Startup growth strategy 101 — Sell or Die

Back in 2003 Niklas Zennström and Janus Friis conceptualised a telecommunication software that we all know by the name of Skype.

But imagine if Niklas and Janus hadn’t persisted in their initial struggle of selling to early adopters when the technology was newer and raw? At one point, even disruptive technology makers as them would be giving demos and pitches. I’m sure they didn’t sit idle.

They sold what they created, and they sold it well.

They sold the world the possibility of making free calls from the middle of nowhere to pretty much everywhere.

So why is it that most young founders often undermine the importance of selling and not focus on sales early enough?

Why is it that funding forms the first instinct of most founders when they think of scaling?

Image credit: @jk2kphotos via Unsplash

The only way to scale, and scale sustainably well is to sell. Sell what you created. Sell what you breathed every single day for many months or even years.

Sales is the” One Function That matters (OFTM)”

If you’re a new startup and you want your business to be around for the long-haul, then you better start thinking about Sales, paying customers, revenue, and cash flows.

If you’re not focussing on sales first thing, then you will encounter the ominous startup “valley of death” sooner than later. Worse still, you’ll raise a round of financing and disappear soon after.

Stop whatever Product thing you’re doing and ask yourself: “Does this increase Sales?” If not, move on.

Allow me to walk you through the importance of selling, why it must be your number one and how.

1. Sales is as honest as a mirror — It tells you what you are!!

If your sales numbers are steadily growing, it means your company is running like a well-oiled machinery. If you have sales happening but you’re not growing, it means some part of your engine is slow and not running well. If you have no sales, you have no engine. You’re just a bl@#y idea.

You are not a company but a set of people working together.

I’m not saying the fault lies entirely on the product or service that you’re offering, it could mean many things besides the MVP not being right.

a. A demotivated sales team:

If you feel the team is appearing to be drained and demotivated and missing milestone after milestone, explore the reasons. There are many reasons why sales teams get demotivated — Micromanagement and Poor compensation plans being primary. The solution is easy, train your managers to be easy on delegation and ensure that sales teams have the right monetary incentives in place.

Source: Harvard Business review

Sales is also very commission driven, so that might be something to not forget. However, also be careful that commission-based sales creates a commission based thinking. Find the balance.

b. An incompetent sales team

Sometimes poor hiring decisions are also the reason for lack of results. Ensure you’re catching the right fit. For e.g. early in the hiring process, get a behavioural assessment done and filter out unsuitable candidates than have them bluff their way into your organisation and leave a few months later.

c. Old school sales techniques

What worked in Zig Ziglar’s time may not all work today. There’s tons of technological advancements that have happened and ensure you’re selling to the right persona with the right offer.

d. Untimely follow ups

A study by the Aberdeen Group stated that “companies that use sales automation software’s can decrease their sales cycle by 16 percent and cut the time-to-quota by 15 percent, while their deals can increase in size by an average of 27 percent “. This happens when there are timely follow ups and automated personalised campaigns quadruple your reach outs.

e. The competitors counter-offer

It might just be a simple case of an established competitor offering all that you’re offering and possibly at a cheaper price. Review your product positioning and pricing strategically.

f. Poor team-work

Here Team work issues could be of two kinds, Intra-team rivalry within the sales team or the poor coordination with marketing teams. Sales and marketing need to complement each other to really succeed. A study by Firebrick consulting stated that “75 percent of sales representative’s report that they never or only occasionally use what they get from their marketing teams mainly because they feel that the content isn’t personalized or that it won’t resonate with their buyers.”

2. Sales proves your worth, funding helps you scale.

Two in three first-time founders I meet, thinks funding is crucial for success. That’s scarily incorrect. It might have been the case when computer’s cost a liver and a lung back in the 1990s and cloud was just a fluffy thing in the sky. Not anymore.

The honest thing is if the product is great your product will pick pace and your sales team will be busy. Reach that point where you have a repeatable formula in hand eg “for every 60 USD you spend you will generate 300 USD in revenue.”

I can assure you that when you have your repeatable formula, you will reach a point where revenues will possibly plateau because “x” number of people can only engage with “y” number of prospects a day. That’s when you need to scale. And that’s when you need funding. NOT the other way around. FB, AirBnb etc all have not used Funding to survive, they have used funding to make sales more robust and grow. MailChimp is still Bootstrapped.

3. Healthy sales can help delay need for funding. Excess funding dilutes your equity

If you’re selling you’re making money to meet your needs. If you take funding early on and the product or service that you’re selling is really cool, then you’re only going to be diluting your equity and stakes for when the product is a success and running on its own.

Tech Crunch explained this in the simplest example — “If you own 20% of a $2 million company your stake is worth $400,000. If you raise a new round of venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). So you own 15% of the new company but that 15% is now worth $1.5 million or a gain of $1.1 million.”

Worse still, if you have VC presence and sales dipping and they blame you for it, they have the power to oust you as well. In an article on Harvard Business Review published in Feb 2018, Michael Ewens and Matt Marx shared their research on VC presence in startups. They found that “approximately one-fifth of founders in venture-backed companies are replaced, which roughly matches findings by other studies, and is roughly similar to replacement rates in public companies.”

4. Higher Sales inspires the team do better

Nothing can beat the adrenaline rush in a business development team than seeing sales velocity increase. Wouldn’t you be pumped if you were selling 30 deals a day instead of 5 ?

5. Sales helps you innovate and stand out from business

When your sales velocity increases and you have the dollars coming in, you know your product has been validated and valued. And this is when the competitors will take notice of you. You would be relatively free to focus on refining your offering at this stage with the extra dollars. Now’s the time to innovate and realign your business goals to stand out from the crowd.

You can also totally reinvent the way your sale steam is interacting with prospects by developing tools that can help the hustlers focus on selling value than tentative costs. E.g. if you have a software, create a smart interactive demo for the sales team to show and excite prospects.

6. Sales teaches you to be humble, losing more than winning is not easy

When the sales numbers are good the world looks rosy, when the numbers dip its grey clouds all around. That’s also when you learn humility. To not dwell on temporary success or revenue projections. You become grounded and a realist like never before.

Humility as such is a great trait to have in sales contrary to what Hollywood would have us believe on humility being a liability in sales. In my experience humble sales people are better listeners, less likely to turn off prospects with their cockiness and more relationship centric. Sales people need not always be assertive and aggressive.

7. Sales gives you feedback

Dipping sales is the biggest health check your business can have. It could mean many things. Your competitors are catching up, your target audience has shifted its focus, the solution you’re offering is not relevant enough etc. Read this data every day.

As a best practice, high performing sales people take feedback throughout the sales process and work on it constantly. NPS scores could be a part of this framework you choose for yourself.

Conclusion:

Increasing Sales should be the number one focus of every startup and small business until you’ve arrived at a repeatable process or formula. Thereafter is the right time to scale and it’s the choice of the founders to want to go for funding or remain bootstrapped for longer or permanently.