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By Sharon Wienbar, Director, BA Venture Partners
On October 2, 2002 BA Venture Partners hosted the CEO's of our software portfolio companies. This wasn't your usual boondoggle; we worked at BAVP's offices in Foster City, CA, for the afternoon then let off some steam over wine tasting and dinner at a local Italian joint. Our objective was for these guys to meet, share war stories and tips, and connect for future collaboration. We ostensibly discussed sales execution for the first couple of hours, but the conversation ranged broadly. This is consistent with my current thinking-sure, a company needs a "balanced scorecard," but in reality the proof that the green lights in various non-sales functions are truly green is when a customer parts with some "green" of it's own and buys something. Then your company can say it's shipped a quality product with the right features, articulated its value, developed working partnerships, etc. To set the stage for the sales execution discussion BAVP showed two slides with results from "pre-bubble" and "bubble" enterprise software companies.
We moved on from that quick slideshow to an interactive discussion among the whole group on how best to deliver sales at a reasonable cost. I've summarized the major take-away's below. Product is destiny Everyone hungers for the quick low cost sale, whether through telesales, direct sales, web sales, whatever. But only a few executives have internalized the extent to which product decisions affect a company's sales options. Skip a few "wizards" or stay with a command line interface because "you sell to a technical audience" and you may be doomed to sending an SE in person to every prospect. Or worse yet, you could be stuck in Proof of Concept Land for the rest of your life. Likewise on installation scripts and configuration options and professional services-abandon at your peril. But having a simple to install product with a pretty GUI is not enough-you also need to be able to articulate its value proposition crisply, appealing not only to your prospect's pocket with ROI, but to his/her heart with an emotional tug as well. As the old saw goes, sell an aspirin, not a vitamin. Ready, Aim, Aim, Aim, Fire Aka Qualify, Qualify, Qualify Who you're selling to is as important as what. BAVP is similar to the software world in general in that half of our portfolio companies sell into IT (about half the software sales dollars worldwide come from the CIO's office). But the most successful of our companies have learned that selling to IT doesn't always mean you're pitching to the CIO exclusively. In fact, most software is bought by directors of something (operations, security, storage, you name it) with input from individual contributor systems administrators. Resist the urge to sell high and figure out who really buys your stuff, then lavish them with attention. One of our companies recently switched VP Sales. The outgoing executive had a successful history selling line of business applications at the "C" level, but hadn't made headway with this company's IT software. As the VP put it in the exit interview, "if I never have to talk to a systems administrator again in my life it will be too soon." Folks, don't let this happen to you. Use market research to find your product's natural buyer and to get inside the buyer's head to understand motivations. Then craft your value propositions to what's important to him/her, not to the company at large (though you might need something for them, such as an ROI calculator, later). Also look for compelling events and company/demographic metrics that help predict who will buy your product fast. Is an impending audit, merger, migration, or move going to tax the existing infrastructure to the point where the benefits of having your product outweigh the costs? Know who to look for and how to identify a hot prospect. Stay Inside to Succeed This topic generated the most heated discussion. A couple of participants were alumni of BMC Software and other firms that sell almost exclusively via telesales. Those folks espoused the opinion that "any compromise is a mistake" and it's a compromise to put sales people in the field while you're trying to build the business. Most other participants, many of whom are former VP Sales themselves, were of an opposite mind: the best place to put sales people is near the customers. These guys thought it especially important to use evangelical field sales for early category creation. These two camps agreed to disagree in a gentlemanly manner, but "much discussion ensued" as they say in Board minutes when things get hot. Phone sales work especially well for products targeted at the department level within an enterprise. Get a handful of groups actively using your widget and soon you spread like crabgrass. If another vendor tries to swoop in with an enterprise-wide deal they will have to dislodge you and disrupt loyal users first…and if you spread up and over fast enough the competitors will never even know there's a deal, or you'll control the RFP anyway. Both sides on the inside versus outside argument did agree that making sales over the phone is not only desirable, it's possible, especially (or rather, only) if your company has the right product and targeting down pat. Measure, manage, motivate In 2002, the holy grail for VC's is a predictable business model that equates some level of spending with more revenue. Our most seasoned CEO's at the meeting focused the most on measurement, and thought their best sales managers did the same: "Bill knows that every time he picks up the phone it is worth $1.47." Remote people need intense micro-management because you can't tell if they're goofing off; mangers require them to report weekly on calls, meetings, pipeline accounts and discounts. When hiring, look for simple motivators from your sales execs, typically either money or raw desire to win. For an early stage venture chose only folks who chomp at the bit for a low base and a high on target commission. Put the Tech Team in Sales' Shoes The group gave consistent feedback that a company's technologists need to be involved not only with, but in sales, on calls or with the customer. Don't let the nerds look down their noses at sales…get them to help set revenue targets, then comp your senior architects and CTO on revenue just like the senior sales team. This tactic increases the company's chance of getting a product customers will buy instead of one they can be sold. How to Hire the VP Sales A recruiter once advised me the best challenge to issue a candidate for sales VP is "show me your W-2." That advise is bunkum according to the BAVP CEO's-look for someone with high earnings last year and you may get "the tumbleweed who rolls from hot deal to hot deal" who isn't hungry to build a winning team. The CEO's agree that the only way to find a great sales exec is to have another one doing the interviewing, "remember, he's a salesman" was their refrain. But they noted it's key to look for a history of success in "push the jungle back" evangelical sales and situations where the exec won from the underdog position. They also noted that a good sales exec or manager is not the same thing as the top sales person; good managers bring good people with them because they know how to manage and motivate the team. Can I Get Some Leverage Here? How to make mo' money, without using yo' money is what channels are all about. So how to do it well? The CEO's shared several tactics with each other: pick your channel partners by asking your prospective customers who they buy from; find categories for adjacent products if you're in a totally new category (one veteran noted that the first PC channels were a combination of low end minis and high end calculator channels); choose partners of your own approximate size so your sales success is meaningful to their numbers; message your prospective partners with value propositions for them, not the end customers, but be as refined in targeting that message as you are with customers; leverage big strategic initiatives of the 800 pound gorillas (.Net, SunOne, etc.) to gain marketing dollars and find market makers. Oh, and the product has to be right to go through the channel. The First $5M Isn't the Hardest An established multi-time CEO started the interactive session by surveying the room on which phase is hardest: $0-5M, $5-25M, or over $25M. Answered clustered in the early stages though each phase earned at least one vote. He then offered the trick answer: they're all hard. At each stage a company must manage different kinds of people, master new skills, and overcome new problems. But reaching the next level is a massive motivator itself. At BAVP, Sharon works with enterprise software and Internet infrastructure and services companies addressing high value business issues. Sharon sits on the board of Stratum8 Networks and works with BAVP's investments in PlaceWare, OuterBay Technologies, and XTRA Online. |
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