you won't be using historical data as in the primary metric section. Rather, you will be projecting potential metrics based on your targets and assumptions to see which vertical is the best candidate. Begin by listing your Target ARR (end of year 3) across all products.

Estimate the projected ACV and win rate for each product/market combination. With these assumptions, you can calculate the annual \# closes and demos that would be required to reach your target ARR. From there, you can assign a probability that your company would be able to deliver those metrics for each product.

If you already are focused on a few verticals and have some traction, then use this exercise to focus your energy on which verticals deserve the most attention. A key indicator that your team is suffering from a lack of focus is a crushing product backlog with deadlines that seem insurmountable. This normally occurs when several different verticals that need different solutions are crammed into one product