The VentureFizz Podcast
I did a podcast with Keith Cline from VentureFizz a few weeks ago. We talked about my career, how I think about growing startups and lots of other stuff. You can listen to it on iTunes here or on Soundcloud below.
Asking Good Questions During The Sales Process
One of the best salespeople I've ever worked with wasn't all that great at giving presentations. He wasn't great at building relationships. He didn't know the product as well as others on the team.
So what made him so good?
He would ask the prospect questions. Lots of questions. I mean almost obsessively. When it got awkward with the prospect because he was asking so many questions he'd ask five more questions.
This helped him sell for several reasons:
- He fully understood the motivations of the buyer and could tap into those things to keep the deal moving.
- He fully understood in great detail what the buyer's buying process was and exactly what was needed to get the deal over the line and he could anticipate any bumps in the road.
- He uncovered things that the prospect didn't know about their own needs or things that exist in their own process that they were unaware of that might slow down the deal.
- He could uncover trends around problems and solutions inside the prospect's organization that he could leverage across other deals.
- He truly got to know the actors involved in the purchase (influencers, blockers, etc.).
Too often salespeople want to hear good news so when they hear it they don't dig in and ask lots of questions. I learned from my former colleague that it's much better to assume the worst and dig in with good questions to understand and confirm everything.
Here are some of the questions that can be asked as a salesperson navigates the sales process. As I said, these may seem somewhat obsessive, but because buying things at a large organization can be so tedious and difficult I've found that most buyers appreciate the thoroughness.
- What are your priorities this quarter/year and do you think this product fits in?
- How would you explain to someone in your company how this product is going to help you reach your objectives?
- What are the other projects on your plate and how would you prioritize this one?
- When we launch this product will you personally be measured on its success? By who? How will it be measured?
- How do you typically buy products like this?
- Who is involved in the buying decision?
- Is there anyone that needs to sign off on this (IT, compliance, etc.)?
- Is there anyone that you think might object to buying this product?
- Have you come across any roadblocks in buying these kinds of products in the past?
- How did you get past those roadblocks?
- What committees need to see this product before you buy?
- When do those committees meet?
- Could we find some time to present this in the next committee meeting?
- What will each of the people in the committee care most about with regard to this product?
- Who will use the product?
- How will they use the product?
- Where would the budget come from?
- Is there enough left in that budget to pay for something like this?
- What is the process to get the budget approved?
- What does it take to schedule implementation resources on your side?
- What specific measures will your company consider when looking at the success of the product after it's been launched?
- Who will sign the contract?
- Does the contract signer need any approvals before signing?
- Can I be introduced to the contract signer’s assistant to make sure nothing gets missed?
- Is the contract signer in the office on the day we expect to sign?
I could easily list twenty-five more. Of course, it's worth noting that there is some art to how you ask the questions and the questions should be documented and placed at different stages of your sales process so it makes sense why they're being asked at the time.
I've found that in complex sales a salesperson almost can't ask enough questions. Those salespeople that have the discipline to use good questions to understand the prospect and uncover potential pitfalls significantly outperform their peers.
Hire Your Buyer
Today’s enterprise buyer can access a nearly endless supply of information on the products they're considering buying. From review websites to customer testimonials to video demos to the backgrounds of a vendor's leadership team, a buyer can compile a nearly endless amount of information on a product before talking to a salesperson.
This has shifted the seller’s role significantly. The work of an elite seller is now a lot less about becoming an expert on what the product does or how to run a great demo and much more about finding a way to truly empathize and understand the context of the person buying the product. Sellers still need to educate the buyer on their products, but they must do it through the specific lens of the buyer. That’s a seemingly minor but crucial distinction.
The more that the seller can “talk the talk” and truly understand the day-to-day and the specific needs of the buyer the faster deals will move. This isn’t about "credibility" — that can be gained in a variety of ways; it’s about real empathy and the ability to understand and share the feelings of the buyer.
The importance of this point for sales leaders has only increased as software eats the world and we’ve seen the emergence of “tech salespeople” that bounce to different jobs selling tech into a variety of verticals (ad tech, health tech, ed tech, real estate tech, etc.). Salespeople are getting a lot better at selling tech but have lost some of the natural empathy that existed when a salesperson sold different products into the same vertical and the same buyer for several years (decades). Often, today's sales formula is this: beautiful demo + positive ROI calculation = successful sale. Without a great deal of empathy, that formula will almost always miss the mark.
One way to create instant empathy is to have buyers join the sales team. That is, identify the people that are in a role where they feel the benefit of the product or make the decision to buy the product (ideally both) and get them to join the sales team. It should go without saying that this doesn't mean poaching a prospect's employees; that's a really bad idea. Everyone should be in the loop and it should be above board. If done well, the prospect will be supportive. Another option is to hire someone that was formally in the role.
Depending on the product, this might sound crazy. And there’s certainly some risk (the buyer must have some basic level of sales ability). But the benefit of having pure empathy living within the team will, at a minimum, force the sales organization to deeply understand the context of the buyer and in some cases level-up the performance of the entire sales organization. The greater risk might be building a sales organization that can run a great demo and talk up a great ROI but lacks the empathy needed to bring new value to today's enormously transparent buying environment.
A Sales-Cycle Acceleration Framework
I’ve written quite a bit about the topic of creating a sense of urgency in a sales process. See here, here and here. This is an enormously important issue for high growth startups as the timing of when sales will close impacts, among other things, investor expectations and perception, salesforce efficiency, financial performance, cash management and when sales commissions are paid. Sales pipeline review meetings often include more discussion about when specific deals will close as opposed to if specific deals will close.
Before any discussion of creating urgency can happen, two things must occur: 1.) the seller must understand the buyer's priorities and how those priorities line up (or don't line up) with the seller's product and 2.) the seller must have a detailed understanding of the buyer's buying process and all of the stakeholders that need to be involved in getting a deal to closure. Once these things are understood, sellers can begin to think about how to create urgency and shorten the length of a sales cycle.
Good sales organizations will use a variety of tactics to accelerate a sales process; from the use of detailed ROI documents to help the buyer prioritize one project over another to offering discounts in return for a speedier close. There’s really no end to the number of tactics that can be used to create urgency and more predictable sales results. I’ve created the framework below to help sales organizations brainstorm solutions to this problem and come up with new tactics.
Here's how to think about the framework. On the X-axis are seller focused versus buyer focused urgency tactics. In most cases, a seller wants to align urgency with what’s important to the buyer. That is, the seller wants to help the buyer understand the cost of the problem of not having the seller’s product and quantify the impact of not having that product. Good sellers will frequently remind the buyer of the value being missed by not having the product in place. It’s also ideal for the seller to line up a close date with a particular event that's important to the buyer (e.g. a life insurance seller lining up their close date with the buyer’s benefits open enrollment period). These are generally the most effective ways to drive urgency.
That said, while a seller always wants a buyer to be moving fast because it’s inherently good for the buyer, this doesn’t always have to be the case. The seller and buyer are on an equal playing field. The seller may have reasons why they want to move a deal faster than the buyer. Obviously, in some cases, the buyer may not care about the seller's priorities but I would encourage sellers to be transparent about them anyway. Recently, a salesperson was trying to sell me more software for my sales team and he told me he’d give me a substantial discount if I bought sooner rather than later. I asked him why he would sacrifice a lot of revenue for an earlier close and he was very transparent about the fact that his company's fiscal quarter was coming to a close and they had a revenue number to hit. As the buyer, I genuinely appreciated this transparency and he was able to get his sale. I don't support the use of tricks or dishonesty to get sellers buy quickly, but I absolutely support sellers being extremely transparent about their priorities.
The Y-axis outlines qualitative versus quantitative tactics.
Quantitative tactics are those tactics that are driven by a financial impact to the seller or the buyer. On the buyer side this is the revenue that will be gained or the costs that will be reduced from buying the product; e.g. every day that goes by that the product isn’t in place the buyer is losing X dollars. On the seller side, this is about the value to the seller that comes if the deal closes sooner rather than later. This can be the ability for the seller to use idle resources, or the importance of hitting a sales target, or simply the fact that revenue today is worth more than revenue tomorrow.
Qualitative tactics, on the other hand, are more art than science. These are things like the quality of the relationship between the buyer and the seller, the emotional components of the product (e.g. the seller will 'look good' to certain stakeholders if they buy) and the fact that a competitor is using the product and the buyer is not. Qualitative urgency is fun to talk about because it’s a place where sellers can get really, really creative.
Two final thoughts:
First, there are dozens of hooks that will drive urgency within this framework. Those listed above aren't appropriate for every organization. And when brainstorming it's important to get multiple stakeholders involved to come up with as many hooks as possible. Many of them may be totally unique to an individual organization.
Finally, I generally believe that sellers want to spend most of their time focused on the top-right quadrant. Ultimately, quantifiable, buyer-focused value is the most scalable and sustainable way for an organization to grow. But it doesn’t work every time on every deal. Selling into large organizations can get incredibly complex. The best sellers combat complexity with creativity. I hope the framework above helps sales organizations do just that.
Sales Commission Principles
Sales commission plans are a crucial part of a company's sales organization. They can be really complicated and difficult to get right. And for earlier stage companies they'll often change quite frequently. Managing this change can be really difficult as a sales leader has to balance several different components and several different stakeholders. Because of that, I think it's important to have a set of principles that guide the formation of your commission plan. I recently put these down on paper and thought I'd share them here.
- Commission plans should value and prioritize impact over individual compensation. While the best reps should be very highly paid, the goal of the plan is to benefit the entire organization as opposed to individual reps.
- Potential earnings from commissions should be competitive+ and commission should be a large percentage of overall compensation. The percentage will vary depending on the role in the organization. The closer the individual is to the actual transaction the higher the percent of compensation will come from commission.
- Commissions should be paid out to reps quickly to ensure that they can easily connect the value they've added to the business with the financial reward they receive.
- The plan should employ things like clawbacks and true-ups/down to reduce risk to the company when paying commissions ahead of cash collection.
- The plan should include consequences for customer churn and incentivize high-quality sales and smooth hand-offs.
- The plan should be fair so that there's an equal playing field across territories and customer segments.
- The plan should be iterative and updated regularly to ensure that it remains competitive and consistent with the principles above.
Using Incentives In Enterprise Sales
The 'daily deal’ boom and bust, if nothing else, taught us that consumers will respond to incentives. Deep, short-term discounts are extremely effective with consumers because the consumer generally has full autonomy and decision making authority to make the purchase.
This is not true in enterprise sales. When a seller offers a large enterprise an incentive if they agree to buy on a certain date, the work has only just begun.
I’ve written in the past that, very often, the most difficult part of an enterprise sale isn’t getting an enterprise to buy, it’s getting the enterprise to buy now, or to buy on the seller’s timeline.
To help with this, here are four questions a seller can ask themselves to be sure that the incentive they’re offering is going to work:
- Does the buyer believe in the incentive? Gimmicks don’t scale. Incentives must be legitimate and make sense. There are all kinds of legitimate reasons why a seller wants a buyer to buy sooner rather than later. The seller should communicate these legitimate hooks to the buyer in a sincere and logical way. If it doesn’t make sense to the buyer then they won’t respect the seller’s timeline.
- Does the buyer care about the incentive? Incentives that sound great to the seller may not always sound great to the buyer. Sellers should take the time to dig in and discover how impactful the incentive is to the buyer. It's helpful to say something like, “if this deal closes by the end of the quarter I can offer you a 20% price reduction. I understand that it may be challenging to move this through your process on such a short timeline, so is this something that’s important enough to you to accelerate this deal?"
- Does the buyer understand their own buying process? A buyer’s job most likely is not to buy things. They have their own set of priorities to worry about and they may have no idea what it takes to get a contract signed within their own organization. It’s hard for big companies to buy things. Sellers should be aware of this and push their buyer to be sure they understand their own buying process. A buyer can’t agree to buy on a seller’s timeline if they don’t understand what it takes.
- Does the buyer have the capability to drive their own buying process and stick to the seller's timeline? While buying decisions are often made at the top, the actual execution of the ‘buy’ often happens at lower levels. Sellers must make sure that the individual that is agreeing to the incentive has the authority to drive the accelerated timeline.
Of course, sellers should always strive to have their product’s core value proposition line up with their buyer's problems to create inherent urgency. But in many cases an incentive may help. Sellers should answer the questions above before they get comfortable that the incentive they’re offering is going to accelerate the deal.
Bottom-Up Enterprise Software Is Now Mainstream
Back in 2012 I wrote about the 'bottom-up' approach to enterprise software distribution. Bottom-up happens when a product is initially procured by an individual employee or group of employees and then, once a critical mass is reached, a seller upsells the product across the organization with additional features, bulk pricing, etc. This has now become a mainstream approach to enterprise software distribution. I recently attended a Go-to market conference held by a prominent venture capital firm and they advised everyone that the first question an enterprise startup should ask before designing a go-to market strategy is: are you bottom-up or top-down?
With successes like Atlassian and Slack and others the bottom-up model has come a long, long way in recent years.
However, bottom-up doesn't work for every industry -- at least right now. Take healthcare as an example. To sell a product into a large healthcare organization you must get IT approval, work with compliance, promote workflow changes, train staff, potentially integrate into an EHR, address HIPPA concerns and do lots of other stuff before the first user can log-in. The top-down model can be a requirement.
That said, I believe we’ll start to see this change. The bottom-up model will only become more mainstream and will take market share from vendors that don’t adapt. Traditional enterprise vendors should take note and start to evolve.
Some specific implications:
Software vendors need to prioritize the user of their product over the buyer of their product (they're quickly becoming the same person). Engagement and user satisfaction metrics should be equally important as sales metrics. Employees are increasingly demanding that the software they use at work function at an equivalent level to the apps they use on their phone. And switching from vendor to vendor continues to get easier. If a product isn't adored by its users its ripe for disruption.
This change also means that product must play a much larger role in distribution. The product must be remarkable so people will talk to their colleagues about it and it must be easy to spread the word about and nearly effortless to access. If you look at the fastest growing enterprise startups (see below) the one thing you’ll find is that nearly all of them make it extremely easy for a new user to sign up.
Finally, this trend will bring big changes to sales and marketing teams. Marketing (messaging from one to many) will play a larger role in the selling process as it'll be responsible for acquiring the product's early users. This changes messaging and use of channels in a big way. When any employee within a company is a potential buyer your marketing starts to look a lot more like Apple's than Oracle's. And salespeople will need to increase their selling competence to represent both the user (human factor data insights, workflow changes, usability) as well as the enterprise buyer (product context, integration, ROI).
The line between enterprise software and consumer software is continuing to blur. And while there are industries where top-down will continue to thrive, the processes and systems and beliefs that have enabled this approach are beginning to crumble.
In the end, the real threat that bottom-up startups present to top-down vendors isn't just that they may have a more effective way of getting a product into market, it's that their approach requires them to build something that's very unique in enterprise software: a product that people love.
Buyers Aren't Rational
Perhaps the biggest challenge in enterprise sales is getting a large organization to act and act quickly. Because of size and complexity and bureaucracy it can be very difficult for large organizations to make quick decisions. When an enterprise becomes a certain size it inevitably creates a series of checks and balances to protect its assets and competitive position. This protects shareholders but also makes it difficult to innovate and to make decisions to invest in innovative technologies.
Selling into these organizations requires one to find an external champion that is willing to break through blockers and jump over walls. One of the ways to do this is by helping the buyer see a future positive state. This is what great sellers do. They get a buyer to see a future state that is better than their current state that will require a relatively small investment. If the buyer is rational then they will buy.
Of course it's never that simple.
Over the holidays I had the chance to read Michael Lewis’s new book, The Undoing Project, and it shined some light on some of the many reasons why it's never that simple. The book takes on the issue of “decision theory” and tells the story of two Israeli psychologists and their mission to better understand how the human mind makes decisions. They found that people are absolutely not rational decision makers. I thought I'd capture some of their ideas here.
One of the most interesting ideas discussed in the book is the notion of 'loss aversion'. People will irrationally avoid losing what they have -- even if it could result in a much larger gain. Here's a summary of one their experiments.
When you gave a person a choice between a gift of $500 and a 50-50 shot at winning $1,000, he picked the sure thing. Give that same person a choice between losing $ 500 for sure and a 50-50 risk of losing $1,000, and he took the bet. He became a risk seeker. The odds that people demanded to accept a certain loss over the chance of some greater loss crudely mirrored the odds they demanded to forgo a certain gain for the chance of a greater gain. For example, to get people to prefer a 50-50 chance of $1,000 over some certain gain, you had to lower the certain gain to around $370. To get them to prefer a certain loss to a 50-50 chance of losing $ 1,000, you had to lower the loss to around $370.
People’s desire to avoid loss significantly exceeds their desire to secure gain.
This is the reason insurance companies make money. They take margin from our irrationality. For most people, the happiness involved in receiving a desirable object is smaller than the unhappiness involved in losing the same object.
Not only do people act irrationally (from a probability perspective) to avoid loss, they'll also make decisions based on descriptions of probabilities.
Another useful example from the book is a study done with lung cancer patients:
Lung cancer doctors and patients in the early 1980s faced two unequally unpleasant options: surgery or radiation. Surgery was more likely to extend your life, but, unlike radiation, it came with the small risk of instant death. When you told people that they had a 90 percent chance of surviving surgery, 82 percent of patients opted for surgery. But when you told them that they had a 10 percent chance of dying from the surgery — which was of course just a different way of putting the same odds — only 54 percent chose the surgery.
People facing life and death decisions will not respond to probabilities, they will respond to the way probabilities are described to them.
Lastly, the book notes that most people will respond to probabilities using their own context and view of the world, as opposed to the actual probability. Here's a great example.
Ask yourself the following question:
An individual has been described by a neighbor as follows: “Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve more likely to be a librarian or a farmer?
The vast majority of people would say that Steve is a librarian despite the fact that there are 20 times more male farmers in the United States than there are male librarians. People ignore probabilities and give more credence to “resemblance” or context or experience. We don't make rational, probabilistic decisions.
The lessons from all of this for enterprise sellers are simple:
Most buyers will prefer to buy something that will help them avoid loss (keep their job) rather than increase gain (get a promotion). Sellers need to find a way to appeal to loss aversion or find a champion that's willing to take a risk.
Buyers are not buying your product, they are buying your description of your product. The way you explain what you do is incredibly important and needs to be constantly tested and iterated.
Finally, buyers may not make rational buying choices based on the probability of success. They’ll rely on “resemblances” and their own context. They’re more likely to buy the thing that 'feels' like it will be successful than the thing that has the highest probability of creating a positive future state.
What Qualifies As A "Good" Meeting In Enterprise Sales
What one salesperson defines as a good initial meeting in enterprise sales can often be quite different from another salesperson's definition. This is natural as different people have different perspectives and definitions of success. I've found it useful to standardize the definition of a high quality meeting to remove some of this ambiguity and get everyone aligned on what success means. Here are four simple checks to determine whether or not you had a high quality initial meeting with a prospect.
- Did you gain a solid understanding of the customer's buying process (who needs to be involved, where budget comes from, timeline for decisions, potential roadblocks, etc.)?
- Did the prospect agree to a short, weekly check-in to keep the buying process on track?
- Did you identify an executive sponsor and project lead?
- Does the prospect understand and feel some level of urgency to get to closure?
Note that of course you can still have a positive interaction and discussion with a potential customer and not do all of these things. Often it's not appropriate to get through all of this in an initial meeting. But from a pipeline velocity perspective, if you haven't accomplished these four things there's definitely some work to get done.
How To Diagnose Bottlenecks In A Sales Funnel
When sales aren't moving fast enough, the first thing a sales leader should do is look at the sales funnel to identify the bottleneck. Are we not filling the top of the funnel? Are we not converting meetings to proposals? Are we not getting the contract signed quickly enough?
I've written in the past about how to build and analyze a sales funnel.
But in some cases the sales funnel might not be granular enough to tell you what's really going on.
With that in mind, I've come up with a set of questions to ask to help you identify trends and areas where things aren't working.
Look across the entire pipeline and ask the questions below about each individual deal. if the answer to any question is 'no' put a checkmark next to the question. If the answer is yes leave it blank. If the question isn't relevant because the deal isn't far enough along in the sales process also leave it blank.
After going through each of these questions for each of your deals you should get a good sense of trends and what's slowing things down and you can now focus on fixing that problem area. Do it again in a month and focus on that newly identified problem area. Repeat.
This is a super simple and quick way to find out what's going on in the funnel. It can be used for an entire team or an individual rep.
- Is there adequate top of the funnel activity -- are we working hard?
- Are we getting meetings with people we want to meet with?
- Do the people we’re talking to have a problem that we’ve diagnosed?
- Do the people we're talking to believe that the problem they have is a large and important one?
- Do the people we're meeting with have decision making authority?
- Is our message (solution) resonating with the people that have the problem?
- Is there excitement around moving to a proposal?
- Do we have agreement on a proposal?
- Are we getting insight into the buying process and the actors that need to be involved in the buying process?
- Are we executing the closing process at a rapid pace?
- Are we having weekly check-ins with our project sponsor?
- Have we identified a contract signer?
- Is there urgency around the close date?
- Is there anything preventing our signer from signing?
How To Sell An Innovative Product To A Large Enterprise
Selling an innovative product into a large organization is extremely difficult. The average enterprise sale requires sign off from 5.4 individuals. And when selling something that is novel that the buyer hasn't bought before it can be two or three times that number. In addition, there's no set budget or buying process in place for a buyer to buy. As a result, it falls on the seller to create a process for the buyer to purchase the innovation.
I designed the process below to help address this challenge. The idea is to take the buyer through a set of meetings that generates support for the idea and get an gets them comfortable that they're checking all the boxes they need to check to get a contract signed.
The process requires three meetings (though the second and third meetings could be grouped together for smaller, less complex deals).
- The Concept Meeting. This meeting is where the seller introduces the concept, gets support from the buyer that the product solves an important problem and that the seller's product might be a good solution to that problem. The goal for this meeting is to ask for the buyer's permission to start a process around examining the potential ROI of a partnership. If the buyer isn't supportive of the concept, both parties shake hands and part ways.
- The Financial Meeting. If the concept meeting is successful, prior to the financial meeting, the seller should ask the buyer to provide them with some financial inputs that will help determine the return on investment that would come from a partnership. The purpose of the financial meeting is to walk through the financial inputs and an ROI model and allow the buyer to poke holes in the model and to get to agreement on what a realistic ROI might be. If the ROI is compelling and the project is worth prioritizing, move to the next meeting. If it's not, shake hands and part ways. The ROI is going to be the thing that drives the rest of the process so it's crucial to have agreement in this area. It's also crucial that, when possible, the seller is using the buyer's own numbers in the model, rather than industry averages.
- The Implementation Meeting. The purpose of this meeting is to determine whether or not it makes sense for the buyer to buy the product now. With a compelling ROI, it will most likely make sense, but there are lots other considerations. Technology resources, leadership changes, budget cycles, competing priorities, etc. The idea is to get the prospect so excited about the importance of the problem and the concept and the ROI that all of these concerns will be overcome. But this meeting should be used to put everything on the table. The meeting should include the appropriate stakeholders from both sides to determine if the project can be implemented and, if it can, what kind of work will need to be done and which resources will be required. A timeline with tasks and assigned owners should also be discussed and (ideally) agreed upon. If successful, the next step is to move to contract and setup a weekly meeting between both organizations to track the deal to contract close and product delivery. If that can't be done, both parties should shake hands and part ways. In this meeting the seller should inventory all of the elements of the customer's procurement process and get all of them down on paper. Those elements should be incorporated into a project management document that will be tracked in the weekly meeting.
One other note: when moving the deal to contract, the seller should setup a short meeting with the attorney on the buyer side. Because the product is innovative, the contract terms may be confusing and non-standard. Walking the attorney through the product and the purpose of the partnership should dramatically reduce back and forth on the contract.
Being disciplined about taking the buyer through these three meetings and understanding exactly what they'll need to do be able to write a check will help sellers accelerate sales cycles and avoid many of the pitfalls that come when selling into a large organization.
So often "selling" innovation is the easy part. The bigger challenge, in many cases, is helping the buyer "buy."
10 Things B2B Startups Need To Know Before They Start Selling
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.