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Every company needs to grow, but a start-up runs on a knife edge between success and failure. Having worked for a start-up in my early career I’ve seen lay-offs and impending insolvency. The excitement of building something new was quickly replaced with panic that the ship was sinking.
Sales and marketing are the key players in B2B growth. Nothing new there, but there are ways to not over invest too soon, or to avoid investing where it’s just not profitable enough.
In a recent FT article a tech start-up CEO reflected on how much he’d underestimated his selling role. For many start-ups the variation of selling a new business concept to potential venture capital (VC) investors is quite different from selling to prospective customers.
A First Round Capital study also highlighted that sales is the hardest hire to afford and get right. The top 3 concerns turned out to be 74% of start-up CEOs were worried about hiring the right people, 72% were having sleepless nights about revenue growth and 69% were anxious about acquiring customers.
Burning through VC funding with sales and marketing that doesn’t deliver growth could be catastrophic, especially when the VC expects immediate achievement of revenue goals.
Here’s my top 4 observations on setting yourself up for growth using professional sales and marketing…
Observation 1: have a robust go-to-market strategy
What’s the best go-to-market strategy for start-ups?
Focus on new and existing customers
In order to secure VC investment, a start-up already got its ducks in a row here, but that doesn’t mean it shouldn’t be refined. The go-to-market strategy is an essential component for the who, what, how and where sales and marketing will focus and deliver profitable growth.
Sales and marketing is not just about focusing on new business from new customers. Many start-ups focus on purely managing existing customers and fail to consider how existing customers can be grown as well.
What is a go-to-market sales strategy?
- Analysing your existing customers with the largest growth potential
- Developing a segmented key customer strategy, based on size, growth, margin, strategic importance and needs
- Focusing efforts on their retention and new opportunity identification
- Understanding the customer journey as they research options, speak to vendors, select and buy, embed and track value based ROI
- Driving B2B sales and share of wallet, where it matters.
Know what customers value
This isn’t just quantitative (what’s selling at the best margin in which verticals), it’s also qualitative (how much they value your product over others, their sales experience and how well you retain them once they are on board).
This will progress your buyer persona understanding to feed marketing, but also tell you what competitors are doing and if customers are likely to stick around.
Know what works during the buyer journey as customer are attracted, converted, closed and retained. Likewise, route to market is key in B2B sales and this can be via direct or indirect channels, online and in-person (or a mixture of all of them). This will allow a start-up to keep doing what’s working, improve or kill what isn’t, or start doing something new.
Calculate what sales and marketing you can support to prevent cash burnout
There’s much to be learned from building a solid sales and marketing function that’s fit for today’s start-up, but also something that can scale without burning cash too quickly.
Calculating sales growth will not only help you scale a sales and marketing team that you can afford, it will also help you know the pricing parameters you need to stick to.
How to calculate sales growth?
Looking at customer financials every quarter can help here. This means benchmarking the customer gross margin, by tracking:
- Customer acquisition cost (CAC) and management costs (overall or by customer verticals if they have different characteristics)
- Number of new customers won
- Customer lifetime value (CLV)
- Cost of goods sold.
You’re looking for a baseline ratio of at least 3x CLV to CAC.
If you fail to meet the benchmark: target bigger deals, raise your prices, focus on the highest value customer segment, try to keep profitable customers for longer, prioritise or reinvent the route to market or remove the worst performing verticals. When you’re comfortable with the numbers, you can support professional sales and marketing in increments that gross margin allows.
Observation 2: hire the right talent
How to increase B2B sales?
For a first step into a dedicated sales function, many hire a single salesperson. The first professional sales hire should be senior enough to be comfortable flying solo. They should have the know-how to build a sales funnel from scratch or handle changing products, pricing and approach as you refine your go-to-market strategy.
Selecting the right type of person is hard. Many start-ups hire technical sales people because they can talk in-depth, like the CEO does, with clients. Technical people are good at stimulating conversations, but often struggle to adjust into sales people who enjoy, and are good at, both the pursuit and closure of new business.
You’re looking for a grafter, someone that’s hard working and loves building something from scratch. They need to be devoted to building your sales from the ground up.
So how to get it right by knowing what to look for? There are a couple of options:
- A rainmaking entrepreneur who can deliver complex solution-sales over the medium term? These people can be expensive. A B2B sales function that is consultative and focused on solving complex business problems with innovative solutions is harder to sell, but delivers more value to the customer. This generally gives access to bigger deals and a longer customer lifetime value.
- Or a more regimented salesperson to conduct easier transactional sales with a shorter sales cycle? These people are cheaper. A transactional sale often has low customer value and is easy to commoditise, price chip and replace (especially if you already have competitors). But the speed from lead to close is often very fast. Here the customer lifetime value can also be much shorter.
Once you define the right type of first person to bring in you need to know if it’s working pretty quickly. Plan their on boarding, agree targets and set a time-frame for success.
Marketing is more than brand
As for marketing, there are some traps to avoid. Marketing is changing at light-speed with digital advancement. Relying on junior level support is cheap but not enough to help drive sales.
Weigh up the pros and cons before recruiting – eg in-house versus a senior consultant a few days a week or a marketing agency engaged on a specific campaign.
Marketing doesn’t need to purely build brand, it can focus on new business and existing customers. Account Based Marketing (ABM) is the fast becoming the ability to shorten and focus the sales cycle on specific client needs. It allows scarce marketing resource to focus on a pyramid of priorities eg prioritising 1to1 activities and cascading down to inbound marketing across markets and unknowns where you need it.
This will generate a more efficient lead-to-sale relationship between sales and marketing.
Technology and campaign budget
Along with the people recruitment and salary investment comes a need for technology and campaign spend (which can be increased as the ROI is improved). All start-ups will need customer relationship management (CRM) software and marketing deployment tools at some stage. It might be something simple to start but with but offers the scalability to grow.
Observation 3: add a team leader, before you scale
There is a tipping point when you are more able to sustain hiring a team of sales and marketing people. This is especially relevant if your first sales person has worked their socks off and faces burnout. It’s simply not sustainable or healthy.
Any team needs a leader and in this case it’s usually:
- A Chief Commercial Officer (CCO), if sales is the dominant route to market
- Or a Chief Marketing Officer (CMO), if marketing is the dominant route to market.
Here I’m going to focus on the CCO, especially seeing as most B2B start-ups have a sales first strategy. Note that the lines are blurring between the two roles now, as digital channels, social selling and ABM are proving to deliver 1to1 targeting through the buying journey and a shorter sales cycle.
A big no-no is expecting a CCO to be selling in the market AND managing a team.
That doesn’t mean they don’t spend time with the most important growth customers or work on the must-win deals. They have to be.
They also need to help their team members by coaching, shadowing and leading when a sales team member needs help. It’s more about showing by example that it can be done.
If a CCO is the first sales hire, with the ambition to scale a team up over time, they will have to face the market initially but with a short term sales target that allows them to start recruiting. This short term sales drive will also allow them to get to know the customers and refine the go-to-market strategy before hiring.
Ultimately it is more important for them to hire and oversee sellers and marketers, than do it personally with a huge personal sales target. Frankly, it’s a different skillset and a super high revenue generator isn’t always the best team leader.
A CCO is where you want experience. Someone who has successfully built a sales and marketing team from scratch. There are many ways to bring in CCO talent and you can dial up or dial down aspects that are more or less relevant to your business. You will need to mull over strategic focus, management approach, process skillset, technology awareness and people experience. There are some neat ways to interview a first CCO appointment with role plays, scenario analysis, presentations and even psychometric testing.
Observation 4: scale the sales team with solid foundations
Here you are looking for predictable, scalable revenue growth.
Hiring – Once you know what type of sales person is most successful, use this as your template to hire a team. Have a standardised recruitment process, know what your top 5 must-have qualities are and build an interview structure / review approach to flush them out. For example coach-ability and inquisitiveness might be of high importance. Accept that you won’t get it right 100% of the time, but you always need to focus on how you improve.
On boarding – On-board new people effectively and as a standardised approach. This means to train and coach to develop the skills people need, set SMART (specific, measurable, accessible, realistic, time-bound) on-boarding targets, benchmark performance when they start and at regular points along the way. Look for coach ability, sustained development, an inquisitive mindset, and strong team ethos.
Sales targets – Set SMART sales targets. Look at what you’ve sold, of which you want to repeat, and then scan the addressable market for repeatable targets. Consider what % of effort is spend on new business from new customers, versus new business from existing customers, as well as % of time spent social selling. Look at past performance of your best sellers and set the scene for what’s achievable from the rest of the team. Consider if sales targets and commission are capped or not.
Data & analytics – Use analytics to get under the skin of the sales metrics across top end funnel feeding meetings at the appropriate rate, win rate, average deal size per product/ service/ solution, cost of sale and delivery, gross margin per vertical etc. Also consider the level of research, data and analytics support you need to properly map and segment your prospect profile into target lists. Give a solid flow of quality leads each month but make sure they are mapped to the direct sales force strengths eg sectors. This comes from a marketing and lead generation function that deploys data driven insight that segments the market, targets the most profitable customers, prioritises where investment is dialed up or down.
Sales process – Have a well developed sales process which follows the customer journey, seeks differentiation, manages pipeline, and establishes clear value proposition for every qualified lead. Social selling is just as important, as an inbound strategy, as outbound targeting is, but target the ratio that works eg 1:10 (1hr social selling for every 10hrs direct selling).
Sales support – Work out what stops your sales people from spending most time in the market, and improve the process that supports where needed. This could mean that for a proposal heavy sales pipeline, sales support is needed via a professional proposal resource is a key hire, although not client facing, to convert more RFPs and free up the sales team a bit more.
Scaling – Keep an eye on the growth of your start-up and the growth of your sales people. If the business outgrows the sales people you’re going to have an awkward conversation. Khalid Halim as a great way to set this up from the beginning:
PROMISE: “Let’s talk about your last day first. If you look at the latest employment data, it’s likely that you’re going to leave or we’re going to part ways somewhere between 18 months and three years. Now you may be an exception to this trend, but we know someday it’ll happen. So with the time we have, here’s my commitment to you: My pledge to you is that we will be committed to your growth. My pledge to the company and its investors is to its continued growth. I can only keep both promises if the two stay connected. There’ll be a point when they don’t, and when that day comes, I commit to having another conversation about what’s next, whether that’s here in another role or elsewhere.”
Know what sales roles need scaling
This is all about seeing where your current sales process fails. Is it Segmenting the market and building prospect lists? Is it following up on inbound leads from marketing? Is it proposal and pitch production? Is it on-boarding new customers? Is it handling customer success with a growth mindset, rather than a ‘do the bare minimum’ mindset? Plug these gaps with sales expertise to ensure the whole process flows seamlessly for the customer and they aren’t lost along the way.
Then think about scaling up the direct sales team when you have a base that can help them be in the market as much as possible. Don’t just hire to put bums on seats, hire for the longer term. You can hire less experienced people for certain tasks and help them develop by gradually doing different segments of the sales process. That way you can home-grow as well as recruit sales talent.
There are issues and benefits with both models, you just need to work out what is most important to you:
- Home-grown sales people obviously take time and need a fully fledged education and mentoring programme. They also need access to different parts of the sales process to build wholesome awareness and skills, but also so you can see what their strengths are. Here you’re looking for trainability, inquisitiveness, willingness to learn, ability to take and react to feedback. Obviously this may take longer to hone the right sales skills over time and you may lose them before you see 100% of the return you want to justify the investment.
- Experienced sales people are faster to get active in the market and would usually come with a black book of contacts to leverage. Just be aware that these people have often defined how they sell and don’t always possess as much ability to learn and adapt ingrained behaviors into how they sell. They also may struggle to leverage the black book of contacts as much as you’d thought. They will expect some kind of sales support so they spend as much time out in the market
Feel lost on hiring professional sales and marketing in your start-up? Contact Edler Consulting for an initial conversation on what might work best for your business as it grows.
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