Below you’ll find the first ever “guest re-post” on Life-LongLearner as well as a new podcast with my buddy Ryan Denehy. The post + podcast combo effectively makes this a Denehy centerfold.
Ryan is a close friend who most recently co-founded Swarm Mobile which was acquired by Groupon. In the podcast episode, we riff on the mental and emotion journey of getting there. In the post, you’ll see all the things he learned building the local sales machine that fueled their growth.
Enter Sensai Denehy….
“Building A Startup Sales Machine: 64 Things I Wish I Knew”
Newsflash: I had no idea what I was doing when I first started running sales and distribution teams almost 10 years ago. Some would argue that I still don’t. But the hard lessons taught me more than anything I ever did correctly on the first attempt.
Lately, a number of folks have been asking me for advice on sales-related topics so I thought it’d be fun to put down 40 or 50 things I’ve learned that I wish I had known over the years. My pain is your gain.
Most of what’s here is relevant to angel/seed stage companies, and some is applicable to a scaled company looking to hone a new strategy. This is just a rough first pass but hopefully someone out there finds it useful!
1. Everything is an infuriating catch-22 – getting your product and team off the ground is a series of tasks with missing ingredients. “I can’t get money from investors until I have customers, I can’t get customers until I have money to build a product.” Blah blah blah. You’ll never have what you need so just accept that. It’s your job as an entrepreneur to figure out how you’re going to spin something real out of thin air.
2. When the pitch doesn’t work you will feel hopeless – in the early days you hit endless cold call and cold pitch cycles to figure out what’s going to work. During that time you’ll get nowhere and have very little motivation to continue. This is totally normal.
3. When the pitch resonates, you will know right away – some interns and I cold called hundreds of small businesses trying different pitches and value props. We were banging our heads against the wall for weeks without getting a single sale. After two months we finally nailed the script and the sales started tumbling in. More sales in two days than in the past two months.
4. If the product doesn’t respond to an existing need (e.g. credit card processing) or deliver phenomenal, game-changing results (e.g. Groupon, Yelp) then you’ll need to shove it down the customers’ throat – this isn’t necessarily a bad thing if the product delivers real value, but selling something that people don’t actively want or need can be an abrasive and challenging road to go down.
Product Market Fit
5. Local sales is all about distribution and it’s really really hard – in general, selling to SMBs is capital-intensive and involves a lot of manpower (think stateside call centers). You have to get the small business owner on the phone and that alone is really tough. Making a product they are willing to pay anything for is even harder. Making a product they will pay for that can support a direct sales team is harder still.
6. The enterprise sales cycle is typically longer than your runway – meaning, as an early stage company you will run out of money before your clients start paying you.
7. Enterprise products are typically too complex and costly to build on an angel or seed-stage budget – start down-market first since you can always move up. It’s rare to start upmarket and successfully move down.
8. Bark up the right tree – it’s important to be 100% clear who your ideal outbound prospect is before making contact and crafting a pitch. Your best bet is to craft a pitch for two to three different potential decision makers (e.g. marketing, operations, owner) and see what sticks.
9. Don’t confuse product benefits with existing demand – just because your product can theoretically create value for the customer does not mean that there’s demand for it. Take for example loyalty and rewards platforms for small businesses. Yes, every merchant wants to increase customer loyalty and can benefit from that, but the market as a whole is not actively seeking out these solutions every day.
10. Look at search volume on Google to gauge organic demand – Google makes it easy to look up search volume for different terms in different geographic markets. This is a simple and free tool to see if folks are already searching for the solution that you want to provide.
11. Is your product already on the “shopping list?” – point of sale, wireless networking, CRM, loss prevention, HR software, payroll etc.. budgets already exist for these solutions and therefore the sales process comes down to getting a crack at the business. Eventually the head IT or CMO is going to buy something. With entirely new technologies and solutions….you guessed it….budget don’t exist. Dollars you could spend getting a prospect over the line will instead be spent convincing your prospect that they need it in the first place.
12. Pre-selling is effective but dangerous – pre-selling is when you sell a product that you haven’t built yet, then build it after you’ve closed sales or validated the demand. Some people call this “vaporware” or “slideware.” That’s OK. Pre-selling allows you to prove the product/market fit without wasting dev cycles and cash building stuff that people don’t want to buy. Done correctly you will accelerate your speed to market and achieve significant cost savings. More often than not though companies screw this up. Now you’ve got pissed off clients, no credibility and no product.
13. Start with extremely small markets first, and dominate them – when you have a product with seemingly broad appeal you’ll be tempted to sell nationwide, or to move into multiple verticals. This works if you’re a well-resourced company but in general it’s best to identify the smallest market where you can have success and knock that shit down. You’ll find that your efforts in a constrained market have a force-multiplier effect: word of mouth becomes a lot more effective, PR happens organically, and your product team can stay focused on a single set of narrow challenges. Once you dominate there you can expand geographically or by category or both.
14. Inbound leads eventually dry up – constantly invest in new lead generation strategies to prepare for the day when your existing lead sources run out.
15. Running multiple acquisition channels is like running two separate businesses – if you’re an inbound sales organization looking to get an outbound strategy off the ground, be prepared to run this as a separate team with a separate budget and CAC.
16. Don’t blend CAC across acquisition channels – for example, outbound cold-calling can be really effective but you can’t factor in your inbound marketing expense. If you do you’ll get an insane CAC and your CFO will shut it down : (
17. Outbound sales is the only way to have 100% control of your destiny – acquisition channels like inbound or referral will eventually plateau and then you are screwed. Building a process whereby you go out and get the customers in a repeatable manner is the only way to control your revenue growth over the long term.
18. Closers need leads too – common misconception that hiring great closers will create significantly more sales. This won’t work without leads.
19. Tradeshows are a waste of money – well, at least until you can quantify how many decision makers in your target market will be there and the anticipated conversion rate. The fully-loaded cost includes your time out of the office, marketing materials and travel expenses. Closed sales from tradeshows typically don’t cover these costs.
20. Traveling in general is a waste of money – unless you’re selling to large enterprises that require face-to-face meetings you should avoid leaving your office. In many cases you should be able to get to your first $1-3MM in revenue without hopping on a plane.
21. Do the job yourself – you can’t start delegating or effectively managing until you’ve done all the jobs yourself. Cold calling sucks but you just need to do it. Packing and shipping boxes sucks. But you need to do it.
22. Keep your comp plan brain-dead simple – nobody will be motivated to sell if they don’t clearly understand how they get paid. You should be able to ask every rep to explain their commission in two to three sentences or less.
23. There is nothing scarier than a sales team with no leads – just sitting there, f*cking around at their desks with nobody to call. Nightmare! Don’t scale the team until you have the lead-gen to support the headcount at least 6 months out.
24. Opportunity creation is key – how many opportunities are the reps creating weekly?
25. Any customer interaction role in your company is a great “farm team” for cultivating new salespeople.
26. Don’t build out the team too early – I have challenged all of my assumptions HARD before hiring. I thought we were selling to the enterprise and a few initial pilot agreements told me that I was right. We were even about to make a CRO hire. After pinging over 1,000 enterprise prospects to double-verify my assumptions it became clear that we actually did not have an enterprise product.
27. Don’t hire great salespeople to be managers – I did this at Swarm and it worked, but generally this tactic fails. The best salespeople trained by the best managers will often want to join a startup and build the sales team. The problem is that managing people and closing business are two completely different skill sets.
28. People tend to leave managers not companies – managing through motivating is all about keeping your team engaged and mapping their career path. Even if you have no clue how your company is going to make it to the end of the year (your team obviously can’t know that) you need to work one on one to develop an individual path from entry level sales hustler to team lead, to manager, to director and so on. This will change over time but you have to start somewhere and give your team a career roadmap to work toward.
29. People leave managers because they’re not growing professionally and their manager is a dick – so don’t be a dick and invest in the training and education of your team on a regular basis.
30. Reflect on success and failure – rather than saying “close more sales” or “make more calls” dive deep into why your best reps are succeeding and why others aren’t.
31. Sales team attrition is high so get used to it – even in large companies like Oracle 25% yearly attrition is common for sales. In 2013 Salesforce had 3,000 salespeople and LOST 700 in the same year. Your early-stage startup will likely see turnover that’s even higher than that. It’s important to just accept it and condition the rest of your team so that they don’t freak out and think your company is a revolving door. Proactively manage the psychology of your entire company so that morale stays high.
32. No generalists! – once you have two or three people on your sales team it’s important to separate out the different functions. For example: lead gen, pitching/closing and account management are three completely different jobs, with different KPIs and different required skillsets. A closer who’s spending half their day managing existing accounts won’t close nearly as much business as they possibly could. And someone who’s better suited for an account management role trying to close is a waste of time. Teams as small as two can separate functions and start realizing some efficiencies.
33. Discipline is everything – a young inside sales team bears more similarity to pop-warner football than a Fortune 500 company. Establish daily start times, weekly status meetings, rewards/consequences, and a metrics-driven culture. You cannot scale if your team trickles in at9am or asks to work from home.
34. Ban working from home or remote for inside sales – this really only applies to inside sales. It runs counter to the startup “campfires and koombaya” culture but the reality is, nobody is working with the same intensity when they are sleeping in, throwing in a load of laundry and texting with their friends.
35. Recruiting takes a lot longer than you think – plan on a solid 2-3 months to get job postings up, interview, make offers, get turned down and rinse/repeat until you have the right folks.
36. Employee referrals almost always yield the highest quality candidates.
37. Always be recruiting – every happy hour, industry event, whatever. Constantly plant the bug in people’s ear that you are hiring and want the best people to come work for you. Until you start annoying everyone you are not advertising your desire to hire great people hard enough.
38. Consultants rarely work out – but you will probably end up hiring one. and the most important thing is to look at your full funnel and say “where’s my problem?” is it a lead generation issue? is it an appointment setting issue? pitch and close? retention? CRM? Ask yourself what you are trying to get out of hiring this person before you commit to their engagement.
39. Don’t hire a VP of sales too early – a great VP of sales has experience “owning” the entire sales org – hiring, managing, providing strategic direction etc.. You are not ready to hire a VP sales if you aren’t 100% sure who you’re selling to, how your product is priced, how your channels are set up. If you are still in GTM phase it’s too early.
40. Do what is required to lead your team, not what you read about leadership in a book somewhere – you’ll know right away if your leadership tactics are working. The team either listens and is engaged, or they roll their eyes.
41. Learn how to read people – if you think someone is disengaged and not as motivated, it’s because they probably aren’t. Are they requesting more time out of the office than normal? Is their performance sliding? They are probably on their way out and no they will probably not tell you. Point is, if you think something might be up it probably is. Humans are great at avoiding conflict. When you get off your ass and have some hard conversations you’ll be one step closer to a solution.
42. Entry Level Employees are Great – because you can get them right out of school, they are cheap to hire, and the good ones are a sponge for new information. Over time, they can take on significant roles in your organization and serve as mentors to the next class of kids.
43. Entry Level Employees are a Nightmare – because they don’t have any context or perspective, and can grow extremely entitled. As your company grows some will feel that they deserve to take on roles they aren’t ready for or compensation that just doesn’t make sense.
44. Entitlement is the “point of no return” – once an employee develops a toxic attitude they need to be moved out immediately. In almost every case, letting someone go results in a collective “I wish we had done that sooner” refrain from the rest of your team.
45. The process you build is #1, not the salesperson – tell me if you’ve heard this before: “if we can just find five more guys like Alfredo then this team would be blowing it out of the water” *points to star sales guy* – every sales team has their rockstar or rockstars. And everyone is quick to say “if we just had more of them….” but this is a rookie move. You will never find and retain a full team of those people. Ever. And I hate to say it, but at a certain point your rockstar is going to get entitled and hold you up for stupid money and he/she will leave. The star of your sales team needs to be your process not your performer.
In the sales machine your leads are the input and revenue is the output. Nothing else should be left to chance. When you have rock-solid lead gen, a great pitch, a metrics-driven culture and thoughtful management ALL of your b-players can produce A results.
46. Set up a zombie sales death squad – once the team grows past your first few sales reps pick one or two of them to go on top-secret “sales missions” to test new strategies. For example, pick the stage in your pipeline with the lowest conversion rate and test three new scripts or approaches. Every element of your sales process should be open for debate at any time.
47. Don’t let salespeople move to non-sales roles – this sounds harsh but a salesperson, particularly entry-level, can’t think they can just move over to account management or support or biz dev if they miss their number. What happens if they crush their number and want to move to a different part of the company? Sure then you might consider moving them…but it’s highly highly unlikely that a top producing rep will make equal or greater pay moving to a non-sales role.
48. Shitshow or “moving target?” – set expectations at time of hiring that the role your reps are being hired for could change in an instant and they should be ready/excited for that. Startup sales strategy is a moving target that should be embraced.
49. Set your quotas LOW in the beginning – you can’t motivate or manage the team if the bulk of them are not hitting their goals, and nobody will respect your authority if they know they can get away with missing plan. As a sales leader it’s your job to own the number. If 10% of your team is off quota that’s their problem. If half or more is off…that’s your problem. Set low at first, make sure everyone is hitting, then increase a little more the next month
50. Sleep with your pipeline under your pillow – and tattoo it to your face. This is the most important thing you can ever do in sales. It all comes down to a properly understood and managed pipeline. Crawl in there with a microscope and seek out every single conversion rate, cycle, lead source, objection. Know it all.
51. Channels are really hard – reseller channels are a common way to sell most products. For example, small to midsize liquor companies work through a distributor to get their products onto store shelves, IT software and hardware companies work through VARs (value-added resellers) to sell to IT guys and many web publishers sell their advertising inventory through open exchanges rather than directly to the advertisers themselves. Here’s the problem – teaching and motivating anyone to sell your product is really, really hard. Shit – motivating your own employees to sell your product is hard enough! Regardless of what product you are selling, you will get offers from resellers to sell your stuff. It will seem like easy money at first – but avoid it! Until you have a really buttoned up internal sales process – things like lead-gen, marketing collateral, sales training, fulfillment and RMAs you are not ready to start selling through the channel.
52. Resellers will not bring you leads – at least not early on. a common misconception is that resellers will go out and proactively bring you business. In most cases, they will not. They might put your logo on their website, send email blasts to their customers, even throw events. In some cases they will promise you large slugs of business. I can promise you that this is almost never the case. They can already feed their kids with the stuff they’ve been selling for 10 years. It’s your job to send them a lead. and then another lead, and another. and five more. You have to prove to them that they can make money selling your product and that it won’t explode in the hands of a customer, only then can you expect resellers to go out and bring you new business.
53. There is very little room to pivot with a channel sales model – pivoting is hard enough with your own team. The process of changing your product, rewriting collateral, rewriting technical documentation and training materials can take months. Imagine how difficult this becomes when you have a group of loosely-engaged third parties selling your products in their spare time. Every pivot cuts their desire to engage and results in lost sales.
54. Webinars are a generally ineffective tool when you’re starting out – until you’re able to invite thousands of prospects at a time to your webinar you should not expect it to drive any meaningful number of leads. Here’s how this story usually goes: spend countless hours putting the slideshow together, writing the script, rehearsing, setting up the feed, doing email campaigns and building landing pages. And then three people attend the webinar. Sweet.
55. Don’t go international too early – Once you start getting some PR you’ll start getting a flood of inbound leads from outside the US. Asia! Dubai! Denmark! Everybody wants my product! In many cases half of your inbound will come from folks outside the US. Similar to getting interest from resellers, it will seem like free money. But the complicated nature of non-US selling is immense. What you’ll find is that you start shipping some orders to Australia, then to Denmark, then a consultant in Japan wants to get you into some big clients over there. And before you know it you’re staying up all night creating non-US price lists and marketing collateral for each region, adding new fields to your CRM, worried about whether or not you have the right certifications to sell in those countries. Then you actually make some sales and you have pissed off customers because….surprise….Australians need support too. Except their Monday is our Sunday. And then your sales prospects in Australia “need” to see case studies with Australian businesses. So your marketing team now hates you. Focus on your home market first.
Operations and Scaling
56. Get ready for constant interpersonal problems – once the team starts to grow you’ll find that somebody is always leaving, somebody is always about to get fired, somebody always wants to “have a minute” with you. That’s just the way it is so you should be proactively establishing tight bonds between everyone on your team rather than waiting to put out fires.
57. Build an operations plan that’s aligned with your CAC – for example, a $50/month product technically can’t support any direct salespeople. Unless each salesperson can sell 100+ accounts a month the numbers just don’t back out. Really analyze the fully-loaded cost of bringing on a new customer. If you don’t, your investors will do it for you in due diligence and make you look stupid.
58. Don’t overinvest in CRM too early – until you’ve truly established a repeatable sales process – not just five or 10 sales in a row – but actually built a business around your ability to sell your shit over and over and over, only then should you invest in a heavy-duty Salesforce implementation. Your CRM will be your greatest asset or biggest waste of money depending on how you approach it. At Swarm we used a cheap CRM first (Zoho) and customized it ourselves. We worked through five or six different sales models until finally hitting on the winner. And even then we spent probably three or four months using it until we were damn sure things weren’t changing. Only then did we call up Salesforce and spend $200,000 getting our 12-person sales team properly outfitted. CRM design and implementation (if you do it right) is mission-critical to scaling your business. But if you do it too early you will be stuck with a system that nobody wants and is difficult to change.
59. Most biz dev is a waste of time – I say this because I just haven’t met that many great BD guys out there. At it’s core, BD is a scalable way to reach lots of customers through a partner, whereas sales involves going to each customer one by one. Generally speaking the only time you should think about biz dev is if your model relies on a partner ecosystem to work, or if you can pick up a distinct competitive or strategic advantage by capturing value through a partnership (that you can’t otherwise do yourself). Really work to understand and quantify the scope of your opportunity with a partner before going down that path.
60. Establish an internal knowledgebase or wiki – and delegate somebody to own this. it will need to be updated almost daily. But you won’t be able to retain customers or scale your support operations if nobody knows how the hell anything works.
61. Remote offices and expanding beyond HQ too early is a huge time suck and waste of resources – It took me the same amount of energy to manage one guy in NYC as it did to manage 20 people in California at both of my past companies.
62. Establish a ticketing and support infrastructure early on – as soon as you start selling. Even if it’s just an intern supervising and responding to the tickets, it’s better than nothing. Customers will roll down the assembly line and into the trash heap
63. Worry about churn once you prove you can sell – you’re going to have insane churn early on. that’s OK as long as you address it eventually. establishing the repeatable sales model should be priority numero uno.
64. Live in truth – part of a much larger concept by Ray Dalio. You’ll be tempted to make excuses or justify failures when things get really really hard. The worst thing you can do to your team and your investors is to lie to yourself. Your success will come by solving the problems that get in the way of getting what you want. And in the startup vacuum nobody can hear you scream, so don’t bother. Take an honest look at the problems you need to solve and divorce yourself emotionally from the possible failures.
If you have any questions for Ryan, let him know here in the comments or reach out to him on twitter at DenehyXXL