How Startups can Optimize Sales & Revenue for Growth
In the fast-paced world of startups, improving sales & growing revenue at scale are some of the biggest challenges that finance leaders face.
At CFO Connect, we recently spoke with startup growth advisor Pete Hancock to learn about the most common challenges that startup teams face when it comes to scaling sales and revenue — and how finance leaders can help solve for them.
During this live webinar, Pete shared valuable lessons from his 15+ years of experience as a revenue leader at fast-growing startups like Yelp, Knock, and Avochato. Read on for the takeaways...
Table of contents
How to increase sales team productivity
Pete: “A lot of times startups don't have the sales productivity that they want. So the first thing I do is ask them: Who is your ideal customer? Who does your product deliver the most value to? What do they care about in terms of their focus within the company? I really try to put the sales leader or the CEO in the shoes of that customer.
A number one question that founders need advice on is ‘How effective is the team at converting leads into paying customers?’
This is really driven by two things. One is the strength of product market fit and figuring out your go to market strategy. This really varies by customer and it's important to focus on different verticals and different types of businesses. For example at Yelp, although we were selling the same product to each person, they each had different sorts of needs and wants from the product.”
The second part is asking how effective is the team itself — sales and marketing combined. How aligned are they with the mission of the company? Do they believe in the value of the product? How well fit are they for the sales role that they're in?
One of the most important things you can do to scale the sales team in the early stages, if you can afford to, is to constantly bring in new sales representatives or account executives. Having new people come in the door gives you a baseline to understand whether or not there is an opportunity to level up the team.
You don't want just one type of salesperson. You want a variety of different salespeople — introverts, extroverts, all different types of backgrounds. It's important to have a diverse team, so you can understand and have a team that can win different types of customers.”
The importance of one-on-one conversations with customers
Pete: “You have to talk to customers— really there aren't any shortcuts. When a CEO or a sales leader says, ‘Hey, our productivity isn't where it needs to be.’ Well, when was the last conversation you had with a customer? You’ve got to understand who's buying the product, why they're buying it, how they're measuring and valuing the product.
You think you know the business and you know your customers — but really going in and understanding them on a by-vertical basis needs and requires one-on-one conversations.
Then you start to see patterns. At Avochato (a B2B tool for text chat messaging) we saw this pattern where use for vacation rentals was really strong. The reason why is because their customers really liked the product. And if you're selling a product that helps them communicate better with their customers, then that's a win-win scenario.
Use your intuition, but talk to customers. Look for those patterns that you can apply across the whole vertical or the whole set of customers. And, the smaller the better. Pick one, then either prove or disprove if this is the right vertical to focus on. And then you move onto the next one.”
Diversifying inbound & outbound sales channels
Pete: “Generally you have to understand that each channel that you have — outbound, inbound — is going to be a completely unique funnel that will have their own unique set of costs and timelines.
If you launch a new channel — say, inbound content for example — you need to think about where customers are in the adoption curve of your product and what their mindset is going to be when they engage with your content. Then ask yourself how can we build the right sales motion around that?
Think about the unique funnel for each inbound and outbound channel, and determine the unique costs. You also want to do a sort of pre-analysis before you start launching a channel, to at least have a sense of what metrics to look at and understand their unique timelines.
Some common mistakes to avoid when diversifying sales channels are: making assumptions that ad-driven inbound channels will perform consistently, and inaccurate forecasting around the outbound conversion rates based on other successful channels.
You always want to understand what runway you have for each channel, meaning how long can this channel continue to be productive at the customer acquisition costs that we have?”
Startup Growth Advisor
Tips for moving up market to mid-market and enterprise
Pete: “If you’re planning to move up market, you should definitely be seeing some level of interest from larger customers. Maybe they're emailing in with questions or you've got a competitor in the marketplace that’s starting to work with larger companies. There should be some sort of pull that indicates your product can actually help these larger enterprises — and generally this is going to require outbound sales and marketing.
As you're working with larger companies, you start working with buyers who are thinking about their job security before they implement new products. They're not going to come to you as much, so you've got to reach out to them. You've got to educate them. You've got to have marketing collateral that will make them feel comfortable, which they can share across their organization with their coworkers.
All of a sudden you might go from working with one or two people to make a purchase decision, to working with teams of people. So that requires a unique salesperson who can do that, and has done that before.”
Common challenges when expanding to SMEs
Pete: “If you've got a good product market fit and work with larger enterprises, chances are that you can build out sort of a simpler version of the product to deliver a great solution to smaller companies.
However, the challenges are more around the go-to-market strategy and distribution. It can be really difficult to scale messaging across a large set of smaller enterprises when you may not be able to afford as much one-on-one personalized messaging, because the deal sizes are a lot smaller.
Figuring out how to build outbound marketing strategy when you've got lots of different verticals and companies can be really challenging. When modeling out your pricing and acquisition costs, you want to think about what's the right pricing strategy for a smaller enterprise. Does it align with what they can afford? What are the acquisition costs going to be? And what's the churn going to be like — smaller enterprises have less resources to invest in these kinds of things.”
Managing and motivating a remote sales team
Pete: “If you previously had a sales team that were all in an office, sitting together in cubicles or an open floor plan making calls — the change for that human being is massive.
It’s a very challenging situation to be a salesperson cold calling into businesses when you're in your bedroom, with your kids or roommates in the living room playing video games or something.
The most important thing to do is understand to whatever extent your team is willing to share. Particularly with customer-facing roles, understand what their work setup and life is like. If there's any way you can help them, you've got to do it, because these are customer-facing employees, they are representing your company day in and day out.
If there's anything you can do to help make them more comfortable — like getting them a noise-canceling headset, for example — these types of things make a huge difference. They may not proactively realize the types of tools and things that can help them create a better work from home situation.”
Startup Growth Advisor
CFO Connect is a global community of finance leaders. We host regular meetups & virtual events, have a private Slack group for CFOs, and produce helpful content on our blog and podcast. Join Us!