David Cummings on Startups

Category: Sales and Marketing

  • Inside Sales Program and Compensation Model for SaaS/Cloud Businesses

    One of the best ways to scale a Software-as-a-Service/cloud-based enterprise application is through an inside sales team. Field reps work well when the price point is sufficiently high, but most SaaS products are focused on the SMB segment of the market, necessitating a more cost effective way to acquire customers.

    Here’s an example inside sales program and compensation model:

    Business Development Reps

    • Goal: Set quality appointments via cold calling and lead nurturing
    • Commission: $175 per completed appointment (completed is when the prospect shows up for the call) with no commission on the first 10 each month
    • Quota: 20 completed appointments per month (240 per year)
    • Salary: $30,000
    • On Target Earnings: $51,000 based on $30,000 salary plus $21,000 commission (commission is 10 appointments * $175 * 12 months)
    • Payout: Paid monthly for completed appointments
    • Promotion: Promoted to account executive after completing 240 appointments

    Account Executive

    • Goal: Take prospects from initial interest/demo through to close
    • Commission: 14% of first-year’s annual recurring revenue and 5% of services/consulting revenue at time of signing the deal (hunters and farmers are completely separate)
    • Quota: $25,000 in new annual recurring revenue per month ($300,000 per year) with no services/consulting allocation
    • Salary: $40,000
    • On Target Earnings: $82,000 based on $40,000 salary plus $42,000 commission (commission is 14% * $300,000)
    • Payout: Paid monthly after cash received (all at once for annual pre-pays and 50% per month for monthly payments up to the equivalent of 14% annually)
    • Promotion: Promoted from Junior Account Executive to Account Executive to Senior Account Executive for each $1,000,000 in new annual recurring revenue with a 30% salary raise and a 30% quota raise at each promotion

    This program provides a multi-year career path for sales people along with black and white metrics for each step in the process. A high quality inside sales team provides predictable revenue and is an integral part of a successful SaaS/cloud business.

    What else? What are some other thoughts on inside sales programs and compensation models? Here are 20+ more posts on sales reps.

  • Thoughts on the Content Sourcing Marketplace Space

    Almost two years ago I wrote a post on a Content Marketing as a Service idea where I talked about the need in the market for high quality custom content on a regular basis for companies. It’s been two years and I still haven’t seen anything breakthrough as a clear leader in the space.

    Here are three content marketing companies that are related to the idea but not the exact thing:

    • Contently – marketplace that facilitates high quality freelancers for companies
    • Compendium – content marketing platform that provides a set of tools for content planning, managing, and publishing
    • Kapost – content marketing platform with a marketing calendar, workflow, analytics, etc

    After thinking more about the idea and market for content marketing marketplaces, I believe there are some challenges in the space to build a $100 million business:

    • Content is too personal and custom to a business such that business owners and marketers are very reluctant to outsource it to a third party (this is anecdotal after asking several business owners about it)
    • Crowd sourcing areas in the creative space have been most successful with simple, visual items like logos where there are people that design logos for fun and it’s easy to decide which ones you do and don’t like. It’s exponentially more difficult on both sides of the equation to facilitate 1,000 word blog posts as the product.
    • Even if you outsourced the content development to a third party, it still takes a significant amount of effort to come up with content ideas and the subsequent editing of it to maintain a consistent voice and message aligned with your brand

    Content marketing continues to grow in importance but I think there’s too much friction relative to the return on investment for a content marketing production as a service company to emerge as a large vendor. As it is now, it will continue being serviced by agencies, PR firms, and more involved freelancers.

    What else? What are your thoughts on the content sourcing marketplace space?

  • When All Paying Customers are Friendlies

    Recently I heard the story of an edge case from an angel investor commenting on the question How Much Traction Does a Startup Need to Raise Angel Money. Here’s the background: an angel investor is pitched by an entrepreneur that has recently cleared the $100,000 in annual recurring revenue mark. The idea sounds plausible but it isn’t completely clear if the product is candy, a pain killer, or a vitamin due to the lack of domain expertise by the angel investor. As the angel investor starts to dig in on due diligence it becomes clear that there’s an anomaly here in which the 10 customers each paying $12,000/year are all friends with the founder of the startup.

    All the paying customers were friendlies. That is, all the customers already had a prior relationship with the founder such that there wasn’t a clear picture regarding the true value of the product as well as how difficult it would be to build a repeatable customer acquisition process. Now, the fact that the founder had such strong relationships with a variety of people bodes well for success in general, but as an investor one of the biggest questions is how the sales and marketing process is going to scale.

    The next time you’re thinking of working for a company or investing in a company with 10 customers, research how the customers were acquired.

    What else? What are your thoughts on the situation when all paying customers are friendlies?

  • Sell Software or Do More Engineering First

    Recently I was talking to a software company that had a few non-paying beta users and a working product. After getting a demo of the software, which looked really good, I asked what was next and how their round of financing was going to be used. Interestingly, even with a solid, fully-functional product, the vast majority of the funding was going to more product R&D.

    As an entrepreneur, the product is never finished and there’s a tendency to keep adding more and more features. With a ready-to-sell product, even if it has a few rough edges, my recommendation is to start seriously selling it. Here are a few questions to ask internally:

    • Why aren’t we already selling the product?
    • If we add these desired features, how is that better for our short-term cash flow compared to selling the product now?
    • How much of wanting to do more R&D is the desire to build a perfect product vs a desire to build a minimum respectable product?
    • If we never added another feature to the product, and only fixed bugs, could we build a viable business?

    Entrepreneurs like to build more than to sell. Resist the temptation to keep building and instead start selling.

    What else? What are your thoughts on selling software or doing more engineering first?

  • Self-Service Calendar Scheduling

    With all the requests to see the Atlanta Tech Village I’ve found self-service calendar scheduling invaluable. For a couple years I had Tungle.me, which worked great, but after they announced the service was shutting down, I hadn’t spent time looking for a replacement. ScheduleOnce was recommended as an alternative and it’s been great.

    Here are a few notes about self-service calendar scheduling:

    • Attach the service to your Google Calendar so that it has your real-time availability
    • Configure the days of the week and the hours of the day you want made available (e.g. I do Monday – Friday 10:30am – 4pm so that I have time in the morning and late afternoon that aren’t scheduled)
    • Make sure any standard repeating events, like a Monday morning sprint review, are on your Google Calendar so that they show up as busy when someone is scheduling a time with you
    • Consider putting the self-service calendar scheduling URL in your email signature if you’re in sales or you like meeting with people to make it easy for everyone to schedule time with you (e.g. the URL is like http://meetme.so/YOURNAME)

    I recommend a self-service calendar scheduler for everyone to save time and make things more efficient.

    What else? What are your thoughts on self-service calendar schedulers and ways to get the most value from them?

  • B2BCamp January 19th in Atlanta

    B2BCamp: The Unconference for B2B Sales and Marketing is having their first 2013 event in Atlanta on January 19th. The unconference already has over 400 people registered, which is great because the event space at GTRI Conference Center is huge. I’m humbled and honored to be the opening speaker at the event.

    Here’s info on my talk “Sales and Marketing Lessons From Building a $100MM Company”:

    • Background on Pardot
    • Marketing lessons learned
    • Sales lessons learned
    • Sales and marketing alignment
    • 3 big failures
    • 3 big successes

    Please visit the B2BCamp site and register for the Atlanta 2013 event.

  • How Do You Know if Cold Calling Will Work for a Startup

    Earlier today I had the opportunity to talk with an entrepreneur that has a successful Software-as-a-Service (SaaS) startup. He’s been at it for a few years and the business is growing nicely. Naturally, a question that’s top of mind for him is how to grow even faster. After I mentioned that cold calling works well for us, he started asking a number of questions.

    Here’s how I like to think through if cold calling will work for a startup:

    • Markets that suffer from a lack of market awareness are ripe for cold calling (e.g. the technology is ready, the ROI proven, but people just don’t know about it yet)
    • Products with a high lifetime value, and gross margin, help make cold calling more viable
    • Test cold calling on a list of prospects by hiring a college intern for $15/hour and see how many people answer the phone, how many people engage in a conversation, how many people schedule a demo — shoot for at least 50 calls per day
    • Ensure that social proof and case studies are readily available to educate the potential prospect

    Cold calling one of the most under utilized, but effective, method of B2B sales. Startups would do well to experiment with it and figure out how to make it work in their organization.

    What else? What are some other ways to know if cold calling will work for a startup?

  • Startups Should Have a Structured Discount Policy

    Recently I was talking to an entrepreneur and he asked how discounts worked for our sales team. I explained we have a structured system to remove ambiguity and maximize autonomy for sales reps (how often have you heard the refrain “let me go ask my manager for a discount”).

    Here’s how an example structured discount policy might work:

    • For every $12,000 in annual contract value (ACV) sold, the rep gets $600 ACV discount for future deals
    • Discounts are accrued in a discount bank and don’t expire
    • No deal can be more than 25% off the retail price
    • No deal can be below a certain floor
    • If a customer pre-pays for a year, they get an extra 10% discount
    • If a customer commits to a longer contract, each additional year gets a 10% discount

    So, the star reps that sell more deals get more money for their discount bank. Interestingly, the higher producing reps, with more discounts at their disposal, actually offer fewer discounts. Most startup discount policies are too vague and result in ambiguity (should I wait until my boss is in a good mood after his coffee to ask for this discount?). Startups should implement a structured discount policy and make everything easier for their sales team.

    What else? What are some other thoughts on a structured discount policy for startups?

  • Sales Department Management Structures for Startups

    As product/market fit is achieved and a repeatable customer acquisition process found, it becomes necessary to start scaling out the sales department. A sales department, like any department, requires strong leadership with a combination of customer-first thinking and metrics-oriented actions. After you’ve avoided the early VP of Sales temptation, hired and trained a couple sales reps that are making quota, it becomes time to recruit the sales management. Always remember that the best sales reps don’t usually make the best sales managers.

    Here’s an example sales department structure:

    • VP of Sales
    • Two sales directors
    • Eight sales managers
    • 64 sales reps

    In this growth stage startup example, the sales department has 75 people (not counting sales assistants, sales engineers, etc) with a pretty standard hierarchy. Building a sales department is hard but having great leadership and managers makes it much easier.

    What else? What are your thoughts on sales department management structures for startups?

  • Another Cold Calling Benefit: Market Intelligence

    Cold calling and hiring an army of awesome sales people seems crazy to many entrepreneurs that haven’t seen that side of successful technology startups. Google does an amazing job of putting its engineers front and center as the all-stars while having thousands of sales people behind the scenes selling stuff. Neil Patel just put up a post talking about competing with Omniture in web analytics and how he underestimated the importance of sales people.

    Another big benefit of cold calling is gathering market intelligence.

    Here are some examples of market intelligence from sales cold calls:

    • Competitor customers (e.g. what companies are using your competitors)
    • Existing vendor contract terms (e.g. when the competitor’s contract is up)
    • Product functionality (e.g. features that are most important to a prospect as well as features missing from competitive products)
    • Non-public industry news (we once learned a competitor was going out of business from one of the competitor’s customers before news hit the industry)

    Cold calling doesn’t work for all industries but for ones that are fast growing and suffer from lack of market awareness, cold calling works great.

    What else? What are some other types of market intelligence gained from cold calling?