Since starting the Enterprise Sales Meetup, I have spent quite a bit of time reviewing advice about sales. My particular interest is in the advice that is directed to startups. The challenge with this advice, however, is that it is either too high-level or does not really apply to anyone. Even if the advice comes with caveats, it is easy to miss the nuance of when said advice should apply. Startups are fluid and dynamic organizations, so it is critical that people first consider an organization’s maturity level before applying strategies and tactics.
Everyone wants to focus on the rocket ship, but startups grow in very distinct and recognizable phases. At first, you have no product and zero customers—all you have is a minimally viable product (MVP). Then, you have a pilot or two with beta customers using a product that is being shaped. Some time later, you have some paying customers outside of your network using a more evolved product. If you start to sense product-market fit, you are probably on your way to expanding the startup into a sustainable business.
Each phase in the life of a startup comes with different rules and problems. This is especially true for the sales strategy phase. For example, many founders make the mistake of hiring a vice president of sales when there is barely a product prototype. Startups are better off waiting until it is time to scale out the company. This is when you need to better-formalize the sales process and refine the sales engine you are building.
When I provide advice on sales strategy, the first consideration is to understand the stage of the company. These stages I sometimes refer to as Stage 1X, Stage 10X, Stage 100X and Stage 1000X because each stage is a represents greater scope of sales growth than the previous stage. In other words, this is the increase in the magnitude of the amount of customers, the revenue, the sales team, and the prospective sales goals.
- Stage 1X– This is the classic pre-product discovery, or customer discovery stage, to use Lean Startup phrasing. There is probably only one “customer” at this stage that is more akin to a consulting gig that builds a specific solution for them. The goal is to create a working, generic prototype of the solution and gauge market interest with a minimal, but working product. There are no sales questions here because the only question is whether the market even exists. Therefore, “sales” is mainly about founders finding a handful of clients willing to take a flyer on an idea.
- Stage 10X– This is the product-market hypothesis stage, or customer-validation stage. Now, a handful of customers are using the product and are helping to define the value proposition and feature set. The key questions here revolve around checking the solution’s validity and the market’s potential. In practice, this generally ends up being three-to-five customers, as resources are too tight to handle more customers without a large execution risk. As in the 1X stage, this is a founder-driven exercise and “product-market fit” is still elusive and evolving. This stage is more of a hypothesis including a narrowed market and a value proposition of the solution.
- Stage 100X– This is the pre-scale momentum stage, or customer development stage. You have a solid product offering that delivers reference-able customer testimonials, not to mention a better understanding of the long-term business model. The goal here is to build a base of loyal, passionate, and successful customers to create credibility and prepare the startup for growth. This growth could be less than 10 customers for complex products, or up to a few hundred customers for simpler, out-of-the-box solutions. The key here is that you understand why you win, sales become repeatable, and there is continuous monthly growth in revenue and customer numbers.
- Stage 1000X– This is the growth trajectory stage where the startup is a known market player with established customers, a solid business model and accelerating growth. For enterprise tech startups, this is the stage that defines the true market challengers. It is also when the startup evolves from a scrappy startup to an actual business proficient in acquiring customers at a strategic cost. This is the stage when companies try to create market momentum and dominance and invest heavily in sales and marketing.
With these stages in mind, a startup’s sales strategy will be radically different from stage to stage. Applying scaling tactics at the pre-product stage would be as ridiculous and counter-productive as leveraging product-fit tactics at the scaling stage. This especially is true when building a sales process and expanding the organization. The multifaceted process of product development should also be used to build the sales team. Skipping ahead often results in catastrophic issues that require corrective measures like churning the sales team, firing customers, and instituting staff reductions.
Whenever you read something about sales and startups, be mindful of how the tactics mentioned can be used given the various stages. It is easy to get lulled into false confidence about your startup’s growth speed. Make sure to ask the hard questions and understand where your startup lies on the continuum before you make any strategic sales decisions.
Image Credit: CC by CurrencyFair
