10 Deadly Sales Mistakes Startups Make

I spent this past week in San Francisco, attending events, meeting and collaborating with interesting people. To say I’m mentally tired would be an understatement.

On Thursday, I had the opportunity to attend an event called Sales Hacker Conference. I honestly had no idea what to expect. What I did know was that I knew very little of this weird, and what I left with after the event was that I knew even less than I thought. That unfortunately becomes harder for a number of reasons as your company continues to grow, and at some point you start to yearn for a more sustainable, repeatable, approach. Hence attending this event.

I was pleasantly surprised with the content and caliber of information being shared. Who knows, maybe it was my lack of knowledge on the subject that made it so interesting.

Whatever the case, I was especially keen on one talk by Gabriel Luna-Ostaseski.

The 7 Sins Sales Groups Make

I’ve never heard or met the guy before today, but what a good talk he gave. I’d encourage you to read through his LinkedIn profile to gain a better appreciation for his background and the basis of his insights.

Biggest mistake is scaling prematurely, burning cash and crashing

— Gabriel

He prefaced each sin with an experience from his background that he used to bring his point home. I’ll share what I was able to capture in this post.

Sin 1: Boiling the Ocean

Focus on doing less things with more intensity, in the long run its easier and more effective:

Got to $2m revenue within 2 years — then we stalled out around this number — what was happening was we were covering 15 markets, 7 verticals — pretty wide and the business couldn’t bust through the ceiling.

They sat down and did a win / loss analysis of all the customers — all the verticals, all the areas, what was spent and all the attributes of each of the customers.

Although we were covering 14 markets / 7 verticals, there were 2 verticals there were producing 50% of our revenue — why are we in these markets / verticals? does it make sense? the numbers say, if we did more of these two, the company would get bigger.

How to avoid:

  1. Less segments and less verticals — optimize those and develop a playbook, then scale;
  2. Focus on customers with most urgent, pervasive and costly need (problem) — sell to those first, then come back for the rest.

Sin 2: Not understanding the Architect and Builder

This was an interesting sin, and his distinction between an Architect and Builder, and the roles of each, I found very insightful.

Went through 4 VP of Sales over the 7 years of the company. Took until the third one to figure it out. There is a saying that goes, “Hurry up and hire your first VP of sales so that you can hurry up and fire them to get your second one.

The problem with most start-ups is they want to hire the VP of sales to solve their problems — this is the wrong way to think. This is a unicorn — design and build characteristics is a very rare breed.

It’s important that the CEO and Executives are building the blueprints, then hire a builder to scale it.

How to Avoid:

  1. Recognize these are two different jobs – Architect vs Builder;
  2. Blueprints first and build second.

Sin 3: Scaling Prematurely

This is perhaps one of the things that weighs the heaviest on my mind these days, scaling before it’s your time. Yet, there is no real recipe for scaling, when is the right time?

We had 8 sales people, company reached 8 / 9 million revenue. Thought we had it figured out. Pushed the go button hard, and hired 40 sales people next quarter. Everything looks great at first. We were doubling the deals, month over month.

Four months later, looking at the numbers and the churn grew by 3x. We were scaling the business based on a 5k LTV and it had dropped to $1.5k. We had 35 / 45 days before we would have been out of business.

Had to make the decision to lay off 35 people and had to scale the business back.

We had not build a repeatable model. Silicon valley is all about scale, it’s dangerous and it’s important, but it’s about the right time.

The biggest take away here though was the point on a repeatable process.

How to Avoid:

  1. Recognize the difference between traction and scale;
  2. Get sales people profitable before hiring more;
  3. Need total visibility into all stages of the sales process.

Sin 4: Burning Cash

This was refreshing to hear, the more time I spend in the city the more in awe I am at how ridiculous the spend seems to be on having, what I’d consider to be unessential items. He cracked a joke about trying to refrain yourself to buying only one ping pong table, which must chuckled at but still resonated as a reality in this world.

Don’t be stupid, spend money hiring not on your ping pong tables. Live meagerly. For every dollar you spend, is that the best use for that dollar? Can we use it on something that will generate revenue for the company.

Efficiencies, funnel it into sales. Every person, every dollar spent was on revenue growth.

How to Avoid:

  1. Start charging Early;
  2. Focus on getting breakeven;
  3. Cut frivolous spending.

It was refreshing to hear the idea of getting breakeven, I assumed operating in the red was just the way to do things in this world.

Sin 5: The All in One Sales Person

There really is no such thing, they’re known as Unicorns, don’t get lost chasing the Unicorn.

Every week you see during analysis, 30-40% of their revenue generators time is spent outside of generating revenue. Different levers to pull when you’re scaling — hire more people (one option) second is how do you make the people you have more efficient. Stop doing things that don’t generate revenue.

How to Avoid:

  1. Segment job roles;
  2. Delegate or outsource low leverage tasks;
  3. Remove client success from responsibilities.

Sin 6: Relying on Emotion over Data

He shared his past experience and what he sees, a perfect example he provided was when he’d ask teams who their audience was.

Often the response would come from whomever was the highest paid in the room and when asked to show how they knew that, the response was silence. It was n interesting level of emphasis on data.

Rely on logic. Recurring pattern with companies, who is your ideal profile? The highest paid person often says, this is who we think it is.

The response is, show me the data. Prove it. Nobody in the room had more right to make a decision, until the data was available. That was engrained as part of the values of the company. Data drives decision.

If you don’t have the data, shut up and find the data.

How to Avoid:

  1. Remove ego from decision making;
  2. “What do the numbers say”;
  3. Let data drive decisions.

Sin 7: Flying Blind

How many folks can look at the dashboard, and clearly identify every stage of the sales process? What are the metrics that you’ll need to grow the business? If no one knows, how do you scale?

We wanted to double every year. We broke this down to daily numbers and further to hourly numbers. By 11 o’clock each day we could predict how well the day was going and how well the week was going.

If you don’t have this level of visibility you’re flying blind.

How to Avoid:

  1. What gets measured gets managed;
  2. Trending in reporting (something more tactical — it’s about context, how does it compare to yesterday? last month?);
  3. Identify and manage lead measures.

1 Comment

  1. Alycia on November 7, 2014 at 8:16 pm

    These are all great tips, thanks for sharing Tony :)

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