Author : Mark Suster
Most technology startups seem to be funded by product people or business people. Specifically what is often not in the DNA of founders are sales skills. Nor do they exist in the investors of early-stage companies.
The result is a lack of knowledge of the process and of sales people themselves.
My first startup was no different. I had never had any sales training so everything we did for the first couple of years was instinctual. While we did fine learning on the fly, it turned out that a lot of what we did was wrong. I’ve started writing up some of those and I plan to continue to build that section out over time.
As we grew into several millions of dollars of sales per year it was no longer acceptable to “wing it.”
So I did want any rational person who wants to improve does – I hired a coach. We focused together on improving our sales methodology, our training and our comp plans. These days there are even startups like to make this easier for all of us. Back then it was a larger than life ex country manager from PTC named Kai Krickel. He taught me much – most of it unconventional. Most of it worked and his philosophies have proved enduring to me.
He called his business TEDIC. The Excuse Departement is Closed. That mindset always stayed with me and even rung true at the time. Excuses. Whenever I heard why we didn’t feel a sales process at an important customer was going well (or if we lost) I would get involved myself. Invariably the reasons I was hearing why we weren’t well positioned versus my own perception were different.
I boil it down to this: sales people are sales people. They are the lifeblood of many companies yet they are different than the traditional technology startup DNA so the ways that you hire, motivate, compensate and assess performance of these individuals will be different. Obviously to understand a “class” of people you have to make broad generalizations. Here are mine.
- Are motivated by cash. None of this namby pamby options stuff or “do it for the team – we’re all in this together” crap. Cash, cash, cash.
- Are more mercenaries than missionaries. That doesn’t make them bad – it just means that they know that they are “hired guns” and they act accordingly
- Many great ones don’t thrive in the early phase of a company where the sales is more consultative or evangelical. They like a solid product, well defined pricing, good references to sell against, a clear quota and well defined competitors. This is why I tell startups that
- They are as good at selling you as they are at selling your product to customers. That means if you don’t understand the way they work you’re susceptible to being blind sided.
Before reading my tongue-in-cheek post, please know that I love sales people. I’ve talked many times on my blog about how they’re the lifeblood of most businesses – even those that pretend like they’re above it all. Treat them well and they’ll love working with you. Treat them like the rest of the company and you’ll struggle to hold on to them.
Here’s what I learned. It’s my guide to understanding when you’re being gamed.
1. Sales people often blame the product
Startups are the art of the possible. By definition an MVP (minimum viable product) means there’s room for improvement. Your competitors will always highlight a feature here or a feature there that is better. Features don’t win or lose sales – especially in nascent markets. People are buying YOU. They’re buying trust that you’re going to do what you’re saying you’re going to do.
Customer also buy social proof because others are acting as strong references. (there is a nascent industry to try and help you with this, too. The best thinker I met on the topic is Mark Organ who founded Influitive to solve this. They’re in beta). Customers buy solutions to solve their problems. They give orders to people they like, which is why despite your best well reasoned non-sales ethos – you need to understand that sales people do need money to schmooze.
But what customers don’t do is buy features. Don’t get my wrong – a great looking product can really help support a sale.
But customers use features as a rationalization for why they made the decision that they concluded for a complex set of other reasons that they probably don’t even understand. How can I be so sure? Ask yourself how they came to decide what features should they be making the decision upon. Who set in their mind what the “right” feature set was? If it wasn’t you, I guarantee you they were influenced by your competitor – either through their sales efforts or through marketing.
So know up front that many times sales people will blame the product when they lose or when they’re losing. It’s never them, their lack of effort or relationships.
And as you build out your team and grow you realize that it’s always the other guys fault. It’s why leaders need to be respected, not loved or you’ll constantly be gamed. In a startup you soon learn that not only does the sales guys blame the product, but the product guys blame the marketing guys for giving them too many requirements. The marketing guys blame the sales guys who can’t close their leads. The sales guys in turn say that they didn’t get the Glengarry leads from marketing.
And they all secretly blame you. “It doesn’t look that tough to be a CEO. I’m doing all the hard work anyways.”
Stop the madness. You need to teach your sales team and make it clear that you don’t lose on features. They can give you product input, customer requests and wish lists – sure. But the excuse department is closed.
2. Sales people will often blame your pricing
They lost the deal because your competitors dropped price. Customers seldom buy on price. They buy on perceived value. Sure, you need to be competitive on price. But a sales person needs to be able to demonstrate the business case of why using your product will deliver more total ROI than your competitors. Otherwise you need not keep building out great features – just always drop your price! Of course that’s not true.
If your team (and you) see a competitor massively undercut you on price you sure better be able to sell to your customer that the temporary offset in a cheaper price will be eroded by the much great benefit of working with you.
“Sure, they can sell at 50% of our price. Their customer support is much smaller and therefore won’t be able to respond to your needs as quickly. We have 12 developers and they have 3. That matters because over the next 12 months our product will continue to pull further away from them. That’s why we raised $5 million from top-tier VCs.
Please call our references. We worked with customer X who saved 38% of their costs in the first year and increased sales by 14%. The pay-back period on our product was 16 months. We have lots of cases of demonstrable business success.
If we just dropped prices to match our less funded competitors we wouldn’t be able to keep innovating and adding value for our clients. If short-term price is your primary drive then our competitor might actually might be a better fit for you. We’re definitely a premium product, which is why we don’t just drop prices to match their moves to “buy” business.
Or whatever. You need to justify value. And this has to be led by your sales teams and driven home through training.
Also, don’t give your sales teams too much authority on price negotiations. Given them small authority to discount, give the sales leader a slightly larger level and anything above that comes to your desk for negotiation. Too big of discount authority will lead to price drops because it’s easier for sales reps to drop price than to sell on value and do the hard business-case work. The excuse department is closed.
3. Sales people will often sell future development work
If your sales teams think that they can throw in some extra features that you’ll build to win the big contract they will. I’ve seen it a thousand times. They feel like they need to show a customer that they’re flexible, listening to their needs and building features the customer perceives as important.
They’ll always lobby you to approve it. ”They can’t win the deal without it!” They’ll throw in extra storage, extra modules, extra freebies. Hold the line on any additional dev work. There will be times where you do need to commit. But find a way where the bonus program is adjusted for any work that has a higher COGS due to dev work and they’ll sell around it – I promise. Don’t let them sell futures. The excuse department is closed.
4. Sales people will often exaggerate the strength of competitors
Sales people will always tell you how far ahead the competition is. It’s the easiest way to justify losing deals, put pressure on your to build the features they want and they always believe a competitors PR more than the reality they see inside your business. Always make your own assessment of your competitors. Talk personally to customers. Encourage the sales teams to give you feedback but make it clear that it’s no excuse for losing. The excuse department is closed.
5. Sales people will always ask for more sales support
Sales people are bag carriers. That’s the most important thing in your business to get revenues up. They somehow always want junior bag carriers. The more, the better.
They want lots of post-sales support. They want junior staff to work on proposals for them. “It’s not efficient for me to do my own proposals.” They want technical sales to help with customer objections. You’re a startup. That stuff is for Oracle or IBM. They need to be scrappy, rollup their sleeves, learn multiple functions. When you hit scale you need to add staff. And division of labor really will drive up productivity. For now? The excuse department is closed.
6. Sales people will always tell you their quotas are too high
And my favorite. The quota. It’s always too high. It’s always unachievable. They were always above quota at every other company they’ve ever worked for. It’s all your fault. And when you get their forecasts they’re always sandbagged. And they know that you play games back. Management always sets sales budgets that roll up to a number beyond the actual board budget.
Sales people are smart – they know this. That’s where the sandbagging comes. They know you’re going to play games and ask for more so they need to leave room for you to do so. It’s the game everybody plays, everybody says they wish nobody played and yet it’s human nature. Just accept it and play the game.
Seriously, you DO need to be careful about not setting unattainable quotas. But as a general rule – the excuse department is closed.
OK, so if any sales people reading this took it in good enough humor for the broad generalizations that I made – I would say two things to management:
1. Treat your sales people well. Train them, . Get out there with them – no hiding in the ivory tower. Customers want to see you. It’s the hardest job in the company. They sink or swim on their results. And as a result they’re the best paid people in the company. If they start sucking – they’re out. They know this.
2. Don’t do silly things like cap bonus payments. Make their pay-for-performance unlimited, but well structured. They are supposed to be the best paid people in the company. That’s why they endure the jobs that they have and the constant pressure to deliver results. Don’t hire sales people if you expect to be over-the-top cheap on T&E. They need some money for schmoozing. You can book them at budget hotels – but don’t go too far. Treat them with utmost respect or their next interview is right around the corner.
Author : Mark Suster
Mark Suster is a 2x entrepreneur who has gone to the Dark Side of VC. He joined GRP Partners in 2007 as a General Partner after selling his company to Salesforce.com. He focuses on early-stage technology companies. Read more about Mark.