A time comes when a B2B SaaS company starts to think about sales to big companies. Becoming an enterprise SaaS in other words. It soon becomes obvious that getting enterprise sales is not easy. Then its a short step to the place where you decide its time to start hiring sales people.
There is a bit of consensus in Scotland right now. A lot of companies are on the cusp if they can just get the right sales team onboard. The problem is great sales people are hard to find. And expensive.
I sit in a lot of conversations about how much to offer sales people. For most SaaS founders it feels like a big risk. The salary alone can add 20 or 30% to the monthly burn rate. Then comes the vexed question of commission. How much should you offer for on target earnings? What is a reasonable target?
At this point I like to confuse the issue by offering my thoughts. I don’t think targets and commissions are a good model for rewarding sales in general. I believe they are terrible approach for a SaaS startup.
The four killer flaws
Commissions based on the achievement of targets (or quotas if you prefer) are popular for three reasons. First they are simple, clear and easy to measure. Second the targets can be tied in to your overall revenue goals. Finally, sales people generate real value. And this is the established way of rewarding them for it.
All these arguments sound attractive. Everything is a balance though. And there are four big reasons why this traditional thinking does not stand up:
There are bunch of conflicting incentives and messages inherent in traditional per head sales quotas. I love this article by Steli Efti, a true sales guru, pointing out the downside risks of getting this stuff wrong.
Luckily there is an alternative that avoids many of these pitfalls. And it grows naturally with your business.
How team targets work
Most of my career, I worked towards team based targets. In a startup this is dead simple. You need to have one goal. Everyone in the business has to have a laser focus on achieving that single goal. So everyone shares the same target. Hiten Shah explains the importance of this.
As you grow, different teams will emerge. Targets and objectives will grow more complex. But each person will be a member of one or more teams. They share objectives with everyone in the team. This leads to a natural process. Objectives grow and diverge with your business. They are not made up to fit with “iconic,” expensive, big name hires.
In a large business, most senior people are part of more than one team. The effect is that everyone has a different set of objectives. Each individual target is shared with the team but no two people have the same combination.
For example, in my last year I was leading two major account teams and part of an industry business unit team. I had shared objectives with each of these teams. Yet no other individual had the exact same combination of teams and objectives.
Be clear team targets do not mean splitting objectives up into separate portions. Each member of the team shares 100% of the same target.
The Chairman's View
How does this affect reward? First and foremost everyone gets rewarded better because the business performs better. Teams work towards the same goals. People support each other. Incentives are unify not divide.
Performance reward in this system has to be based on total contribution. Simple numbers matter but they don’t tell the whole story. Total contribution gives you the opportunity to look at everything. Close sales, build relationships, deliver great customer service, product innovation - whatever really matters.
You can take the chance to factor in the important cultural things that get left behind in a sales culture. Respect, diversity, honesty and personal growth all matter. So recognise them.
Its true that total contribution is much harder to measure. At the same time it is fairer.
Leadership earns more respect. The right behaviours are supported and encouraged. Well worth the effort.
This post is about psychology. Inspired by one specific facet of motivation and behaviour that is often overlooked. Why does winning drive some people to achieve extraordinary things and leave others cold?
Let me start with a health warning. I am not a professional psychologist. I have never studied psychology or had any training in the discipline. You could say that I am not even a rank amateur in the field.
I do know one thing about psychology. It underpins everything in economics and business.
If you want to understand better. Let me make two recommendations.
For a great business perspective on psychology then listen to a world class amateur in Charlie Munger (on human misjudgement).
Or get the professional view from Thinking Fast and Slow by the Nobel Prize winner Daniel Kahneman.
(Note that Professor Kahneman is a psychologist yet his Nobel is in Economics.)
All I have to offer is observations of real people in all kinds of business situations over the years. Unsystematic and anecdotal evidence if you like. Much of it gathered through business activities that revolved around winning and losing. Or at least were characterised in those terms.
I have enjoyed many great, even elaborate social occasions in celebration of wins. I have listened to ten times as many speeches or presentations bemoaning the fact that we don’t celebrate victory enough. And sat around countless tables analysing and agonising over every detail of a campaign.
In every case, the definition of victory was a business deal. Often a big sale to an important customer. But mergers, acquisitions, new hires, promotions, partnerships, procurement agreements are also seen in the same terms.
Don’t get me wrong, I enjoyed the parties (although I am getting a bit old for these things now).
Yet something always felt a little hollow. I didn’t feel the same rush that bubbled and popped in many of my friends and colleagues. It took me many years to recognise the reasons. For me, winning the deal or making the sale is the beginning not the end.
Selling versus doing
I was drawn into consulting because I like to help businesses become better. Since I found my way into SaaS and startups, I have kept to the same focus. Grow faster, be more efficient, develop new strategies, change culture, improve margins, enter new markets and many more. That’s how I have fun.
Making the sale or closing the funding round are means to an end. They give me the right to start doing what I love.
Sales or deals are a hard and painful process. Fuelled by adrenaline, myth and lots of late nights. The energy generates excitement. But the result is no more than another box ticked. There has been no value for the client. Nothing has been billed.
Closing the deal is the start of something for me. The process of creating value. The pressure to deliver. The sense of achievement. All begin after the win.
I don’t feel stress in a deal. Only when the overture ends and the show begins. Delivering what I have promised is the greatest pressure. Seeing the benefits realised offers the only real job satisfaction.
My world is very much services. Its an environment where the customer only pays after the job is done. The service provider is only as good as the last experience. Perhaps this means securing an engagement can never really be a win.
Yet I think the same principle holds true for product. If I pick your product off the shelf and pay for it, the sale is made. Is it good for your business if I hate it as soon as I open the box. No. Again the process of value and the customer relationship only begins after the sale.
Leopard or Impala - What makes the SaaS ecosystem?
I believe there are two basic types here. But the traditional type A/ type B comparison doesn’t work. So lets call them Leopards and Impalas instead. (I have also heard ducks and eagles but that was from an idiot so lets move on.)
I choose Leopards as the symbol not Lions because Lions are mangy, smelly, lazy scavengers in the wild.
Leopards are the hunters. Silent killers who stalk their prey and live for the hunt. The leopard is a beautiful, natural machine. Sounds pretty cool huh?
Then we have the antelope. I choose Impala to represent this crowd. It is the most common species in the Kruger Park and they are also sleek and stunning. Plus they are about the biggest antelope a leopard would take on as prey.
They gather in herds to defend against predators. When one moves, they all follow. The group takes precedence over the individual every time. The alternative is death.
By now its clear which type you want to be. And this type of image is common and widely accepted as a motivational tool. Hunters and farmers. Predators and Prey, Winners and losers. You can hear that motivational speaker revving up as I write.
But stop a moment and consider this. Impala graze the grasses, bush and trees. They keep the savannah clear and pristine. And they thrive and grow in huge numbers.
There are 2,000 leopards in the Kruger National Park……and 160,000 Impala.
So which species is more successful? Which model of evolution would you rather follow? Maybe that superficial impact is not so convincing.
I loved Yuval Noah Harari’s book Sapiens. One of the ideas that struck me most came early in the story of human evolution. Around 10,000 years ago our ancestors made the move from hunter/ gatherers to farmers. We developed reliable crops and gained control over a handful of animal species.
Its natural to talk about domesticating cattle and grains. But did man domesticate wheat or wheat domesticate man?
The Chairman's View
Its obvious that leopard and impala are both essential to the eco system. I think the same is true in business. Those who see a sale as victory are needed to drive through the obstacles and pain of the sales process. This is especially true for Enterprise SaaS.
Those who are only happy when their customer sees value are also essential. That’s how great products get built and excellent service is delivered.
A great business has a good mix of these two types. Its worth taking the time to recognise them and make sure you are developing that type of diversity in your team.
Both types are equally vital to creating value in your business. Too often I see rewards skewed towards the leopards. Sales are seen as some kind of rainmakers. A special breed who deserve super rewards.
This is a mistake which is embedded deep in business culture. The myth lasts long and spreads far. But sales do not generate value. They may close the deal. Success is a product of every element of the team.
Remember this when thinking about incentives and rewards. And think about it when you are building a business. Building a sustainable business requires the whole team.
In my last post I talked about selling your SaaS product to big companies. It included some of the key challenges for boards and CEOs. And No 1 on that list is building the right team.
In my subsequent discussions with companies and other NEDs, one problem in this area has dominated. At least in Scotland, finding sales people is proving difficult. Many SaaS companies feel hamstring by a failure to identify suitable recruits.
A group of NEDs and advisors are gathering in a few weeks to share ideas. In advance, I wanted to do a bit of thinking aloud.
My basic idea is simple. Why buy an expensive sales team with long track records? And offer further rewards with hard to define commission structures. Instead try to find young people with potential and ability to learn. Let them grow into the role like everyone else.
When I talk to entrepreneurs about this subject, the discussion centres on three things. Finding a candidate with the right experience and track record. Designing an appropriate (and expensive) salary and commission package. Confusion and uncertainty about the exact needs of the business.
At one level the last point is not surprising. For a SaaS company at the start of the scale up journey many things are unclear. Seeking larger customers is fine. But which are the best fit for your product? You know that selling to the enterprise is a longer and tougher road. Yet the steps along it and the path to success are unknown. Revenue depends on both new logo accounts and upsell. What is the right balance of resources between them?
SaaS Scale up - You don't know what you don't know
The reality is that hiring a sales person is not going to resolve these issues. At this stage of growing a SaaS business you are still exploring and experimenting. You must find the answers to a whole series of fundamental questions, including:
This is a job for the CEO and the whole team. A sales person may have the right skills and experience to help. But there is not a defined and measurable role waiting to be filled. Sales, account management, customer support and product development all need to combine to get to the right answer.
Ability to learn not ability to sell
So the reason you are unsure about the exact needs of your business is that you don’t know. And the critical task is to find out the answers. Not to sell an established product to a well understood target customer base. That comes later (if you are lucky).
In this light, the two earlier questions (track record and package) need quite different answers.
Take skills and experience first. The critical qualities needed to succeed in this role are:
It may well be that you can find a sales person who fits this description. But you will need to look well beyond their pure selling skills.
Hire for potential
Reading the list above again, does it remind you of anything? These are the talents that everyone in a startup needs. Every other senior appointment tends to be someone with little or no experience in the role. The CEO and founder may be a first time entrepreneur. The CTO will be a great software engineer but have they led a development team in the past?
Each company will have its own mix. The guiding principle is the same. A typical team is a group of ambitious, talented individuals doing something new. And taking on different and stretching roles as they do it.
As a founder you understand this. You look to hire people with potential to grow and achieve great things. Why would you approach sales any differently?
Most often, the CEO is the best person to “sell” your SaaS in the early days. Of course as you grow, you don’t have time to make every sale. But you can coach others. This article by Steli Efti on coaching junior reps offers a basic framework.
Reward for growth
Yet the reality is different time and again. I look at business plans and the most expensive planned hire is the sales lead. Often paid more than the CEO. The job spec includes 10 years experience. The objective is to find the finished article. One person who can rewrite the growth curve single handed.
On top of the big salary, sales reps are also looking for commission. If your SaaS is at the start of the enterprise journey you don’t know who you will sell to. What exactly you are selling. Or how much your customers will pay for it. How do you design the right reward systems?
Commissions and other sales rewards are systems of incentives. They work well in a world where the role of sales is defined in detail. The product options and margins are established. And the target market is clear. Then you can motivate the right behaviours. And set stretch goals.
Where these things are not well understood, incentives are fraught with danger. Without any ill will on either side, it is easy to encourage the wrong things. Sell at the wrong price. Sign up the wrong customers. Push for revenues too early. And a hundred other ways to damage your business.
So is a high paid VP of Sales the answer. Is a commission structure that no-one fully understands the best way to spend money?
The Chairman's view
Experienced sales people are difficult to find. Bringing them into a startup is high risk and high cost. It may still be the right strategy. But it is worth considering an alternative approach.
Look for people who are young, ambitious and talented. The type who fit well with the nascent culture of your organisation. Maybe someone who is in a sales training scheme. Or doing a sales support job and getting frustrated perhaps.
Offer them a fair base salary and some options. You can always add a commission scheme later. Work with them. Help them learn and grow into the best sales team on the planet. And they will help you find the right market and business model to build your SaaS….or is this all crazy?
I love to talk to people about their businesses. Thinking through strategy. Tackling challenges and opportunities. Helping leaders take tough decisions. That has been my working life and there is nothing I would rather do.
Every so often, I facilitate a group of SaaS entrepreneurs based here in Scotland. This means I get to talk business with a dozen or more startups at the same time. Heaven.
The focus of the group is to share common challenges in SaaS. When we met on 4 October the discussion topic was selling to enterprise customers. This is a great sign. A number of companies in the group are now mature enough to be targeting deals with larger customers. (We also had some new joiners so the community is growing nicely.)
Our discussion picked up some great ideas that would help anyone dealing with large companies. The main things in my mind are: Team/ hiring; target markets; patience and process; land and expand.
Build the right team
Enterprise revenues are like every other aspect of your business. The biggest determinant of success if the quality of your team.
You need to find a way to sell your product to large and complex customers. A good SaaS pricing page and clever inbound marketing are not going to cut it. You will need to build a team. That means some combination of hiring and developing/ promoting your existing talent.
People are the biggest decisions you make as CEO. So think through the type of person you want. Get a second pair of eyes and ears involved in the interview process. For example, an advisor, mentor or NED might be able to help. Design the right package for the best talent.
And remember, at the end of a recruitment interview, maybe means No.
Target the right customer
Making a sale to an enterprise customer is often a long process. Growing that initial deal into substantial revenue requires even more time. And there is no guarantee of success when you start. How can a startup or scale up with limited resources handle the demands?
Focus on the right target.
It can be tempting to respond to every corporate enquiry. When a household name approaches your little SaaS it is flattering and exciting. There is nothing wrong with having an initial discussion. Use that time a bit of research to find out if this company is a genuine opportunity for your product.
Patience, Patience, Patience
Completing an enterprise sale takes a long time because the process is complex and slow moving. Large companies have whole departments just to buy stuff. Called procurement, purchasing, supply chain or whatever. These teams have systems, processes and standards that take time and effort to navigate. Often it feels like you are up against the deal prevention team.
And procurement is not the only challenge. You must convince and reconvince the business of the value in your product. You may also have to prove you are better than the competition.
No wonder one of the companies in the SaaS group had planned for 9 months to complete its first enterprise sale. And is running behind schedule!
Tactics and specifics for managing these matters is a big subject. The biggest risk is impatience. Push too hard. Appear desperate for a deal. Or just let your frustration show. And the prize will slip through your fingers.
Hunt for thrills, farm to live
Winning deals with enterprise customers is worthless. The goal is revenues. Actual cash in the bank. Sustainable and underpinned by rapid growth.
For a SaaS company that means the long and painful sales effort is only the tip of the iceberg. The value is only delivered after the contract is signed. Persuading and supporting individuals, departments and divisions to adopt and use your product. All the moving parts inside your new minted enterprise customer.
A bit of new language has grown up around this. Customer success, upsell, negative churn etc. These are all terms for an old fashioned business fundamental. Account relationship management.
You should plan for your SaaS to have account management people, systems and resources. Think about the organisation you want after you win the deal. Develop budgets to reflect a realistic view of the way enterprise customer revenues develop.
The Chairman's view
Moving from an SMB focus toward enterprises is not an easy road. From a board/ investor point of view I want to help the leaders of SaaS companies focus on the key decisions. Give entrepreneurs the best chance to realise the opportunity and manage the main risks. You should for an experienced head to help you with:
All are interdependent. Nothing happens in a neat sequence. You never have all the information you want. Welcome to leadership!
When it comes to hiring there is one absolute rule. Maybe means No.
Adding the right person to your team is the most important investment decision most founders and CEOs will ever make.
Every SaaS investment is spent on 3 things
In a SaaS company all the investment money raised goes on 3 main things:
Hiring is make or break for a startup
These people will make or break your business.
No hiring decision is easy. In a startup there are so many roles to fill. So many gaps in the skills and experience of your team. Such intense pressure to show results to your investors. And even with the cash from a successful fundraise in the bank, capacity to hire and pay is so limited.
A confusion of choices and compromises
On the surface each hire is a black and white decision. Yes or No. Yet as soon as you start reviewing CVs, you will find that one person seems to present an array of choices:
Over time the process starts to feel like a series of compromises. Remember you are looking for a person. Can you work with them? Will it be fun? Would you trust them? These questions are much more important than any specifics.
It will never be easy. You need to be patient. Prepared to spend the time. The effort will be worth it in the long and short runs. Consult with other people. Listen to their views. Take up references.
In the end it is your decision. So try not to compromise. Only hire someone who is a definite yes.
I received an invitation to an event a couple of weeks ago. When I read the speaker’s name I felt a slight shiver. It reminded me of a game we used to play over a beer after work. A group of us used to challenge each other to recall our worst hiring mistakes. The name I had just read was always high up that list. And every name on the list resulted from someone who had forgotten the basic lesson. In hiring, maybe means no.
Best I don’t disclose that name. Or worse the reasons it featured in those discussions. But it did get me thinking about the whole recruitment challenge. After funding and making sales, it is the question I get asked most often by SaaS founders and leaders.
And so it should. In almost any business the biggest factor that impacts on performance is the quality of the team. In a startup the existing team will be small. So every error in recruitment will be amplified. Of course the benefit of adding one more great person will also be that much greater.
The great leaders I have worked with over the years understood this. We all ended up crying into our beer. But those chats served an important purpose. Learning from each other and trying to improve. So I thought it would be fun to share the most important lessons (or at least those I can remember!)
Mistake 1. Allowing track record to trump talent
In my corporate days HR professionals were often part of the hiring process. Many of these were very smart people. But they shared one common blind spot. HR people have an ingrained belief in track record. Making decisions on hiring, bonuses, promotion based on evidence of past performance.
It sounds simple and unarguable. Yet it is not how people work. Every hire is a decision about the future. A small (or large) investment in your future dreams and hopes for the business. So the things that matter are potential and ability to learn. Angus Woodman, the CTO of Crew wrote a post Why we hire noobs on exactly this point.
Past performance matters. If only as evidence of integrity - is the story on the CV in front of you backed up by the facts. But it is only a guide. Be data influenced, not data driven on hiring.
Mistake 2. Believing sales people are rain makers
And be careful of that data when it relates to sales. Sales numbers are the easiest thing in the world to fake. I realise some people will be horrified/ outraged by this assertion. Yet it is true. It applies to whole companies as well as individuals. Sometimes people don’t even know they are doing it.
This will also be scary for some. Hiring sales people is one of the toughest calls in a startup. If you can’t rely on the numbers, how do you choose? Imagine the potential recruit alone in front of your best customers. When that feels wrong, the answer is no.
It is a tough decision. But take my word for it. Hiring based on sales numbers alone is always a mistake. Always.
Mistake 3. Failing to take up references
The oldest and most obvious mistake in the book. Yet it still happens. Even in the biggest companies the basic process steps get missed. Time and again we would find surprises. People who just couldn’t do what they had been hired for. More than half the time the issue was avoidable. All that was needed was a basic reference check.
You have a lot on your plate in a startup. And some corners have to be cut. Not this one.
Mistake 4. Falling for the illusion of psychometrics
Psychometric testing has grown in popularity. The attraction is simple. All those tests appear to turn gut feel and emotion into hard data. What could be better?
Except that clarity is deceptive. I have seen a whole bunch of different approaches over the years. At one time we used to run a two day testing based assessment centre for big promotions. Quite often the data aligned with the judgement of colleagues and peers.
But when it was wrong it was spectacular. One year our top candidate scored the absolute bottom marks not he assessment. The best scores came from someone we had to fire 3 months later.
We also used simple psychometrics in screening for recruitment. This looked OK for a while. Until we took a high level look at the data. One thing stuck out. Candidates who did not have English as a first language had the worst scores. We were killing diversity by screening out too many international prospects.
Psychometrics are a bit like horoscopes. When you dig in there is something for everyone in the conclusions. The data-like appearance is a delusion and it can be a distraction. Given the time and money available, it is not a worthwhile investment for a startup.
Mistake 5. Filling up the next level in the depth chart
There is no substitute for judgement when hiring. In the end of the day it is a people decision so it can’t be reduced to a spreadsheet or a checklist. But there is one common tendency to watch. If you ask people what their recruitment priority is, the answer is always a No 2.
It is human nature. The person you need is whoever will take the most pressure away from you. In an early stage business this tendency is acute. There is so much that matters. So confidence is essential before you delegate. And for the first couple of hires you may be making the right decision.
The problem is that hiring is cumulative. Once you reach 20 plus people the depth chart should show a range of experience. By the time you hit 100 all the levels need to be balanced. Yet if you keep hiring the top priority, the junior staffers will never arrive.
The economics of your business depend on leverage. Your long term sustainability relies on a constant flow of talent. Both aspects need a team with depth as well as breadth.
Mistake 6. Relying only on social fit and missing diversity
Once you start making human judgements, conscious and unconscious bias play a big part. Nowhere does this have more impact than around fit. The most natural thing in the world is to pick people that will fit in well with the culture and style of your team. It is a short step from this to selecting on how much you enjoy the company of like-minded individuals.
And before you know it you are baking in complacency and narrowing your thinking. Great teams are not just about social factors. Range of skills. Leadership and teamwork. Specialisms and strengths. Even creative conflict. All play a part in building a team for long term success.
I benefited from this for a long time before I learned to recognise it. In my early years at work I found myself working with a wide variety of new people. I became close friends with men and women that I would never have spoken to at school or university. Diversity of roles, of thinking, of cultural and social background all played a part. I learned faster and I learned more. My education went far beyond the acquisition of technical skills and experience.
So look for people that fit into your team. And broaden the thinking and experience at the same time. The best analogy is a jigsaw puzzle. The pieces are all different shapes, sizes and colours. They need to join together to make a greater whole.
Building a great team - maybe means no
All those tears and beers arise because I have made all these mistakes and had to live with the consequences. You will make some too. When in doubt remember 3 words that sum up the right approach to hiring. Maybe means no.
After my previous post I had a great exchange with Brad Feld. To cut a long story short, he pointed out that I had left out a couple of crucial points. His book on Startup Communities stresses:
I can’t argue with either of these things. And taken together they remind me of another important challenge. The young founders and entrepreneurs in Scotland today are our best and brightest. The leaders for the next generation. I suspect the same is true for most startup ecosystems. How do we help them grow to realise their potential over a lifetime? The lifetime of a leader that is. Not just of a business or a technology.
I was lucky enough to enjoy a long and somewhat successful career in professional services. Start and up had not then been joined into the same word. Yet in my time (1984-2013) the industry and my firm experienced rapid growth and change.
Throughout learning and personal development were at the core. Central to what was expected and valued in the organisation. As a result I became a different a better person. Better at serving clients. More of a leader. Better balanced and more thoughtful.
Personal development objectives were part of every appraisal. More senior members of the team were always happy to make time to help with achieving these goals. As I progressed into leadership roles I found out why. The objectives of leaders also embraced growing talented people and teams. This applied at every level.
All sorts of behaviour flowed from this culture. Responsibility was given early to allow individuals to learn. But with a supportive mentor to ensure they succeeded. Promotions were denied on occasion. Because hitting the numbers was only part of the story. We also looked at how close each candidate was to realising their potential.
It could lead to unexpected moments of genius. I remember a media campaign we launched about a year before I left. At its core were a series of brilliant cartoons. They were produced by a teenager working in the post room in one of our offices. The marketing team found him. Because he had expressed a desire to develop his artistic talents in his annual review.
At length I realised that this culture arose from 3 mantras. They apply to leaders and leadership at all levels. Any time, any place, anywhere:
1. The only job of a leader is to grow more leaders
You do this by generating more work for others. So that you create space in the business for additional leaders.And by mentoring, coaching and supporting others to do more challenging work. Helping them achieve their leadership potential.
2. Grow leaders better than you could ever be
Be generous by bringing all your learning to the next generation. They will learn faster and achieve more as a result. Your goal is for your successors capability and talent to go beyond your own. And so take the business to new heights.
3. Look to future value not present gain
Make sure the business you leave behind has more potential than the one you inherited. Act for the long term growth of the business. Not just to maximise the value today. Or the exit value for current stakeholders. This is essential to build a great, sustainable business. It is also the foundation of fair dealing with employees, customers, investors and the wider world.
My ambition is to lead and mentor with these ideas in mind. We all owe it to the people who are taking the risk. The entrepreneurs of today and tomorrow. Those who will grow into the leaders of our communities for years to come.
This is the best investment in the future anyone can make. Succeed and you will find it is also the best fun you ever have.
People are the heart of any business. In a startup there is often little else. A few lines of code and some sketched designs. Doesn’t amount to much. The ideas, the passion, the execution all rest in the people. This means people skills are not an option for a founder or CEO. Without the ability to build relationships, learn from other people and get the best from your team you will fail.
Any startup leader will be practicing these skills every day. It is part oft he dynamic in all their activity. In my experience most of them have a natural talent for this sort of thing. As well as being an integral part of the job, that talent is needed in two key situations. Growing people and hiring people.
This is not going to be a post about the hows of leading people. I wanted to set the scene. And then focus on one key point. The basis of success in any aspect of leading people….
Its about strengths not weaknesses
Most people have a kind of intuitive model for managing others. Every individual is good at some things - strengths. And not so good at others - weaknesses. Human nature then triggers a simple thought process. If we want someone to improve we need to fix those weaknesses. Seems obvious right?
Conscious or not this approach is endemic in all kinds of business. And it undersells your people and your organisation.
We all succeed by honing and building the things we are good at. Becoming great at the stuff we know how to do. And excelling at what we love. In a surprising number of cases people become the best in the world at what they do
Think about it. You didn’t leave school and focus on the subjects you were no good at. You forgot all that stuff and became the best you could.
I always remember a friend of mine from high school. We were in the same class for English but nothing else. I was good at numbers so maths and science were my real strengths. I ignored the language stuff. (This should be obvious to anyone who reads this stuff regularly). But my friend found English was his best subject. He made a career as a journalist and became the editor of a national newspaper. He took his strength and made the best he could of it. Which turned out to be outstanding.
Why change this thinking when we leave school? Great companies are built on this principle. Support great people to do what they do best.
As a leader your first task is to identify the strengths of your people. When you are hiring you have little time with the candidates. Invest it in figuring out their strengths. Get to know what people can do. Not just technical skills. Are they potential leaders? Great team members? Social catalysts and influencers? Deep thinkers about the world? These are the qualities that will add value to your business.
Making strengths count
You can do this every day. Great leaders do it every minute. You can also take a different approach to 4 other situations:
A focus on strengths means a different thought process for weak areas as well. We all have them and beyond a certain stage of life they are tough to eliminate. Instead of obsessing about perfection look for other solutions. Find a way to cover weaknesses by defining roles that allow others to fill in the gaps. Structure projects and teams to offer a good variety of talents. Try to keep things in balance rather than attempt the impossible.
When you are hiring look for honesty and self awareness. Bring in people who understand their own strengths and weaknesses. You need to take account of those weaknesses. And place them in jobs that fit their talents. Why would you hire someone for a job they don’t suit anyway? But the purpose of the hiring process is not to catch people out. Try to understand the whole person.
You will get great value out of people when you can see their talents and put those to work for your business.
The strengths revolution
If you want to see the benefits of this thinking, check out the Genius, Power, Dreams programme run by my former colleague Andy Woodfield.
The difference may appear quite subtle. But the impact is profound. You need everyone to do awesome things and grow with your business. It is the hidden agenda for startup success. And I promise the most rewarding thing you will ever do as a leader.
I need to admit something. I have a problem with pure sales people. I have met some real nice ones. But the model just doesn’t sit with me. I worked all my life in professional services. Built on the principle that you must do AND sell. No separation. It is true that my former firm did hire the occasional pure “sales” person. It never worked. Those people did not add value. And our professionals did not value them.
I like to think of services in the words of a good friend of mine “We are all selling a little bit.” Hairdressers, plumbers, accountants, bankers. All services where the sale depends on people as well as the service delivered.
I have also had the experience of building global partnerships. Alliances between professional services and clients/ partners with strong and successful direct sales models. This mix never worked in the real world.
Sales people are great at selling a product but not at delivering a service. For me this creates an inherent conflict in SaaS.
One consequence is a negative reaction to the wall of advice out there on how to more, organise and reward SaaS sales teams. I specifically hate the word quota. With a vengeance. All this material seems to be driven by an inherent assumption. That the the model for direct sales in traditional software companies is not broken. The advice and recommendations and even the basic language have this imprint. They bear an uncanny resemblance to the words you will hear inside Oracle or HP or whoever.
This led me to work on a post called something like “Why you will never need sales in SaaS.” I have had versions of this kicking around for a while. But I realise that nothing in any of them is helpful or constructive.
So let me try a different approach. Some SaaS companies will end up with a product which is best for large enterprises, government organisations and the like. The buying process in these customers is complex. The culture is unique and often challenging. Such sales need real people to spend time with the customer. Logic says that hiring people to engage with these customers will be necessary. For some SaaS companies at least.
In my career I have worked with some of the best services sales people in the world. As leader I have been in charge of teams of professionals across the world. Generating billions of dollars of revenue. What have I learned? Below are a handful of truths. Things that work. Or at least reduce the risk of failure. This is not a system of success. But I hope it will be helpful if you are trying to build a SaaS sales capability.
It is not just a numbers game
The funnel analogy is common in sales. Feed enough leads into the top and revenue will flow from the other end. Inevitable. Hire more sales people and generate more leads. Growth will follow. If this doesn’t work for any reason tweak it. Improve conversion. Fire your team and find better sellers. Market to a bigger audience. Build more product features. Until you have the economics working.
Is this a real philosophy? Crunch enough data and you will have the answer to life, the universe and everything? Of course not.
Metrics are a great way of figuring out what works and what doesn’t. But real revenues only arise form quality relationships with real customers. In an enterprise environment those relationships are complex. They are also few in number (at least until you are SAP).
If you are SaaS is for large companies you need a clear plan for each relationship. Who do you need to meet? How will the target make its decision? What is the purchasing process? And much more. It is a long slog. You will have to listen to every nuance in each meeting. Understand and respond to different problems and agendas. Find features and benefits that work for the whole audience.
Pumping numbers through is not the answer. Quality not quantity will win.
Who will be the real sales person for your SaaS?
Get a clear idea who will truly sell your product. In the early days it is always the founder(s). By definition the team selling are also doing. Why then jump straight to a “pure” sales person? What you need is someone who can persuade your customer to buy your SaaS. Not just someone who says they can sell anything.
The best professional services sales people I worked with had the right combination of three things. Skills and track record that were credible with the client. The right personal and cultural fit for the client’s way of working. Enough knowledge and patience to navigate the buying process. Remember what counts is not your sales process. It is your customers way of purchasing.
In an established business I had to find these people and allocate them to accounts. It was a combination of personal experience from working with them and instinct. Not always right. In a startup you don’t have this. Instead apply a principle from the other side of the equation. Build up a persona for your ideal sales person. Then go out and find people who match.
Hiring is a real jungle
Sales are built on relationships. You need the right people. No matter how big your company gets. No matter how tough the economy is. Finding the right people is always tough. Get over it. And be patient. I said it in a different context last week. Maybe means NO. You will still make mistakes. But only hire when your gut tells you it is right. This applies to sales as much as any other role.
My firm went through a big hiring exercise a few years ago. We needed senior people. Partners who would generate real revenue. Headhunters told us to expect an attrition rate of 20%. We achieved 6% over 5 years. There was no process. All we did was have people in the team meet candidates. If anyone who met them was unsure we said No. We kept going until we were sure. Every time.
Don't be afraid to promote from within
Your best option may already be on the payroll. I can already see this happening with a couple of the SaaS startups I work with. Youngsters who have started as interns are growing before the founders eyes. Take a chance on someone you know. Who fits into the team culture. And has worked for it. This is much lower risk than insisting on someone who has a CV that ticks every single box.
Seeing people grow and succeed. In roles they would never have imagined a year or two earlier. This is one of the most rewarding experiences you will ever have as a leader.
The fallacy of reward
Sales theory is often based on a pure, individual financial incentives. You pay on personal performance. You match or exceed the going rate. You hold individuals accountable and fire them if they fail. This is great for getting hard driving mercenaries. And high staff turnover. It is bulls**t for your business and your customers.
The more complex your SaaS and your customer’s business, the wronger it becomes. Selling products or services to large enterprises requires a team effort. Everyone from the PA who makes the appointments to the CEO who seals the deal has a role to play.
Startups are small teams by definition. Everyone and everything depends on everyone and everything else. The last thing you need in your culture is a high paid outsider. Motivated only for him or her self.
Ditch those individual quotas. Get everyone working as a team in development and in sales. Reward team success. You will be more effective and have more fun.
The myth of CRM
CRM must be the wrongest named software category in history. It implies that the system is about managing customer relations. In reality CRM is about building and tracking sales funnels and pipelines. Nothing wrong with that but call it what it is.
The wrongness doesn’t stop there. CRM is a crowded space with hundreds of companies - most SaaS based - offering solutions. The basic proposition is the same. A system and the metrics it drives will transform your SaaS growth. The trouble is sales is tough. And overcoming the challenge is not just about process and numbers. It needs thought, analysis, effort and a bit of luck.
In the early days your success is not about being more organised. Or a more precise measure of progress. It will be about working out and guessing the right path. Through the messy world of the right corporate customer. There will be a tiny number of real quality leads. You will not win by trying to impose a pattern on these. Rather you must treat them as individuals until you see something that repeats. This will take a long time in the enterprise.
The right choice at the right time
In enterprise SaaS sales the biggest decision is right at the start. Are we selling to the right customer? Most times this is followed by the other key choice. Are we selling the right thing to this customer? These things are true in every business. They matter more in enterprise sales. Because the time and cost of investing in a sales relationship with the wrong customer is so high. It can be enough to kill and early stage SaaS company.
The second choice (what to sell) is not about changing your product. It is about focus on the benefits that will make the biggest difference.
Do not allow CRM or logo blindness to distract you from this fundamental. Dig deep to find out if you can add real value to your target customer. Listen to every contact. Direct or indirect. Even if your product is what they need, are they ready to adopt it and realise the benefits.
Every culture is different
The sales model I have disparaged throughout this post does work in some places. National cultures vary. Industry cultures vary. Every large organisation has a culture all its own. You will build your own culture for your own organisation. Whether you like it or not. Once your SaaS is established it will have a culture.
You should respect and grow that culture. But you must understand and adapt to the culture of your customer. In enterprise sales buying is a reflection of culture and process. You will need to navigate both.
I had a period where I looked after relationships with the Europe, Middle East and Africa (EMEA) business of two Fortune 50 clients of my firm. We were trying to sell the same portfolio of services to these clients. Their total procurement spend was similar - $14Bn per annum for one and $12Bn per annum for the other. As far as we could see the spend on professional services was also close.
Yet the experience was different. There were many reasons. The first signal lay in procurement itself. One client had 180 people for its entire global spend. The other had 1,100 just for EMEA. At the same time, the buyers in the first client were happier to spend time with us than for the second. Despite having one tenth the resources.
If you must hire sales people....
There are a series of process mistakes that are common in sales. Quotas too high. Measuring and rewarding the wrong behaviour. Hiring the wrong people. And so on. In enterprise SaaS you need to think deeper and more strategic. Fixing the wrong system is not the answer.
If your SaaS needs a sales force it is because your customer wants and need personal relationships before they buy. This is true for most large organisations. And it may be true for some things in the SMB sector as well. Professional advice is a great example.
This is a great opportunity to learn about your customers and deliver real value. Instead of “How do I create the right sales process?’ Ask yourself “How can I best learn about my customer’s business and help them improve?” Build your sales team on that answer.
Being in front of customers talking about their problems is fun. The rest is bull.
Business is about people. How do competitors think? What will they do next? How do customers decide? Pressure to succeed and an uncertain world tempt us all to think others are stupid or malicious. Teams and leaders believe decisions are made because of stupidity. Or that the competition is out to get them. Thinking this way leads to bad decisions. And a stressful life. It is almost always wrong. Put yourself in others shoes. And do the right thing for your business.
I spotted this recent article by Y Combinator partner Aaron Harris . He raises part of an important mindset that is needed to succeed in business. His article points out that it is naive and dangerous to assume that the competition is stupid. I would go much further.
People love to attribute motives and rationale to third parties. Whether it is bosses, colleagues, customer or suppliers. It is one of the biggest mistakes in business. No matter how someone’s behaviour looks, you don’t know why they act in the way they do. Repeat that. You. Don’t. Know. Why.
Don't Fall For Conspiracy Theories
So many discussions centre around stupidity. Even more often I heard people explaining badness. How and why customers or competitors were acting with deliberate malice. I am a big believer that the best approach to the market is to put yourself in your customer’s shoes. Believing others are stupid or bad fails to achieve that. Identifying malicious or stupid motives works against you in three main ways:
Stress Is The Only Outcome
Number 3 is important. It arises because this kind of behaviour always ends up focusing on the negative. It is a symptom of paranoia. “Why are they out to get us?” is the basic mentality.
It is human nature to fear that others will do us harm. In a group situation jealousy and malice add fuel to this fire. I saw most stress and distress caused by this downward spiral in my time in the corporate world. Teams have a special vulnerability. Another human instinct is to defend the tribe. It is so easy for members of team to become convinced that management are working against them. Failing to reward success. Giving more money to other people.
Stress in the workplace is a major problem for society. Negative spirals based on mythical animosity are a major cause. Startup founders and teams are vulnerable to these challenges at least as much as anyone else.
Your Fear Is Wrong
The flip side is that these motives are almost always wrong. Grand conspiracies and complex schemes don't exist in the real world. Your competition don't think only about damaging you. Even isolated or individual acts of malice tend to be carelessness or misunderstanding. People are not bad. They are different from you. They have different goals and pressures. But true nasty, evil people? I can think of at most two in the last 32 years. And I may be wrong about those.
One area where this does extra harm is when working across cultures. Normal behaviours and just common courtesies are different across cultures, countries and continents. Small areas can contain many different cultures. We recognise this in Europe but forget that it is also true in the Middle East, Africa or Asia. Experiencing different cultures is the real joy of working across international borders. Software and startups give us a historic opportunity to enjoy this experience. Don’t spoil it by not taking the time to understand.
The summary is simple. Listen to what people say and watch what they do. This is all the information you have. Be honest, smart and professional in your responses. Base your actions and communications on the best information you have. If you are dealing with another culture, do some research and find out what is normal.
Don’t speculate. Don’t assume. People want to be nice and to be liked. They are striving to achieve their own goals. Sometimes these will conflict with yours. That’s business life. Finding a way for everyone to win is much more rewarding than stressing about non existent attacks.
Avoid this kind of thinking. Start from the basis that others are just like you. Except maybe smarter and nicer. It will be better for your business, your peace of mind and your health.
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Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.