11 Comments

Summary:

For startups to grow, they need to adopt some big-company practices, especially concerning the sales team. In the first post of a three-part series, entrepreneur-turned-VC Mark Suster shows how growing companies should assess the deals in their sales pipelines and help sales teams focus their time.

Target practice

At my first company, we had four or five sales reps who’d been around since the early days. They intuitively knew how to position the company and how to sell the products; they didn’t need (and we didn’t have) sales materials, pricing strategies, or elaborate service-level agreements (SLAs).

We then increased the sales staff to about 10, and even hired an SVP of global sales and marketing. Because he was a big-company sales exec, he was very critical of some of the missing tools at my company. He pushed for more standardization of pricing, marketing collaterals, sales processes, etc.

He told me, “There’s no standardized way for me to onboard new people. There’s no way for us to easily roll out changes to pricing, positioning relative to competitors or new sales tools. We need standardized tools to arm our sales teams with the information they need to effectively do their jobs, and we need to better aim them at the right opportunities.”

I was stuck in startup culture, and he was stuck in big-company culture. There was a chasm between us that couldn’t be bridged. But he was right about one thing: We needed to change as we grew. I think this happens at a lot of startups. Like my company did, startups get stuck in this middle ground where process and tools become more important.

This is the first in a three-part series in which I’m going to talk about some of the scaling issues startups face. In this first post, we’ll talk about aiming your sales staff at the opportunities most likely to pay off.

Review every deal in your sales pipeline.

Very early-stage startup people are used to rigorous prioritization, and they need to apply this same approach with the sales deal pipeline. I did this through regular pipeline reviews.

In order for a deal to be forecast in the current quarter, the sales team had to have done four things:

  • Identified a champion on the team
  • Identified a budget holder with money to spend
  • Presented the customer with an ROI (return on investment) calculation of the benefit of using our product
  • Determined the customer was in an active review of choosing a supplier of document and collaboration services (the product we offered).

By having the salesperson walk me through each deal, I could often tell when he couldn’t defend having the deal be listed as an “A deal” (and thus have a high forecast percentage). When I got busy and only had time to review spreadsheets or output from Salesforce.com, it was impossible for me to know which deals were “real.” The reason, I learned, is that many salespeople take meetings with customers who are willing to meet them and give all the right messages. But many of these people they’re meeting with are NINAs (no influence, no authority), and thus, aren’t qualified.

Qualify, qualify, qualify your sales leads.

Inexperienced salespeople spend too much time with people who are nice to them and talk a good game about being interested in their products, but don’t have the budgets. I learned this the hard way. Either we’d have deals that seemed stuck (for example, they were in the “closing within three months” pipeline for nine months), or we’d have sales reps who constantly kept adding new deals and taking out the old “sure deals” that never closed.

The most experienced sales reps were the ones who knew the three most important things to do with a sales lead were to qualify, qualify, qualify. Lead quality matters, because the most scarce resource for a sales rep is time, and no matter how much you want to sell your products, you can’t push them on a customer who isn’t ready to buy. They might have other initiatives, budget constraints or just need more time to evaluate your space. As the best sales leaders will tell you, “you have to align a company’s sales cycle with a prospect’s buying cycle.”

Aim for the A deals.

After the sales rep walks through the deal, management has to step in and help with aiming. As the company grows, this task can be shared between a VP of Sales, VP Marketing and the CEO.  Part of this is standardizing the assignment of territories, industries and accounts, but part is focusing efforts on the most likely sales.

“A” deals — those that have a realistic shot of closing in the next three months — should get much of the sales person’s time (say 66-75 percent). “B” deals, forecast to close in 3–12 months, should get the remainder of sales reps’ time. Each sales rep needs to build their pipeline with these, and many bigger deals take time. However, the key to scaling is that “C” deals — deals that are unlikely to close within 12 months — get no time from sales. Marketing should own those.

Let marketing nurture the C deals.

Marketing has two roles in managing pipelines. First, they need to fill the top end of the funnel with new “qualified” leads (e.g. converted from “suspects” to prospects). Second, they need to manage C deals. Today’s C deals are obviously tomorrow’s As and Bs.

So the best-run companies have marketing running activities, such as the following, to nurture their C deals.

  • Newsletters. One of the goals of newsletters is to keep your company and its products in the consciousness of your suspects or future buyers. C deals go in the newsletter bucket and should be identified as C-deal newsletter companies. The information you send them should be different from the newsletters you send to existing customers, for example.
  • Customer events. It’s far easier to get potential customers interested in your products when they hear actual customers talking about your products and how they are using them. Suspects and prospects are often in search of success stories from their peers to hear how they’re improving internal operations. So one of the smartest things we did at Salesforce.com was run “city tours,” in which we had our existing customers talk about how they were using our products and had our product management teams talking about future innovation and development. Customer events are a great way to market to your C deals to keep them informed and try to raise their interest levels
  • PR. Some companies are excellent at PR, and others don’t put much effort into it at all. I think PR is an incredibly important activity for technology companies, but most companies aren’t very good at it. (I wrote a post recently about how to better manage journalist relations.) The reason many companies don’t put enough effort into PR is that PR doesn’t have an immediate translation into sales. It’s mostly a “C deal” activity.
  • Analyst relations. In many technology fields, analysts are hugely influential in determining enterprise budgets. I sometimes find it funny, since 73.6 percent of all statistics are made up, but the truth is, many analysts are great and help customers frame the decisions they need to reach. Spending time with analysts and getting into their “innovator quadrants” will help you manage your C deals and pull them forward to Bs and As. This is obviously a marketing and CEO activity.

In the next post, I’ll cover how sales reps can handle objections.

Mark Suster has started and sold two companies and is now a general partner at venture capital firm GRP Partners. He blogs about issues related to tech entrepreneurs and other startups at Both Sides of the Table.

Image courtesy of Flickr user ryochiji.

You’re subscribed! If you like, you can update your settings

  1. Awesome post.
    Some many people, including me, struggle with the game of liars poker that goes along with as 50% of the so called “A” deals. I call it the prospect life cycle an analogy I use to draw a diagonal to the product life cycle that most people easily internalize.

    Bottom line. Great post. Great insight. The view on marketing and PR being a “C” deal effort is frankly new to me and priceless.

    Thanks.
    Bob

  2. The strategies to boost up sales effort for a start up needs to be more agile and innovative for the obvious reason that it is a start up.They have the flexibility and energy to try out innovative ways to promote and sell their products unlike well established corporates.

  3. Insightful Post on Startup Strategies. Thanks.

  4. Vishnu, I agree with your comments. I had written an earlier piece for pure startups along the exact same lines. This post was more about “scaling” sales. The original piece was here: http://www.bothsidesofthetable.com/2010/10/12/startup-sales-why-hiring-seasoned-reps-may-not-work/

  5. One of the best feelings in running a startup is reading about their common challenges and knowing that you’ve already implemented the suggested solutions experts like Mark Suster recommend.

    I’ve always preached that having a great mentor was the sole reason to my success. Thanks Mark for hinting that there are still great mentors out there.

  6. If you heaven’t read “The Ultimate Sales Machine” By: Chet Holmes then you have no business talking about sales processes. It’s that simple!

  7. Very good and insightful post. I have managed sales teams exactly like that succesfully with one addition: lead qualification should be followed by ‘fact finding’ – meaning that the sales person really needs to understand client’s needs, organization, decision making, etc. My experience is that if these are done well, the deal closes.

  8. Startup Strategies: Overcome Customers’ Objections: Tech News « Sunday, October 31, 2010

    [...] and management in order to scale. I call this “arming and aiming” your salesforce. My post yesterday dealt with “aiming” your sales teams, or making sure they are focused on the right opportunities. Recent ResearchIn Q3, E-Books and [...]

  9. An early stage startup trying to get customers and marketshare will generally have to compromise and do some customization to win early deals.

    The first salespeople at a tech startup should be folks who can communicate effectively with the tech team. They’ll end up talking to customers who perpetually want more than the product current does, and will have to strike a balance between ‘take it like it is’, and lobbying for features for ‘A’ deals to be implemented by the team team.

  10. Startup Strategies: You Can’t Grow Without Process: Tech News « Tuesday, November 2, 2010

    [...] previous posts, I wrote about aiming sales reps toward the best deals and arming them with information to help them overcome common objections from prospects. But arming [...]

Comments have been disabled for this post