I recently had the chance to sit down with Scott Sambucci from SalesQualia on his Startup Selling Podcast to discuss: The Selling Process vs. The Buying Process in the Enterprise Sale. We covered a wide range of topics, including the most common mistakes entrepreneurs make when selling into large companies, selling innovation and building and managing teams. Check it out below on Soundcloud or on iTunes.
Back when I was working at Next Jump, an e-commerce company that enabled big brands to offer their products and services at a discount to large employers and customers of large consumer marketers, our primary objective was to drive spend through our website.
My specific job was to drive user acquisition. I was focused on acquiring more companies to buy the product for their employees and then to get employees (users) to register an account and keep coming back. My colleague, I'll call her Jane, was in charge of site merchandising and had the job of converting those users into buyers once they came to our site. So my job was to get people to our site, and her job was to get people to buy once they arrived.
Every week our teams would meet to review results. We’d start by focusing on the total spend on our site during the previous week. Some weeks the numbers would be up and some weeks they'd be down. In the weekly meeting, our leadership would look at Jane and ask what happened during the previous week. Frequently, Jane would look at me and say, “we didn’t have a lot of spend on the site because we didn’t have a lot of traffic.” Other weeks I would look at Jane and say, "we had plenty of traffic but that traffic didn’t convert into spend."
This was obviously unproductive. We were pointing fingers at one another and defending our impact on the overall number which meant that nobody was responsible for the overall number.
Our solution to this problem might seem counterintuitive: we created silos.
We came up with something we called “the box.” My team had the job of getting people into the box (get people to the site) and Jane's team had the job of making good things happen once they were in the box (get people to buy things once they were on the site). My primary metric was weekly unique users and Jane’s primary metric was conversion of those users (spend per unique user).
This changed everything. We set up specific metrics for each team where neither one of us could ever blame the other. My team wasn’t measured on overall spend (something we couldn’t control alone) and Jane’s team wasn’t measured on overall spend (something her team couldn’t control alone). We were measured on our slice of the spend metric (users and conversions) and if we both did our job we had a great week. This change created crystal clear ownership and accountability which led to lots of creativity and powerful initiatives to drive each teams' numbers. Our overall spend numbers started heading up and to the right.
Over time, though, things started to break down. Because we were so silo’ed my team wasn’t focused on the overall company goal, we were focused on our team goal. So my team would do whatever we could to drive users to the site regardless of the impact on spend. We would repeatedly promote offers from Target and Best Buy (brands that had 'mass appeal’ and would drive traffic but had relatively low value discounts with low conversion rates). This would drive a ton of traffic to the site, but the traffic didn't convert. Similarly, Jane was focused on conversion so she would promote the best offers on the site (30% off Juicy Couture, as an example). Users would come to the site expecting to see an offer from Best Buy and would see a great offer from a brand they had no interest in and a not so great offer from Best Buy. This led to a low-quality experience, lower spend, and user churn. Overall growth in spend began to slow down.
In response, we quickly setup processes to begin working more closely together. We had to fix the disconnect. We had to collaborate.
We built a monthly merchandising calendar that every team member could access in real-time. We set up several 10-minute check-ins so that the acquisition team knew exactly what the site merchandising team was promoting each day and which offers were converting at the highest rates. The acquisition team would send all marketing emails to the merchandising team prior to sending to users to get their sign off. We used data from the acquisition team to convince the mass appeal brands to offer deeper discounts.
At first, these efforts forced collaboration. But over time the collaboration became much more organic. The teams became inclined to be collaborative. After a few weeks, the numbers started to head back up. That said, we definitely didn’t abandon the silo’ed metrics for each team. Hitting those metrics was still the primary job of each team. What changed was the approach we took to hitting each of our metrics. It was about transparency and collaboration and a broader focus on what was best for the company as a whole.
The point here is simple: not having silo’ed metrics is a bad thing and being too silo'ed is a bad thing.
As an example, sales teams need to have silo’ed sales metrics that they’re accountable for to force ownership and creativity and high performance. But if the sales team is only focused on one top line metric and nothing else, over time they’ll be motivated to close deals that may be bad for the company and will lead to high churn rates. They have to have a silo’ed metric but also be forced to consider what’s best for the company as a whole.
Companies get in trouble when they lean too far towards one side. Telling groups to just work together to drive an overall number leads to a lack of accountability and creativity. And too much separation leads to a lack of collaboration and focus on the broader goal.
Well run companies find a balance and learn to silo and un-silo.
One of the best salespeople I've ever worked with wasn't all that great at giving presentations. He wasn't great at building relationships. He didn't know the product as well as others on the team.
So what made him so good?
He would ask the prospect questions. Lots of questions. I mean almost obsessively. When it got awkward with the prospect because he was asking so many questions he'd ask five more questions.
This helped him sell for several reasons:
- He fully understood the motivations of the buyer and could tap into those things to keep the deal moving.
- He fully understood in great detail what the buyer's buying process was and exactly what was needed to get the deal over the line and he could anticipate any bumps in the road.
- He uncovered things that the prospect didn't know about their own needs or things that exist in their own process that they were unaware of that might slow down the deal.
- He could uncover trends around problems and solutions inside the prospect's organization that he could leverage across other deals.
- He truly got to know the actors involved in the purchase (influencers, blockers, etc.).
Too often salespeople want to hear good news so when they hear it they don't dig in and ask lots of questions. I learned from my former colleague that it's much better to assume the worst and dig in with good questions to understand and confirm everything.
Here are some of the questions that can be asked as a salesperson navigates the sales process. As I said, these may seem somewhat obsessive, but because buying things at a large organization can be so tedious and difficult I've found that most buyers appreciate the thoroughness.
- What are your priorities this quarter/year and do you think this product fits in?
- How would you explain to someone in your company how this product is going to help you reach your objectives?
- What are the other projects on your plate and how would you prioritize this one?
- When we launch this product will you personally be measured on its success? By who? How will it be measured?
- How do you typically buy products like this?
- Who is involved in the buying decision?
- Is there anyone that needs to sign off on this (IT, compliance, etc.)?
- Is there anyone that you think might object to buying this product?
- Have you come across any roadblocks in buying these kinds of products in the past?
- How did you get past those roadblocks?
- What committees need to see this product before you buy?
- When do those committees meet?
- Could we find some time to present this in the next committee meeting?
- What will each of the people in the committee care most about with regard to this product?
- Who will use the product?
- How will they use the product?
- Where would the budget come from?
- Is there enough left in that budget to pay for something like this?
- What is the process to get the budget approved?
- What does it take to schedule implementation resources on your side?
- What specific measures will your company consider when looking at the success of the product after it's been launched?
- Who will sign the contract?
- Does the contract signer need any approvals before signing?
- Can I be introduced to the contract signer’s assistant to make sure nothing gets missed?
- Is the contract signer in the office on the day we expect to sign?
I could easily list twenty-five more. Of course, it's worth noting that there is some art to how you ask the questions and the questions should be documented and placed at different stages of your sales process so it makes sense why they're being asked at the time.
I've found that in complex sales a salesperson almost can't ask enough questions. Those salespeople that have the discipline to use good questions to understand the prospect and uncover potential pitfalls significantly outperform their peers.
Today’s enterprise buyer can access a nearly endless supply of information on the products they're considering buying. From review websites to customer testimonials to video demos to the backgrounds of a vendor's leadership team, a buyer can compile a nearly endless amount of information on a product before talking to a salesperson.
This has shifted the seller’s role significantly. The work of an elite seller is now a lot less about becoming an expert on what the product does or how to run a great demo and much more about finding a way to truly empathize and understand the context of the person buying the product. Sellers still need to educate the buyer on their products, but they must do it through the specific lens of the buyer. That’s a seemingly minor but crucial distinction.
The more that the seller can “talk the talk” and truly understand the day-to-day and the specific needs of the buyer the faster deals will move. This isn’t about "credibility" — that can be gained in a variety of ways; it’s about real empathy and the ability to understand and share the feelings of the buyer.
The importance of this point for sales leaders has only increased as software eats the world and we’ve seen the emergence of “tech salespeople” that bounce to different jobs selling tech into a variety of verticals (ad tech, health tech, ed tech, real estate tech, etc.). Salespeople are getting a lot better at selling tech but have lost some of the natural empathy that existed when a salesperson sold different products into the same vertical and the same buyer for several years (decades). Often, today's sales formula is this: beautiful demo + positive ROI calculation = successful sale. Without a great deal of empathy, that formula will almost always miss the mark.
One way to create instant empathy is to have buyers join the sales team. That is, identify the people that are in a role where they feel the benefit of the product or make the decision to buy the product (ideally both) and get them to join the sales team. It should go without saying that this doesn't mean poaching a prospect's employees; that's a really bad idea. Everyone should be in the loop and it should be above board. If done well, the prospect will be supportive. Another option is to hire someone that was formally in the role.
Depending on the product, this might sound crazy. And there’s certainly some risk (the buyer must have some basic level of sales ability). But the benefit of having pure empathy living within the team will, at a minimum, force the sales organization to deeply understand the context of the buyer and in some cases level-up the performance of the entire sales organization. The greater risk might be building a sales organization that can run a great demo and talk up a great ROI but lacks the empathy needed to bring new value to today's enormously transparent buying environment.
I’ve written quite a bit about the topic of creating a sense of urgency in a sales process. See here, here and here. This is an enormously important issue for high growth startups as the timing of when sales will close impacts, among other things, investor expectations and perception, salesforce efficiency, financial performance, cash management and when sales commissions are paid. Sales pipeline review meetings often include more discussion about when specific deals will close as opposed to if specific deals will close.
Before any discussion of creating urgency can happen, two things must occur: 1.) the seller must understand the buyer's priorities and how those priorities line up (or don't line up) with the seller's product and 2.) the seller must have a detailed understanding of the buyer's buying process and all of the stakeholders that need to be involved in getting a deal to closure. Once these things are understood, sellers can begin to think about how to create urgency and shorten the length of a sales cycle.
Good sales organizations will use a variety of tactics to accelerate a sales process; from the use of detailed ROI documents to help the buyer prioritize one project over another to offering discounts in return for a speedier close. There’s really no end to the number of tactics that can be used to create urgency and more predictable sales results. I’ve created the framework below to help sales organizations brainstorm solutions to this problem and come up with new tactics.
Here's how to think about the framework. On the X-axis are seller focused versus buyer focused urgency tactics. In most cases, a seller wants to align urgency with what’s important to the buyer. That is, the seller wants to help the buyer understand the cost of the problem of not having the seller’s product and quantify the impact of not having that product. Good sellers will frequently remind the buyer of the value being missed by not having the product in place. It’s also ideal for the seller to line up a close date with a particular event that's important to the buyer (e.g. a life insurance seller lining up their close date with the buyer’s benefits open enrollment period). These are generally the most effective ways to drive urgency.
That said, while a seller always wants a buyer to be moving fast because it’s inherently good for the buyer, this doesn’t always have to be the case. The seller and buyer are on an equal playing field. The seller may have reasons why they want to move a deal faster than the buyer. Obviously, in some cases, the buyer may not care about the seller's priorities but I would encourage sellers to be transparent about them anyway. Recently, a salesperson was trying to sell me more software for my sales team and he told me he’d give me a substantial discount if I bought sooner rather than later. I asked him why he would sacrifice a lot of revenue for an earlier close and he was very transparent about the fact that his company's fiscal quarter was coming to a close and they had a revenue number to hit. As the buyer, I genuinely appreciated this transparency and he was able to get his sale. I don't support the use of tricks or dishonesty to get sellers buy quickly, but I absolutely support sellers being extremely transparent about their priorities.
The Y-axis outlines qualitative versus quantitative tactics.
Quantitative tactics are those tactics that are driven by a financial impact to the seller or the buyer. On the buyer side this is the revenue that will be gained or the costs that will be reduced from buying the product; e.g. every day that goes by that the product isn’t in place the buyer is losing X dollars. On the seller side, this is about the value to the seller that comes if the deal closes sooner rather than later. This can be the ability for the seller to use idle resources, or the importance of hitting a sales target, or simply the fact that revenue today is worth more than revenue tomorrow.
Qualitative tactics, on the other hand, are more art than science. These are things like the quality of the relationship between the buyer and the seller, the emotional components of the product (e.g. the seller will 'look good' to certain stakeholders if they buy) and the fact that a competitor is using the product and the buyer is not. Qualitative urgency is fun to talk about because it’s a place where sellers can get really, really creative.
Two final thoughts:
First, there are dozens of hooks that will drive urgency within this framework. Those listed above aren't appropriate for every organization. And when brainstorming it's important to get multiple stakeholders involved to come up with as many hooks as possible. Many of them may be totally unique to an individual organization.
Finally, I generally believe that sellers want to spend most of their time focused on the top-right quadrant. Ultimately, quantifiable, buyer-focused value is the most scalable and sustainable way for an organization to grow. But it doesn’t work every time on every deal. Selling into large organizations can get incredibly complex. The best sellers combat complexity with creativity. I hope the framework above helps sales organizations do just that.
Sales commission plans are a crucial part of a company's sales organization. They can be really complicated and difficult to get right. And for earlier stage companies they'll often change quite frequently. Managing this change can be really difficult as a sales leader has to balance several different components and several different stakeholders. Because of that, I think it's important to have a set of principles that guide the formation of your commission plan. I recently put these down on paper and thought I'd share them here.
- Commission plans should value and prioritize impact over individual compensation. While the best reps should be very highly paid, the goal of the plan is to benefit the entire organization as opposed to individual reps.
- Potential earnings from commissions should be competitive+ and commission should be a large percentage of overall compensation. The percentage will vary depending on the role in the organization. The closer the individual is to the actual transaction the higher the percent of compensation will come from commission.
- Commissions should be paid out to reps quickly to ensure that they can easily connect the value they've added to the business with the financial reward they receive.
- The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
- The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs.
- The plan should be fair so that there's an equal playing field across territories and customer segments.
- The plan should be iterative and updated regularly to ensure that it remains competitive and consistent with the principles above.
The 'daily deal’ boom and bust, if nothing else, taught us that consumers will respond to incentives. Deep, short-term discounts are extremely effective with consumers because the consumer generally has full autonomy and decision making authority to make the purchase.
This is not true in enterprise sales. When a seller offers a large enterprise an incentive if they agree to buy on a certain date, the work has only just begun.
I’ve written in the past that, very often, the most difficult part of an enterprise sale isn’t getting an enterprise to buy, it’s getting the enterprise to buy now, or to buy on the seller’s timeline.
To help with this, here are four questions a seller can ask themselves to be sure that the incentive they’re offering is going to work:
- Does the buyer believe in the incentive? Gimmicks don’t scale. Incentives must be legitimate and make sense. There are all kinds of legitimate reasons why a seller wants a buyer to buy sooner rather than later. The seller should communicate these legitimate hooks to the buyer in a sincere and logical way. If it doesn’t make sense to the buyer then they won’t respect the seller’s timeline.
- Does the buyer care about the incentive? Incentives that sound great to the seller may not always sound great to the buyer. Sellers should take the time to dig in and discover how impactful the incentive is to the buyer. It's helpful to say something like, “if this deal closes by the end of the quarter I can offer you a 20% price reduction. I understand that it may be challenging to move this through your process on such a short timeline, so is this something that’s important enough to you to accelerate this deal?"
- Does the buyer understand their own buying process? A buyer’s job most likely is not to buy things. They have their own set of priorities to worry about and they may have no idea what it takes to get a contract signed within their own organization. It’s hard for big companies to buy things. Sellers should be aware of this and push their buyer to be sure they understand their own buying process. A buyer can’t agree to buy on a seller’s timeline if they don’t understand what it takes.
- Does the buyer have the capability to drive their own buying process and stick to the seller's timeline? While buying decisions are often made at the top, the actual execution of the ‘buy’ often happens at lower levels. Sellers must make sure that the individual that is agreeing to the incentive has the authority to drive the accelerated timeline.
Of course, sellers should always strive to have their product’s core value proposition line up with their buyer's problems to create inherent urgency. But in many cases an incentive may help. Sellers should answer the questions above before they get comfortable that the incentive they’re offering is going to accelerate the deal.
Back in 2012 I wrote about the 'bottom-up' approach to enterprise software distribution. Bottom-up happens when a product is initially procured by an individual employee or group of employees and then, once a critical mass is reached, a seller upsells the product across the organization with additional features, bulk pricing, etc. This has now become a mainstream approach to enterprise software distribution. I recently attended a Go-to market conference held by a prominent venture capital firm and they advised everyone that the first question an enterprise startup should ask before designing a go-to market strategy is: are you bottom-up or top-down?
With successes like Atlassian and Slack and others the bottom-up model has come a long, long way in recent years.
However, bottom-up doesn't work for every industry -- at least right now. Take healthcare as an example. To sell a product into a large healthcare organization you must get IT approval, work with compliance, promote workflow changes, train staff, potentially integrate into an EHR, address HIPPA concerns and do lots of other stuff before the first user can log-in. The top-down model can be a requirement.
That said, I believe we’ll start to see this change. The bottom-up model will only become more mainstream and will take market share from vendors that don’t adapt. Traditional enterprise vendors should take note and start to evolve.
Some specific implications:
Software vendors need to prioritize the user of their product over the buyer of their product (they're quickly becoming the same person). Engagement and user satisfaction metrics should be equally important as sales metrics. Employees are increasingly demanding that the software they use at work function at an equivalent level to the apps they use on their phone. And switching from vendor to vendor continues to get easier. If a product isn't adored by its users its ripe for disruption.
This change also means that product must play a much larger role in distribution. The product must be remarkable so people will talk to their colleagues about it and it must be easy to spread the word about and nearly effortless to access. If you look at the fastest growing enterprise startups (see below) the one thing you’ll find is that nearly all of them make it extremely easy for a new user to sign up.
Finally, this trend will bring big changes to sales and marketing teams. Marketing (messaging from one to many) will play a larger role in the selling process as it'll be responsible for acquiring the product's early users. This changes messaging and use of channels in a big way. When any employee within a company is a potential buyer your marketing starts to look a lot more like Apple's than Oracle's. And salespeople will need to increase their selling competence to represent both the user (human factor data insights, workflow changes, usability) as well as the enterprise buyer (product context, integration, ROI).
The line between enterprise software and consumer software is continuing to blur. And while there are industries where top-down will continue to thrive, the processes and systems and beliefs that have enabled this approach are beginning to crumble.
In the end, the real threat that bottom-up startups present to top-down vendors isn't just that they may have a more effective way of getting a product into market, it's that their approach requires them to build something that's very unique in enterprise software: a product that people love.
Perhaps the biggest challenge in enterprise sales is getting a large organization to act and act quickly. Because of size and complexity and bureaucracy it can be very difficult for large organizations to make quick decisions. When an enterprise becomes a certain size it inevitably creates a series of checks and balances to protect its assets and competitive position. This protects shareholders but also makes it difficult to innovate and to make decisions to invest in innovative technologies.
Selling into these organizations requires one to find an external champion that is willing to break through blockers and jump over walls. One of the ways to do this is by helping the buyer see a future positive state. This is what great sellers do. They get a buyer to see a future state that is better than their current state that will require a relatively small investment. If the buyer is rational then they will buy.
Of course it's never that simple.
Over the holidays I had the chance to read Michael Lewis’s new book, The Undoing Project, and it shined some light on some of the many reasons why it's never that simple. The book takes on the issue of “decision theory” and tells the story of two Israeli psychologists and their mission to better understand how the human mind makes decisions. They found that people are absolutely not rational decision makers. I thought I'd capture some of their ideas here.
One of the most interesting ideas discussed in the book is the notion of 'loss aversion'. People will irrationally avoid losing what they have -- even if it could result in a much larger gain. Here's a summary of one their experiments.
When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $ 500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker. The odds that people demanded to accept a certain loss over the chance of some greater loss crudely mirrored the odds they demanded to forgo a certain gain for the chance of a greater gain. For example, to get people to prefer a 50-50 chance of $1,000 over some certain gain, you had to lower the certain gain to around $370. To get them to prefer a certain loss to a 50-50 chance of losing $ 1,000, you had to lower the loss to around $370.
People’s desire to avoid loss significantly exceeds their desire to secure gain.
This is the reason insurance companies make money. They take margin from our irrationality. For most people, the happiness involved in receiving a desirable object is smaller than the unhappiness involved in losing the same object.
Not only do people act irrationally (from a probability perspective) to avoid loss, they'll also make decisions based on descriptions of probabilities.
Another useful example from the book is a study done with lung cancer patients:
Lung cancer doctors and patients in the early 1980s faced two unequally unpleasant options: surgery or radiation. Surgery was more likely to extend your life, but, unlike radiation, it came with the small risk of instant death. When you told people that they had a 90 percent chance of surviving surgery, 82 percent of patients opted for surgery. But when you told them that they had a 10 percent chance of dying from the surgery — which was of course just a different way of putting the same odds — only 54 percent chose the surgery.
People facing life and death decisions will not respond to probabilities, they will respond to the way probabilities are described to them.
Lastly, the book notes that most people will respond to probabilities using their own context and view of the world, as opposed to the actual probability. Here's a great example.
Ask yourself the following question:
An individual has been described by a neighbor as follows: “Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve more likely to be a librarian or a farmer?
The vast majority of people would say that Steve is a librarian despite the fact that there are 20 times more male farmers in the United States than there are male librarians. People ignore probabilities and give more credence to “resemblance” or context or experience. We don't make rational, probabilistic decisions.
The lessons from all of this for enterprise sellers are simple:
Most buyers will prefer to buy something that will help them avoid loss (keep their job) rather than increase gain (get a promotion). Sellers need to find a way to appeal to loss aversion or find a champion that's willing to take a risk.
Buyers are not buying your product, they are buying your description of your product. The way you explain what you do is incredibly important and needs to be constantly tested and iterated.
Finally, buyers may not make rational buying choices based on the probability of success. They’ll rely on “resemblances” and their own context. They’re more likely to buy the thing that 'feels' like it will be successful than the thing that has the highest probability of creating a positive future state.
What one salesperson defines as a good initial meeting in enterprise sales can often be quite different from another salesperson's definition. This is natural as different people have different perspectives and definitions of success. I've found it useful to standardize the definition of a high quality meeting to remove some of this ambiguity and get everyone aligned on what success means. Here are four simple checks to determine whether or not you had a high quality initial meeting with a prospect.
- Did you gain a solid understanding of the customer's buying process (who needs to be involved, where budget comes from, timeline for decisions, potential roadblocks, etc.)?
- Did the prospect agree to a short, weekly check-in to keep the buying process on track?
- Did you identify an executive sponsor and project lead?
- Does the prospect understand and feel some level of urgency to get to closure?
Note that of course you can still have a positive interaction and discussion with a potential customer and not do all of these things. Often it's not appropriate to get through all of this in an initial meeting. But from a pipeline velocity perspective, if you haven't accomplished these four things there's definitely some work to get done.
When sales aren't moving fast enough, the first thing a sales leader should do is look at the sales funnel to identify the bottleneck. Are we not filling the top of the funnel? Are we not converting meetings to proposals? Are we not getting the contract signed quickly enough?
I've written in the past about how to build and analyze a sales funnel.
But in some cases the sales funnel might not be granular enough to tell you what's really going on.
With that in mind, I've come up with a set of questions to ask to help you identify trends and areas where things aren't working.
Look across the entire pipeline and ask the questions below about each individual deal. if the answer to any question is 'no' put a checkmark next to the question. If the answer is yes leave it blank. If the question isn't relevant because the deal isn't far enough along in the sales process also leave it blank.
After going through each of these questions for each of your deals you should get a good sense of trends and what's slowing things down and you can now focus on fixing that problem area. Do it again in a month and focus on that newly identified problem area. Repeat.
This is a super simple and quick way to find out what's going on in the funnel. It can be used for an entire team or an individual rep.
- Is there adequate top of the funnel activity -- are we working hard?
- Are we getting meetings with people we want to meet with?
- Do the people we’re talking to have a problem that we’ve diagnosed?
- Do the people we're talking to believe that the problem they have is a large and important one?
- Do the people we're meeting with have decision making authority?
- Is our message (solution) resonating with the people that have the problem?
- Is there excitement around moving to a proposal?
- Do we have agreement on a proposal?
- Are we getting insight into the buying process and the actors that need to be involved in the buying process?
- Are we executing the closing process at a rapid pace?
- Are we having weekly check-ins with our project sponsor?
- Have we identified a contract signer?
- Is there urgency around the close date?
- Is there anything preventing our signer from signing?
Selling an innovative product into a large organization is extremely difficult. The average enterprise sale requires sign off from 5.4 individuals. And when selling something that is novel that the buyer hasn't bought before it can be two or three times that number. In addition, there's no set budget or buying process in place for a buyer to buy. As a result, it falls on the seller to create a process for the buyer to purchase the innovation. I designed the process below to help address this challenge. The idea is to take the buyer through a set of meetings that generates support for the idea and get an gets them comfortable that they're checking all the boxes they need to check to get a contract signed.
The process requires three meetings (though the second and third meetings could be grouped together for smaller, less complex deals).
- The Concept Meeting. This meeting is where the seller introduces the concept, gets support from the buyer that the product solves an important problem and that the seller's product might be a good solution to that problem. The goal for this meeting is to ask for the buyer's permission to start a process around examining the potential ROI of a partnership. If the buyer isn't supportive of the concept, both parties shake hands and part ways.
- The Financial Meeting. If the concept meeting is successful, prior to the financial meeting, the seller should ask the buyer to provide them with some financial inputs that will help determine the return on investment that would come from a partnership. The purpose of the financial meeting is to walk through the financial inputs and an ROI model and allow the buyer to poke holes in the model and to get to agreement on what a realistic ROI might be. If the ROI is compelling and the project is worth prioritizing, move to the next meeting. If it's not, shake hands and part ways. The ROI is going to be the thing that drives the rest of the process so it's crucial to have agreement in this area. It's also crucial that, when possible, the seller is using the buyer's own numbers in the model, rather than industry averages.
- The Implementation Meeting. The purpose of this meeting is to determine whether or not it makes sense for the buyer to buy the product now. With a compelling ROI, it will most likely make sense, but there are lots other considerations. Technology resources, leadership changes, budget cycles, competing priorities, etc. The idea is to get the prospect so excited about the importance of the problem and the concept and the ROI that all of these concerns will be overcome. But this meeting should be used to put everything on the table. The meeting should include the appropriate stakeholders from both sides to determine if the project can be implemented and, if it can, what kind of work will need to be done and which resources will be required. A timeline with tasks and assigned owners should also be discussed and (ideally) agreed upon. If successful, the next step is to move to contract and setup a weekly meeting between both organizations to track the deal to contract close and product delivery. If that can't be done, both parties should shake hands and part ways. In this meeting the seller should inventory all of the elements of the customer's procurement process and get all of them down on paper. Those elements should be incorporated into a project management document that will be tracked in the weekly meeting.
One other note: when moving the deal to contract, the seller should setup a short meeting with the attorney on the buyer side. Because the product is innovative, the contract terms may be confusing and non-standard. Walking the attorney through the product and the purpose of the partnership should dramatically reduce back and forth on the contract.
Being disciplined about taking the buyer through these three meetings and understanding exactly what they'll need to do be able to write a check will help sellers accelerate sales cycles and avoid many of the pitfalls that come when selling into a large organization.
So often "selling" innovation is the easy part. The bigger challenge, in many cases, is helping the buyer "buy."
Below is an updated version of a presentation I show to B2B startup teams that are beginning their sales efforts. It's presented here without the context surrounding each of the points but the insights should still be helpful.
People are complex and every situation and every environment is different. So it's extremely difficult to apply a blanket set of attributes that will lead to success in any job.
I’ve found that this is particularly difficult with “strategic sales” roles in a startup. By strategic sales I mean a role where a salesperson is selling a highly innovative product into a large organization that requires a large investment of time and/or money from that organization.
It’s important to define strategic sales because the skill set required to be able to close strategic deals is very different from the skill set required to close smaller, more defined, "transactional" deals. Often, success in transactional selling comes down to simple hard work and effort. If you analyze a transactional sales funnel you'll see that there actually isn’t a huge difference between conversions for high performing salespeople and conversions for low performing salespeople (by conversions I mean things like 'phone call to meeting set' and 'meeting held to verbal commitment'). Success in that world often comes down to volume. More calls = more sales.
While there’s certainly nothing wrong with good old-fashioned hard work -- in fact, it's a requirement -- strategic sales is almost exactly the opposite of transactional sales. Conversions really matter and lead qualification is even more crucial because strategic deals require a huge time commitment from the salesperson. And there are massive differences between the conversion rates of high-performing salespeople versus low-performing salespeople. A high-performing strategic salesperson can convert 100% of their meetings into an active sales cycle; a low performing strategic salesperson may convert none. Literally zero. Strategic sales is not a numbers game.
Ben Horowitz likes to say that closing a deal with a large organization is like passing a law in congress. And it’s even harder than that when selling innovation — there's no set process for the buyer to buy within their organization or budget to buy the product. And in a startup, you’re small and nobody knows you and you don’t have a clearly defined sales process and you don't have perfectly polished sales materials. It’s really difficult.
I've thought a lot about the attributes that are most closely correlated with success in strategic sales. I've seen a lot of successful strategic salespeople and a lot of unsuccessful strategic salespeople. It's a problem I've been trying to understand for years.
Recently I’ve spoken to a number of people I trust on this topic and here’s where I think I’ve landed. Here are the four key attributes of a successful strategic salesperson.
In order to solve a complex problem you need to fully understand it. How does the buyer buy? Who has influence in the organization? What value do customers see in the product? What does the customer do during the day? How is the buyer bonused or promoted? What other options does the buyer have?
I could literally write 100 more questions like this. A strategic salesperson must always be wondering about the answers to these questions. They should constantly be learning from their customers, their leadership, their colleagues, the media, their competitors and anyone else that will talk to them. They need to be obsessing about the problem and trying to build a story and a solution and constantly iterating their approach.
A person that doesn’t have this level of insatiable curiosity simply won’t figure it out. They'll get stuck.
I’m fusing two attributes together with this one but I think it’s necessary. Any type of sale will inevitably lead to lots of rejection of the salesperson, the product and the company. This sucks. It’s painful. It’s even worse when selling innovation because there will be prospects that think the idea is crazy and will never work and the buyer has no process or defined way to buy the product. In order to get through this the salesperson must be a winner and must have a winning attitude and know that they can overcome. And they must have the grit and determination to keep getting up after they get knocked down. It may sound cliché but it's true. I've never met a pessimist that was good at strategic sales. There will be an endless number of reasons why it won’t work and the only people I’ve seen that will push through have a high level of optimistic grit.
I used to joke that there are two types of salespeople:
1.) The type of salesperson that flies home from a bad meeting with a prospect and sits on the plane mentally blaming the product, the marketing team, the legal team, their boss or the prospect that just doesn’t “get it."
2.) The salesperson that sits on the plane thinking: How could I have answered that one question better? What else should I add to the presentation? What should I take out? What’s the context of the person that didn’t like the product? Where are they coming from? Does the product I’m selling threaten some of the people in the room? What went well in that meeting and what didn’t go well in that meeting? Who can help me get better?
The second approach requires an immense, almost unnatural level of humility. It’s human nature to point fingers when things don’t go well. It’s also often perfectly reasonable -- because it might actually may be someone else’s fault! But placing energy into #1 is a losing approach. Obsessing about the things that we can control is the way to win. So much energy can be soaked up by complaining and blaming others. Great strategic salespeople transform the energy that most put into complaining and blaming and point it toward improvement.
Ability to educate and inspire
I’ve written before that people buy with their heart and justify it with their mind. This is why I advocate not showing a lot of numbers in an initial sales presentation — the prospect doesn’t know or trust the salesperson yet and they’re generally not buying for ROI anyway. They’re buying because of the way the product makes them feel.
As a result, when selling innovation it’s crucial that the buyer be on board with the salespersons's mission and buy in to their perspective on both the problem they have and the way that the salespersons's company is going about solving that problem. The sale has to be somewhat fun and interesting and educational and insightful. It can’t be boring. I don’t mean that the salesperson has to personally be super charismatic or an amazing presenter (though that helps), I mean that they have to be intelligent and interesting and insightful. The buyer has to want to get behind the company and the product -- they have to become a true advocate.
It's a lot of work for a company to buy something. It requires security reviews, legal reviews, budget reviews, consensus building and many other activities. It also creates a lot of risk for the champion. If they're going to go on the line and buy an innovative product they have to be excited and inspired.
Great strategic salespeople continuously inspire, excite and educate their prospects.
Earlier this year I participated in a panel for the NYC Enterprise Sales Meetup. The topic of the panel was Managing the Enterprise Deal. It was a great discussion and I thank Mike and Mark for inviting me to participate. Prior to the panel, the moderator provided us with a list of questions that we should be prepared for. In preparation for the discussion I wrote down some rough answers to each of the questions and I thought I'd post my notes here. It's great to see that Enterprise Sales Meetup has expanded to other cities over the last few months. I highly recommend attending one if they're in your area.
How many deals do you think a high level business to business professional can manage?
This depends on the salesperson's goal and the average deal size. Generally, salespeople should have a pipeline that is 3x their goal. So if your goal is $1MM and your average deal size is $250k, then you need to be working 12 deals.
What are the best tactics you find to manage a pipeline effectively?
To me it comes down to good stages and good tipping points. I recommend using 4 or 5 stages of a deal, and then for each stage assign actions or things you need to get done before you can move them to the next stage (tipping points). This ensures that there's consistency across deals and ensures the salesperson isn't kidding themselves when they say they have 3 deals 'in contract'. The stages I use are generally something like, Lead, Decision Maker Engaged, Project Design, In Contract, Closed Won. The tipping points for each stage depend on what you're selling, but it could be things like contract sent, legal work completed, technical review completed, etc.
Do you believe in mapping out a process for your company to manage deals?
Absolutely. You need consistency across stages and tipping points. And you need a funnel so you can determine where you're getting stuck.
How do you qualify deals?
Typically I would come up with 3 or 4 elements that I'm looking for from a prospect. Size, revenue, technical setup, management structure, etc. Over time you can iterate on these as you discover what makes a good prospect that leads to good revenue.
How do you find your deal sponsor?
You have to nail down the one or two business metrics that your product impacts and then find the people who are responsible for those metrics. If X metric goes up at the company you're selling to, who is going to get a bonus at that company? That's the person that should drive the deal for you.
Who else do you need besides a sponsor, what other personas do you see?
Project Managers. You want to push for a strong Project Manager that is totally sold on your product and can get it launched and can help you get the deal done. After the executives are sold, so much of enterprise sales is about simple project management and driving the deal through the prospect's buying process. It's really hard for big company's to buy things. You need a partner at the company that can help you get it done.
How do you build a relationship with your sponsor?
One thing is frequency of communication. I always try to set up a weekly check-in. Those consistent check-ins force you to get to know one another. The other thing is I try to make their job really easy. Keep communications really short and simple and show them how to buy your product. Map out their own buying process and track them on it.
How do you determine the buying cycle and process?
You try to identify trends across organizations on how they buy. Who needs to be involved? Who needs to approve? What kinds of meetings need to happen to get to that approval? And then you start to map out the ideal buying process that works for you. If you don't have one, make one up based on what you do know. And map to that.
How do you map out the decision-making team?
Again, another useful way of mapping out a decision-making team is to show one from another client and get them to react to it. Make sure you show legal, technical, compliance, procurement, business people, etc. so nothing gets missed.
How prevalent do you think consensus decision-making is?
It's huge. I've never seen a large company buy without consensus. You have to tell everyone that is involved in the decision-making process your story. Everyone has to support the concept.
How do you use or overcome the startup stigma?
Use it as an advantage. By definition you're disrupting the old way of doing things.. You're doing something much bigger. Inspire them. I find most people want to get better and recognize that the status quo isn't working. Tap into that. Challenge them. The way they are doing things now is not acceptable anymore. Get them to see that and get them on your side. The size and stage of your company is irrelevant compared to the problem you're solving.
How do you establish an ROI, is it even that important?
It's important, but it's often not as important as you think. I think most businesses buy primarily for emotional reasons, rather than rational reasons (prospects buy with their heart and justify it with their mind). So when you come up with your story, it's important that you focus on how your story makes people feel. Most buyers aren't going to believe your ROI anyway. It's about emotion. And most big companies aren't as metrics driven as salespeople would like them to be. Your focus should be on getting the team you're selling to a bonus at the end of the year. And you need to understand what are the levers that will drive that bonus.
If you have a brand new offering how do you overcome the need for an ROI?
The easy answer is a pilot. But the bigger answer is that you have to sell them on your vision and the thing you're trying to disrupt. They have to believe in you, in your company, in your priorities and in your team. That's the hard part. Then you can provide them with a rough ROI that gets them comfortable they're going to make their money back. Use the "what you would have to believe" approach where they only have to believe that you will move the numbers a small amount and they'll still make their money back. Be conservative.
How do you add value in your interactions dealing with other executives?
I like to use what I refer to as "insight selling". Be interesting. Your pitch should be exciting and provocative and short. Like Peter Thiel says, "say things that others aren't". Be exciting. But also use the approach of not "always be closing" but "always be leaving". Have one foot out the door. Look to disqualify opportunities. The prospect is looking to disqualify you and you should do the same thing. You're both trying to figure out if there's an opportunity to help one another. You're total equals in that sense. Act like it. Also, I try to drip prospects quarterly with tidbits of information that might be interesting to them with absolutely no ask. You're not allowed to ask for something in these drips. It could be an article, an insight you picked up from another prospect, etc. Stay on the radar but do not ask for anything. You need to preserve that level of trust and the power dynamic you've built.
Last week I had a conversation with a founder about how much they should charge their first few customers. Cost plus a fee? Slightly below the incumbent? The same as the incumbent? Some fraction of the estimated ROI? My answer to this question is pretty simple: charge as much as you can get, charge whatever the market will bear.
At an early stage, a founder's time and focus is the firm's number one asset. Any compromises made in getting less than the absolute maximum amount that a client will pay creates an unrecoverable opportunity cost. Early-stage companies can't afford to not charge what the market will bear.
Pushing for the max more has other benefits. It helps to determine the product's real worth and the real challenges the client is having in buying the product. When pricing makes buying too easy you don't get a good sense of the challenges you'll encounter down the road, you don't get the real story. It also generates a level of respect from the client (we've all heard the stories of people appreciating things more because they cost more regardless of the true value).
Finally, often a startup's instinct will be to charge less because it'll move the deal along faster. This is a myth. The opposite is true. The larger the deal the more attention it will get, the more senior people will need to be involved and it'll move faster as a result.
This post isn't meant to say that you shouldn't negotiate, do a pilot and be flexible where and when it makes sense. You should do all of that. But in lieu of a defined market price, charge a simple one -- the absolute most that you can get.
One of my favorite questions to ask when interviewing a potential sales hire is: “given your experience in sales, if you had to write a book about sales, and you wanted to sell a lot of copies, what would be the theme or the thesis or the title of the book, what insight would you bring?” Much to my dismay, the candidate will often sit back and say something like, “that one is easy, relationships, it’s all about relationships”.
This is a disappointing answer. And it also isn't true. I don’t think it is all about relationships. Especially when selling innovation. People buy from a seller because they think they believe it'll move their company forward or, more selfishly, they'll get a raise or a promotion or a bonus at the end of the year after they roll out the product. They don’t buy from a company because they like playing golf with the salesperson.
That said, for some products it's different. For some products, successful selling is driven by good relationships.
This got me thinking about which products are sold based on relationships and which aren't.
I think a lot of it is driven by the life-cycle stage of the product and the level of competition in the product's vertical. For example, when Salesforce.com when out to sell their first cloud-based CRM product to its first group of customers, it wasn’t about building a relationship. It was about convincing early adopters to completely rethink the way they manage their customer data. It was about getting big companies that were stuck in their ways to make a massive mind-shift. You can't do that with a relationship. You do that with thought leadership and creating a vision and great communication. Of course, it probably didn't hurt if they built a nice relationship along the way but there’s no way that was what was driving their deals at that stage.
On the other hand, when Benjamin Moore sales reps sell paint to a commercial real estate developer, it probably is very much about the relationship. The products are more of less the same, so it comes down to price, and how much the buyer likes the seller.
This chart illustrates my point:
When a product is brand new and innovative, relationships matters less than when the product is mature and commoditized by lots of competition.
Of course, the line is probably not this linear. For the first 1 or 2 customers, relationships typically matter a lot (often these are friendlies) and the importance of relationships probably levels out at some stage of product maturity. But I don't want to over-think the simple point.
It’s worth salespeople taking some time to think about how they sell and whether or not the product they're selling is at the right stage for their skill-set.
You might not want a relationship salesperson selling structural innovation and you might not want a disruptive salesperson selling paint.
A few weeks ago I was chatting with a guy that specializes in something called "disruption consulting". Basically he goes into mature companies and works with their management teams to help them think through how they would disrupt their own business. This is a healthy exercise for large, successful organizations and something individuals ought to think about with regard to their own company and -- more importantly -- their own role in their own company. This got me thinking about enterprise SaaS sales and the theory that salespeople have become less of a necessity in this new world. As I've written in the past I actually think the opposite is true. Sales is growing, not shrinking, in importance. That said, here are some of the trends that I've seen out there that are giving the skeptics some ammunition:
- Micro budgets. With the 'consumerization' of enterprise software, lots of companies are letting their employees directly buy and expense their own productivity tools circumventing the traditional buying process.
- Pay-per-use contracts. Traditionally enterprise salespeople have sold large buckets of access to their software -- e.g. Salesforce has negotiable pricing tiers based on the number of licenses purchased. Companies like Slack and others are getting away from this model and are pricing based on who actually uses the system. At the end of a month, they look at how many people logged-in and then send an invoice accordingly. This pushes the revenue responsibility pendulum far away from sales and much closer to product.
- Freemium enterprise software. This is a model where software can be accessed for free by an individual employee and an enterprise deal gets triggered at some critical mass of employee usage (e.g. B2E2B).
- Standardized contracts. More enterprise software companies are creating click-through agreements that can't be negotiated by the buyer. And there does seem to be a very slow but steady move towards more consistency across companies in what they want a contract to look like. Corporate attorneys will make this really difficult, but the idea does seem to be gaining momentum.
- Data in the cloud. The advent of the cloud has made the old-fashioned, big, CIO-based sale a bit less prominent. Cloud-based software programs require much less of an implementation burden and thus much less of the need to sell the bureaucratic IT department. That said, much of the work these teams do has moved towards integration into the cloud, which still requires a hefty sales process.
There's no doubt that the landscape in enterprise sales has changed. And all of these trends are worth watching. But what the skeptics miss is that this is nothing new. Buyers and sellers always been trying to minimize the cost of their transactions. These are just new variations of that process. It simply means that to stay relevant enterprise salespeople must continue to shift their energy towards larger, more complex deals and higher value sales activity.
When real estate listings became available to everyone on the web, real estate brokers didn't disappear (in fact, there are more of them now). They simply started focusing on higher value activity. Instead of their core asset being access to listings, their new asset is helping someone navigate the process of buying a home (over half of home buyers find their home online, but 90% still use a broker to make the purchase).
Similarly, when employees begin buying their own software, enterprise sales teams will just shift their activity towards more strategic, higher value deals. They'll focus on the things that can't be bought or implemented by a single employee.
In short, enterprise sales drives new and incremental growth. It's the hard stuff. The easy stuff gets automated. And diffusion of the greatest innovations and the highest value deals can't be automated.
Companies that aren't growing their enterprise sales teams are likely either very early-stage and don't have enough product to sell, or they're later stage and aren't trying hard enough.
Andreesen Horowtiz had a great podcast a few weeks ago on the topic of Getting Sales Right. It was a conversation between Peter Levine, a GP at the firm, and Daniel Shapero, who helped build LinkedIn’s initial enterprise sales team. Levine asked a question about sales compensation, and why are salespeople paid mostly on commission where almost every other role is paid a flat salary. Surely companies care about getting the best out of every employee, why isn’t every employee paid mostly on commission?
Two interesting insights came out of this discussion.
- Salespeople are unique in that they spend most of their time facing the outside world and are constantly being told ‘no’. They face rejection on behalf of their company all day long. To offset some of this pain, when they finally do get a yes and a big win, it’s something that should be celebrated; both in the form of compensation (commission) and public recognition. The commission helps keep salespeople motivated to go get the next one in the face of all that rejection.
- There have been studies that suggest that when a person is paid largely on commission, they’ll tend to go after a win at all costs. They’ll look for shortcuts and take the quickest path to success. There are lots of roles where that “win” isn’t so easy to define and measure. Further, for some roles like product and engineering, shortcuts could cause longer term damage and stifle creativity and long term thinking.
For these reasons most of the sales teams I've seen are paid largely on commission. But the other side of this issue is the failure rate of sales versus other roles. In nearly all of the companies I’ve worked with, salespeople fail at a far higher rate than any other role. This also begs the question, why?
Are recruiters just really bad at hiring for sales roles and really good at hiring other roles? Of course not. In my view the reason for the discrepancy is that the performance of a salesperson is easy to measure. If a salesperson is failing, everyone knows it. If an engineer is failing it's not as easy to see. That's why you'll often see 30% variances in termination rates between these roles.
The best companies I've seen are aware of this and take this on as a challenge and expose these numbers and try fix the imbalance. If the termination rate of a sales team is 40% and the termination rate of other roles is 5% then non-sales managers either aren’t measuring performance or they don’t have a high enough bar for success. Measuring success in non-sales roles is hard (that’s a topic for another day). But measuring the difference in the failure rate of a non-sales team versus a sales team is easy. And an important thing to expose.