Category: Sales and Marketing

Sales and sales teams are one of my favorite topics as I’ve seen the wonders of what an amazing sales leader and sales team can accomplish. According to the Four Stages of a B2B Startup, after achieving product / market fit, it’s time to build a repeatable sales process. Building a repeatable sales process does not mean spending a ton of money on sales and marketing right out of the gate. What it does mean is experimenting with a variety of sales and marketing tactics, including things like 100 Growth Hacks in 100 Days.

A startup is ready to start scaling the sales team when the following two metrics are in place:

• Full burdened cost of sales and marketing expenses for a 90 day period of time is equal to or less than new annual recurring added in that same time period (e.g. spend $50k in sales and marketing salaries, commissions, trade shows, PPC ads, etc and generate at least $50k of new annual recurring revenue)
• Annual recurring revenue generated by a sales rep is at least 3x the fully loaded cost of the sales rep (e.g. if a fully loaded sales rep with salary, commission, and taxes is $80k, the rep should bring in at least $240k in new annual recurring revenue in a calendar year – see The 3x Rule for SaaS Inside Sales Rep Quotas)

Of course, there are a number of other important factors like gross margin, renewal rates, etc. that are play into these recommendations but this is a good start. Much like Startups Should Resist the VP of Sales Temptation, startups should also hold off scaling the sales team until the appropriate metrics are in place.

What else? What are your thoughts on when to start scaling the sales team?

One of the challenges that arises when working to achieve product / market fit is around charging full price to a new customer vs offering a discount to get a customer that wasn’t going to pay retail. Of course, in an ideal world every customer would pay retail and be a reference. In reality, the personalities and budgets of the people making the buying decisions come into play and there are desirable accounts where a special arrangement is required.

Here are a few thoughts on the balance between full paying customers and discount customers:

• At the earliest stage, any customer is better than no customer, but the key is that they have to pay something to have some skin in the game (the corollary is that they have to actually use the product as well on a regular basis and not just pay for it)
• As the product matures and new features are introduced, sometimes it’s required to offer a discount to the first few customers that need the new feature so as to have a willing guinea to work out any kinks (this is especially true when moving up market to more complex customers)
• Develop a written discount policy so that there’s clarity throughout the organization and the sales reps are more autonomous

As the startup grows and matures the desire to discount should decrease and the number of reference customers should increase. As with anything there’s a balance to be had and it takes time to find out what makes sense. Do whatever it takes to get oxygen for the product and then slowly introduce more standards around pricing.

What else? What are some other thoughts on balancing the desire for full paying customers with the need for discounting?

Over the years, I’ve seen startups raise significant amounts of money from investors and plow it into sales and marketing. Only, many times this is prior to product / market fit — I call it forcing sales. The reason it’s forcing sales is that the product doesn’t meet the needs of the market (yet) and good sales and marketing can sell an inferior product.

What’s the tell tale sign sales are being forced?

Answer: high churn rates.

Now, some products, due to the nature of what they do, are prone to high churn rates (think of things that are one-off or temporary). But, products that are designed to be used indefinitely, as long as they are providing real value, shouldn’t have high churn rates (annual renewal rates in the 75 – 90% range are normal with 90%+ renewal rates being exceptional).

So, if you hear of extremely high churn rates, peel back the layers and see if sales are being forced without product / market fit.

What else? What are your thoughts on forcing sales without product / market fit?

One of the repeated themes at last week’s Ultimate Sales Conference was around measuring sales rep activity metrics. Sales is an unusual position in that the desired results and expectations are so easy to measure: revenue from deals. While measuring a rep based on quota makes sense, it’s also important to measure sales rep activity since it’s a great proxy for deals.

Here are four sales rep activity metrics that every sales manager should measure:

• Calls Logged – The phone is not dead. In fact, selling over the phone and cold calling is extremely effective.
• Meaningful Conversations – Just because calls are being logged it doesn’t mean the sales rep is productive. More importantly, making calls is not enough as reps need to reach people on the other end and have meaningful conversations
• Demos / Appointments Completed – Following the logical progression, meaningful conversations with the right people should turn into demos or appointments, and completed meetings are more important than scheduled meetings.
• Opportunities – Often the last step before signing a deal, an opportunity should be created once some defined criteria are met, typically budget, authority, need, and timeline (BANT).

What gets measured gets done and these four sales rep activities are key to a productive sales team and management visibility into future revenue.

What else? What are your thoughts on these sales rep activity metrics and what are others that you like?

Last Thursday the Atlanta Tech Village hosted the first Ultimate Sales Conference and four great speakers. With 200+ people, there was an excellent turnout and the quality of conversations set the bar high. Here are a few takeaways from each conference speaker:

Derek Grant of Pardot / Salesforce.com

• Build a sales playbook
• Develop an ideal sales rep profile
• Find reps that can punch above their weight class
• Include a written assessment during the hiring process

Steve Richards of Vorsight

• Coaching is a critical part of sales management
• Use a headset splitter and listen to sales calls weekly
• Sales prospecting is a science
• Millennials want small promotions ever six months and a career path

Howard Diamond of MobileDay

• Listen, listen, listen – the best sales people are the best listeners
• Enter sales meetings with a goal but adapt during the conversation
• Culture is critical and should be nourished

Allen Nance of WhatCounts

• Embrace sales rep specialization as much as possible
• Recognize the need to go from individual contributor to leader as the company scales
• Sales leaders should not carry a quota while managing a team
• List building gets much more difficult as the team grows due to the need for such large numbers of contacts
• Scaling a sales team is incredibly hard

Special thanks to SalesLoft and Rivalry for putting on the event.

What else? What are some other takeaways from the Ultimate Sales Conference?

Inc. magazine’s latest edition has a great article up titled How to Sell to Humans where the author Jeff Haden interviews HubSpot’s Dharmesh Shah. Here’s one of my favorite passages:

A delighted B2B customer is a long-term customer: He will tell friends and colleagues (boosting your algorithmic brand), and if he leaves his job, he’ll take your business with him. But forget about Customer Lifetime Value. Person Lifetime Value matters most.

Over the years I’ve seen the power of a happy person repeatedly occur in three common use cases:

1. Referrals – Word of mouth referrals are the best sales introduction possible, and happy people are most likely to make referrals
2. Job Changes – When a happy customer changes jobs, it’s one of the best opportunities to earn a new customer
3. Account Cancellations – Even with a seemingly successful account, everything can change when the cheerleader for the product leaves, demonstrating that people drive decisions, not companies

The next time someone brings up customer lifetime value, take it up to an even higher level and think about personal lifetime value.

What else? What are your thoughts on personal lifetime value instead of customer lifetime value?

Over the past few weeks I’ve received an uptick in requests for advice on building out a sales team. More startups in the community are finding product / market fit or are past product / market fit and are in the process of building a repeatable customer acquisition machine. One of the first things I recommend is to hire a sales assistant to support one of the founders as he or she learns what works, and doesn’t work, first hand. Once the first 50 customers have been acquired, and things are looking good, it’s time to make that first sales hire.

Here are the top five mistakes entrepreneurs make hiring sales people:

• Culture Fit – Never settle on finding team members that fit the core values and culture of the startup. Too often, startups get desperate to fill a position and start relaxing standards. Don’t do it.
• Lack of a Clear Plan – When a sales person starts it should be crystal clear as to what’s expected of them in terms of role, metrics, and quota. The best sales people are self-motivated and want to know expectations.
• Commission Complexity – Whatever the system for compensation, human nature is to game it and optimize for what’s best personally. As an entrepreneur, the best solution is to keep the commission policy incredibly simple and straightforward. If it can’t fit on one sheet of paper in simple bullet point form, it’s too complicated.
• Cap on Commissions – In the fastest growing startups, the top sales people should make more money than the CEO, and that’s a good thing. Never put a cap on commissions as sales people need to stay focused on what they do best — bringing in revenue.
• Unrealistic Expectations – Top sales people shouldn’t be expected to hunt, farm, support, and exceed quota all at the same time. Sales people should be empowered to do one thing and do it exceptionally well. Limit the number of responsibilities and create realistic expectations.

Building a great sales team is one of the most difficult challenges for an entrepreneur. Moving quickly, having a clear plan, and being very hands-on is one of the best ways to do it. Regardless, don’t make these five common sales hire mistakes.

What else? What are your thoughts on the top five most common sales hire mistakes?