Sales for the tech start-up: an alternate approach A new look at sales, from an engineer’s perspective
For most tech start-ups, the traditional approach to sales is almost certain to fail. Here’s another approach – better suited to the executives that run tech companies and to the environments in which these companies exist.
Justin Roff-Marsh: founder, Ballistix www.salesprocessengineering.net
Sales for the tech start-up: an alternate approach A new look at sales, from an engineer’s perspective The reluctant sales manager For many tech entrepreneurs, sales is a necessary evil – something that gets bolted-on to the organization after the engineering is substantially done. The requirement for sales is unavoidable. It’s either demanded by investors or by the cold realities of the marketplace, or both. Typically, sales is not something that the tech entrepreneur truly understands – at least not in the same sense that the entrepreneur understands software. Rather, the sales function is something that is hastily assembled from borrowed parts: unquestioned assumptions, tired bromides and sheer acts of faith! If the resulting sales function works: well and good. But if it doesn’t, the entrepreneur is in trouble. This paper presents a radical approach to the design of the sales function – an approach well suited to technology companies. Actually, this approach is well suited to most organizations, it’s more correct to say that it’s likely to be better appreciated by tech entrepreneurs! The hallmarks of this new approach are: 1. The centralization of everything that can possibly be centralized 2. The addition of outside salespeople only when it absolutely cannot be avoided 3. The total elimination of commissions and all performance pay 4. A total commitment to the Web for the origination of sales opportunities 5. An appreciation – and exploitation – of the fact that innovation is the fountainhead of the enterprise as a whole
Bad advice The traditional approach to sales starts – and pretty much ends – with the commissioned salesperson. A walking, talking, revenue-generating machine. A rainmaker. The rest of the traditional approach revolves around how to find, motivate and retain the rainmaker.
Justin Roff-Marsh
www.salesprocessengineering.net
Think about that. Imagine if the entire software-engineering body of knowledge amounted to an exhortation to find a genius coder. That’s laughable, right? But, it’s a pretty accurate analogue to the situation in sales. So, let’s work that analogy a little and see where it takes us. Let’s assume you have a non-technical friend with a decent-sized business. Your friend’s business desperately needs a software-development function – and because software is going to be the source of his competitive advantage, we’ll assume it’s critical he builds this function in-house (rather than outsourcing it). So, imagine your friend comes to you for advice and you tell him to go find a genius coder. Let’s think about where this advice gets him. For starters, your friend is incapable of distinguishing between someone who can code and someone who’s a complete klutz. And we can pretty much assume that few capable coders would relish the opportunity to work for someone who thinks a parsing operation has something to do with sugar. Of course, even if your friend finds himself a genius coder, those two individuals will be totally incapable of communicating with one another. And, even if that isn’t an issue, your friend will ultimately discover that a genius coder does not a software function make! The coder might shine over there in the Googleplex but, in your friend’s business, there’s no DB specialist, no testing team, and no one to build the kind of UI that’s required to enable the genius’s code to interact effectively with mere humans. This is exactly the kind of mess that a typical tech entrepreneur ends up with when they attempt to build a sales function with the find a rainmaker approach. Inevitably, this approach leads to the wrong people, in the wrong roles, within totally the wrong structure. The consequences are a lot of conflict, a lot of cost and very few sales. And, yes I did say, a lot of cost. It’s a myth that good salespeople will work for pure commission. They won’t. And even if they would, you don’t shouldn’t wish them to. If you find yourself in the situation where a commissioned salesperson is generating 100% of your sales, it’s only a matter of time before you’re calling that person boss! If you, dear reader, are a tech entrepreneur – and if you (or your investors) have formed the conclusion that your start-up needs a sales function then you need an alternate approach. An approach that parallels the advice I hope you’d actually give your hapless imaginary friend!
Unpacking sales: three critical distinctions It all starts by recognizing that sales (like software development) is a function – not a person. It’s true that, at some point in the past, sales was a person – just as software engineering was – but now is not the past. There should be no question that the business environment is more complex now than it was at the dawn of industry.
Justin Roff-Marsh
www.salesprocessengineering.net
So, let’s skip the history lesson and limit our discussion to the present. If sales is a function – as I claim – let’s take the time to discover its constituent parts – and how they should be assembled to make a productive whole. Our process of discovery will be structured around three alternatives. We’ll examine each alternative and then derive a set of three rules to guide us in conceptualizing an ideal structure for our sales function. (As we uncover the complexity of the sales endeavor I think it will become obvious why I’m claiming that sales is a function and not a person.)
Business development versus transaction processing As we start to unpack sales, the first thing that we recognize is that there are two types of purchases in most sales environments: 1. Initial purchases 2. Repeat purchases It makes no sense to treat these purchases types as equivalent – they clearly aren’t. An initial purchase is often a risky and difficult decision for a client – a repeat purchase rarely is. Accordingly, the effort that your organization needs to expend to convince a client to make a repeat purchase is a fraction of the effort required to win that initial transaction. It also makes no sense to use the same word to refer to both purchase types. So, from this point on, I’ll use the term business-development to refer to the pursuit of new transactions (new accounts or the sale of new service lines to existing accounts) – and I’ll use the term transaction-processing to refer to the handling of repeat purchases.
Inside versus outside The second distinction we should make is between two (quite different) environments: 1. Inside 2. Outside Most business-development involves a mix of inside and outside activities. But these environments are fundamentally different. When a person operates outside, their work is dictated by their calendar. A field representative moves from one unit of work (appointment) to the next. Inside, the worker works to a dynamic task list. The work moves to the worker. Now, this distinction is not simply academic. The latter mode of work is significantly more efficient. Accordingly, it only makes sense to have a person operate in the field if their presence in the field results in a massive improvement in their effectiveness. And, if we do have a field representative, if behooves us to allocate to them only those tasks that must be performed face-to-face with potential (or existing) customers.
Justin Roff-Marsh
www.salesprocessengineering.net
We should also recognize that, if field workers spend some of their time working inside, they inevitably bring their field method-of-operation into the office with them. This means that they will be less productive than a native inside person and it also means that they are likely to be hugely disruptive to the rest of your office workers.
Opportunity origination versus opportunity prosecution Within the sales function, there are two quite different types of work: 1. Opportunity origination 2. Opportunity prosecution Loosely speaking, opportunity origination means finding someone to sell to and opportunity prosecution means selling to them. Aside from the fact that salespeople hate the first and enjoy the latter, these two types of work differ at a more fundamental level. Sales opportunities can be originated in batches (think of a pay-per-click advertisement or pretty much any kind of promotional campaign). But, opportunities need – for the most part – to be prosecuted one at a time (events – particularly webinars – are an important exception to this rule). If you want to build a sales function that will scale (and I know you do!), this distinction is a nontrivial one.
Re-conceptualizing sales: three rules It’s not hard to tease three simple rules out of the three critical distinctions we’ve just discussed: 1. Repeat purchases should be processed using a different method and different resources from initial transactions 2. Field salespeople – when required – should do nothing other than face-to-face, businessdevelopment meetings – and they should work exclusively in the field 3. Opportunities should be originated and prosecuted using different resources With these rules in mind, we can now revisit each of the alternatives we just discussed and draw some concrete conclusions about the optimal design of the sales function.
Business development and repeat tractions Grocery stores and gas stations have customers. Everyone else has accounts and clients. With customers, each sale is an isolated event. However, with clients, the real sale is the first transaction; all the rest are fulfillment, an operational function. You can’t have it both ways. If you have accounts (and not customers), then it makes no sense for you to treat repeat transactions as sales.
Justin Roff-Marsh
www.salesprocessengineering.net
The ideal methods for processing transactions include (in descending order of appeal): 1. Automatic: via an until-further-notice billing arrangement 2. Online: via a shopping cart – with automated reminders 3. Customer service team (performing a mix of inbound and outbound calls) There are very few circumstances (even in major-sales environments) where it makes sense for field salespeople to be involved in repeat transactions. Of course, for salespeople, this statement is heretical. Left to their own devices, commissioned field salespeople will, over time, build themselves a book of accounts. As this book grows in size, salespeople dedicate less time to business development and more to transaction processing. Because it’s more efficient to process transactions inside than out, salespeople spend an increasing percentage of their time working either from head office or from their own home offices. Salespeople will justify this wasteful practice by claiming that they are custodians of critical relationships (after all, people buy from people, don’t they?) but this position is untenable. Personal relationships are simply not critical where repeat transactions are concerned. I suspect, when you bought your first computer you felt the need to look a salesperson in the eye and ask them tough questions. However, with each subsequent purchase, I suspect your requirement for personal interaction diminished rapidly – to the point where you’ll now make an online purchase based on a spec-sheet, a CNET review and some Amazon buyer feedback. So, if you must have salespeople, please make sure that these individuals are responsible only for business development – winning new accounts or selling new service lines to existing accounts. Each time your salesperson wins a new account that account should be handed off to the customerservice team for ongoing management. If you discover that your clients really do need to interact with a salesperson each time they purchase, you need to face up to the fact that: 1. You don’t have clients: you have customers 2. You most likely have a product design – and not a sales – problem
Inside versus outside Team members who operate in the field (outside) are expensive. It’s not just the salary; it’s the travel costs and the management overhead they consume. But, as mentioned previously, outside team members are also incredibly inefficient. A telephone operator can easily have 40 meaningful conversations a day. A field representative will struggle to have four. What’s more, inside people cost almost half what outside people cost – assuming a similar level of capability!
Justin Roff-Marsh
www.salesprocessengineering.net
So, if an inside person costs almost half what an outside person costs and does ten-times the volume of work you need that outside person to be at least 20 times more effective in order to justify their existence. That’s a big call! Consequently, you should do everything you possibly can inside – including business development. You should add field representatives only as a last resort. And, if you do add them, you should ensure that you fully exploit them by: 1. Ensuring that they operate at 100% utilization (four appointments a day, five days a week) 2. Ensuring that they ONLY perform activities that absolutely must be performed in the field There are only two classes of activities that ever need to be performed in the field: 1. Business-development appointments (in the case of complex or major transactions) 2. Delivery-related visits (e.g. to survey a site in order to generate an estimate) You should only have a field-based salesperson if your field requirements are in the first category. If you have a requirement for delivery-related visits, business development should be an inside function and your inside sales team should be supported by field-based technical people. In my experience, managers underestimate the potential of the telephone. You should not conclude that your service cannot be sold on the telephone until you have tested telephone sales personally. In summary, then, where business development is concerned, here’s the approach you should take to building your team: 1. If at all possible, build an inside-sales team 2. If you have a requirement for occasional field visits, add field personnel only to service these discrete field requirements – if these requirements are of a technical nature, put a technical person in the field, not a salesperson 3. If you do have to have a field salesperson, ensure that opportunities are still originated and managed inside The third point is an important one. I’m suggesting that if field salespeople really are instrumental to your sales (let’s assume you sell enterprise applications to government departments), even then, your sales should not migrate entirely to the field. Opportunities should be originated internally (we’ll discuss that in a minute) and they should be managed internally too. In practice, you can achieve this by providing your salesperson with an office-based executive assistant who is responsible for managing all opportunities, as well as managing the salesperson’s calendar. So let’s pause, for a moment to consider the picture I’m painting of the outside sales role: 1. You add field salespeople only as a last resort 2. Field salespeople ONLY perform face-to-face, business-development appointments
Justin Roff-Marsh
www.salesprocessengineering.net
3. Field salespeople operate at 100% utilization (four appointments a day, five days a week) 4. Each field salesperson has an executive assistant – who manages that salesperson’s portfolio of open opportunities AND manages the salesperson’s calendar And, yes, I’m serious about every one of those points. If you’re going to employ an outside person who is 1/40th as efficient as a comparable inside person, you’d better make damn sure you exploit every last unit of that person’s capacity! While I’m speaking frankly with you, I may as well let you in on another secret. If you’re convinced you have a rock-solid case to employ an outside salesperson, you still hold off on posting that ad on Craigslist. If you need an outside salesperson and you’re the founder, then, guess what: you’re the outside salesperson! There are four important reasons why you should be your first outside salesperson: 1. Field salespeople are incredibly high-risk hires (and once you’ve hired them, they’re very hard to get rid of) 2. Founders – even founders with limited sales experience – tend to be far more effective at selling than career salespeople 3. The enterprise will get enormous benefit from providing the founder with an executive assistant (the founder’s EA should take 100% control of the founder’s schedule) 4. In most cases a start-up can’t grow fast enough to keep a full-time salesperson in the field, doing 20 business-development meetings a week – however a founder can split their time between sales and operational responsibilities, resulting in a more realistic growth rate
Opportunity origination versus opportunity prosecution Salespeople can originate sales opportunities, it’s true. They can also grind coffee by hand and fashion themselves into human desks upon which to balance developers’ workstations. But, of course, the fact that a person can is not an argument that they should! Salespeople (of either the inside or outside variety) should not originate sales opportunities because it’s a hideously inefficient use of their limited (and expensive) capacity. Prospecting, as salespeople like to call it, is like mining for gold. You have to shift a ton of dirt to find an ounce of gold. And, like gold mining, prospecting (or opportunity origination as we’ll now call it) is better performed by machines (or, technology, at least). There are numerous ways to originate opportunities but the only ones worthy of note are those that can be classified as inbound marketing. (If you haven’t already, you owe it to yourself to read the excellent book by Brian Halligan and Dharmesh Shah with that very title.)
Justin Roff-Marsh
www.salesprocessengineering.net
There are very few (if any) environments where cold calling makes sense. There are still some dinosaurs among salespeople who swear by cold calling but I’d caution you against employing dinosaurs in any function where large beaks and scales are not genuine requirements! Cold calling should be avoided because: 1. It consumes large amounts of salespeople’s time that could be better applied to prosecuting opportunities generated via more efficient means 2. It generates poor-quality sales opportunities 3. It’s a cruel and unusual punishment that burns through salespeople (and executive assistants) The more appropriate method for originating sales opportunities is no secret in the tech community and, what’s more, it’s a method that technical people take to like ducks to water. Here are the basics of inbound marketing: 1. Use SEO and PPC (in addition to offline advertising) to drive prospects to squeeze pages 2. On your squeeze pages, provide a compelling incentive for visitors to provide their email (or postal addresses) 3. If you only get emails on the first pass, use a bounce-back offer (along with an autoresponder sequence to convince prospects to request something that must be delivered by mail) 4. Once you have prospects contact details (the magic of delivering something by mail is that prospects tend to surrender their phone numbers along with their snail-mail details), you now have opportunities to be prosecuted either by your inside-sales team or by your salesperson’s executive assistant Okay, so each of those points could be expanded into another whitepaper but, for now let’s just acknowledge two important implications of this approach to opportunity-origination: 1. If inbound marketing is ALL you do to originate sales opportunities, this means that: a. Your promotional offers must be exciting b. Your product must also be exciting enough to provide you with a platform from which to generate those exciting promotional offers 2. If your inbound marketing doesn’t generate sufficient sales opportunities, the solution is NOT to expect salespeople to start prospecting again; the solution is to fix your offers – even if this means reengineering your core product offering (better to face reality now than later!) It should be obvious that the creation of this inbound-marketing machine is a critical (and significant) endeavor. It should also be evident that an operational promotional machine is a prerequisite for salespeople of any type.
Justin Roff-Marsh
www.salesprocessengineering.net
Accordingly, if you’re just starting work on a sales function, you should first concentrate on building an opportunity-origination machine. Then, when you have a set of procedures that are sustainable (and scalable) you should hand the responsibility for operating this machine to a promotional coordinator. This person should be your first hire – not a salesperson. Once you have a steady flow of sales opportunities, you can go-ahead and build the opportunityprosecution machine you need to convert these opportunities into actual accounts. Sales Function. The Market
Opportunityorigination Machine
Opportunityprosecution Machine
Promotions Coordinator
New Accounts
Executive Assistant
An effective sales function consists of two machines: opportunity origination and opportunity prosecution Here’s how the creation of that machine should play out: 1. As opportunities start to trickle in, prosecute them yourself to determine: a. That your opportunities are, in fact, opportunities! b. Whether or not they can be prosecuted on the phone 2. From your experiences, generate an standard opportunity-prosecution procedure (that can be taught to others) 3. If field representation is not required (which hopefully is the case), hire one or more inside salespeople, teach them your procedure and work with them until they are replicating your results 4. If field representation is required, hire yourself an executive assistant, transfer full ownership of your calendar to your new EA and insist that they: a. Prosecute opportunities using your procedure (allocating appointments to your calendar when required) b. Generate a fixed number of appointments each week, no matter how busy you are (to avoid the inevitable feast-and-famine problem that results from selling only when you’re quiet)
Justin Roff-Marsh
www.salesprocessengineering.net
5. Hire a dedicated field salesperson ONLY when: a. You have standardized and benchmarked every element of the opportunityprosecution procedure b. You are confident that you can consistently generate 20 field appointments for this person, week after week – and that your delivery team can cope with the resulting business volume 6. If you do hire a dedicated field salesperson you MUST provide this person with a dedicated executive assisting, meaning that you either surrender yours or (better still) recruit them a new one The magic of events (particularly webinars) While there’s a practical limit to how tactical I can get in this paper, I’d be doing you a huge disservice if I didn’t at least mention the magic of events. As I hinted earlier, events are exciting because they can be used to prosecute sales opportunities in batches – extending the effective capacity of your limited sales resources. They are also exciting for a few other reasons: 1. Events (particularly webinars) are often a good offer within your opportunity-origination machine. Specifically, they are an effective way of converting email addresses into genuine sales opportunities. 2. Because events are cost-effective, you can afford to invest significantly more effort into them than you can a single sales conversation 3. The presence of other prospects at events provides you with valuable social proof 4. Events (physical events, as well as video conferences) are a very effective tool in the sale of complex services. Specifically, a well-choreographed in-house event can be used to counsel a group of decision-makers through the design of their own solution – thereby increasing buy-in and shortening your opportunity lead-time I would encourage you to experiment with the integration of (particularly) webinars and video conferences into your sales function and – where webinars are concerned – I would also encourage you to consider replacing the traditional webinar format with a live video stream (even if this means setting-up a mini-studio in your office!)
No room for sales commissions I suggested earlier that an exploration of the (necessary) complexity of the sales endeavor would convince you that sales is a function and not a person. An interesting consequence of the conversion of sales from an individual to a team endeavor is we now have no room for sales commissions. It’s not just that we don’t need them – the reality is that sales commissions will actually damage the performance of our new sales function.
Justin Roff-Marsh
www.salesprocessengineering.net
The reason why – of course – is that sales is now a team endeavor; and performance pay destroys team work. In the environment we’ve conceptualized, there is no one person responsible for selling. Sales are the consequence of a number of people working closely together: 1. Your product team: who generate the exciting products that enable compelling offers 2. Your promotional coordinator: who uses inbound marketing to originate sales opportunities 3. Your inside sales team members: who convert sales opportunities into accounts – and who sell new service lines to existing accounts 4. Your executive assistant: who manages the calendar of your field representative (most likely you) and who, more importantly, manages those opportunities that genuinely require field representation 5. Your field representative (again, most likely you!): who performs the discrete appointments that appear – as if by magic – in their calendar There are almost certainly clear parallels between this approach to sales and your approach to software development (or, at least, I hope there are!) So now, performance pay makes as much sense in your sales team as it does in your development team.
Getting started It’s true that this approach to sales requires more specialists (more overhead) than the find a rainmaker approach. However, this is simply a reflection of the nature of reality: the sales environment is more complex today than ever in the past. Fortunately, it is possible to build out the necessary infrastructure in stages (as suggested above). When your advisors counsel you to think about sales they are no-doubt right. But when they suggest that sales is as simple as finding a rainmaker, they are dangerously wrong. What’s required is not a rainmaker but an engineer – one who’s prepared to apply the same methodical and analytical approach to the design of this critical function as they have previously applied to the design of the development team.
Learn more To learn more about this approach to sales (what we call sales process engineering), request an extract (first three chapters) from Justin’s upcoming book, The Machine, here: www.fourappointmentsaday.com
Justin Roff-Marsh
www.salesprocessengineering.net