Growth Stage Sales
As the CEO of a startup company, have you ever wondered what the main difference is between sales in the venture stage and sales in the growth stage? If you have, you are in good company. At Mercato Partners (Mercato), we talk with hundreds of companies every year and as VP of sales practice, I have the privilege of working closely with many sales organizations. What is unique to the growth stage is that sales organizations will need to evolve in three distinct areas as they transition from Venture to Growth. These adjustments are:
• Aligning Go to Market (GTM) with corporate strategy
• Hiring stage-specific sales leaders and team
• Formal sales process
In considering each of these areas, it’s clear that there is a sequential effect; if one is off, it’s likely to cause an organization-wide problem. Ironically, problems in any one of these areas are most frequently manifested in one simple outcome: missed revenue targets. In sales, success hinges on hitting sales targets. While we often see a team of scrappy fighters, consistently hitting their sales targets as the company transitions from the venture to the growth stage, it’s also not uncommon to find that company culture has allowed a couple of folks to tag along for the ride. Statistically, the number is 30% of your sales team.
No CEO in her right mind would set off with a sales goal of “average” after successfully building and establishing product-market fit, building a strong leadership team, and growing over 50% YoY. However, what many CEO’s may fail to recognize is that by allowing underperforming salespeople to linger on the payroll they run the risk of unknowingly creating a passive sales culture.
A CEO facing the challenge of growing from $5M to $20M in annual revenue is most likely to achieve success when they place a high priority on the preparation and fine-tuning required to take the organization to the next level. I hope you never hear a CEO say, “I want our sales organization to be average.” However, industry statistics for growth companies show that the average attainment for sales is only around 70%. Unless something is done to intentionally guide a sales team into a better-than-average scenario, chances are that the company will not achieve optimization.
What does it look like when a sales organization is operating in a highly optimized state? I’ve seen and worked with some incredibly efficient sales organizations and I’ve yet to find one that doesn’t have room for improvement. In one organization, the sales team was operating at 90% attainment, and those reps below that floor were shown the door. However, growth-stage companies that are led by a CEO who understands that acceleration doesn’t just happen are well on their way to optimization.
Similarly, a CEO who is willing to make difficult changes sooner rather than later will create a more direct path to an accelerated sales team. As Ken Krogue the founder of Insidesales.com would say, “Delay is decay.” It behooves the new growth stage entrant to be quick and decisive in making necessary course corrections appropriate to an era of scale and growth.
Models are particularly helpful in framing and helping CEOs understand the root causes of underperformance. Once the issues are identified, action can be taken by applying playbooks, frameworks, and tools to overcome the common issues of the growth stage. Here’s a brief look at three common challenges to get you accelerating faster than you thought possible.
Strategy and Sales Alignment
Strategy and sales alignment is perhaps the most important component of sales acceleration, but often the most overlooked. Everyone has endured a negative buying experience and it typically originates from a rigid sales process. Many venture sales environments and funnels are created based on one-size-fits-all online content. Ensuring that your overall strategy aligns with how your sales team is organized will enable sales for success.
One litmus test for how well a CEO has aligned strategy and sales is how fast a company can optimize growth. For the sake of this discussion, I think we can all agree that there is a strong argument to spend capital efficiently to 1. Exit the “J-curve” sooner, reducing cash burn. And 2. Achieve a steeper growth curve. One question savvy entrepreneurs ask is, “Where should you invest your money to achieve a steeper curve sooner?” According to a current survey sponsored by KeyBanc Capital Markets, companies have much higher organic growth rates when they consider channel sales in their overall GTM strategy. By as much as 59%. In contrast, companies that go with a “pure-play” Enterprise Sales GTM will on average achieve 23% less organic growth. That difference in growth can make or break a company as they are seeking to reduce cash burn and simultaneously scale.
According to Frank Cespedes, author of Aligning Sales and Strategy, “The goal of strategy is to achieve economically profitable growth.” This is accomplished by tying strategy to sales tasks and behavior. So it is important to close the loop through proper sales instrumentation. Reporting should align with the company’s broader go-to-market strategy to ensure the proper KPIs are measured. Business model, industry, and product should dictate the sales process and overall GTM, not the other way around. Growth-ready teams are well-instrumented with key performance indicators, and dashboards that create transparency and accountability. These elements provide a feedback loop for the sales process that allows leadership to align with corporate strategy.
Hiring Stage-Specific Sales Teams
The sales team that successfully launched a venture stage company may or may not be the right team to conquer the unique challenges of growth. A competent, stage-specific sales leader unlocks tremendous value within an organization through coaching, managing, and leading by establishing a culture of performance. Assessing the skills of sales leadership and the team proves to be a valuable exercise for a CEO focused on optimization. Mercato establishes internal recruiting, training, and retention playbooks to assist our portfolio companies in capturing value. Those playbooks also to help establish a well-organized team to support leaders and drive predictable quota attainment, oftentimes helping sales avoid both common and uncommon mistakes that exist in the growth stage.
The third component of sales acceleration methodology involves creating a process and framework that allows the sales team to expand markets and explore new streams of revenue. Customer expansion, new customer acquisition, product expansion, geographic expansion, and channel development all offer the potential for greater revenue growth and profitability. Traverse works with CEOs to uncover domestic and international opportunities through direct and indirect strategies and in turn, the accelerated growth and reduction of cash burn creates a highly repeatable and efficient sales model.
Also, the proper application of playbooks and frameworks reduces rep churn, missed quotas, outlier quarters, and increases success across the board. By applying a solid sales acceleration methodology, we reach higher levels of success quickly and our portfolio companies avoid pitfalls so commonly found in the Growth Stage. Here is a glance at the Traverse Sales Acceleration model:
The common areas identified in the model are most certainly not comprehensive but should serve as a guideline to help identify the symptoms you are feeling and tying them back to the root cause. As CEO, if you are struggling to identify or address the challenges of sales in the growth stage, you are not alone. By applying our proven sales acceleration methodology, Mercato portfolio companies reach higher levels of success efficiently and help our CEOs avoid the common pitfalls so commonly found in the Growth Stage. So, remember to think about the following when your sales targets aren’t being met:
• Aligning GTM with corporate strategy
• Hiring stage-specific sales leaders and team
• Formal sales process
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