Category Archives: Go To Market

The Holy Grail of Enterprise Sales: Proving a Repeatable Sales Process

(This is the second in a three-part restructuring and build-out of a previous post.  See note [1] for details.)

In the prior post we introduced repeatable sales process as the Holy Grail of enterprise software sales and, unlike some who toss the term around rather casually, we defined a repeatable sales process as meaning you have six things:

  1. Standard hiring profile
  2. Standard onboarding program
  3. Standard support ratios
  4. Standard patch
  5. Standard kit
  6. Standard sales methodology

The point of this, of course, is to demonstrate that given these six standard elements you can consistently deliver a desirable, standard result.

The surprisingly elusive question is then, how to measure that?

  • Making plan?  This should be a necessary but not sufficient condition for proving repeatability.  As we’ll see below, you can make plan in healthy as well as unhealthy ways (e.g., off a small number of reps, off disproportionate expansion and weak new logo sales).
  • Realizing some percentage of your sales capacity?  I love this — and it’s quite useful if you’ve just lost or cut a big chunk of your salesforce and are ergo in the midst of a ramp reset — but it doesn’t prove repeatability because you can achieve it in both good and bad ways [2].
  • Having 80% of your salesreps at 100%+ of quota?  While I think percent of reps hitting quota is the right way to look at things, I think 80% at 100% is the wrong bar.

Why is defaulting to 80% of reps at 100%+ of quota the wrong bar?

  • The attainment percentage should vary as function of business model: with a velocity model, monthly quotas, and a $25K ARR average sales price (ASP), it’s a lot more applicable than with an enterprise model, annual quotas, and a $300K ASP.
  • 80% at 100%+ means you beat plan even if no one overperforms [3] – and that hopefully rarely happens.
  • There is a difference between annual and quarterly performance, so while 80% at 100% might be reasonable in some cases on an annual basis, on a quarterly basis it might be more like 50% — see the spreadsheet below for an example.
  • The reality of enterprise software is that performance is way more volatile than you might like it to be when you’re sitting in the board room
  • When we’re looking at overall productivity we might look at the entire salesforce, but when we’re looking at repeatability we should look at recently hired cohorts. Does 80% of your third-year reps at quota tell you as much about repeatability – and the presumed performance of new hires – as 80% of your first-year reps cohort?

Long story short, in enterprise software, I’d say 80% of salesreps at 80% of quota is healthy, providing the company is making plan.  I’d look at the most recent one-year and two-year cohorts more than the overall salesforce.  Most importantly, to limit survivor bias, I’d look at the attrition rate on each cohort and hope for nothing more than 20%/year.  What good is 80% at 80% of quota if 50% of the salesreps flamed out in the first year?  Tools like my salesrep ramp chart help with this analysis.

Just to make the point visceral, I’ll finish by showing a spreadsheet with a concrete example of what it looks like to make plan in a healthy vs. unhealthy way, and demonstrate that setting the bar at 80% of reps at 100% of quota is generally not realistic (particularly in a world of over-assignment).

If you look at the analysis near the bottom, you see the healthy company lands at 105% of plan, with 80% of reps at 80%+ of quota, and with only 40% of reps at 100%+ of quota.  The unhealthy company produces the same sales — landing the company at 105% of plan — but due to a more skewed distribution of performance gets there with only 47% of reps at 80%+ and only a mere 20% at 100%+.

In our final post in this series, we’ll ask the question:  is repeatability enough?

# # #

Notes

[1] I have a bad habit, which I’ve been slowly overcoming, to accidently put real meat on one topic into an aside of a post on a different one.  After reading the original post, I realized that I’d buried the definition of a repeatable sales model and the tests for having one into a post that was really about applying CMMI to the sales model.  Ergo, as my penance, as a service to future readers, and to help my SEO, I am decomposing that post into three parts and elaborating on it during the restructuring process.

[2] Unless you’ve had either late hiring or unexpected attrition, 80% of your notional sales capacity should roughly be your operating plan targets.  So this is point is normally subtly equivalent to the prior one.

[3] Per the prior point, the typical over-assignment cushion is around 20%

Should Your SDRs Look for Projects or Pain?

There’s a common debate out there, it goes something like this:

“Our sales development representatives (SDRs) need to look for pain: finding business owners with a problem and the ability to get budget to go fix it.”

Versus:

“No, our SDRs need to look for projects: finding budgeted projects where our software is needed, and ideally an evaluation in the midst of being set up.”

Who’s right?

As once was once taught to me, the answer to every marketing question is “it depends” and the genius is knowing “on what.”  This question is no exception.  The answer is:  it depends.  And on:

  • Whether you’re in a hot or cold market.
  • Whether your SDR is working an inbound or outbound motion

I first encountered this problem decades ago rolling out Solution Selling (from which sprung the more modern Customer-Centric Selling).  Solution Selling was both visionary and controversial.  Visionary in that it forced sales to get beyond selling product (i.e., selling features, feeds, and speeds) instead focusing on the benefits of what the product did for the customer.  Controversial in that it uprooted traditional sales thinking — finding an existing evaluation was bad, argued Bosworth, because it meant that someone else had already created the customer’s vision for a solution and thus the buying agenda would be biased in their favor.

While I think Bosworth made an interesting point about the potential for wired evaluation processes and requests for proposal (RFPs), I never took him literally.  Then I met what I could only describe as “fundamentalist solution seller” in working on the rollout.

“OK, we we’re working on lead scoring, and here’s what we’re going to do:  10 points for target industry, 10 points for VP title or above, 10 points for business pain, -10 points for existing evaluation, and -10 points for assigned budget.”

Wut?

I’d read the book so I knew what Bosworth said, but, but he was just making a point, right?  We weren’t actually going to bury existing evaluations in the lead pile, were we?  All because the customer knew they wanted to buy in our category and had the audacity to start an evaluation process and assign budget before talking to us?

That would be like living in the Upside Down.  We couldn’t possibly be serious?  Such is the depth of religion often associated with the rollout of a new sales methodology.

Then I remembered the subtitle of the book (which everyone seems to forget).

“Creating buyers in difficult selling markets.”  This was not a book written for sellers in Geoffrey Moore’s tornado, it was book for written for those in difficult markets, tough markets, markets without a lot of prospects, i.e., cold markets.  In a cold market, no one’s out shopping so you have no choice but find potential buyers in latent pain, inform them a solution exists, and try to sell it to them.

Example:  baldness remedies.  Sure, I’d rather not be bald, but I’m not out shopping for solutions because I don’t think they exist.  This is what solution sellers call latent pain.  Thus, if you’re going to sell me a baldness remedy, you’re going need to find me, get my attention, remind me that I don’t like being bald, then — and this is really hard part — convince me that you have a solution that isn’t snake oil.  Such is life in cold markets.  Go look for pain because if you look for buyers you aren’t going to find many.

However, in hot markets there are plenty of buyers, the market has already convinced buyers they need to buy a product, so the question sellers should focus on is not “why buy one” but instead, “why buy mine.”

I’m always amazed that people don’t first do this high-level situation assessment before deciding on sales and marketing messaging, process, and methodology.  I know it’s not always black & white, so the real question is:  to what extent are our buyers already shopping vs. need to be informed about potential benefits before considering buying?  But it’s hard to devise any strategy without having an answer to it.

So, back to SDRs.

Let’s quickly talk about motion.  While SDR teams may be structured in many ways (e.g., inbound, outbound, hybrid), regardless of team structure there are two fundamentally different SDR motions.

  • Inbound.  Following-up with people who have “raised their hand” and shown interest in the company and its offerings.  Inbound is largely a filtering and qualification exercise.
  • Outbound.  Targeting accounts (and people within them) to try and mutate them into someone interested in the company and its offerings.  In other words, stalking:  we’re your destiny (i.e., you need to be our customer) and you just haven’t figured it out, yet.

In hot markets, you can probably fully feed your salesforce with inbound.  That said, many would argue that, particularly as you scale, you need to be more strategic and start picking your customers by complementing inbound with a combination of named-account selling, account-based marketing, and outbound SDR motion.

In cold markets, the proverbial phone never rings.  You have no choice but to target buyers with power, target pains, and convince them your company can solve them.

Peak hype-cycle markets can be confusing because there’s plenty of inbound interest, but few inbound buyers (i.e., lots of tire-kickers) — so they’re actually cold markets disguised as hot ones.

Let’s finally answer the question:

  • SDRs in hot markets should look for projects.
  • SDRs in cold markets should look for pain.
  • SDRs in hot markets at companies complementing inbound with target-account selling should look for pain.

 

Ten Pearls Of Enterprise Software Startup Wisdom From My Friend Mark Tice

I was talking with my old friend, Mark Tice, the other day and he referred to a startup mistake as, “on his top ten list.”  Ever the blogger, I replied, “what are the other nine?”

Mark’s been a startup CEO twice, selling two companies in strategic acquisitions, and he’s run worldwide sales and channels a few times.  I first met Mark at BusinessObjects, where he ran our alliances, we worked together for a while at MarkLogic, and we’ve stayed in touch ever since.  Mark’s a seasoned startup executive, he’s go-to-market oriented, and he has some large-company chops that he developed earlier in his career.

Here’s an edited version of Mark’s top ten enterprise software startup mistakes list, along with a few comments prefaced by DK.

1. Thinking that your first VP of Sales will take you from $0 to $100M.  Startups should hire the right person for the next 18-24 months; anything beyond that is a bonus.  (DK:  Boards will often push you to hire someone “bigger” and that’s often a mistake.) 

2. Expecting the sales leader to figure out positioning and pricing.  They should  have input, but startups should hire a VP of Marketing with strong product marketing skills at the same time as the first VP of Sales. (DK:  I think the highest-risk job in Silicon Valley is first VP of Sales at a startup and this is one reason why.)

3. Hiring the wrong VP Sales due to incomplete vetting and then giving them too much runway to perform.  Candidates should give a presentation to your team and run through their pipeline with little to no preparation (and you should see if they pay attention to stage, last step, next step, keys to winning).  You should leverage backdoor references.  Finally, you should hire fast and fire faster — i.e., you’ll know after 3 months; don’t wait for more proof or think that time is going to make things better.  (DK:  a lot of CEOs and boards wait too long in denial on a bad VP of Sales hire.  Yes, starting over is difficult to ponder, but the only thing worse is the damage the wrong person does in the meantime.)

4. Marketing and selling a platform as a vertical application.  Having a platform is good to the extent it means there is a potentially large TAM, but marketing and selling it as an application is bad because the product is not complete enough to deliver on the value proposition of an application.  Align the product, its positioning, and its sales team — because the rep who can sell an analytic platform is very different from the rep who can sell a solution to streamline clinical trials.  (DK:  I think this happens when a company is founded around the idea of a platform, but it doesn’t get traction so they then fall back into a vertical strategy without deeply embracing the vertical.  That embrace needs to be deeper than just go-to-market; it has to include product in some way.)

5. Ignoring churn greater than 15%.  If your churn is greater than 15%, you have a problem with product, market, or most likely both. Don’t ignore it — fix it ASAP at all costs.  It’s easy to say it will get better with the next release, but it will probably just get a bit less bad.  It will be harder to fix than you think. (DK:  if your SaaS bucket is too leaky, you can’t build value.  Finding the root cause problem here is key and you’ll need a lot of intellectual honesty to do so.)

6. Waiting too long to create Customer Success and give it renewals.  After you have five customers, you need to implement Customer Success for renewals and upsells so Sales can focus on new logos. Make it work. (DK:  Truer words have never been spoken; so many startups avoid doing this.  While the upsell model can be a little tricky, one thing is crystal clear:  Customer Success needs to focus on renewals so sales can focus on new ARR.)

7. Pricing that doesn’t match the sales channel.  Subscriptions under $50K should only be sold direct if it’s a pilot leading to a much larger deployment.  Customers should become profitable during year two of their subscription. Having a bunch of customers paying $10K/year (or less) might make you feel good, but you’ll get crushed if you have a direct sales team acquiring them. (DK:  Yes, you need to match price point to distribution channel. That means your actual street price, not the price you’re hoping one day to get.)

8. Believing that share ownership automatically aligns interests.  You and your investors both own material stakes in your company.  But that doesn’t automatically align your interests.  All other things being equal, your investors want your company to succeed, but they also have other interests, like their own careers and driving a return for their investors.  Moreover, wanting you to succeed and being able to offer truly helpful advice are two different things.  Most dangerous are the investors who are very smart, very opinionated, and very convincing, but who lack operating experience.  Thinking that all of their advice is good is a bit like believing that a person who reads a lot will be a good author — they’ll be able to tell you if your go-to-market plan is good, but they won’t write it for you. (DK:  See my posts on interest mis-alignments in Silicon Valley startups and taking advice from successful people.)

9. Making decisions to please your investors/board rather than doing what’s best for your company. This is like believing that lying to your spouse is good for your marriage. It leads to a bad outcome in most cases.  (DK: There is a temptation to do this, especially over the long term, for fear of some mental tally that you need to keep in balance.  While you need to manage this, and the people on your board, you must always do what you think is right for company.  Perversely at times, it’s what they (should, at least) want you to do, too.)

10. Not hiring a sales/go-to-market advisor because they’re too expensive.  A go-to-market mistake will cost you $500K+ and a year of time. Hire an advisor for $50K to make sure you don’t make obvious mistakes.  It’s money well spent.  (DK:  And now for a word from our sponsor.)

Thanks Mark.  It’s a great list.