David Cummings on Startups

Category: Sales and Marketing

  • The All Hands Startup Sales Meetings

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    Recently I was talking with a friend about sales-oriented startup cultures. He recalled how at his first startup, of which he was an early employee and investor, everyone in the company was extremely focused on sales. It was such a sales-oriented culture that the entire company participated in the weekly sales meetings where they discussed the pipeline, opportunities, wins, and losses.

    Naturally, you’re probably thinking that that’s not a big deal when you have five or 10 employees. Everyone can jump into a conference room and hash things out for an hour. Well, they kept doing the all hands weekly sales meeting by conference call up to the time they had 100 employees. Imagine taking an hour a week out of the busy schedules of 100 people, most of which weren’t in sales, to be on the sales meetings.

    The all hands sales meetings were important so that everyone in the company was thinking about ways to improve the product, close deals, and outsmart the competition. There was no telephone game from the front line sales reps back to the engineers by way of the product managers. Everyone was able to hear everything good, and bad, that was going on each and every week.

    What else? What are your thoughts on an all hands weekly sales meetings?

  • What Percentage of Revenue Should be Spent on Marketing?

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    Today I had lunch with a successful marketing executive. Mid-way through the meal he asked how much we spent as a percentage of revenue on marketing. Not sales and marketing, just plain marketing. Not knowing the answer off the top of my head I did some mental calculations and came up with 15%. We spend 15% of our revenue on things marketing related (salaries, campaigns, trade shows, content, PR, etc). Being a marketing guy, he was impressed as 15% was much higher than what his company spends on marketing.

    The most successful SaaS companies spend significantly more on sales and marketing as a percentage of revenue than you would expect.

    It isn’t that SaaS companies aren’t investing in other aspects of the business. Rather, SaaS markets are growing so fast that there’s a disproportionate amount of money spent on customer acquisition to capture market share.

    Salesforce.com spends 54 cents on sales and marketing for every dollar of revenue (source). Growing fast and acquiring customers is expensive. Marketing for SaaS companies should be a meaningful percentage of revenue.

    What else? What are your thoughts on marketing as a percentage of revenue for a SaaS business?

  • Inside Sales Rep Comp Model for Startups

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    Most B2B SaaS startups should start with an inside sales rep model. The idea is that a consultative inside sales model is significantly less expensive when compared to a traditional enterprise field rep model. Prospects still need to talk to a knowledgeable sales person to help them make a decision.

    When thinking about the inside sales rep compensation model, I like to have the majority of the comp be the commission with a common split being 40% salary and 60% commission. Here are some ideas when thinking about the inside sales representative compensation model in a startup:

    • Base salaries in the range of $25k – $50k
    • Commissions in the range of $25k – $60k (e.g. $40k base salary and $60k in commission for an on-target earnings of $100k)
    • Commissions would be 10% – 20% of first-year’s revenues (e.g. $1,000/month SaaS product is $12,000/year with a 15% commission would be an $1,800 commission)
    • Commissions should be paid out after the customer’s payment has been received by the startup

    Sales rep comp should align closely with the interests of the startup and be win-win for everyone.

    What else? What are some other thoughts on inside sales rep comp models in startups?

  • Startups Should Resist the VP of Sales Hiring Temptation

    Recently I was talking to a startup that lamented they had hired a VP of Sales too early and wasted a ton of money. It was the typical situation: feel good about the innovative product, have a few customers, then hire the $150k salary plus stock VP of Sales to build the sales and marketing machine. It didn’t work.

    The VP of Sales was focused on building out channel relationships with big resellers. The big resellers weren’t interested in reselling because there wasn’t enough market demand yet. After a year it was time for the startup to part ways with the VP of Sales.

    Here are some things that should be in place before a startup hires a VP of Sales:

    These requirements are hard to achieve and should be owned and managed by one of the founders. With these items in place, a VP of Sales will be able to come in and start scaling out the sales organization.

    What else? What other pieces should be in place before a startup hires a VP of Sales?

  • Startups Should use Retargeting to Increase the ROI of Existing Efforts

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    Retargeting is one of the most profound advancements in online advertising in the past decade. With retargeting, banners ads on mainstream sites are shown only to visitors that have already been to your website. The idea is that banner ads in general aren’t very effective since people have learned to subconsciously block them out. With retargeting, banner ads that would otherwise go unnoticed get clicked due to recognized logos and relevant calls to action.

    So, any efforts to drive traffic or generate leads are complemented by retargeting campaigns. Retargeting campaigns are done on a cost per click or cost per impression basis at little cost (e.g. $100 to get started). Startups that blog, tweet, market via email, work on SEO, or any other web-based marketing activity should add retargeting to their mix — it really is that straightforward.

    We’ve worked with AdRoll.com and recommend them.

    What else? What are some other ways startups should use retargeting to increase the ROI of existing efforts?

  • Startups and End of Quarter Financial Performance

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    At the end of each quarter we push hard to finish strong and win deals in the pipeline. Unlike many technology companies, we don’t discount and do end-of-the quarter specials to achieve a goal that pulls demand from future quarters. The success of any one quarter is determined well in advance of the quarter based on the hard work of the sales and marketing team to build a strong pipeline and on our ability to provide solid customer solutions.

    Here are some ways we close out each quarter without making it a fire drill dependent on discounting product:

    • Build bottom-up forecasts and goals for the quarter based on the number of quota bearing sales reps (as opposed to top down ones based on an arbitrary increase from the same quarter last year)
    • Publish pricing online for anyone to see providing greater transparency and prospect understanding
    • Stand by our pricing with pricing integrity so that customers know our other customers are paying the same price and that our sales team earns respect greater than that of a used car salesman
    • Encourage our sales reps to be pleasantly persistent in their consultative approach such that prospects know we are good at what we do and are ready to move forward when they are

    With these strategies in place we still push hard at the end of the quarter but do it standing true to our principles and values.

    What else? What have you seen other companies do to meet their end of quarter financial goals?

  • 5 Steps for Finding Great Sales Reps

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    Earlier today a successful serial entrepreneur emailed me saying she was going to expand her sales team and to see if I had any recommendations. High quality sales reps, much like strong programmers, are always in short supply, regardless of the macroeconomic condition (and coincidentally are the two most complementary skills to have for startup cofounders). Finding great sales reps requires a methodical process and hard work.

    Here are five steps for finding great sales reps:

    1. Engage with social networks like Twitter and Facebook using a service like TheResumator to manage applicants and broadcast job openings
    2. Pay for LinkedIn Jobs and target sales people at companies with similar corporate cultures to your own
    3. Offer a bounty or referral bonus to people inside and outside your company
    4. Participate in local college career fairs, especially if they have general business or management degrees and you are hiring entry-level reps
    5. Network at local sales executive organizations and ask for referrals to reps
    6. Bonus: talk to vendors are trade shows and use it as a form of interviewing to find reps you’d like to have on your team (I know one successful rep that was recruited in a Delta Crown Room at the airport because he did such a great job on a call)

    Finding great sales reps, much like finding great employees, takes time and hard work. Participating in communities where the reps hang out as well as targeting specific companies through LinkedIn help increase the chances of finding strong candidates.

    What else? What are some other tips for finding great sales reps?

  • 5 Steps to Evaluating New Inside Sales Reps

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    Hiring sales people is one of the more difficult things for startup founders, especially technical ones. Naturally, sales reps are great at selling themselves so they come across as being successful, even if they aren’t. Knowing that it’s considered good if 50% of new inside sales reps work out, it’s important to evaluate progress and results objectively as well as quickly.

    Here are five steps to evaluating new inside sales reps after they are hired:

    1. Set a required number of logged weekly calls and demos with self-reporting of the CRM values in a Google Spreadsheet
    2. Establish activity-based metrics for months one through six around call conversations, demos, pipeline opportunities, and deals won so that it is black and white to continue employment each month
    3. Review calls and demos by using a phone system that provides for recording calls (with the permission of all parties involved)
    4. Compare performance of the new inside sales reps to existing, proven reps and share how they compare on a weekly basis
    5. Continually ask questions and drill into things the rep should know about the company, product, and market on a weekly basis

    Evaluating the performance of inside sales reps after they’ve been hired is easier than picking the right people to hire. Even then, it’s important to clearly lay out the required goals and track the metrics so that the sales rep know exactly where they stand with respect to expectations.

    What else? What do you think of these five steps to evaluating new inside sales reps?

  • To Spread or Not Spread FUD

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    Spreading FUD is a common tactic from traditional, old fashioned enterprise technology companies. Fear, uncertainty, and doubt (FUD) combined with patently false claims (e.g. the product doesn’t do X when it clearly does) are a way for companies to try and persuade a prospect that the other product and company are inferior. Startups with integrity and strong values don’t participate in slinging mud and prefer to stay above-board by focusing on solving customer problems instead of putting down the competition.

    Here are some ways companies spread FUD about their competition:

    • Cite things the product does or doesn’t do when two minutes of web research show the truth
    • Talk about lack of funding or institutional investors in an attempt to imply that money makes a company successful (what happened to Webvan?)
    • Provide anonymous quotes claiming to be from customers that switched products

    Sales reps that spread FUD act like used car salesman in the worst of ways. Startups and sales reps should focus on solving customer problems and not putting down competitors.

    What else? What do you think about startups that spread FUD?

  • Notes for Putting on an Annual User Conference

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    The Fall is a common time of year for annual user conferences. Salesforce.com had their Dreamforce conference recently and I know of many more happening now or shortly (Hannon Hill and Pardot). User conferences are an amazing time to bring together customers, prospects, partners, and employees to spend time face-to-face and talk about best practices, the past year, and what’s on the horizon.

    For companies thinking about or doing an annual user conference, here are some notes:

    • Splurge for a great venue — with people traveling to the conference it’s important to invest in the facility and make it memorable (I highly recommend auditorium-type seating with power outlets and great wifi for everyone)
    • Find ways for attendees to intermingle and meet new people (mixers, receptions, consistent Twitter hash tags, etc)
    • Give the conference a consistent name (user conference, users conference, user’s conference, or users’ conference — it doesn’t matter as long as it’s consistent)
    • Put the attendees first name in big letters on their badge (it’s common for the first and last name to be the same size and hard to read amidst all the other text on the badge)
    • Let customers do most of the talking and presenting during the sessions (avoid the tendency to have employees do most of the presentation)

    Annual user conferences are great way to bring an eco-system together and I highly recommend them.

    What else? What are some other notes from user conferences you’ve attended?