No one starts a business with visions of failure, but it is no secret that many startups never make it. There are numerous reasons for startups’ failures, not least of which is a lack of understanding of what Mark Leslie and Charles Holloway dubbed the “Sales Learning Curve.”

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Eight Tips to Conquer the Sales Learning Curve

No one starts a business with visions of failure, but it is no secret that many startups never make it. There are numerous reasons for startups’ failures, not least of which is a lack of understanding of what Mark Leslie and Charles Holloway dubbed the “Sales Learning Curve.”

In their Harvard Business Review article by the same name, the two break the curve into three phases: the initiation phase, the transition phase and the execution phase. They then highlight the need to approach the sales process differently throughout, cautioning that, “Hiring a full sales force too fast just leads the company to burn through cash and fail to meet revenue expectations.”

“If start–ups apply conventional sales wisdom to new–product launches and add sales capacity too quickly, the result is often disappointing revenue growth and a cash shortfall,” they wrote. “That’s because the conventional wisdom fails to address a number of challenges involved in creating markets for unfamiliar products: the time required to educate customers about the offering and learn how they will use it, the inevitable design modifications needed to deliver a robust product that will fully satisfy customers, the identification and resolution of service issues, the development of a repeatable sales model, the selection of appropriate market positioning, and the design of effective sales incentives.”

This eGuide will cover eight things entrepreneurs can do to hit the sales learning curve head on, successfully scaling in the process.

ONE: Mind your metrics.

ONE: Mind your metrics.

The essence of the sales learning curve is to keep spending in line with revenue and to know when to ramp and when to keep the status quo. Consequently, it is extremely important to keep a close eye on the numbers. After all, as the old saying goes, “You cannot manage what you don’t measure.”

For those in the SaaS space, Bessemer Venture Partners has identified the most important metrics to monitor and measure as Committed Monthly Recurring Revenue (CMRR), Cash Flow, Customer Acquisition Cost (CAC), Customer Lifetime Value (CLTV) and Churn. iii (For more information, read our August 2013 Article: How SMaaS for SaaS Helps You Play Moneyball with the 5 C’s)

All startups, however, must track (and keep a lid on) the sales, general, and administrative costs (SG&A) that it takes to acquire and service customers. They must also have a solid understanding of how long it will take for the assets these costs are covering to bear fruit so as not to nip them in the bud too early.

TWO: Go lean.

TWO: Go lean.

In his May 2013 Harvard Business Review cover story, “Why the Lean Start–Up Changes Everything,” author Steve Blank promoted his idea that early stage companies can move faster and reduce their chance of failure (citing the current start–up failure rates at 75%) by moving towards a leaner model that “favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over ‘traditional big designs up front.’”

This concept intersects with the sales learning curve at the very early “initiation” phase— the point when the value of the information gained by conversations in the market is almost as great as the value of a direct sale. It is a model that encourages getting “feet on the street” sooner rather than later. These feet, however, can be virtual. Thanks to today’s technology, inside reps can cover a lot of ground without ever leaving the office.

At NuGrowth, we’d also argue that it is also a model that substantiates the value of the sales and marketing as a service offering—a fully built, fully staffed sales and marketing team, and all the tools they need to execute.

As the authors of Bessemer’s Top 10 Laws of Cloud Computing and SaaS, wrote in “Law #1: Drink Your Own Champagne,” “Your cost of capital is also likely very high, making upfront hardware and license costs unnecessarily expensive for a young company. By pushing as much as possible into the cloud, you avoid management headaches and make these expenses variable.”

Working with a sales and marketing as a service partner allows you to push your expenses “into the cloud” and budget your sales and marketing expense as a fixed, rather than variable cost. It also puts you in a better position to pivot if necessary.

THREE: Hire effectively.

THREE: Hire effectively.

Hiring the right individuals is essential when you are trying to grow your business. Hiring business development staff is a science as well as an art, and few early stage companies do it well. It is very important to have a well–vetted process for bringing new sales reps into the fold. The downside is too great not to pay close attention to this area. Because human capital costs will always be one of your biggest expenses, it is very important to get it right the first time, otherwise you could end up burning through a lot of money and inflating your CAC just by blowing through sales reps.

FOUR: Invest

FOUR: Invest in the necessary support structures.

While hiring is exceedingly important, getting the right person on board is only half the battle. Without the proper tools and support structure, that person will have a difficult time getting up to speed. Not only does this slow the sales cycle and increase the cost of customer acquisition, it decreases job satisfaction and increases employee turnover. Hiring without a good sales infrastructure, direction, process, and plan in place is a risky proposition with no guarantee of effectiveness.

Suggested support structures include sales coaching and management, a solid training plan, a defined territory management plan and system to attack the market, a fully built CRM system, strong prospect lists, a marketing automation tool to leverage the power of digital lead generation.

By investing in a system, you will increase the effectiveness of your reps, and decrease your CAC.

FIVE: Know your market

FIVE: Know your market.

In an early–stage company, knowing your market is easier said than done—a fact that makes it all that much more critical to have processes in place to collect, record and distribute information throughout your organization. Knowledge gained can be used to build out your sales plan, define or adjust territories and, if necessary, modify your product or service offering to better fit the needs of the market.

It is the need for this knowledge–gathering phase that serves as the basis of the Sales Learning Curve. Rather than hire high priced sales representatives that will “burn through cash and fail to meet revenue expectations,” the better option is to invest in resources that will not only sell, but mine for information. This can be done through a combination of digital marketing and high volume critical conversations in the marketplace. Because speed and cost containment are critical at this stage, it makes sense to consider an inside sales model coupled with a strong digital marketing program. Well–trained inside sales/business development representatives equipped with a fully–built CRM system, and backed by a good lead gen marketing team can cover a lot of ground faster and more cost effectively than high level “enterprise” reps.

SIX: Know when to push and when to pull.

SIX: Know when to push and when to pull.

There are many ways to reach out into a market—from tradeshows and events to industry associations to outbound calling, email marketing and full–blown content marketing plans. Each of these activities requires a different level of investment. Some are human capital intensive and others are not. Each will provide a varying rate of return. The key is figuring out which will provide the greatest return for the least investment, and, if a combination of tactics is required, how best to utilize your resources.

One key example of this is the inbound vs. outbound debate. Do you sink all your money into inbound marketing to “pull” prospects in, or do you invest in the resources and infrastructure needed for an outward “push” strategy?

There are some who would argue that since statistics now show most B2B buyers are well on their way through a sales cycle before they ever talk to a sales representative, all business development money should be spent on content marketing, website development, online webinars and demonstrations, and other inbound tactics. There are others who just want to pick up the phone book and start calling until they find someone who will “bite.”

The optimal scenario is a mix of outbound and inbound efforts. At the very early stages of the sales cycle, inbound tactics work wonders for building a brand and getting interested parties to self–identify, in essence warming the conversation for the business development rep. Couple these tactics with outbound email campaigns and a strategically focused phone strategy with all results captured in your CRM, and you’ve got the first stage of the cycle covered. The further you get through the cycle, however, inbound marketing becomes less important and critical conversations become more important.

SEVEN: Know when to hold and when to fold.

SEVEN: Know when to hold and when to fold.

Know when to hold and when to fold—and when to let marketing take over. There are so many hours in a day. It is important that your business development representatives spend their time wisely and focus their efforts on the deals most likely to convert. Establish a set of standards by which to evaluate the prospects they are talking to, so that less time is wasted on talking to prospects who are not ready to buy. Determinations need to be made about when to continue calling, when to disqualify a prospect altogether, and when to turn over the prospect to marketing for “nurturing.” NuGrowth typically recommends 7-10 touches before turning a prospect back over to marketing.

EIGHT: Hang on to the customers you’ve got.

EIGHT: Hang on to the customers you’ve got.

It may sound simplistic to say it, but a key part of growing and scaling your business is customer retention. First, it costs much less to keep a customer than it does to find a new one, and second, happy customers are an excellent source of referrals, while unhappy customers tend to be vocal in expressing their displeasure with your brand.

There are many facets of customer retention, only one of these facets is providing a good product. Service is critically important, as is consistent, open lines of communication.

In his blog post, “SaaS Sales Management Tips | Organization Strategy,” Chaotic Flow author Joel York writes that most early–stage companies start off at a considerable advantage over their larger competitors from a service standpoint simply because their clients truly are a name not a number. “However, this advantage will be forfeited,” he writes, “if you fail to establish a strong service culture and back it up with the right sales support systems, including your web site, communications infrastructure, sales automation, selling tools, training and interdepartmental cooperation, so that your sales team can deliver the goods.” vi

To best serve your clients as your organization continues to grow, start splitting your sales team into different groups, specifically designating a team for account management and one for new business development. Continue to market to your current clients, albeit in a different way than you do to your prospects. Newsletters, loyalty programs and referral incentives are just a few examples of good customer based marketing.

Partner Effectively

As we touched on briefly in point #2 above, NuGrowth’s sales and marketing as a service (SMaaS) model will give all the benefits of a world class sales organization that you need to hit the ground running—the hiring, the training, the strategy, the infrastructure and the people.

By partnering with NuGrowth you will increase your speed to market, reduce your risk and get a fully built machine all for the cost of one “traditional” rep.

If you are interested in tapping into the power of NuGrowth’s virtual sales and marketing team to get ahead of the sales learning curve and effectively scale your business, please give us a call today at 800.966.3051.