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Jacco is the founder of Winning by Design and works with many in the Notion Portfolio and beyond to design and build highly scalable sales organisations. This post is a summary of a podcast we recorded with Jacco as part of the Notion “Pain of Scale” – you can listen to the podcast below and read the transcript in full here.
Understanding how to grow revenues, repeatedly, predictably and increasingly productively is critical for any SaaS company, and understanding how that plays out across the three life stages of a tech company – start up, grow up and scale up – is critical for every founder and sales leader.
If we categorise the “Start Up” phase ($1-5m revenue and the first two to three years) figuring out if you are solving a problem worth solving at scale, then what really matters is to gather insight on why people do and the impact your solution has. The “Grow Up” phase, say $5-25m revenue, is about predictability based on process and data while the “Scale Up” phase, $25m+ is about world class execution and culture.
The “Start Up” phase is about understanding impact
Going back to the beginning of the journey, the start up phase, what really matters is to revisit your customers and to understand why customers bought. Some people think of success as magic number, as if achieving a specific revenue number, such as $100k MMR is what’s important. I’m not saying it’s not good to have, but it’s nowhere near as important having 10 customers who if you said you would remove that product they would scream bloody murder! That’s what really matters. That’s what means you are on to something. That’s what means you’ve built something scalable.
But there’s more. It’s about really tuning into the customers and what they say, and this is what you need to listen out for, the magic words that give you the inkling that you have something that will scale. It goes something like this…
“When we bought your product we thought it would do this and this. And though it did deliver those benefits, what we didn’t know and what we really treasure is that it actually helps us to do x and y”.
That snippet of x and y is what founders need to listen out for intently. Now you know you’re really onto something. You’re starting to understand your rational and emotional impact.
Figure 1. SaaS sales is based on Impact not Usage. You must find clients who have a pain, not those who are a fit says Winning by Design. Picture from the book The SaaS Sales Method.
From founder-led selling to sales-team selling
“A critical component of the start up phase is the transition from the founder sell to the salesperson sell and we need to understand two concepts, 1) what makes a founder sale successful and 2) the difference between value and impact.
When a founder builds a company she often builds it out of a sense of frustration and passion, she looks at a problem and says “That is broken, I’m going to fix it.” She has an in-depth understanding of the problem and start building the product according to their insight, so she has a great understanding of the solution too. They have so much knowledge on both that when they start selling they can fill in any gaps that arise, they don’t need sales skills. Their knowledge is enough. But, it has been accumulated over many years.
But the sales people don’t have the benefit of the founders knowledge and experience, in particular because by the nature of start ups they are selling something innovative and new. They don’t know enough about the problem or the solution and rely on the value proposition they’ve been given, and they often fail. The CEO doesn’t understand, “Why is it so hard for you to sell!?”
The reason those early stage sales people fail is that the value prop is just not good enough, for the sales person to pick up and run with because what the founder is able to do is to fill all the gaps in the proposition in real time.
The simple fact is that at this early stage the sales people aren’t sales people at all, they are business developers. This is still in discovery mode.
In a conventional sales team in a proven business, the sales person is working of a list of leads to call on customers with a common problem. But in the start up, nothing is proven, so you need different skills in your early stage sales team and a discovery mindset.
Sell on the impact today, not the promise of value tomorrow
“As the business moves into the grow up phase, and wants to scale revenues then they must professionalise the sales function.
But, and it’s a big but, in the early days the founder was selling based on passion and knowledge and, most importantly, value. And selling on value is the Achilles Heel of SaaS sales.
Selling on value is based on the promise something good will happen in the future and it is a massive misconception in SaaS sales that we need to sell on value propositions based on future value. This is entirely wrong.
The premise that if you buy this solution today, you will get value in the future is flawed and hopelessly outdated.
People today buy on impact. Immediate impact.
So looping back to the start up phase, what you must learn is the impact you are having on your customers today and selling on the impact new customers will receive from day one, NOT the value you and they hope to receive in the future.
Finding and selling to customers with a common and acute pain
What’s the one thing a professional sales team needs? Leads!
But the first problem in most companies is that people are looking for customers that ‘fit’ the characteristic of the customers acquired in the first stage – the customer in the similar vertical or segment. Again, sorry, but this is wrong.
We are now selling on impact, which is focused on selling to customers with the pain we identified.
The marketing team need to lose their obsession with value propositions and customers who are a fit based on segmentation, what we really need to be focused on are customers with a common pain, where we can have an immediate impact.
The “Grow Up phase: Taking the first steps towards a scalable sales organisation and business model.
Step 1: build the process.
Sit down with your most successful sales people and you understand the how they are selling in detail. Ask them what they do and the steps they take to become successful. “Well first I do a discovery call, then I do a demonstration, after that I submit a proposal and so on.” Each of these steps must be figured out. In the discovery call which questions do you ask, which use cases do you use, during the demonstration which screens do you show, which particular elements of the product do you highlight. In each of these steps we catalogue with 10-20 tasks for each. This is the basis of the repeatable sales process.
Step 2: train your people on the process.
Step 3: apply the process and practice, practice, practice to ensure the process is correct, and while iterating to constantly improve.
But today, most sales organisations do not execute a process.
They are not training.
And they are not practicing, not even listening into calls.
Most sales organisations today pay professional salaries to sales people who most likely spend more time practicing and training for their hobbies than their job.
The modern sales team – and modern sales people – demand and deserve process, training and practice.
During the “Grow Up” phase, sales organisations must become data driven and highly analytical
Figure 2. The SaaS Sales Methodology, a data driven model for sales by Winning by Design. Picture from the book The SaaS Sales Method.
The grow up phase is not just about repeatability and predictability, it is also about becoming highly data driven and increasingly analytical.
This is the stage where we must create a data discipline, as that is what will take us to and through the scale up phase. If you are not data driven, if you do not know if, how and why your winning ratio is going down, your sales cycle increasing, your churn worsening then you are in big trouble. If you do not understand which of your sales people are most successful and why then you cannot grow.
Every company in the grow up phase must focus on three data metrics: volume metrics, conversion metrics and performance metrics.
- Volume metrics – most companies have these – how many visitors to web site, how many mqls, how many sqls. These are basic table stakes.
- Conversion metrics – many do this – the connection between all of the above, over time and not looking at this statically understanding why the changes have happened and when.
- Performance metrics – this is the killer and very few do this – performance metrics allow me to indicate which sales person is most successful and why. We see which salespeople we should keep and which we should fire. Which new sales people we should hire and how we should improve the process and training.
SaaS founders must think of sales as a science
The art of sales is still there, but while historically it may have been 90% art, now it’s more like 10%, specifically in SaaS, the science and the metrics are taking over.
Historically B2B sales has been built around low volume and high value, what we called rainmaker sales; 20% of the sales people deliver 80% of the revenue.
But today, the deal that 10 years ago for $1m up front is now sold for $8k per month! The 80/20 rule, the pareto effect, no longer works. The rainmaker model no longer works.
So here’s the big reveal.
When the 20% were delivering 80% of the revenue, what were the other 80% doing?! They were delivering 20%. But in SaaS sales, those B performer must now produce deliver at 4X of the previous success.
The name of the game is about process, practice and training, backed up by data, becoming highly process and data driven, to ensure that your B players deliver at 4X value.
Figure 3. The SaaS Sales Methodology, a data driven model for sales by Winning by Design. Picture from the book The SaaS Sales Method
The “Scale Up” years – how does a company translate the repeatable and predictable sales model into a global execution machine?
For me the critical aspect of the “Scale Up” phase is cultural.
We have the science locked down, so what matters now is hiring sales professionals aligned to a set of behavioural requirements. Yes they are highly skilled salespeople, but they are also a strong cultural fit.
We need to build a team sport mentality and culture into every aspect of the sales hiring process.
For me I believe a really important aspect of successful sales is listening and taking notes to ensure I can respond to what the customer is saying, so test for that.
And to be a good listenrer you need to be empathetic and understanding. How do you test for that? Well take a candidate out of the interview environment and see how they treat the people they interact with.
They need to be open minded and hungry to learn.
They need to be prepared to practice and hone their skills.
The people you attract and hire at scale – 10, 20, 30 people in sales and customer success – must all form part of a team that is aligned with the cultural norms you value most.
Of all of these, the ability to have a conversation with a customer is the ultimate sales skill set.
Who will win?
Today we are in era where companies, like Hubspot, that industrialize the role of sales, while paying particular attention to culture and behaviour, develop processes, who train their sales people well, use data to understand performance and practice hard will win.