There is a transition in every company from a “seat of the pants” kind of entrepreneurial company to a “process driven” mechanized one. Many people who are successful in the former fare less well in the latter.
Frankly, I’m much more of the former kind of guy and I tire of the routine process & politics required to succeed in a big company. The reality is that you need to standardize many things in a company if you’re to scale quickly, which is why many founders depart at the time of the transition.
Others resist and continue to run companies that need to scale the same way they ran the company when it was smaller. This seldom works. Rarer still is the startup CEO who can make the transition effectively on their own. The path I went down after a few years was to hire more process driven people and devolved more daily operational ownership to people running individual functions such as product management, sales management, finance, etc.
Unwillingness to devolve power is the bane of many management teams at startup companies. I see the problem directly at many startups I know.
One of the most obvious places where you see this is in sales & marketing. I call this “arming & aiming” your sales teams where you need to standardize both the assignment of territories, industries & accounts (aiming) as well as the process of selling, the collateral, the legal agreements & pricing.
Here are some of the tools in the Swiss Army Knife that your team needs to be armed with to scale:
(this article was originally posted on GigaOm in a shorter format.)
1. Packaging, pricing & discounts – In the early days of my first company we always had “list prices” we quoted to customers and of course we were always willing to negotiate based on who the client was, how important the business was to us, who the competition was and how well the deal was negotiated.
Like most everybody, I would prefer a world in which “the price was the price” but no matter how much we all want that world it seems the human psychology is pre-disposed to buyers wanting “a pound of flesh” so we were forced to play this game. You might get away with “the price is the price” with your business unit buyer but then by the time the procurement departement was involved they wanted to prove that they earned their keep. Ditto the CFO. Let’s not even talk about legal.
It seems sort of silly but for enterprise sales at least, if you don’t have buffer built into your price & services you’re bound to get hacked down anyways.
For the first couple of years I got involved with pricing any serious deal because I wanted to stay close to the business. Over time I realized I was a bit of a bottleneck in pricing and I didn’t add significant value. We moved toward more standardized pricing (e.g. less negotiating & haggling). So if the prices of our offering was, say, $100,000 we then gave each sales rep the ability to discount up to 15% ($85,000) on their own with no approvals and 30% ($70,000) for a country sales manager and anything above that required my sign off.
Additionally, we standardized the “allowance rates” for services such as document storage, maximum numbers of users and we created more standardized packages of features that constituted an “up-sell” to a our premium offerings. Before doing this any deal who wanted to win at a given price would just “throw in more storage into the deal.” We stopped allowing this.
2. SLAs, T’s & C’s - When we started we had a standard service level agreement (SLA) that talked about our uptime, customer service response times and penalties if we breeched our service levels. This document was important both for giving customers confidence as well as protecting our liability in the case of outages. The problem is that we started with an SLA that was too favorable to us. We really didn’t need to because we had a long track-record of uptime from which to judge our ability to manage the SLA. But we still had one that hugely favored us and made people negotiate hard to get a better deal.
Sophisticated buyers saw straight through it and knew what to negotiate for. The original agreement called for 99.8% uptime and if they pushed we’d agree 99.99%. We then would have to agree what constituted “uptime %” – was it % of total hours or % of “working” hours. Once percentage was agreed we’d negotiate “service credits.” The standard contract had no remedies in the event we didn’t meet our SLA. Sophisticated buyers knew that an SLA with no financial teeth was worthless and would negotiate a percentage of monthly contract as a service credit. Really professional buyers could push further.
First, I’m embarrassed now that we didn’t just start with a hugely customer oriented SLA and stand confidently on our ability to successfully manage our service. Those were the early days of SaaS and you might remember that even Salesforce.com has major outage problems. So we thought we were just managing our economic risks. The reality was that we added a HUGE overhead to negotiating deals that didn’t need to be there. In the first few years it was manageable but over time it became a nightmare.
We eventually migrated to one standard SLA for normal customers and a high-level SLA for premium customers (and 1-2 specially negotiated ones which I regretted).
Same thing with terms & conditions (T’s & C’s). When we bought products / services I envied the companies that said “we don’t alter our t’s & c’s at all.” It was easier that way. At my company we let customers negotiate because we didn’t want to lose deals. But we created a patchwork of non-standard contracts that added to the overhead of managing a business as it scaled. When we signed the deals we were frankly only worried about getting through the next few quarters. It seemed a luxury to think about the future.
If I did another startup I would only have standard, non-negotiable t’s & c’s (and maybe agree the occasional side letter to win bigger deals).
3. RFP Generators – Another obvious investment area. So many of the sections of an RFP (request for proposal) are standard questions that can be templated out. I had a fair amount of “cut-and-paste” text I would include when I wrote responses to RFPs but I hadn’t institutionalized it for the entire company.
I then noticed that our head of sales in France had created almost a manufacturing process for responding to RFPs. He knew that he could compete for a lot more business if he could minimize the amount of time his team spent preparing these time-sucking documents. So he hired an intern plus a junior marketing person and tasked them with mechanising responses. His opinion was that his expensive direct sales reps should maximize their time in front of customers. And that was my opinion, too. And he actually did something about it. I was the laggard.
4. Sales Decks – Most companies have a standards sales deck. As sales teams grow and become distributed these sales decks morph over time. Each sales person tends to slot in their own slides to win deals or to position things in their own words or style in order to win deals. To some extent this can be good and agile.
Two things to pay attention to: 1) often when you release features that help you better differentiate from competitors these are often lost if you aren’t good at standardizing decks across your organization and 2) the local sales reps need a better way of feeding changes into management & marketing because if they have local success the chances are these will work well if you deploy them to other reps.
5. Demos – One of the things that most people are bad at and that are hard to standardize is the demo. I have written about how to do a demo before (even though this was in the context of a VC pitch much of it applies). A good demo tells a story. A good demo walks the user through “a day in the life” of a user trying to do his/her job. 80% of demos I see are features, functions & benefits. People don’t buy features & functions. They buy solutions to their problems. So you really need to script the story telling of your demos to talk in your customers language. You need to train your staff to pause and ask questions & solicit feedback during the demo. In short, you need to institutionalize your company’s demos.
7. Call Scripts / Plans – I know it’s a modern trend to want to empower inside sales departments (aka telesales) rather than having people on formal “dialing scripts.” I understand this. It makes for a more authentic discussion. And if you hire super bright telesales reps you need to trust them to a degree to manage a process in the same way you trust your outside sales reps. But too many startups stop at just hiring bright people, training them on the products, teaching them the pricing and unleashing them to start closing deals. I know we did and it wasn’t that effective. And without process & procedure telesales reps will be less effective. So at a minimum they should have “call plans” that talk about the who in the organization to call, what to discuss and how to handle objections. In some places a more “scripted” approach makes sense but certainly not somebody LITERALLY reading text. That never works.
8. Process / Methodology – Finally, one of the most important changes we made in our organization is actually defining our sales process, hired a trainer to help us implement it and we then rolled it out and enforced it across all sales campaigns. Just as with product releases – our strategy was to put the process out there, monitor what worked and change the things that did not.
The process in and of itself was pretty lengthy and at some point I’d like to write about it in more detail. But essentially it boiled down to: doing a business plan with a customer, finding a champion to guide you through the sales process, identify everybody involved in the decision and what their roles were, identify the budget holder, figure out who the competition was and who was supporting them, demonstrate your USPs (unique selling propositions) relative to the competition and understanding the buyer’s decision process. We called it PUCCKA. That’s for another day.
9. ROI Calculators – Often you want a simple ROI calculator for early in the sales process and a detailed one as the process unfolds. We built standard tools in Excel spreadsheets. I spoke a bit about it in my last post on “objection handling” and there is a good discussion in the comments section.
As I re-read this post it came across as a bit dry & factual rather than some of my lively posts with fun stories. And that’s kind of fitting. Scaling a business is often about the boring stuff that doesn’t excite the early-stage entrepreneurs. It’s about having rules and having people follow them. It’s more about standardization than free-form improvisation.
Some people excel at rules & process. And these are the people you want to find & hire when it’s time to scale your sales organization. And if it’s not you (like it’s not me) recognize this early and surround yourself with people who are better at it than you are.
[Note: the original post in this series on sales segmentation is here.]
[Editor's note: Mark, you've got a baby knife. Here's the real thing for grown-ups: :-)]
(Cross-posted @ Both Sides of the Table)