For SaaS companies with a somewhat complicated sales model (i.e. sales process that involves a person talking to a prospect in order to close a deal), the sales process should evolve as the company grows. The best way to move through this evolution is to relieve the congestion that naturally occurs in the sales funnel as it builds (and not before that). In my experience, evolving from founder selling to building a sales team too quickly comes with a lot of risk that is easily avoided by making sure you are ready for each new phase in the evolution.
Here’s the phases most B2B SaaS companies should pass through and the risks at each step.
Phase 1 — Warm referral founder selling
In this phase the founder is typically the person that does the “selling”. That’s a good thing because there is still a lot to learn from interacting with customers. Founders will learn what works in their value proposition, what the typical objections are that might stall a deal and what really gets a prospect excited. This stage is where you are perfecting your sales pitch and your demo. Also, importantly, you are learning how your prospects like to buy — do they have to get approval from purchasing? What person in the company has authority to do a deal? Are there legal hoops you might have to jump through? How would you qualify a prospect as one that is likely to move forward or not? Leads at this phase are usually coming from working your network for warm referrals. A Phase 1 sales process typically looks like this:
Phase 2 — Marketing leads, founder selling
As you get more experience selling and a better understanding of who you are targeting, you will start to get more efficient at closing deals. Soon the only thing holding you back from selling more is having more people to talk to. At this point you are likely exhausting your network of people that can make warm referrals to you and you are starting to look elsewhere for a way to grow your suspect list to call. At this stage the focus should be on finding ways to build your list. This could be the time to start experimenting with some marketing tactics (scraping public lists, building lists from LinkedIn, attending shows where your prospects gather, sponsorships that get you access to a list, etc.).
At this stage it might be tempting to hire a sales person that already has a deep set of contacts in your target market. In my experience this is almost always a mistake for several reasons. First of all, you don’t understand your sales process deeply enough to teach it to someone else. Secondly, you may find that your understanding of exactly who you will sell to (both the target market and the key contacts in those businesses) is still very likely still evolving. Selling to warm contacts is exponentially easier than selling to people that have no connection to you and no reason at all to do you a favor and talk to you. In my experience you need to grind through Phase 2 for a while before you know what sort of sales people you might want and what sort of contacts might be valuable to you (if any — more on that later). A Phase 2 process typically looks like this:
Phase 3 — Founder selling with pre-qualification
In this phase you are getting pretty smart about who your best prospects are — meaning the folks that are the best suited to your solution, that understand your value proposition most easily, and close the fastest. You are also getting smart about how to find those people and connect with them. You are likely getting more sophistication in your marketing efforts and building bigger and bigger contact lists and at this point the biggest roadblock in your funnel is your own time to do calls and meetings, particularly initial calls with contacts that you haven’t spoken to yet.
Again, it would be tempting at this stage to simply hire someone to replace you in the sales process but again in my experience that would be a mistake. A better way to relieve this pressure is to take as much of the sales mechanics as possible off of your shoulders while leaving you in the process to do the hard stuff (key sales meetings, demos, closing). By this point you should be getting pretty smart about what a good prospect looks like. You should know what questions to ask early in your interactions with a prospect that would tell you if they are worth spending more time with or not. At this point adding someone to help you pre-qualify deals and help with the logistics of setting up sales meetings can free up a lot of your time while still letting you be involved in the key parts of selling that require your deeper expertise and experience. It’s generally much easier and lower risk to hire an inside business development rep/inside sales person (aside — the way we name these jobs is just plain stupid imo) than it is to hire a sales closer/account rep. Typically this person can be trained easily to reach out to prospects to ask a specific set of questions to qualify the prospect and set up sales meetings with the founder.
The Phase 3 process usually looks like this:
Phase 4 — Sales does the selling with minimal founder involvement
Once you have a process working with an inside sales person doing pre-qualification on deals and appointment setting, you will finally be ready to think about bringing on sales reps that can close deals. At this stage you have a deep understanding of who you are selling to, the stages a deal goes through before it closes, and how to pre-qualify a deal. Not only that you also have a nice machine running that is churning out a good volume of pre-qualified leads. This is the perfect time to start looking for someone that can replace you as the person who does the sales meetings, gives a demo, and works the deal until closing. At this stage you will know exactly the type of person you want, what skills they need and how to train them. An interesting thing as well about hiring a sales person at this point is that you won’t be tempted to over-value the connections and network a sales person brings with them. In my experience, when you have a good sales funnel working, those don’t matter nearly as much as the ability to build relationships with customers and close business. I have found that when I focused my hiring process on that (rather than let it be weighted in favor of leads the person might be able to bring to the table) the outcome was much, much better in the longer run.
Here’s what a Stage 4 process looks like:
Most of the mistakes I have seen (and made myself) in this evolution come from adding Account Managers/Sales closers too early in the process. By letting the sales process evolve slowly, you get the benefit of learning more at every stage and this will set you up to make better hires that are more likely to be successful in the longer term.
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April Dunford is the CEO of Sprintly and a veteran of 6 startups. She blogs on startup marketing and sales at rocketwatcher.com