Revenue Traction in a Startup World

Sales is an odd function in early stage companies.  The traditional salesperson is tasked with presenting the company story in front of as many prospects as possible.  If those prospects are not responsive, move on to the next.  The best salespeople get fewer no’s and cycle faster.  In a start up, the situation is different and the role even more critical.  Generating revenue is still paramount and product pitching is the daily focus;  but now the cash from those sales becomes the immediate and essential life-blood of the company.   Beyond revenue, Sales often carries the additional responsibility of ensuring customer satisfaction, accumulating market feedback, acquiring competitive intelligence, defining product requirements, assessing vertical and channel strategies, and being a key influencer in the company’s morale and momentum.  However, many startup leaders still hire their initial sales team based on the traditional sales profile and the desired quota performance with little consideration for these elements.

Mark Leslie, founder of Veritas and currently professor at Stanford, calls the traditional class of salesman “coin-operated”, suggesting they are great at execution and tenaciously drive a consistent and proven process.  But in order to perform they require tools, infrastructure, and support that simply do not exist in a startup.  The result is missed forecasts and high turnover in the position.

One client with a SaaS offering approached Altus out of board pressure due to lower than expected sales.  What we found was two Quota Club Kings as regional reps; they were in the field and miles away from the product with limited support.  The repair was a few months of assessing the best sales process, identifying the target customer, and bringing in two inside reps matching a profile more consistent with a product manager–to listen, learn and share their experiences internally.  Now with a closer connection to the right customer, the closing ratio and sales cycle improved.

Another scenario we find in early stage sales is the under-hire, where precious cash has been allocated outside of sales and the plan is a junior rep / CEO tag team. This model creates the opposite challenge with relatively junior people trying to find, qualify, and manage prospects for the CEO to close.  Now you have a lack of experience, no process, no tools and often an incomplete product representing your company in the marketplace.  These recruits tend to thrash, driving more activity than results just to create an impression of productivity.   The result again is a weak qualified pipeline, missed targets, and often “bad revenue”—a customer willing to listen but who is ultimately not a good match to the product.  Now you have product development thrashing too.

We saw an example of this with an online offering looking for key partnerships and distribution.  Here the lower cost junior rep was able to build a large list of companies and activities that were not strategic or prioritized and the CEO was not able to support the volume while managing his other duties.  The repair was a senior part-time business development profile that could identify and close much bigger transactions with far bigger players.

Many leaders and boards believe ‘sales is sales’.  The perception is that a good sales person will always be good regardless of when or where you drop them.   While sometimes true, it is certainly not the case in the early stages of a company.  The profile of the best sales people for early stage is what we (and Leslie) refer to as Renaissance Salesperson.  The Renaissance rep is one who is more driven intellectually than financially.  He wants to learn and therefore asks questions and listens to what customers, and ideally markets, truly want and need. He evolves to what resonates with buyers and adapts quickly from one call to the next.  He likes to share his findings with the company and help to shape and evolve the product while it is still in its infancy. Most importantly, he is resourceful and can inform and persuade prospects with little infrastructure, support or materials.  He is challenged, intrigued, and motivated rather than frustrated and demanding more resources.

We recommend early stage companies begin their sales with this renaissance profile, and in small numbers, until a replicable model starts to take shape.  It is critical at this stage for the company to learn and adapt quickly and understand that results do not come quickly or easily with a sales group versed only in mature products and markets. This is the time to build the system that will henceforth guide the company’s sales (and perhaps marketing) strategy.

Once you can see the beginnings of a repeatable and scalable model you can now shape the sales organization into a high-yielding machine.  And just as sales people are not all created equal, neither is the makeup of a sales organizational model.   There are many different structures that can be implemented to maximize the cost, speed, and efficiency of sales, i.e.:
Inside / outside
Qualify / close
First sale / growth sale
Volume / relationship based
Direct/channel

Consequently these different models require different profiles of salespeople in order to be successful.  Failure to clearly understand and define the role will again translate into a bad hire, turnover, and loss of momentum and profits.

This recommendation is often hard for CEOs to accept because they need more revenue and rapid adoption and therefore bigger investments in sales. Most companies we begin working with tend to build to an immediate sales model based on their experience or council from established and successful companies in which they used to work and to which they aspire to return. However, just as a company evolves and matures its development cycle through prototypes, so too do sales strategies and tactics.

Although counterintuitive, the fastest path to the greatest revenue is to begin slowly with fewer salespeople until you feel a foundation capable of building on. They will burn far less money and create an environment where traditional sales will succeed.

Didn’t we learn anything from the childhood Tortoise and Hare story?