Category Archives: Startups

The Holy Grail of Enterprise Sales: Is a Repeatable Sales Process Enough?

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

In the first two posts in this series, we first defined a repeatable sales process and then discussed how to prove that your sales process is repeatable.

All that was just the warm-up for the big idea in this series:  is repeatability enough?

The other day I was re-reading my favorite book on data governance (and yes I have one), Non-Invasive Data Governance by Bob Seiner.  Reading it reminded me of the Capability Maturity Model, from Carnegie Mellon’s Software Engineering Institute.

Here’s the picture that triggered my thinking:

Did you see it?  Look again.

Repeatable is level two in a five-level model.  Here we are in sales and marketing striving to achieve what our engineering counterparts would call 40% of the way there.  Doesn’t that explain a lot?

To think about what we should strive for, I’m going to switch models, to CMMI, which later replaced CMM.   While it lacks a level called “repeatable” – which is what got me thinking about the whole topic in the first place – I think it’s nevertheless a better model for thinking about sales [2].

Here’s a picture of CMMI:

I’d say that most of what I defined as a repeatable sales process fits into the CMMI model as level 3, defined.  What’s above that?

  • Level 4, quantitively managed. While most salesforces are great about quantitative measurement of the result – tracking and potentially segmenting metrics like quota performance, average sales price, expansion rates, win rates – fewer actually track and measure the sales process [3].  For example, time spent at each stage, activity monitoring by stage, conversion by stage, and leakage reason by stage.  Better yet, why just track these variables when you can act on them?  For example, put rules in place to take squatted opportunities from reps and give them to someone else [4], or create excess stage-aging reports that will be reviewed in management meetings.
  • Level 5, optimizing. The idea here is that once the process is defined and managed (not just tracked) quantitatively, then we should be in a mode where we are constantly improving the process.  To me, this means both analytics on the existing process as well as qualitative feedback and debate about how to make it better.  That is, we are not only in continual improvement mode when it comes to sales execution, but also when it comes to sale process.  We want to constantly strive to execute the process as best we can and also strive to improve the process.  This, in my estimation, is both a matter of culture and focus.  You need a culture that process- and process-improvement-oriented.  You need to take the time – as it’s often very hard to do in sales – to focus not just on results, but on the process and how to constantly improve it.

To answer my own question:  is repeatability enough?  No, it’s not.  It’s a great first step in the industrialization of your sales process, but it quickly then becomes the platform on which you start quantitative management and optimization.

So the new question should be not “is your sales process repeatable?” but “is it optimizing?”  And never “optimized,” because you’re never done.

# # #

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] The nuance is that in CMM you could have a process that was repeatable without being (formally) defined.  CMMI gets rid of this notion which, for whatever it’s worth, I think is pretty real in sales.  That is, without any formal definition, certain motions get repeated informally and through word of mouth.

[3] With the notable exception of average sales cycle length, which just about everyone tracks – but this just looks at the whole process, end to end.  (And some folks start it late, e.g., from-demo as opposed to from-acceptance.)

[4] Where squatting means accepting an opportunity but not working on it, either at all or sufficiently to keep it moving.

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%

The Holy Grail of Enterprise Sales: Defining the Repeatable Sales Process

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

The number one question go-to-market question in any enterprise software startup is:  “do you have a repeatable sales process?” or, in more contemporary Silicon Valley patois, “do you have a repeatable sales motion?”

It’s one of the key milestones in startup evolution, which proceed roughly like:

  • Do you have a concept?
  • Do you have a working product?
  • Do you have any customer traction (e.g., $1M in ARR)?
  • Have you established product-market fit?
  • Do you have a repeatable sales process?

Now, when pressed to define “repeatable sales process,” I suspect many of those asking might reply along the same lines as the US Supreme Court in defining pornography:

“I shall not today attempt further to define the kinds of material I understand to be embraced… but I know it when I see it …”

That is, in my estimation, a lot of people throw the term around without defining it, so in the Kelloggian spirit of rigor, I thought I’d offer my definition:

A repeatable sales process means 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

All of which contribute to delivering a desirable, standard result.  Let’s take a deeper look at each:

  1. You hire salesreps with a standard hiring profile, including items such as years of experience, prior target employers or spaces, requisite skills, and personality assessments (e.g., DiSC, Hogan, CCAT).
  2. You give them a standard onboarding program, typically built by a dedicated director of sales productivity, using industry best practices, one to three weeks in length, and accompanied by ongoing clinics.
  3. You have standard support ratios (e.g., each rep gets 1/2 of a sales consultant, 1/3 of an SDR, and 1/6 of a sales manager).  As you grow, your sales model should also use ratios to staff more indirect forms of support such as alliances, salesops, and sales productivity.
  4. You have a standard patch (territory), and a method for creating one, where the rep can be successful.  This is typically a quantitative exercise done by salesops and ideally is accompanied by a patch-warming program [2] such that new reps don’t inherit cold patches.
  5. You have standard kit including tools such as collateral, presentations, demos, templates.  I strongly prefer fewer, better deliverables that reps actually know how to use to the more common deep piles of tools that make marketing feel productive, but that are misunderstood by sales and ineffective.
  6. You have a standard sales methodology that includes how you define and execute the sales process.  These include programs ranging from the boutique (e.g., Selling through Curiosity) to the mainstream (e.g., Force Management) to the classic (e.g., Customer-Centric Selling) and many more.  The purpose of these programs is two-fold:  to standardize language and process across the organization and to remind sales — in a technology feature-driven world — that customers buy products as solutions to problems, i.e., they buy 1/4″ holes, not 1/4″ bits.

And, most important, you can demonstrate that all of the above is delivering some desirable standard result, which will be the topic of the next post.

# # #

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.  My favorite example:  it took me ~15 years to create a post on my marketing credo (marketing exists to make sales easier) despite mentioning it in passing in numerous posts.  After reading the prior 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] I think of patch-warming as field marketing for fallow patches.  Much as field marketing works to help existing reps in colder patches, why can’t we apply the same concepts to patches that will soon be occupied?  This is an important, yet often completely overlooked, aspect of reducing rep ramping time.

The Holy Grail of the Repeatable Sales Process: Is Repeatability Enough?

Most of us are familiar with Mark Leslie’s classic Sales Learning Curve and its implications for building the early salesforce at an enterprise startup.  In short, it argues that too many startups put “the pedal to the metal” on sales hiring too early – before they have enough knowledge, process, and infrastructure in place – and end up with a pattern that looks like:

  1. Hire 1 salesrep, which seems to be working so we …
  2. Hire 2 more salesreps, which seems to be mostly working so we think “Eureka!” and we …
  3. Hire 10 more salesreps overnight

With the result that 8 of the 10 salesreps hired in phase three flame out within a year.  You end up missing numbers and hiring a new VP of Sales who inherits a smoldering rubble of a salesforce which they must rebuild, nearly from scratch.  The cost:  $3-5M of wasted capital [1] and, more importantly, 12-18 months of lost time.

But let’s say you heed Leslie’s lessons and get through this phase.  Once you’re up to 20-30 reps, you don’t just need sales to be working, you need to prove that you have attained the Holy Grail of startup sales:  a repeatable sales process.

Everyone has their own definition of what “repeatable sales process” means and how to measure if you’ve attained it.  Here are mine.

A repeatable sales process means:

  1. You hire salesreps with a standard hiring profile
  2. You give them a standard onboarding program
  3. You have standard support ratios (e.g., each rep gets 1/2 of a sales consultant, 1/3 of a sales development rep (SDR), and 1/6 of a sales manager)
  4. You have a standard patch (and a method for creating one) where the rep can be successful
  5. You have standard kit including tools such as collateral, presentations, demos, templates
  6. You have a standard sales methodology that includes how you define and execute the sales process

And, of course, it’s demonstrating some repeatable result.  While many folks instinctively drift to “80% of salesreps at 100% (or more) of their quota” they forget a few things:

  • The 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 [2] – 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%
  • 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.

But all that was just the warm-up for the big idea in this post:  is repeatability enough?  Turns out, the other day I was re-reading my favorite book on data governance, Non-Invasive Data Governance by Bob Seiner, and it reminded me of the Capability Maturity Model, from Carnegie Mellon’s Software Engineering Institute.

Here’s the picture that triggered my thinking:

Did you see it?  Repeatable is level two in a five-level model.  Here we are in sales and marketing striving to achieve what our engineering counterparts would call 40% of the way there.  Doesn’t that explain a lot?

To think about what we should strive for, I’m going to switch models, to CMMI, which later replaced CMM.   While it lacks a level called “repeatable” – which is what got me thinking about the whole topic – I think it’s a better model for thinking about sales [3].

Here’s a picture of CMMI:

I’d say that most of what I defined above as a repeatable sales process fits into the CMMI model as level 3, defined.  What’s above that?

  • Level 4, quantitively managed. While most salesforces are great about quantitative measurement of the result – tracking and potentially segmenting metrics like quota performance, average sales price, expansion rates, win rates – fewer actually track and measure the sales process [2].  For example, time spent at each stage, activity monitoring by stage, conversion by stage, and leakage reason by stage.  Better yet, why just track these variables when you can act on them?  For example, put rules in place to take squatted opportunities from reps and give them to someone else [3], or create excess stage-aging reports that will be reviewed in management meetings.
  • Level 5, optimizing. The idea here is that once the process is defined and managed (not just tracked) quantitatively, then we should be in a mode where we are constantly improving the process.  To me, this means both analytics on the existing process as well as qualitative feedback and debate about how to make it better.  That is, we are not only in continual improvement mode when it comes to sales execution, but also when it comes to sale process.  We want to constantly strive to execute the process as best we can and also strive to improve the process.  This, in my estimation, is both a matter of culture and focus.  You need a culture that process- and process-improvement-oriented.  You need to take the time – as it’s often very hard to do in sales – to focus not just on results, but on the process and how to constantly improve it.

To answer my own question:  is repeatability enough?  No, it’s not.  It’s a great first step in the industrialization of your sales process, but it quickly then becomes the platform on which you start quantitative management and optimization.

So the new question should be not “is your sales process repeatable?” but “is it optimizing?”  And never “optimized,” because you’re never done.

# # #

Notes

[1] Back when that used to be a lot of money

[2] You typically model a 20% cushion between quota and expected productivity.

[3] The nuance is that in CMM you could have a process that was repeatable without being (formally) defined.  CMMI gets rid of this notion which, for whatever it’s worth, I think is pretty real in sales.  That is, without any formal definition, certain motions get repeated informally and through word of mouth.

[4] With the notable exception of average sales cycle length, which just about everyone tracks – but this just looks at the whole process, end to end.  (And some folks start it late, e.g., from-demo as opposed to from-acceptance.)

[5] Where squatting means accepting an opportunity but not working on it, either at all or sufficiently to keep it moving.

Unlearning as you Scale: Recording of my Costanoa Ventures 2020 Summit Presentation

Last month I presented Unlearning As You Scale at Costanoa Ventures 2020 Costanoa CEO UnSummit.  In response to several requests for a live recording of the presentation, I sat down this weekend and recorded the following.

Key topics discussed:

  • How to properly apply the popular Silicon Valley adage, “the folks who got you here aren’t the ones to take you to the next level.”
  • How to generalize that adage to not only people, but systems, processes, and strategies.
  • If and when required, how to hire next-level executives while avoiding common pitfalls.
  • How to critically think about success with your team.

 

An audio-only version of the presentation is here:

 

My original post on the event is here.

Marketing Targeting: It’s Not Just Where You Fish, It’s What You Put on the Hook

Back in the day I was taught that marketers do three things, memorized via the acronym STP:  segment, target, position.

  • Divide the audience into different segments.  For example, dividing consumers by demographics or dividing businesses by size or industry.
  • Select the segments that the company wishes to target for its marketing.  For example, choosing small and medium businesses (SMB) as your target segment.
  • Position the product in the mind of the consumer, ideally in a unique way, providing differentiation and/or benefit [1].  For example, positioning your offering for the SMB segment as easy to deploy and inexpensive to own.

I’ve always thought of targeting as the answer to the question, “what list do I want to buy?”  Do I want buy a list of marketing directors at SMBs or a list of chief data officers (CDOs) at Fortune 1000 companies?

The list-buying metaphor extends nicely to events (what shows do these people attend), PR (what publications do they read), AR (to which influencers do they listen), some forms of digital advertising (e.g., LinkedIn where you have considerable targeting control), if not Google (where you don’t [2]).

For many people, that’s where the targeting discussion ends.  When most people think of targeting they think of where on the lake they want to fish.

While an angler would never forget this, marketers too often miss that what you put on the hook matters, too.  Fishing in the same part of the lake, an angler might put on crayfish for largemouth bass, worms for rainbow trout, or stinkbait for catfish.

It’s not just about who you’re speaking to; it’s about what you tell them — the bait, if you will, that you put on the hook.

Perhaps this is too metaphorical, so let’s take an example — imagine we sell financial planning and budgeting software to businesses and our target segment is small businesses between $0M to $50M in revenue.  Via some marketing channels we can communicate only to people in this segment, but through a lot of other important channels (e.g., Google Ads, SEO, content marketing), we cannot.  So we need to rely not only on our targeting, but our message, to control who we bring into the lead funnel.

Consider these two messages:

  • Plan faster and more efficiently with OurTool
  • End the misery and mistakes of planning on Excel

The first message pitches a generic benefit of a planning system and is likely to attract many different types of fish.  The second message specifically addresses the pains of planning on Excel.  Who plans on Excel?  Well, smaller businesses primarily [3].  So the message itself helps us filter for the kind of companies we want to attract.

Now, let’s pretend we’re targeting large enterprises, instead.  Consider these two messages.

  • End the misery and mistakes of planning on Excel
  • Integrate your sales and financial planning

The first message, as discussed above, is going to catch a lot of small fish.  The second message is about a problem that only larger organizations face — small companies are just trying to get a budget done, whereas larger ones are trying to get a more holistic view.  The second message far better attracts the enterprise target that you want.  As would, for example, a message about the pain and expense of budgeting on Hyperion.

I’ll close in noting that marketers who measure themselves by the number of fish they catch [4] — as opposed to the conversion of those fish into customers — will often resist the more focused message because you won’t set attendance records with the more selective bait.  So, as you perform your targeting, always remember three things:

  1. It’s about where you put the boat
  2. It’s also about the bait you put on the hook
  3. It’s not about the number of fish you catch, but the number of the right fish that you catch.

# # #

Notes

[1] The decision to emphasize differentiation or benefit is covered in The Two Archetypal Marketing Messages:  “Bags Fly Free” and “Soup is Good Food.”

[2] In a B2B sense, at least.

[3] Amazingly, a lot of large and very large businesses also plan on Excel, but let’s not confuse the exception for the rule or the point of the example — different messages attract different buyers.

[4] Either literally by putting KPIs on high-funnel metrics such as MQLs or, more subtly and more dangerously, by getting too much inner joy from high-funnel metrics (“look how many people came to our webinar!”)

Unlearning As You Scale: Presentation from a VC Portfolio CEO Summit

The good people of Costanoa Ventures invited me to speak at their summit where they gather portfolio company CEOs to participate in an impressive set of sessions related to building and scaling startups.  I was honored to be in the company of friends and respected colleagues like Nick Mehta and Rob Reid as presenters at the conference.

Costanoa asked me to speak about un-learning at this year’s un-summit and, as a (sometimes, some might say frequent) contrarian, I was only too happy to do so.  The slides from the presentation are below.  I focused on 4 topics:

  • The sensible application of the popular Silicon Valley adage, “the folks who got you here aren’t the ones who will get you to the next level,” and how to reconcile it with an older, even more popular adage:  “dance with who brung ya.”
  • Generalizing the next-level adage beyond people to systems, processes, and operational strategies.
  • Things to do and pitfalls to avoid in recruiting next-level executives, with a particular focus on avoiding very successful people caught in the lather/rinse/repeat trap.
  • Critically thinking whether you have been successful because of, in spite of, or independent of a list of your company’s practices, values, and deeply held beliefs

This slides are here and embedded below.

Thanks to Greg Sands, Martina Lauchengco, and Rachel Quon for inviting me and giving me such a great topic to work with.