Yesterday, I had the chance to meet 12 entrepreneurs at the Impact Hub in Seattle, who attended the Sales Hacker Workshop.
Max Altschuler of Sales Hacker reached out to me last month to be a part of the panel to a set of developer and technical folks who were at the early stages of getting their sales efforts started at their startup.
I am personally happy that folks like Max, Richard and Balaji in India, are raising the level of sales discussion with the entrepreneur community, mostly so that we can help B2B entrepreneurs find, grow and enhance their teams.
I was surprised that there were only 10-12 folks in the audience, since the list of people who can benefit from this is a lot more in Seattle.
I am wondering what it would take to get more folks who are entrepreneurs to attend sales training and enablement sessions instead of only spending time on technical briefings. Thoughts?
As exciting as it sounds, when a business development or partner sales representative from a large company in your domain calls you, it tends to, in most cases, generate more work than get customers in the short term for a startup.
The first part of partnering with a large company is to understand when you are ready to “sell with” or “sell through” the larger company.
In theory, partnering sounds awesome. The large company has a huge installed based, they may not have a product competitive to the one you posses and your solution fills a gap they may have in their portfolio.
In practice the mechanics of the partnership, the logistics, elapsed time and commercial terms are the things that wear you down.
First realize that they are multiple “players” within the large company – if it is a large technology company, they are very much engineering driven – so the internal engineering teams have a preference to build not buy or partner. While the product management teams might have a more outside-in view, it is also likely they will prefer to build internally (“I dont think the product will take too long to build” OR “We can build what that startup built in 3 months with 3 resources”).
Then you have the marketing teams, which tend to be consumed (in larger companies) with the current quarter’s lead generation or to focus on helping their sales team’s quarterly goals. While they would like to partner, it is with the intent to have their message be more “cool”, “relevant” or “credible” with potential customers or analysts / press etc.
The sales teams would like to partner if it helps them get the deal done. If they do not get credit for the deal, (or quota relief), no amount of convincing will get them to partner with your startup.
I am going to skip over the other incidental teams such as Finance, Legal and Services team, since they tend to get involved in the back end of most partnership opportunities and rarely lead.
That leaves you with the Business Development team – who reached out to you in the first place. In most large technology companies, they are chartered with “inorganic” growth – or the ability to generate revenue either by having other companies sell their products or helping revenues grow by selling other products the company does not build itself.
In larger technology companies, most BD organizations report either to the Sales team or the Marketing team. In less than 10% of the companies they might report directly to the CEO (via the Corporate Development organization or Finance in even rarer cases).
Most business development professionals are well meaning, have an outside in market perspective and are keen to make deals happen, but, in most companies, they tend to execute deals and influence the strategy, not come up with it.
Meaning, they can make the deal happen if the product or sales teams desire, or they can say no to a deal, but they rarely initiate the deal. There are exceptions.
So, what should you do when a Business development person reaches out to you to partner?
First, ask them to help you understand the dynamics of their organization and their process.
Typically, they will have a 3 or 5 step process.
Step 1: Layout the market scenario, including product fit, competitive roadmap, etc. and get buy in from Engineering and the product teams. Obtain an executive champion
Step 2: Layout the Go to market plans, with help from the marketing and sales teams. Secure the executive champion for post integration.
Step 3: Detail the financial impact – the investment to be made, the potential revenue impact, the opportunity. Secure the budget needed for the various teams for the deal.
Step 4: Get buy-in to start negotiations with your startup. This includes discussion with their legal team on the framework of the agreement, discussions with your startup on the roles, responsibilities and work each team needs to do to be successful. This includes defining success with milestones at each stage.
Step 5: Final contract completion and roadmap for the partnership with the outline of the announcements, etc.
This entire 5 step process usually takes months if not 2 quarters on average.
The whale shark is an unusual fish. It travels an incredible 5000 miles off the cost of Caribbean each year. It does though help a lot more fish when it makes this journey. Many small fish and other sea animals live on its back and travel with it.
Intellectual pursuits have been similar. Issac Newton is quoted saying:
If I have seen further than others, it is by standing upon the shoulders of giants.
That’s one of the key items I have learned about distribution and growth hacking over the years. If there is a large “installed based” of practically any product, it is possible to jumpstart your new startup idea on its back.
Startups cannot help other startups. Except for giving advice, which is practical and practitioner-led, there’s not much a small startup can do to help other smaller startups.
The new “large” installed based in technology lead themselves to help new startups more than previous ones. While SDKs (Software Development Kit) and API’s have existed for a long time, the new age companies are helping bring their installed based to new innovations lot quicker by exposing their customers to new technologies via 3rd party solutions built on their solution. Some of them are doing so with the intent of being a “platform”, but many dont have a choice but to grow and build relationships via API’s.
I was talking to an entrepreneur yesterday about how they can improve discovery and distribution for their SaaS application.
The first part of the problem is just discovery –people getting to know about their product.
The second part of the problem is distribution –people trying their product.
The last and most challenging part of the problem is engagement – people using their product frequently.
The 3 problems are distinct enough to have different people responsible for them at your startup. Typically, the discovery is a “marketing” effort, distribution is a “sales” effort and engagement is a “product” effort.
New startups, especially consumer (eCommerce) are finding that being on the app store alone is only solving the distribution effort, not the discovery or the engagement problems.
SaaS companies are finding that discovery can be solved by SEO and SEM, and distribution with “freemium” pricing, but engagement is their toughest challenge.
Finally games have always found that engagement is their biggest challenge.
Depending on your company, and the market, there are some criteria to keep in mind when you are trying to decided where to “spend” your time and energy. Then using a large company in the space to solve that problem is the best way to grow fast.
So, if discovery is a problem, then I’d suggest listing on multiple marketplaces and directories and getting the word out via customers. If there is a large company in the space and they have an API or marketplace, list your product on both. The rising tide of customers will lift your boat as well.
If distribution, however is the problem, then ensuring easy “provisioning” on the larger company’s platform will help the most.
Finally, to solve the engagement issues, making API tie-ins to a larger company’s product – e.g. using Line’s API for new stickers or in app purchases will help.
If you have examples of how you have leveraged a larger company to make it easier to discover, distribute or get user engagement, I’d love to hear from you.
Over the last 6-7 months I have been helping #napkinStage companies hire their first few sales people to grow from the founders selling the product to growing a sustainable team to help sell.
The most important thing I have noticed is that most of the sales people are learning the science and art of marketing – building an email list, engaging on social media, writing short opinion pieces on trends, etc.
The primary reason is that most of the sales folks at startups have to build their funnel first, and most of them have few relationships or existing customers to get referral customers from.
10 years ago, or even 20 years ago, most of the techniques sales people used to fill their funnel was “cold calling” or “smile and dial”. There were few emails as well, but largely attending events to network and cold calling were the prevalent strategies.
Now targeted emails have replaced cold calling. Initial connection on social media – Twitter, LinkedIn have replaced connecting at an event. Writing a blog post or participating on a podcast have replaced sending PDF files of marketing collateral.
The role of the sales person as a closer is becoming less relevant now, and their role as a facilitator is becoming more important. The effective sales professionals I know are learning the art and science of coordinating a concerted campaign to get access to individuals within an account who can help become champions at a prospect.
Sales people are becoming more “industry experts” and learning about events prospects should be attending, having an opinion on current trends and curating content that they believe will be useful for their prospects.
That used to be the role of the marketing person.
In tomorrow’s post I will examine the changed role of the marketing person. Their roles are moving from more being more art and creative to science and data driven.
Initially when you are looking to hire a person in your company, you will hire “from your network”. The challenge is to have a good network that’s diverse and varied to help you bring those critical “early believers” on board.
One of the most difficult hires for most developer / technical people is hiring that first sales person.
The hustler will get you any deal and will focus on getting you in the door quickly to open opportunities.
The relationship sales person will open doors to the few, but you will need to supplement her with other technical and sales resources.
The process or consultative sales person is good when you have a clearly defined sales process you need to scale.
The account manager is great when you have to expand your footprint within your existing customers.
The four types of sales people are best segmented by the depth and breadth of their relationship building efforts.
In the chart above I have tried to segment them based on my experience of working with these kinds of sales people. I dont think it is perfect, but it gives you a framework to think.
This could be a framework you use for your personal entrepreneurial journey as well, as you build your own network.
The best entrepreneurs have a broad (wide) and deep network.
They use the network to hire, recruit customers and attract partners. You know these folks who can not only help you get to the 2-3 people you need to talk to quickly to validate something but also help you canvas the 20-30 folks you need to get feedback from.
Building such a network is hard and takes time. Most people have 3-5 good friends and colleagues who they hang out with often and maybe 10-20 folks they work with on and off. Others have 500+ LinkedIn connections, but wont know more than 5 of them very well.
To build a wide network you need to have the mindset to seek out new people each time you have a question or run into a challenge. That’s not normal behavior for most people.
To build a deep network you need to invest time with a few folks and really get to know them, not only by working together but also personally.
The best way I have found to build a deep network is to find projects that mutually benefit others based on common interests.
The best way to build a wide network is to find a way to help as many people as possible for any type of request.
All this takes time, which is why you have to prioritize your relationships. In the early stages of your entrepreneurial journey, depth of relationships beats breadth, so make sure that you have the 3-5 people who you can count on, and then look to build adjacent relationships to grow your network.
1. Speak to as many customers as possible to understand “Why did they buy”? Ask the founders to help connect you to existing customers before you join so you can clearly understand why customers are buying. Is it because of the relationship the founder has (most likely at early stage startups), or are they solving a real pain point? Is it obvious there is a pain? Will there be budget allocated for this pain? Help the founders document the set of steps in the sales process during this phase as well.
2. Find out what your disciplined schedule will be for the first 30 to 90 days. Besides building your pipeline of business, there should be nothing else you should be working on. Whether it is researching 20 prospects, cold-emailing 20 potential targets or engaging with 20 candidate customers on LinkedIn, figure out the basic unit of activity and the way to measure it consistently.
E.g. Your basic unit of activity might be to spend 5 min researching a prospect on LinkedIn and understanding what your subject line should be to them and 5 min to craft an email that will help you send a response, followed by reviewing all the people in your suspect list from the previous day. Follow the disciple consistently.
3. Write down 10-20A/B test headings, subject lines and messages that you will test during your pipeline development phase. You will need to test your Subject lines, the time you email prospects, the call to action, the collateral you will use to incent prospects to engage with you. The founders may already have a message they use, but dont take that at its face value. You will need to find the top 3-5 things your prospects will care about and the top 3-5 things they are willing to do as a next step or the 3-5 things they need to be educated about during the sales process. You job is to try and have enough permutations and combinations of these pain points, calls to actions and collateral till you hit the top 3 combinations.
E.g. Try the 3 top industry news items as headlines rotating and also your top 3 benefits, then the top 3 pain points or the top 3 questions on their mind as your subject lines.
4. Align on a system (Excel works just as well, if you dont like CRM systems) you will use to track your activity with your founders. Initially you will not have an immediate term wins, so in the absence of sales, activity will have to be measured as a proxy for outcomes. Whether it is # of sales calls per day or the # of demos per week or the # of responses to emails and phone calls that you will have to track, find a way to measure it, and track it diligently.
E.g. Put a simple spreadsheet with names of companies, target people, status (1st email sent, No response, Not interested, Call back in 3 months, No budget, etc.) and use a color-coded system for follow ups.
5. Network religiously to find a way to help potential partners who will help you after you help them. Many of the folks in your existing network may be able to help, and they may have an inclination to do so since you are now at a “startup”. Use the fact that you are at one to your advantage. Most people I know love helping and engaging with entrepreneurial-minded people and want to help early stage risk-takers. Even if you dont have a prospect in your network, it does not hurt to ask.
E.g. Last week, many of the participants at our customer day, at the accelerator were not prime targets for one of our companies in the Health care segment, but many had “friends” or “ex colleagues” who were now in hospitals and they were willing to help.
After the initial 5 or so customers and exhausting your personal network, and having product market fit, you are likely to look outside and hire your first sales person. Here are the top 5 things you need to do before, during and after you hire that individual.
1. Ensure you have set the right expectations for yourself, cofounders and the new sales person. If the sales process is long, dont expect the sales person to make it any faster initially. If you have no leads to start them off, dont expect them to bring a pipeline and if your customers are expecting a POC and trial before they are willing to consider purchase, dont expect the sales person to be able to close a sale before they experiment. You should also have the expectation that the sales person will take 2 times your average sales cycle to build their sales pipeline. So if your average deal takes 3 months, expect them to take 6 months to get their pipeline “filled“.
I am often surprised at how much entrepreneurs and cofounders expect from a new sales person, if they have not been able to close an opportunity themselves. They often assume that since the sales person is a “professional” they will make magic happen. That’s highly unlikely.
2. Document and help the new person understand the sales process as well as you can. A blow-by-blow account of every activity in the sales process is better than a top level set of steps.
This step is very useful to also understand what you need to provide in terms of sales tools, marketing materials and collateral, to the sales person to make them successful during the sales process. If the 2nd meeting requires a demo, have it ready. If the best way a customer is convinced is to do a POC (Proof Of Concept), then have a checklist of things the customer needs to have ready for a POC.
3. Help your sales person fill up their pipeline in the first 30-60 days. Remove all distractions that your new sales person has by ensuring that they are not responsible for “strategy”, “blogging”, “SEO”, “fund raising”, or any other thing that makes them less productive. Their sole aim should be to sell and to do that they need to build their pipeline.
The last thing you need to do is to have the sales person’s time filled with non-selling activities. They will likely want to help and get excited with all the other value added activity, but that’s the thing you dont need from them. A not so great sales person will likely bring up all these items towards the end of the quarter when they did not make their quota as excuses.
4. Go on the first 5-10 sales calls yourself to help them learn the ropes. If you have hired an inside sales person, make them a “listener” in the first 3 calls, then be an active listener in the next 3 and finally a passive listener in the next 3calls.
It is important for you to understand if the sales process is different if a founder goes to meet prospects versus a sales person. It is also important to gauge the sales person’s ability to handle objections, prospect questions and also understand the politics of the customers’ organization. It also helps for them to hear you pitch your product, or vision or benefits.
5. Segment the right prospects based on your current customers to ensure they dont chase the difficult or slow to convert prospects. Until the first few deals happen, the sales person will be on edge and they will get frustrated if they make no progress. If they are good, they will likely leave on their own, and you will have to start all over again.
Give them hard qualification criteria on who makes the ideal customer – if that is an early adopter, then you need to define their budget, behavior, title, size, industry, and be as clear as possible. There are not too many early adopters, so I highly recommend you only give them less than 10-25 prospects (cold or warm) to start with to give them confidence and help you build conviction that they can sell this.
Some VC’s are known to ask the question “Why is now the best time for your idea / startup / venture to succeed”?
That question is indicative of the key underlying themes of successful venture funded companies – they have to grow extremely fast in a very short period of time (3-5 years), unlike other businesses which take 7-10 years. That helps drive valuations of early stage startups higher quickly and soon.
The question also forces you to think about why a customer would buy or pay or use your product now, versus stall and not have a large reason to buy.
This is what most of us in sales call a “compelling event“. A compelling event is a forcing function that has a hard date for your customer to buy by.
If your customer does not buy from you by that day, really bad things happen – for example Sarbanes Oxley law required you to report certain items of your company or you would face stiff fines. Or your customer has an upcoming product launch within the next 2 months and they need to get a logo, website and social presences up and running.
There are some natural forcing functions, such as year end, quarter end, new product launches, regulatory deadlines, obsolescence of an existing solution or their current vendor withdrawing support for their current product.
In many cases, customers dont have forcing functions. They may not have them because the problem you are trying to solve is not a visible pain for them. It may be latent, so they dont even know that if they solve this problem they will benefit otherwise.
So, if your customer does not have a compelling event, or forcing function, can one be created?
Here are 3 techniques that I have used to create a forcing function:
1. Create competition by the date: This works best when you are trying to raise money, sell your startup or when you have something to sell that is produced in limited quantities. For example, if you have an event space or a training event and there are limited seats, you can let your customer know that their competitors might get the product which leaves them behind.
When does it backfire? When you truly have no competitors lined up, and claim to have them, and your customer calls your buff, you are left without a deal and an artificial deadline that passed. You leave the opportunity with no deal and also a customer who knows you are now possibly desperate.
2. Show the paucity of resources: This works best when you are selling consulting or services. If a client is taking too long to let you know if they can start a services engagement, some sales people let them know that the resources they want will no longer be available if the customer does not make a decision by a certain date.
When does it backfire? When the customer believes that resources and people are “replaceable” and so they can make do with any resource not just the person they want on the project.
3. Offer time-bound discounts: This is the most used and abused technique by software sales people. Offering a discount by end of the month or quarter (or any other time they are measured) helps the customer understand that if they dont sign up by that period, the offer is no longer valid and the negotiation process and sales process begins again.
When does it backfire? In most cases. Truly. This is what happens, when most sales people try to set discounts by their defined time schedule. The deadline passes, the customer does not buy and the sales person sets a new artificial deadline. Meaning, the discount is now valid for the next quarter, month or week.
Forcing functions or compelling events are rare. So if you have one at your disposal, use them to the fullest. Else, find another way to get time on your side, since the customer has the money.
Some of them talk about possible “channel” sales efforts via partners or larger companies in their domain who can help, who they would like to approach.
When I tell them about the potential costs, commissions and the customer relationship efforts that are involved, they take a second look at their direct sales efforts. I thought I’d document that for many of the other entrepreneurs who have the same question.
There are 5 models of partnerships I have encountered so far in my career. I will outline these models and list their pros and cons. While I cant say which model will work for you, and there may be other models as well, I think understanding the landscape will help you figure out which one makes sense in your situation.
First off, most channel or indirect sales models assume that the partner has an existing relationship with the startup’s customer. After all you are trying to shorten your sales cycle by using the partner’s strength.
Lets now look at these different models.
1. Co selling partnerships: These agreements tend to have a low to medium level of commitment from both the partner and the startup. If a sales person from the partner is going to meet the client, and are in active discussions on a deal and they feel like bringing your solution will help them win the opportunity, they will look at trying to position your product as well. In this case, you will have to go on the sales call with the sales person at the partner. The advantage of this partnership is that you typically dont have to do the initial “opening of the doors”. The “paper” or contract is typically separate as well. This means there will be 2 separate agreements for the customer to sign.
Pros: Since there is no commitment (most times) from both parties towards a quota or target, the discount you offer to the partner is low (typically starts at 20% and can go up to 30%). Also, since you can have a direct relationship with the customer, you can control the relationship going forward. Be sure to ensure that there are lower levels of “pass through” revenue you have to pay to the partner after year one.
Cons: There is no commitment to sell by the partner so you cant quite depend on this channel to deliver consistently. The customer also tends to get confused about the single person who will responsible for their success (the bad term usually used is one throat to choke).
2. Reseller agreements (sometimes called VAR or Value Added Resellers) : This partnership is medium to higher level of commitment. The partner will either resell your product on their paper or include your “quote” in their contract. You will hence have to train and manage their sales professionals.
Pros: There is a quota commitment in most cases, so you can be sure that sales people are motivated to sell, but you want to be sure that there are some downsides if they dont hit the commitments, else all this is a co selling agreement structured on the partner’s paper.
Cons: Since there are commitments, you will pay a much higher commission % – typically 40 – 60% are standard. Some partners may ask you for more. You will still have to train and do the lead generation to bring their sales folks into deals. Typically when you sign an agreement, even if you bring the partner into a new customer, they might ask you for the commission that they technically dont deserve.
3. OEM associations: When your product (or module) becomes part of another product and is integrated in such a way as to cause sales of your product each time the other product is sold, have an OEM (Original Equipment Manufacturer) association. These are typically for run time modules of developer products or a contact management product within a CRM system as an example.
Pros: Since your product is part of another product, you will typically be sold each time the other product is sold. In most cases this guarantees revenues and commits the partner to certain revenue goals.
Cons: Since your product is part of a module, you dont have the end customer relationship. Most OEM products also tend to generate smaller % of sales. Don’t be surprised if the final product is sold by the partner for a significantly more cost that what they pay you. Typically I have seen 10% of the final cost of the product paid out to the module.
There are 2 other models that I dont have much experience with, so I will let you give you an overview and try and address them in a future post.
4. Certified agent alliances: These are loose agency models (typical in affiliate sales) where the solo sales person who maybe has a few clients will try and sell for you. Since you have to recruit and manage each sales person yourself, these will be hard to scale. The only advantage is that the sales person is not an employees, so their base salary costs dont hit your books. This also means they are less committed to your product.
5. Distributor agreements: When your product is sold in a different geography where you need a local partner to stock (for hardware) or help educate local re-sellers, then distributors can help you with education, local tax and integration and identifying resellers. They can help you navigate a local market, but since they stock and manage multiple products for that region, getting their attention to focus on your product tends to be rather hard.
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Most every entrepreneur does things initially that don’t scale, and that’s okay to start. Pretty soon they realize that the things that made them successful enough to get initial sales and customers wont work for them to reach the next level at their startup.
One of the most frustrating things for the entrepreneur is when they run out of folks “in the network” who they can sell to. After having sold to their ex colleagues, friends, etc., their network dries up. No longer is it possible to sell via the network to sustain the growth.
That’s when they realize they have to build a sustainable sales process and organization to grow the business and increase revenues.
They then encounter 3 most frustrating things as they try to recruit sales people, define the sales process and grow their sales muscle.
1. How to hire the right sales people who are motivated by commissions alone?
First, realize that the market tends to be fairly well balanced. It follows consistent demand and supply constraints. Most good sales people have many folks chasing them to work in their company, similar to good engineers. If you wont expect an engineer to work for stock options alone, then expecting a sales person to work for commission alone is something you should be able to relate to.
The problem I hear from many entrepreneurs is that they are unable to determine if the sales person would actually close any deals, so they are unwilling to make a commitment to the sales person. Well, that’s the chicken and egg problem for sure, which means that person who’s more in demand will not make the compromises. Most likely, you the entrepreneur will end up finding some small amount of money to pay as base salary to give the sales person a start to get going. The best sales people are smart about risk and reward. If they see the opportunity to make more money by forgoing their base salary but get a much higher commission, they will.
2. How do they share the details of the “sales process” that they have perfected with the nuances that make the new sales people successful quickly?
As an entrepreneur and the initial sales person, you understand the sales process for your product the best. You have likely sold to many potential prospects and have addressed many objections and handled the toughest questions. So, it is best for you to detail the steps of your sales process to on-board the new sales person. It is best if you do it in a 2 step method.
a) First you can tell – take the sales person through the steps in your sales process via examples. How you sold to the first 5 prospects is more important than how the ideal sales should happen. Take them through the detailed steps in the number of meetings, the different people you met and what questions came up at each stage.
b) Follow this up by showing them – go on the first 5-10 sales calls together so they can learn from your initial pitch, the questions, etc. Show them how you demo, how to position the product, handle pricing questions etc. This also helps you build a bond with the sales person so they can be honest with you later when it comes time to ask the difficult questions.
3. How can they determine if the sales person is on the right track?
Initially you have to be on all / most of the sales calls after you hire a new sales person. Hopefully you have hired someone ambitious and mature, so they will be able to then build a sales organization for you instead of you having to hire a new VP of sales above them. The Tell and Show approach works best for sales people, is my experience.
Use this time to determine and evaluate the sales person – are they able to build relationships with the prospects? Are they able to handle questions effectively? Are they following through on their commitments? Are they able to keep activity level high consistently?
The other thing you should do is to take your average sale cycle time – lets say that is 8 weeks from introduction to close. Double that and evaluate the sales persons ability to close deals in that time period. The reason is that the first cycle time is usually the period of extreme learning. It is rare to get a sales person that will shorten the sales cycle right away unless they come with connections in the industry who have the problem you set out to solve.