Top 5 Mistakes Pre-Seed Founders Make with Sales
In the third part of our ‘mistakes series’, I take a look into the most common avoidable mistakes founders make with sales. These were learned over more than a decade of being a Sales Director who sucked at first and then working with dozens of startup founders to refine their sales/GTM strategies.
Sales is an emotive topic.
Whilst some love the cut and thrust of sales, the thrill of making target, and the trappings that go with success, others find it an alien world that is equally mysterious and intimidating.
Regardless of how you feel about it, sales is an essential part of building a successful company and many startups flounder because they make some avoidable mistakes in the early days.
Whilst avoiding these mistakes won’t guarantee success, it will allow you to maximise the time to find a workable sales strategy and make progress towards Product Market Fit.
Mistake 1: Weak Foundations
To build a strong sales function, you must put in place strong foundations.
First, you need to implement a CRM.
There are numerous providers on the market, but I most often see startups working with HubSpot (and generally liking it), Pipedrive (also good) and Salesforce (better suited for later on).
In your CRM, you’ll setup a sales funnel with different stages that you move prospects through until, ultimately, they are closed (won) or closed (lost).
Don’t worry too much about getting the stages perfect from the outset — a simple ‘lead’ > ‘first call’ > ‘second call’ > ‘demo’ > ‘negotiation’ > ‘contracting’ > ‘closed (won)’ / ‘closed (lost)’ will work just fine.
With your CRM in place, you’ll be able to effectively keep track of all your prospects, identify those that need attention, and collect data to identify bottlenecks and continually refine your process.
For venture backed startups, the data a CRM provides is helpful in surfacing issues with your investors and advisors to get advice. If you can’t tell them where your process is getting stuck, it’s hard for them to help.
💡CRMs fail when they require too much information to be entered manually and distract from selling. Keep the inputs simple, use shorthand notes and collect only the data you need to improve decision making.
Second, you need to build a Sales Bible.
A Sales Bible is a living document maintained on a platform like Notion or in Google Docs that comprises a sales script and objection handling.
The sales script is your all purpose elevator pitch when you get in front of a prospect. Write it down on day 1 before you make the first contact and then continuously refine it as you learn about your potential customers. This will make you better at selling and form the basis of the training when you hire sales people to start building out a sales team in the future.
The objection handling section works as follows:
- Note down every objection that a prospect gives you during an interaction
- For each objection, come up with the best objection handling script you can
- Keep adding objections and improving the objection handling scripts after testing in live conversations until you have every possible objection covered
💡Founder led sales is pressurised enough without trying to keep everything in your head. Use a Sales Bible to make your process more efficient, but also to offload all those thoughts rushing around your brain.
Mistake 2: Qualification Delusion
Sales is hard work. You need to speak to a lot of prospects before you find one that is in a position to buy. It can be tempting to make the pipeline look healthier by not killing off prospects right away and advancing prospects that you know deep down have no realistic likelihood of converting.
Once you have enough data, make clear rules for yourself about the % likelihood required for a prospect to move between stages.
These can then be added to the Sales Bible to roll out to the sales team in future.
💡 Be honest with yourself about the likelihood of a prospect advancing and update the CRM accordingly. Expect your sales team to do the same.
Mistake 3: Lack of Focus & Research
Effective sales efforts are both highly focused and rigorously researched.
First, you need to have a clearly identified ICP.
ICP stands for Ideal Customer Profile and you can go a little deeper with this Gartner piece.
The key reason for spending time developing an ICP is that it will increase your conversion rates because you’ve already done a lot of work establishing problem to solution fit.
For example, if you are selling a horizontal solution, it is likely the certain industries will have more acute problems than others, and that subsets without those industries will be culturally more open to work with startups.
Similarly, for vertical solutions, there will be a size and shape of organisation within your vertical that is far more likely to buy at the outset than others.
Often startups will target SMB/medium sized companies first, build a track record, and then target enterprise later on for this reason.
💡A clearly identified ICP should increase your conversion rate, but it’s not a static definition and should be reviewed and refined periodically as you learn from your sales efforts.
Second, you need to do research before every sales interaction.
Whether it’s a cold outbound email or LinkedIn message, or you’re cold calling, you will dramatically increase your chances of a successful conversation if you know who you are speaking to, the size and shape of their organisation, the problems you believe they are facing (and why) and how you can help them.
💡Sales is by definition a numbers game, but nowadays focusing on nailing every interaction vs pure volume is the smart move. If you’re not taking a customised approach to every prospect, you’re going to struggle to get through the noise.
Mistake 4: Emotional & Incentive Misalignment
Sales is an emotional rollercoaster that few understand until they have been in the role.
First, be prepared for the emotional highs and lows.
Many founders do not have a sales background and find themselves thrust into this role by virtue of being the most suitable person for the CEO role at their startup.
It can be scary, but this is what I say to every founder who is hesitant about sales:
You are the best person to be selling for your company. Nobody is going to match your passion. Nobody is going to match you knowledge. And nobody is going to match your work ethic. You have all the ingredients to be an incredible sales person.
As a founder, you aren’t expected to lead sales forever, but to do so for the first ~£1m of revenue is a smart move (especially as the alternative is Mistake 5).
Put in place a personal support network, mentors and coaches to provide you with anything you are missing to make it work.
Once you’ve figured out how to be a strong sales leader, you will need to hire in a team to support you. This is the time to double down on the emotional side of the role, ensuring that your new team receives the support and encouragement they need, and that you build a productive, open relationship with each of them.
😩 My biggest mistake as Sales Director at plan.com was not understanding the emotional side of sales from day 1. I approached a month in sales like I would have an M&A deal — devoid of empathy and with high expectations. They rightly thought I was a d*ck. Once I took my time to understand every member of the team, things started improving. If you come from a tech background, remind yourself frequently that sales is very different and you need a high degree of EQ, empathy and to be in the trenches with your team.
Second, ensure you get in place the right commission structure.
So much could be written on this topic, that I’ll just cover a few fundamental rules:
- Commission should be tied directly to the key financial goal of the company — a % of revenue usually works well
- Commission should always be uncapped
- It should be easy to understand — kickers, accelerators, decelerators, etc. create a lack of clarity and unintended consequences
- Incentive schemes should not be changed too frequently and review periods should be indicated at the outset
💰One month at plan.com we had a BDR making more than any of the Senior Management — this was a great month for the business!
Mistake 5: Hiring a Head of Sales Too Soon
As a founder without any sales experience, it can be tempting to want to hire in a ‘big hitter’ for the role.
It’s expensive, you say, but with their experience, expertise and black book, they’ll pay for themselves in no time.
🖐🖐🖐🖐🖐
This is the single most expensive mistake a pre-seed startup can make:
- There are lots of really poor sales people in the ecosystem and it’s hard to tell them from the good ones as they generally interview well (side note: world class sales people rarely join pre-seed companies)
- Without running the sales function as a founder, you won’t know what KPIs to put in place and how the new hire is performing — you’re susceptible to getting swept away with their BS
- Without being able to challenge them quantitatively, you’ll end up keeping them far longer than you should and having a messy exit after 12 months, by which time they have cost a good chunk of runway
- A Head of Sales takes you away from customer interactions and the ability to learn what they want — this not only jeopardises sales, but also lengthens the time, and reduces the chances, of getting to Product Market Fit
When you reach the point of needing more support on sales, analyse the tasks, come up with a job spec and hire what you need. Generally, this will be an SDR or BDR who will help with prospecting, while founders continue to work on the later stage pipeline and closing.
I really struggled for the first few months of running my sales team.
However, within 2 years, we were 15 people, regularly exceeded company revenue targets, and had won numerous industry awards.
It was one of the most challenging and rewarding periods of my career and nowadays I love working with founders to help them avoid the mistakes I made and build strong sales teams.
You can read more about that experience here.
