I like my sales rep.If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbor, though he build his house in the woods, the world will make a beaten path to his door.
—Ralph Waldo Emerson
Sarah B. Yule in her anthology Borrowings (1889) attributed this quote to a lecture Ralph Waldo Emerson delivered in San Francisco or Oakland in 1871.1 There is no other indication that Emerson actually said this. The first spring-loaded mousetrap was invented by William C. Hooker of Abingdon, Illinois, who received a U.S. patent for his design 23 years later in 1894. A similar, better-documented quote appears in Emerson’s journal in 1855: “I trust a good deal to common fame, as we all must. If a man has good corn, or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles, or church organs, than anybody else, you will find a broad, hard-beaten road to his house, though it be in the woods.”2
Apocryphal or not, about half the books on sales and salesmanship open by emphatically disagreeing with Emerson’s mousetrap quote to make one important point, and it stands regardless of the accuracy of the citation: Products, even great products, don’t sell themselves. Only salespeople sell products. Of course, today some products can be sold over the Internet and there is never a human-to-human interaction. Nonetheless, most sales still require a salesperson and a sales encounter. Even Internet commerce companies need a sales plan, not just a marketing plan. What’s the difference between sales and marketing? For some reason, many entrepreneurs apparently think the two are synonymous, and when they talk about selling, they refer to the four P’s of marketing: product, price, place, and promotion. Selling means getting people to purchase a product or service: to write a sales order and give you money. It’s a rare business plan that includes so much as a sentence about how the company will set up to actually sell the product. Often the company hasn’t even thought about it.
A sales plan is critically important. A good operations plan focuses not just on product promotion but especially on selling. Who? How? How often? What are reasonable numbers? Although you don’t usually start hiring salespeople until you have a proof of market, a product, and a scalable production system in place, you can’t start sales planning too early. The easiest gotcha an investor normally finds in a start-up presentation is the absence of a sales plan and realistic projections based on what the salespeople will be able to do. Sales planning should be one of your top priorities in allocating overhead and raising capital because sales produce revenue. From the first moment you start thinking about a product or service, think about why people will buy it and how you will sell it to them.
Sales is a discrete discipline backed by a mountain of information and educational material. You, as the founder, should know enough about selling to understand how sales works, know good salespeople from bad, and manage the sales process in your start-up. Like negotiations or legal matters, this is a huge discipline. The U.S. Department of Labor counts over 9.5 million full-time sales professionals working in the United States today.3 There is more to learn about sales and selling than you could ever know, unless you are one of those sales professionals. You don’t have to know it all. You need to know just enough to be your first, best salesperson; then you will hire good professional salespeople when you can afford it.
Market validation comes first. If you do a good validation in the beginning, not only will you will have the right product and value proposition, you will have people lined up to contact for your first sales. These first sales dramatically increase the value of your enterprise because they answer the most important question: Will your customers buy your product for a good price? A footnote: In the past, founders often could fund a company’s launch by preselling their product to their customers, especially in the software industry. It’s far less easy to do that today, but you should always try. It takes persistence, determination, and good sales skills, but there is no better or cheaper form of financing.
Never stop selling. Keep in touch with interested parties from the market validation phase, and once you have product ready to go to market, ramp up sales by starting with them as soon as possible. The best barrier to entry is capturing a strong market share and keeping it. Remember, it’s not the first mover who has the advantage; it’s the first to get across the chasm between early adopters and the majority.
Getting into the market quickly means having not only an infrastructure of people to perform and manage sales but also an inventory management and distribution system. You need to get products to where the customers want them, when they want them. Building a sales and sales support force costs serious money. You either raise expensive capital to pay for it or grow your sales effort organically from operating cash flow. This strategy decision can make or break a successful launch.
One last point regarding sales that’s often overlooked until too late: Pay attention to your customer acquisition costs. This is the total cost of promoting and selling, divided by the number of customers who actually buy. It is easy to overlook the costs of marketing and sales and find you are spending way too much money to capture a sale. Your per-unit revenue and margins have to cover not only the direct costs of making or delivering the product or service but also the unit sales and marketing costs and still have enough left over to pay for general overhead and make an attractive profit. Google AdWords, for example, generally produce click-throughs to a company’s Web site at a low cost per click, but since only a small fraction of click-throughs convert to serious interest and even fewer to a sale, the fully loaded cost of acquiring a buying customer can add up quickly. It’s often hard to justify promotion methods such as AdWords for low-cost products because the margins are eaten up by customer acquisition costs.
Author and sales trainer Jeffrey Gitomer makes a key point at the beginning of one of his several books on sales training, The Little Red Book of Selling: The most important question you should want answered is not how to sell to your customers. The question is why your customers buy from you.
Gitomer points out that there’s a simple way to find out: Ask them. Included in his list of what he hears when he talks to customer focus groups are the following:
I like my sales rep.
I understand what I’m buying.
I perceive a difference in the person and the company I am buying from.
I perceive that my salesperson is trying to help me build my business in order to earn his commission. My salesperson is a valuable resource to me.
I perceive a value in the product I am purchasing.
I feel there is a fit of my needs and his or her product or service.
The price seems fair, but it’s not necessarily the lowest.4
Note that the first four points are focused on you and the sales team. Remember Chapters 8 through 10: It’s always about the people. This is especially true in selling. Sales is about relationships, reputation, and how much your salespersons’ help is valued. Value and relationship count more than tactics, product, price, or even promotion.
Sales professionals all agree that effective sales starts with effective prior preparation. Do your marketing homework. Understand the environment, the overall industry, and the addressable market. Break out and analyze market segments. You can segment by product type but also in many other ways: by utility, by customer type, by geography, by means of distribution, and so on. Do your competitor analysis (Chapter 11). Understand the customers’ contexts: needs, requirements, strategy, internal situation (decision making), competitive advantages, and challenges. What risks in purchasing are potential customers worried about? How can you reduce those risks? Relate your understanding of your product and/or service to their worries and develop a value proposition.
With this in hand, you can define your promotion and distribution strategies. Note: This is not the sales plan, only the preparation. Promotion equals advertising, publicity, product promotions, and personal selling. How will you get out the word and make people aware? Who will do this marketing plan and execute it? You? Is there someone in the team with this ability? If not, do you know someone you can hire temporarily to put a promotion plan together and do the work to carry it out? There are countless marketing consultants and consulting firms that specialize in this and charge rates ranging from reasonable to ridiculous. As with almost everything, personal referrals are the best source of candidates.
How will you make the first sales calls? Who will do them? Is there a template script tied to your background investigation? Word of mouth is one of the best forms of promotion and sales. Try to collect some third-party testimonials. Can you develop reference customers whose patronage will give you credentials? Will they take calls and provide endorsements to other prospective customers?
Come up with questions to ask potential buyers, preferably ones that are concrete and make people think. Gitomer has a good example: Don’t ask, “Do you have a pager?” Ask, “If your most important customer called right now, how would you get the message?”5 In the pitch, relate your understanding of customer needs and preferences to your value proposition.
Remember, you’re selling solutions, not products. The best sales approach is not so-called hard-selling—manipulative, overly persistent badgering. It’s acting almost as a consultant, understanding the needs and problems of the customer and helping solve them, at the same time helping the buyer make a purchase decision.6
Salespeople call the process of identifying potential future customers prospecting. The lifeblood of a start-up’s sales process is a pipeline filled with qualified potential customers. In an established organization there is a customer base and sales history. A start-up usually has to disrupt existing customer-competitor relationships to get revenue. Where do experienced salespeople identify new qualified customers and get information about them? Here are some of the places:
Referrals from relationships, vendors of sister products, and existing customers.
Databases and publications:
Internet searches and industry databases online such as ABI/Inform Global, Hoovers, Mergent Online, LexisNexis, and Reference for Business (http://www.referenceforbusiness.com/index.html).
Business references, usually available in most larger libraries, such as Standard & Poor’s Corporation Services; Register of Corporations; Directory of Corporate Affiliations; Dun & Bradstreet’s Reference Book of Corporate Management; Moody’s Industrial Manual; H.W. Wilson Company’s Business Periodicals Index and Applied Science and Technology Index; Funk & Scott’s Index of Corporations and Index of International Industries; Encyclopedia of American Industries; International Directory of Company Histories.
Government data; for listings, see the Monthly Catalogue of United States Government Publications and the Monthly Checklist of State Publications. There are numerous surveys and census reports.7
Trade associations; see the Encyclopedia of Associations and the National Trade and Professional Associations of the United States and Labor Unions.
The phone book.
Civic groups (Rotary, service organizations, country clubs, professional groups).
Chambers of commerce.
Contests.
Mailing lists, many of which can be purchased.
Trade shows, conventions, and professional meetings.
Canvassing; spot new potential clients and call on them.
Advertising.
Direct mail.
Once they have been identified, study your prospects. Do your homework on them, both the people and the company. Are they qualified? That is, do they actually have the need, the willingness, and the means to buy? Who are the gate-keepers? A gatekeeper’s job is to screen out unwanted calls and meetings. Who are the people with influence, those who use and know about the product or service but don’t have buying authority? Who actually makes decisions to buy? Often this is more than one person. Discover their authority levels and decision processes. Getting a meeting with the right people in the company is the first sales job. How can you get that meeting? Work it hard.
Cold calls to get a meeting are part of selling, but they have the lowest success rate. External referrals and internal advocates increase success dramatically and often at least get you a hearing. Deliberately plan your call, including the following:
A list of who to try to contact or involve in a meeting.
The objective of the call: What is success?
What questions to ask to understand needs and circumstances.
Something to show: Do you have a prototype? Specs? A demonstration?
A list of benefits and points of differentiation from competitors.
Potential concerns or objections that could come up and persuasive answers.
Possible closing strategies.8
In meetings, remember that sales and negotiation have this in common: Information is the highest value. For all the homework you may have done off-site, getting inside a customer’s offices exposes you to orders of magnitude more information. Absorb and pry out as much as you politely can and integrate it into your plan of attack on the spot.
The presentation is the core of a meeting. Most good books on sales devote much of their content to the mechanics and tactics of sales presentations. Chapter 9 of B. Robert Anderson’s Professional Selling is a good place to look. Many books tell you to make the link between customer needs and product features. Look for ways to create and exchange value. Do demonstrations that spark interest. Be prepared to answer objections and rejection. Foster commitment and look for the close.
Objections and rejection may or may not be bad news. Potential customers may be blowing you off, or their objections may indicate that they’re thinking about the product. No may mean no, or it may mean press on. If you can tell which is which, you may have an opportunity to explain more and move from concerns to commitment. Here are two favorite sayings of effective salespeople: “Sales begins with the first no” and “The salesperson who gets the most nos also gets the most yeses.”
Novices often find asking a customer to close a sale the hardest part of selling. Maybe it’s fear of being refused. The close is the whole point of the exercise. Buyers expect to be asked. Anderson devotes one chapter to the presentation and two to the close. A good salesperson tests openness to closing throughout an encounter with trial closes, which have the added benefit of revealing concerns and objections. Two examples are, “How do you feel about our product? And, “What do we still need to resolve to help you decide to purchase?” Some salespeople advise creating “yes” momentum with a string of questions that are likely to be answered in the affirmative. Sometimes buyer and seller reach a point cooperatively from which to move to a purchase order, often by way of removing stumbling blocks. Buyers sometimes start talking as if they are presuming a sale: “When can you have it here?” Sometimes the seller has to ask, “What do I need to do to close this sale?” Common sales wisdom: Always be closing.
Remember that the easiest sale is a repeat sale to a satisfied customer. Earn a reputation for good customer service. Support and follow-through after a sale are critical. Get all the follow-on feedback you can. It reveals information that helps with troubleshooting potential problems that may lead to dissatisfaction or loss of an account. Making follow-up calls to your customers communicates that you care. Follow-through is also a great source of feedback for your design and manufacturing people, and it positions you to seek referrals and endorsements for other potential customers.
Generally, as you launch, the first selling falls to one or more of the founding team members. For one thing, generally there isn’t anyone else to do it. For another, early high-touch involvement with customers is rich in information. If the same people did the market validation exercise earlier in the process, they should have kept those relationships warm so that they can be activated for first sales. Later, when you bring in salespeople, you will have established a baseline of customer adoption that sets the tone for future expectations and also helps you break in new salespeople quickly.
It’s rare today for a start-up to have plentiful investment before establishing sales and sustainable revenue growth. Sales professionals are paid fairly healthy salaries, and the good ones earn even more. Thus, in building a sales and revenue base, there is a cash flow shadow during which sales expenses run well ahead of sales revenue. That funding gap has to be filled from somewhere, but often at this early stage those funds are nowhere to be found. Accordingly, all but the most amply funded start-ups must find a way to bridge the gap from first trial customers to growing sales volumes without spending a lot of money on a sales force.
Although not ideal, there are some sales resources that can help mount a sales effort on more of a pay-as-you go basis, sparing you from having to spend significant cash up front:
Option 1. Use independent sales reps. These salespeople often market an assortment of related products and work mostly or entirely on a percentage of sales. Advantages: They require less training. There are no recruiting and hiring costs. They are geographically dispersed. Generally, they already have an established base of customers. Disadvantages: They generally sell for a number of firms, sometimes including your competitors. They often focus most of their efforts on the few products in their mix that generate the most revenue. They can be difficult to control and manage. They leave you distanced from your customers and not in control of those relationships. Also, they may not have a good understanding of your product.
Option 2. Use commission-only salespeople. These people work for you exclusively but are paid no or low salaries. Essentially you’re leaving them to eat what they kill. In some situations this is an effective solution, but more often than not you will be getting only what you pay for, if not less. The fact is that skilled salespeople are valuable enough that they usually command healthy compensation packages. Your best chances of doing well on commission-only arrangements come through working with younger people looking for experience in sales, and even then a few will shine and many will get discouraged quickly and drop out.
Option 3. Use a channel sales strategy. Companies selling related products often take on a supplement to their product lines from an outside company and use their own sales and marketing staff to sell it alongside their own products. In return for this, they take a significant share of gross revenue. For some types of products or services, channel sales can be a good option not only in the beginning but indefinitely. Cost is the biggest downside; channel sales easily can squeeze margins to little or nothing.
By contrast, conventional sales employees generally receive a salary plus commission. Ideally, they know your products well, are 100 percent focused on you, are intimately involved in the marketing and sales plans, and develop relationships with the customer base that consistently yield benefits over time. At some point you will grow revenue to the point where you can build a sales force on cash flow or you will have established enough sales validation that you can raise the additional investment needed to scale up a major sales effort. These are the two common outcomes of early sales success, and which one you choose is one of the more fundamental and important strategy calls you will make.
It is also one of the more important execution efforts you will make. Getting sales right is a huge competitive asset. It may not happen all at once; more likely, it will come in stages. But eventually you will have to define your selling needs, organize a structure, recruit talent, set goals and quotas, forecast, measure, and motivate. Professional Selling and Sales Management by Ralph W. Jackson, Robert D. Hisrich, and Stephen J. Newell9 is an excellent source for learning to build a sales force and manage it.
The effectiveness of a sales effort is one of the easiest things to measure. This is not to say that measurement is immune to the law of unintended consequences. For example, if you care about current-quarter sales growth, will salespeople shift effort to the current quarter at the expense of ultimate long-term success? Which might be more important to you, maintaining a loyal customer base or letting the base churn because sales efforts are all focused on obtaining new customers? Any sales metric has the potential to unbalance a sales effort as people chase the aspects you measure and reward. Still, at least sales can be reduced to a number, and a number can become a quota. Salespeople need quotas. Set quotas wisely. Too high a quota and you lose motivation; too low and your sales force probably won’t perform to potential. Once quotas are set, however, they should be met. Change salespeople as needed until you find ones who perform.
In presentations to investors or even in our classrooms, it can rise almost to the level of comical how blind entrepreneurs can be to the importance of a granular, operational focus on the way products actually will be sold. What is the sales plan, and who will do it? How, when, and for how much? There eventually will be a host of people involved, but founders and early employees will be the first. One hopes they will still be responsible for all the others as the company grows and new people come onboard. Always, there is a lot to learn.
How to learn? Some people may have more aptitude for selling than others, but like entrepreneurial effectiveness, selling can be learned by almost anyone who wants to learn. Learning behavioral skills from books is never easy, but there are a number of resources that can provide a good start. There are numbers of training programs and sales coaches. Even better is imitation: Follow a couple of great salespeople around. Of course, there is no substitute for getting in the pool to learn how to swim—experience. It’s that kindergarten poster: Learning is 5 percent hearing, 10 percent seeing, and 85 percent doing. There are so many aspects to building and running an enterprise. That’s entrepreneurship, after all—looking after everything. Whatever the aspect of the business, it’s always the same: Knowledge reduces risk. Learning adds value.
Do you have a sales plan? Does it start with your market validation? Can you write it down in a page or less?
What do you calculate to be your costs of customer acquisition? Can your margins support them? How well do you expect them to scale as you grow?
What trade-off do you anticipate between focusing on growth in sales at the cost of profitability and achieving profitability at the cost of growth in sales?
1. Shapiro, Fred R., The Yale Book of Quotations (New Haven, CT: Yale University Press, 2006): 245.
2. Emerson, Ralph Waldo, Complete Works, vol. VIII, Journal (1855, rev. ed. 1912): 528.
3. Jackson, Ralph W., Robert D. Hisrich, and Stephen J. Newell, Professional Selling and Sales Management (Garland Heights, OH: NorthCoast Publishers, 2007): 3.
4. Gitomer, Jeffrey, The Little Red Book of Selling (Austin, TX: Bard Press, 2005): 7.
5. Ibid.: 113
6. Bygrave, William D., and Andrew Zacharakis, The Portable MBA (Hoboken, NJ: Wiley, 2010): 331–334.
7. Jackson, Hisrich, and Newell, 2007: 88–89.
8. Bygrave and Zacharakis, 2010: 343.
9. Jackson, Hisrich, and Newell, 2007.