Below is an updated version of a presentation I show to B2B startup teams that are beginning their sales efforts. It’s presented here without the context surrounding each of the points but the insights should still be helpful.
Defining the attributes to look for in any new hire is really challenging.
People are complex and every situation and every environment is different. So it’s extremely difficult to apply a blanket set of attributes that will lead to success in any job.
I’ve found that this is particularly difficult with “strategic sales” roles in a startup. By strategic sales I mean a role where a salesperson is selling a highly innovative product into a large organization that requires a large investment of time and/or money from that organization.
It’s important to define strategic sales because the skill set required to be able to close strategic deals is very different from the skill set required to close smaller, more defined, “transactional” deals. Often, success in transactional selling comes down to simple hard work and effort. If you analyze a transactional sales funnel you’ll see that there actually isn’t a huge difference between conversions for high performing salespeople and conversions for low performing salespeople (by conversions I mean things like ‘phone call to meeting set’ and ‘meeting held to verbal commitment’). Success in that world often comes down to volume. More calls = more sales.
While there’s certainly nothing wrong with good old-fashioned hard work — in fact, it’s a requirement — strategic sales is almost exactly the opposite of transactional sales. Conversions really matter and lead qualification is even more crucial because strategic deals require a huge time commitment from the salesperson. And there are massive differences between the conversion rates of high-performing salespeople versus low-performing salespeople. A high-performing strategic salesperson can convert 100% of their meetings into an active sales cycle; a low performing strategic salesperson may convert none. Literally zero. Strategic sales is not a numbers game.
Ben Horowitz likes to say that closing a deal with a large organization is like passing a law in congress. And it’s even harder than that when selling innovation — there’s no set process for the buyer to buy within their organization or budget to buy the product. And in a startup, you’re small and nobody knows you and you don’t have a clearly defined sales process and you don’t have perfectly polished sales materials. It’s really difficult.
I’ve thought a lot about the attributes that are most closely correlated with success in strategic sales. I’ve seen a lot of successful strategic salespeople and a lot of unsuccessful strategic salespeople. It’s a problem I’ve been trying to understand for years.
Recently I’ve spoken to a number of people I trust on this topic and here’s where I think I’ve landed. Here are the four key attributes of a successful strategic salesperson.
In order to solve a complex problem you need to fully understand it. How does the buyer buy? Who has influence in the organization? What value do customers see in the product? What does the customer do during the day? How is the buyer bonused or promoted? What other options does the buyer have?
I could literally write 100 more questions like this. A strategic salesperson must always be wondering about the answers to these questions. They should constantly be learning from their customers, their leadership, their colleagues, the media, their competitors and anyone else that will talk to them. They need to be obsessing about the problem and trying to build a story and a solution and constantly iterating their approach.
A person that doesn’t have this level of insatiable curiosity simply won’t figure it out. They’ll get stuck.
I’m fusing two attributes together with this one but I think it’s necessary. Any type of sale will inevitably lead to lots of rejection of the salesperson, the product and the company. This sucks. It’s painful. It’s even worse when selling innovation because there will be prospects that think the idea is crazy and will never work and the buyer has no process or defined way to buy the product. In order to get through this the salesperson must be a winner and must have a winning attitude and know that they can overcome. And they must have the grit and determination to keep getting up after they get knocked down. It may sound cliché but it’s true. I’ve never met a pessimist that was good at strategic sales. There will be an endless number of reasons why it won’t work and the only people I’ve seen that will push through have a high level of optimistic grit.
I used to joke that there are two types of salespeople:
1.) The type of salesperson that flies home from a bad meeting with a prospect and sits on the plane mentally blaming the product, the marketing team, the legal team, their boss or the prospect that just doesn’t “get it.”
2.) The salesperson that sits on the plane thinking: How could I have answered that one question better? What else should I add to the presentation? What should I take out? What’s the context of the person that didn’t like the product? Where are they coming from? Does the product I’m selling threaten some of the people in the room? What went well in that meeting and what didn’t go well in that meeting? Who can help me get better?
The second approach requires an immense, almost unnatural level of humility. It’s human nature to point fingers when things don’t go well. It’s also often perfectly reasonable — because it might actually may be someone else’s fault! But placing energy into #1 is a losing approach. Obsessing about the things that we can control is the way to win. So much energy can be soaked up by complaining and blaming others. Great strategic salespeople transform the energy that most put into complaining and blaming and point it toward improvement.
Ability to educate and inspire
I’ve written before that people buy with their heart and justify it with their mind. This is why I advocate not showing a lot of numbers in an initial sales presentation — the prospect doesn’t know or trust the salesperson yet and they’re generally not buying for ROI anyway. They’re buying because of the way the product makes them feel.
As a result, when selling innovation it’s crucial that the buyer be on board with the salespersons’s mission and buy in to their perspective on both the problem they have and the way that the salespersons’s company is going about solving that problem. The sale has to be somewhat fun and interesting and educational and insightful. It can’t be boring. I don’t mean that the salesperson has to personally be super charismatic or an amazing presenter (though that helps), I mean that they have to be intelligent and interesting and insightful. The buyer has to want to get behind the company and the product — they have to become a true advocate.
It’s a lot of work for a company to buy something. It requires security reviews, legal reviews, budget reviews, consensus building and many other activities. It also creates a lot of risk for the champion. If they’re going to go on the line and buy an innovative product they have to be excited and inspired.
Great strategic salespeople continuously inspire, excite and educate their prospects.
It was nice to see the news a few weeks ago that Massachusetts House Speaker Robert DeLeo vowed to put new limits on contracts that prevent employees from working for competitors.
“Non-competes” that restrict the free movement of talent from one company to another can do real damage to an individual’s livelihood and the economy at large. Many people believe that the reason that the explosion of successful tech companies happened in Silicon Valley is because of California’s effective ban on employee non-competes. Allowing talent to flow to the best organizations without friction is good for a local economy.
Unfortunately, over the past several months I’ve seen lots of startups going in the opposite direction by including aggressive non-compete terms in employee agreements.
Many companies take it a step farther and require ‘no-poaching’ terms in their vendor contracts and even try to collude with other local startups and agree to not steal one another’s employees.
I don’t think companies fully understand the damage that’s being done with these types of arrangements. Let me explain.
Imagine that you’re working for a startup in Buffalo, New York (Buffalo actually has a pretty hot startup community by the way). And imagine that there are another 20 tech companies in Buffalo that, at some point, you could go work for — you have the talent they need and you’d potentially like working for some of these companies. Then imagine that the startup you currently work for requires you to sign a non-compete as part of your employment contract. Then you learn that your company requires all of their vendors and customers and partners to sign an agreement that precludes them from poaching your company’s employees.
As your company grows, the number of other companies that can demand your services around your home has dropped from 20 to, say, 12. Suddenly 40% of the companies that would potentially demand your services now can no longer demand your services. So the demand for your services has decreased 40%. You’re now 40% less valuable than you used to be.
At a minimum, a company doing this to their employees is unethical. At its worst, it’s illegal (Apple, Google, Intel and Adobe recently paid a $415 million fine for colluding on no-poaching efforts to suppress employee wages).
When a company creates an agreement where another company cannot poach its employees, they are artificially reducing the value of those employees and their ability to make a living.
Again, the spirt of this is understandable. Hiring and training employees is expensive and companies want to fight to keep their best people. But addressing employee churn through contracts is a backwards way of handling the problem.
The better (and harder) way of dealing with the problem is to create an environment where good employees feel valued and are being challenged and are working on difficult problems and are developing professionally and personally and are being compensated fairly. Writing contracts to compensate for shortcomings in these areas is cruel and likely very ineffective in the long term. And it’s nice to see that the state of Massachusetts is catching on and pushing for legislation that will protect employees and the local economy.
The best way to keep employees loyal is to act in a way that deserves loyalty.
I’ve added some productivity hacks over the last several months. Here are 5 that have been working well for me lately:
- File, Do, Defer. I’ve started using the “file, do, defer” system. I look at a task (in Wunderlist, a great to-do list manager) or an email in my inbox and decide if it needs action or not. If it doesn’t need action I either delegate it or file it. If it does need action and takes less than 3 minutes, I do it. If it will take more than 3 minutes I’ll defer to a time when I have more bandwidth and focus. To keep me focused on the 3 minute rule I’ve begun using the Pomodoro app for Mac that tracks the time I spend on a task. This isn’t to make me rush through the task it’s to make sure I stay focused on it and get it done quickly and don’t get distracted.
- Working Offline. I’ve been doing this for years and can’t recommend it enough. I put my email in offline mode, close Slack and focus on initiating rather than responding.
- Virtual Assistant. I’ve hired a virtual assistant for personal tasks. There are lots of great services out there but I use FancyHands which has been great. My virtual assistant does everything for me that I don’t want to do — they have have coordinated my move, found me a couch, helped plan a vacation, changed my cable service, researched health insurance plans and booked a New Year’s Eve dinner reservation. I’m constantly scanning my to do list and looking for low-value tasks that I can outsource. It’s low cost and a massive time saver.
- Soylent. I’ve begun drinking Soylent, a meal replacement drink that supposedly contains every nutrient needed by the human body. It’s fantastic. It allows me to have breakfast on the go and sometimes lunch on the go so I can maintain energy with zero time commitment. It’s incredibly helpful on hectic days.
- Make projects seem small. We all have those projects or tasks that need to get done but seem hard and time consuming and stressful and keep getting put off. I read about a productivity trick in the book Getting Things Done to help deal with this problem. The trick is that you think about the thing you need to do that you keep putting off and on the bottom of a piece of paper you write down the outcome that you want with regard to the project — e.g. what is success? Then break it up until small tasks and write those as a list on the rest of the page. Going through the process of breaking the project into small tasks makes it seem so much easier and actually gets you somewhat excited to go do it.
Hope some of these are helpful.
I had a good conversation the other day with a former colleague who’s considering making a move to very early-stage startup. I shared with him the list of questions I ask myself before I make a commitment to working with a startup and thought I’d share them here as well.
A quick disclaimer: startups are inherently risky and these five questions aren’t designed to help you avoid a high level of risk. That’s not the point. These questions are designed to help ensure that you understand the risk and make you a bit more comfortable that you’re making a good decision.
Here they are:
- Do you have confidence in the people, particularly the leadership team? There’s a great quote from Peter Drucker that I can’t seem to find where he points out that, when a company finally succeeds, more often than not, it will find that it will end up selling a different product at a different price to a totally different set of customers than it initially had planned. The point is that the startup doesn’t have to have the perfect idea or the perfect product to be successful. What they have now probably isn’t right. And that’s ok. What’s important is that you’re working with an ultra-talented team that can iterate and execute like crazy. I’ve written before that the most critical traits for people working in startups are grit, humility, curiosity and adaptability. If you find that the team you’re working with has these traits you’re off to a good start.
- Has the founder(s) earned the right to know a secret? If what this startup is doing is so valuable, why isn’t someone else doing it? More often than not the reason is that the founder knows something that other people don’t. Or at least knows how to execute in a way that others don’t. It’s important to be able to understand the secret that the startup knows and to understand why they know it and others don’t.
- Can the investors/board articulate how the business could be massive and why it’s defensible? Prior to making a jump, when possible, it’s important to talk with some of the investors and board members. This is a good way to test their engagement and confidence in the company and alignment with leadership. Really push them on why they invested. Ask them what they think the core of the business will be and what they think will come after the core. If they can’t confidently articulate this in a way that makes sense it’s a clear red flag.
- Can you see yourself being truly passionate about the work you’ll be doing? Startups are tough. You’re fighting an uphill battle most of the time and there are lots of highs and even more lows (at least at the beginning). If it’s easy then it’s not valuable. I’ve found that dealing with the pain of working at a startup is a lot easier when I truly believe and care about the mission of the company. If you don’t care about the impact you’ll have beyond your own personal benefit then you’ll find that the tough days are a lot tougher.
- What are 3 reasons it could fail? Again, most startups are long shots. And it’s important to be humble enough to know that you can fail. If you can’t articulate 3 reasons that it could fail, then you either don’t understand the business well enough or you aren’t taking the risk very seriously. Do your diligence such that you understand as many risks as possible and the reasons it might not work out. If after truly understanding the risks and potential pitfalls ahead you really feel like you still want to make the move then you’ve probably found a good fit.
There’s been a lot of talk in the tech blogosphere over the last couple of weeks about the convergence of private and public valuations. One of the things that hasn’t been talked about all that much is how important this convergence is for employees at early-stage companies.
I was talking to a founder recently and he was telling me that he really struggles with the tradeoff between the importance of showing the world that his company has a unicorn-like valuation versus the importance of keeping his valuation low so that new employees can see lots of value in a follow-on round or an IPO.
On one hand, being a unicorn gets you lots of good press and attention and is for good sales and good for recruiting. On the other hand, a huge valuation makes it hard to deliver value to employees in the form of stock options — if you’re already a unicorn, it’s likely that future employees have missed the big uptick and equity becomes a lot less valuable from a compensation perspective. When you have a potential bubble in the private market and normalcy in the public market, lots of employees are going to find their options are deep underwater. Castlight Health learned this the hard way following their IPO last year (see image below).
Because of the emergence of crowdfunding, angel syndicates, private exchanges, and a lower regulatory bar to invest in early-stage startups, it’s likely that we’ll start to see much more consistency between private valuations and subsequent public valuations. Also, don’t underestimate tools like eShares that help founders manage complex cap tables. I can vividly remember being at a startup where we didn’t want to give out stock options to consultants for no other reason than it would’ve added too much complexity to our cap table. It’s a lot easier for a private company to manage thousands of investors than it used to be.
A founder’s desire to push for a massive valuation is perfectly understandable. It creates a buzz that helps recruit employees and close big deals. But when founders push too hard for a private valuation that won’t hold up when employees find liquidity, it’s bad for the team that built the company in the early years. It’s great to see private and public valuations beginning to converge.
Earlier this year I participated in a panel for the NYC Enterprise Sales Meetup. The topic of the panel was Managing the Enterprise Deal. It was a great discussion and I thank Mike and Mark for inviting me to participate. Prior to the panel, the moderator provided us with a list of questions that we should be prepared for. In preparation for the discussion I wrote down some rough answers to each of the questions and I thought I’d post my notes here. It’s great to see that Enterprise Sales Meetup has expanded to other cities over the last few months. I highly recommend attending one if they’re in your area.
How many deals do you think a high level business to business professional can manage?
This depends on the salesperson’s goal and the average deal size. Generally, salespeople should have a pipeline that is 3x their goal. So if your goal is $1MM and your average deal size is $250k, then you need to be working 12 deals.
What are the best tactics you find to manage a pipeline effectively?
To me it comes down to good stages and good tipping points. I recommend using 4 or 5 stages of a deal, and then for each stage assign actions or things you need to get done before you can move them to the next stage (tipping points). This ensures that there’s consistency across deals and ensures the salesperson isn’t kidding themselves when they say they have 3 deals ‘in contract’. The stages I use are generally something like, Lead, Decision Maker Engaged, Project Design, In Contract, Closed Won. The tipping points for each stage depend on what you’re selling, but it could be things like contract sent, legal work completed, technical review completed, etc.
Do you believe in mapping out a process for your company to manage deals?
Absolutely. You need consistency across stages and tipping points. And you need a funnel so you can determine where you’re getting stuck.
How do you qualify deals?
Typically I would come up with 3 or 4 elements that I’m looking for from a prospect. Size, revenue, technical setup, management structure, etc. Over time you can iterate on these as you discover what makes a good prospect that leads to good revenue.
How do you find your deal sponsor?
You have to nail down the one or two business metrics that your product impacts and then find the people who are responsible for those metrics. If X metric goes up at the company you’re selling to, who is going to get a bonus at that company? That’s the person that should drive the deal for you.
Who else do you need besides a sponsor, what other personas do you see?
Project Managers. You want to push for a strong Project Manager that is totally sold on your product and can get it launched and can help you get the deal done. After the executives are sold, so much of enterprise sales is about simple project management and driving the deal through the prospect’s buying process. It’s really hard for big company’s to buy things. You need a partner at the company that can help you get it done.
How do you build a relationship with your sponsor?
One thing is frequency of communication. I always try to set up a weekly check-in. Those consistent check-ins force you to get to know one another. The other thing is I try to make their job really easy. Keep communications really short and simple and show them how to buy your product. Map out their own buying process and track them on it.
How do you determine the buying cycle and process?
You try to identify trends across organizations on how they buy. Who needs to be involved? Who needs to approve? What kinds of meetings need to happen to get to that approval? And then you start to map out the ideal buying process that works for you. If you don’t have one, make one up based on what you do know. And map to that.
How do you map out the decision-making team?
Again, another useful way of mapping out a decision-making team is to show one from another client and get them to react to it. Make sure you show legal, technical, compliance, procurement, business people, etc. so nothing gets missed.
How prevalent do you think consensus decision-making is?
It’s huge. I’ve never seen a large company buy without consensus. You have to tell everyone that is involved in the decision-making process your story. Everyone has to support the concept.
How do you use or overcome the startup stigma?
Use it as an advantage. By definition you’re disrupting the old way of doing things.. You’re doing something much bigger. Inspire them. I find most people want to get better and recognize that the status quo isn’t working. Tap into that. Challenge them. The way they are doing things now is not acceptable anymore. Get them to see that and get them on your side. The size and stage of your company is irrelevant compared to the problem you’re solving.
How do you establish an ROI, is it even that important?
It’s important, but it’s often not as important as you think. I think most businesses buy primarily for emotional reasons, rather than rational reasons (prospects buy with their heart and justify it with their mind). So when you come up with your story, it’s important that you focus on how your story makes people feel. Most buyers aren’t going to believe your ROI anyway. It’s about emotion. And most big companies aren’t as metrics driven as salespeople would like them to be. Your focus should be on getting the team you’re selling to a bonus at the end of the year. And you need to understand what are the levers that will drive that bonus.
If you have a brand new offering how do you overcome the need for an ROI?
The easy answer is a pilot. But the bigger answer is that you have to sell them on your vision and the thing you’re trying to disrupt. They have to believe in you, in your company, in your priorities and in your team. That’s the hard part. Then you can provide them with a rough ROI that gets them comfortable they’re going to make their money back. Use the “what you would have to believe” approach where they only have to believe that you will move the numbers a small amount and they’ll still make their money back. Be conservative.
How do you add value in your interactions dealing with other executives?
I like to use what I refer to as “insight selling”. Be interesting. Your pitch should be exciting and provocative and short. Like Peter Thiel says, “say things that others aren’t”. Be exciting. But also use the approach of not “always be closing” but “always be leaving”. Have one foot out the door. Look to disqualify opportunities. The prospect is looking to disqualify you and you should do the same thing. You’re both trying to figure out if there’s an opportunity to help one another. You’re total equals in that sense. Act like it. Also, I try to drip prospects quarterly with tidbits of information that might be interesting to them with absolutely no ask. You’re not allowed to ask for something in these drips. It could be an article, an insight you picked up from another prospect, etc. Stay on the radar but do not ask for anything. You need to preserve that level of trust and the power dynamic you’ve built.
For a while now I’ve been keeping a running list of the health technology startups I come across sorted by the category they compete in. There are about 100 companies on the list.
I’ve moved the list over to an open Hackpad that you can find here. Hopefully this list will help people better understand what’s happening in the industry, research competitors and even discover new investment and job opportunities.
I’ve left the Hackpad open so that anyone can add a company or category. Please add any that I’ve missed (I’m sure there are a lot).
As we move to the “Post-EHR” world where innovation is led by patient and provider needs as opposed to government mandates, I’m sure we’ll see even more startups and categories emerge — so I expect this list to get a lot longer.
As this amazing summer comes to an end, I thought I’d capture some quick thoughts on some of the books I read over the past few months. I tried to read more history books than business books this year and I found a couple pretty good ones.
The list is in no particular order and you can find last summer’s post here.
The Wright Brothers by David McCullough.
A phenomenal book about two of America’s most accomplished entrepreneurs. It was incredibly eye-opening to read how hard it was for them to build their product and, once they had a successful prototype, how hard it was to actually sell it. It’s not clear which part was more difficult. Like most radical innovations, the masses thought their ideas were crazy. Their first planes were sold to clients in Europe because they couldn’t find any buyers in the U.S. that were interested in the product. I’m a big fan of McCullough and this is one of his best.
The 4-Hour Workweek by Tim Ferris.
I’m surprised it took me so long to get around to reading this one. This book is full of productivity tips and a really compelling perspective on how to get more from your energy. From only checking your email to once a day to outsourcing most of your personal life, a lot of the tactics he uses aren’t for everyone. But his perspective is great and there are a few good tips in here that will work for everyone.
King of Capital by John E. Morris.
This is the biography of Stephen Schwarzman, the founder of the Blackstone Group — the massive private equity group. This is one of the best books I’ve read in a long time. The private equity business has always fascinated me and this is a deep dive into how it works and how the best of the best were able to sell it as an asset class. Buying a public company by borrowing money where the only collateral on the loan is the company that’s being bought is mind-boggling to me. And this is great deep dive into the personalities of the founders and early employees that gives great insight on how they got these deals done. A great read for deal makers.
Money Master the Game by Tony Robbins.
A colleague recommended this book to me and, given all that has been written about personal finance, I was shocked that I found this book so informative. Lots of solid and practical advice. Robbins spends a ton of time on mutual fund management fees and makes the case that everyone needs to immediately check the management fees that they’re paying on their retirement accounts. He points out that they’re a total waste of money because less than 1% of managed mutual funds will beat the S&P over a 10 year period. You must move your retirement to an index fund with lower management fees. Over time, these fees will have a compounding negative impact on our portfolio and can cost you literally millions of dollars. Most of us know a lot of the stuff in here but definitely worth reading if you need to brush up on personal finance.
The Johnstown Flood by David McCullough. This book details the tragedy that occurred after a dam that was holding water in a lake at the top of a small mountain broke and poured water into the small valley town of Johnstown, Pennsylvania. The water that poured into the small valley was the equivalent of the amount of water that flows down Niagra Falls for 36 minutes. An incredible tragedy. The writing is great but the story drags a bit and I wish he gave a bit more perspective on the larger impact of the flood.
Dead Wake by Erik Larson.
Dead Wake is the story of the Lusitiania, the sister ship to the Titanic that was sunk by a torpedo fired by a German submarine as it traveled from New York to England. Many believe that this was the key event that brought the United States into World War I. This was hands down the best book I read this summer. It gives incredible detail on some of the individuals involved, including American, German and English political leadership and the captains of both the Lusitania and the submarine that fired the torpedo. It also gives great historical context on what was happening around the world at the time. Like most great non-fiction, this one feels like you’re reading fiction for most of the time. Highly recommended.
Ready, Fire, Aim by Michael Masterson. This is a book written by a self-made billionaire that details some of the basic lessons needed to build or grow a business. His message is basically that sales and marketing are the only things that matter at the beginning and gives tips on how to get started. There isn’t a ton in here that’s terribly new but for entrepreneurs or business-people that aren’t used to engaging in sales and marketing activities it might be worth skimming.
Fred Wilson had a great post last week titled, Bootstrap Your Network With A High Value Use Case. He points out how Waze’s initial value proposition was to help drivers that like to speed identify speed traps. But it of course quickly expanded way beyond that and now provides lots more value to lots more drivers. It has become mainstream. Same thing with Snapchat — it started out as a “sexting” app and has now expanded to more applications and is used by the mainstream.
This is sometimes called the “bowling ball strategy” in new product development where you focus on knocking down the first pin by being very focused on one segment and one application and then you gradually knock down more pins (segments & applications) over time until your product works for the mainstream. The idea is to find a narrow niche that loves what you’re doing, refine the product and expand from there.
Related to healthcare, this blog has talked a lot about centralizing patient data with the patient, as opposed to multiple medical records across multiple healthcare providers. Most would agree we need to get to this place but the path to getting there isn’t terribly clear. Patients aren’t clamoring for it yet and there will likely be some resistance from software vendors and healthcare providers as it flies in the face of the strategy of owning the data and, by extension, the patient.
My guess is the way that we’re going to get there is similar to the way that Waze built a massive maps business and Snapchat built a massive photo sharing business — it’s going to start with a small niche.
I can see an application that has built a network of highly engaged users with a very specific and highly sensitive medical condition that shares important clinical information back and forth between provider and patient becoming the starting point for consumer-driven patient data. Big software vendors will likely ignore this application because it impacts a small niche and the patients will be highly engaged because their affliction is such an important part of their lives. Once the product is refined it can be extended to other patient segments with other medical conditions and it’ll grow from there.
As Chris Dixon likes to say, “the next big thing will start out looking like a toy”.
In this case, the next big thing in healthcare technology will start out looking really small: a simple tool that serves a very small, but highly engaged set of patients.