A company founder has no choice but to secure the first sales of their newly-created product and the first strategic partnership. That’s because they can’t afford to hire a sales or business development professional. But even with demonstrated success, they probably aren’t near as good at sales or business development as they think and this misconception can create some challenges later. Let’s explore this phenomenon a little further.
Not all sales processes are created equal. In fact, the whole purpose of developing a sales process for your company is to uniquely match the dynamics of your target audience’s purchasing methods with the approach you use to convince them to buy your “stuff”. One major mistake I see a lot of startups make is thinking that a transactional, SMB-focused sales process can work with large enterprises but just with longer sales cycles and bigger deal sizes. It’s not nearly that simple.
There are many books about enterprise sales. In this article I’ll highlight what I think are the key attributes of a successful enterprise sales process while sharing some tips and tricks I picked up during my tenure as an IBM enterprise sales rep and later as Sales VP for an early stage tech company with an enterprise focus.
You built your MVP, got it launched to the delight of some paying customers and just raised some seed funding to move to the next phase of your company’s evolution. You and your co-founder have been doing all of the selling (closing deals) but neither of you has real experience as a sales professional, so you decide it’s time to hire one. Easy, right? Well, maybe not as easy as you think. Forget the recruiting process for a moment and take a step back. Should you first hire a sales rep or a sales executive? How will you compensate them? How will you know if they are performing well? Let’s explore further.
I can’t tell you how many startups go through the effort to think through the best method to compensate their sales team but don’t take the next step to document it so that it can be clearly communicated. Deciding about the metric(s) on which to pay the sales team and the right split of base compensation versus sales commission is absolutely fundamental to any sales compensation plan. But that’s not enough.
In the spirit of keeping a sales commission plan simple, many business owners or sales executives choose to use a simple straight-line methodology. In other words, 88% achievement of the sales goal equates to 88% commission payout when compared to the “at plan” amount. Seems fair, right? It’s definitely simple. But it leaves out features and upside leverage that many sales reps and sales managers seek. Let’s explore further by introducing two variants to the straight-line sales commission methodology. I’ve also included a sales commission calculator for both.
Compensating a sales team is a tricky and sensitive endeavor that requires a lot of advanced planning. I previously wrote about my 5 Golden Rules of Sales Compensation. But even if you follow those rules you’ll need to decide about the underlying structure of the sales commission plan. And while there are numerous ways to compensate a sales team, most of them fall into two categories: absolute or relative. This article will explain the fundamental differences between these two methods to help you decide which is best to use for your sales team.
You have a product that is ideally suited for a channel-based distribution strategy. But every time you approach a prospective channel partner, they expect you to already have landed some customers and already have an opportunity pipeline of deals to hand them. In other words, they are looking for traction and they probably also perceive risk with your value proposition, possibly because you’re at such an early stage or maybe because you’ve never done business in their country. So now you’re sort of stuck and don’t know where to go next to start building out your channel. I have an idea to try.
I recently heard Dr. Robert Wiltbank from Willamette University use this analogy and loved it so much I had to share it with others. Entrepreneurs are, by nature, very optimistic. It’s one of their core survival skills. But this often makes it hard for them to recognize signals of negative feedback. This applies to things like the success of their product and progress towards the business plan targets. But it also relates it to investor feedback while pursuing fundraising, customer feedback while pursuing a sale or vendor feedback while trying to secure a partnership. Experienced sales professionals are trained to listen for negative feedback and use various techniques to assess the real viability of the opportunity. But most co-founders aren’t experienced sales professionals and the techniques I’m referring to aren’t easily learned from a blog post or a book. I’ll explain further.
Sales incentive plans are really delicate things. This stems from the fact that the best sales reps/managers intuitively do whatever puts the most money in their pocket. They do so assuming the company has put a lot of thought into how they are incentivized and, therefore, whatever pays them the most surely is good for the company too. Because of this, don’t expect a sales rep to read your mind.
Never break these rules when setting commission plans for your sales team.
Within legal and ethical limits, a good sales rep should do whatever puts the most money in their pocket and it’s up to the company to make sure their associated actions and behavior are consistent with the company strategy. But this is sometimes easier said than done. This article provides insights and suggestions for this dilemma and relates to one of my five golden rules of sales compensation.
Certain startups can only guess what type of sales model they will end up with once their ready-for-primetime product is released. We are now conditioned to use the Lean Startup (order book here) concept of a minimum viable product (MVP) when it comes to our offering. But why not extend this to the sales model as well? Lean Startup principles extend to all aspect of your business model but few use it beyond the product. The last thing you want to do in the early days of your company is overshoot your sales model with expensive hiring, tools and travel. Of course, companies with mobile apps or other offerings that clearly leverage an e-commerce model don’t need to worry about this unless they later identify extensions of their offering that carry a more traditional sales requirement.
I’ll use a crawl-walk-run analogy to demonstrate a Lean approach to refining your sales model. All steps along the way assume you are doing as much as efficiently possible to drive interested prospects to your website and making sure your site is properly enabling sales. Let’s explore further.