What Founders Need to Understand about the Sales Process
Every entrepreneur begins by selling an idea. You convince employees to join your team and persuade investors that your concept has potential. But, often, founder-CEOs lack fundamental knowledge about the sales process that underlies selling products. We sat down with serial entrepreneur, CEO, and advisor Lou Shipley to talk about the sales function in startups. An expert with thirty years’ experience, Shipley has accumulated unique insights into sales in scaling startups. He launched his career with Avid Technology—a pioneering platform of software used for video and audio editing, music notation, and media distribution—when it was an early-stage startup. Under his sales leadership, the Massachusetts-based company reached over $450 million in revenue and became the gold standard of the media industry. Shipley expanded Avid into the global market, founding and serving as president of Avid Japan. Today, he is Executive-in-Residence at General Catalyst. He also teaches emerging tech entrepreneurs and executives on technology sales and sales management at MIT’s Sloan School of Business and HBS. In this short focused interview with Shikhar Ghosh, Shipley defines fundamentals all founder-CEOs should understand about the sales process.
3 Things Every Founder Should Know about the Sales Process
- Sales Mentality—Take Time to Understand the How Salespeople Think
- Buyer’s Journey—Learn Your Customers’ Pain Points and How Your Solution Can Help Them
- Sales Learning Curve—Prepare for Productivity Dips and Get Familiar with Common Mistakes
For more insights on sales, including launching your product in a foreign territory and culture, see our full-length interview with Lou Shipley accessible here.
Sales Mentality—Take Time to Understand the How Your Sales Team Thinks and Learn the Fundamental Sales Cycles
Drawing on three decades of experience, Shipley notes a fundamental difference in the mindsets of sales-oriented people and most founders—and staff in other functions. Focused on solving the problem, most technical founders “don’t think there could be a brain type out there that is simply motivated by just monetary reward.” But Shipley underscores, trying to understand how a salesperson thinks and “what would motivate them is important.”
“There’s a different sort of a mindset” he notes. One of the most common mistakes he’s witnessed has to do with timing and expectations. Often a founder will bring in a salesperson with a great track record from a more established company with a predictable product. At a startup, however, an experienced salesperson often will “not be able to deal with the fact that the product is really not ready for prime time or there’s no repeatability to the process.”
For a founder, trying to understand how that salesperson thinks and what would motivate them is important.Lou Shipley
Founders Should Sell Their Product or Service before Hiring a Salesperson
Shipley would advise all founder-CEOs to gain experience selling in the early stages. It can be as simple as deciding, “I am going to sell the first dozen customers”— whether they’re your perfect customer or not. In the process, of actually selling, you’ll learn how long the process takes, what the justification needs to be, how it deploys, and how it grows.” Learning how to execute sales and truly understand the process before hiring a salesperson or a sales VP can save you time and money. It makes you more effective at hiring the right salesperson or someone you can delegate sales to later.
Understand Your Buyer’s Journey—Learn Your Customers’ Pain Points and How Your Solution Can Help Them
Many founders are accustomed to describing their products. But, Shipley shares, when you’re selling, “it’s not really about what you think your features and benefits are.” Instead, you need to understand your customers’ pain and “what problem you’re solving for them. That involves active listening” with an open mind. If you listen to customers’ questions thoughtfully, he notes, often “you can understand how to craft a solution for them that may be more repeatable than what you thought was the original concept of the product.”
If you listen to their questions, you can understand how to craft a solution for them that may be more repeatable than what you thought was the original concept of the product.Lou Shipley
What does active listening entail? Shipley quips that active listening is “one mouth, two ears. In any typical sales process, you should be listening twice as much as you’re talking.” He emphasizes that active listening requires more than being politely quiet while the customer is talking. It’s more than “just waiting for the person to stop talking, so you can pick up and talk about the next feature.” Instead, after they speak, so some delicate probing. Ask them to elaborate and share the underlying reasons behind their answers.
By listening with an active mindset, you can develop a deeper understanding of your customer before you continue talking about your product. And that can lead to unexpected positive outcomes or a small change in direction that makes a big difference. Shipley confides, “I’ve always found that customers take products in different directions. They take it and stretch it in a good way to take the technology and extend it.”
I’ve always found that customers take products in different directions. They take it and stretch it in a good way to take the technology and extend it.Lou Shipley
Use Active Listening to Understand Customers’ Pain Funnel
As you practice active listening, you begin to build a series of questions to help you determine the accuracy of your assumptions about the buyer’s pain points. This can help you know if your product can solve their problem.
Shipley and other sales experts call those series of questions a “pain funnel.” The process entails taking the customer through a series of pre-scripted questions. Two to four questions should suffice. “Each time they answer” a question, he coaches, “ask for a little bit more of an extension of that original value proposition or the original pain proposition.” That way, you can truly understand their pain and what solution could best meet their needs “as opposed to saying, ‘I’ve got this thing, it can solve your problem.’”
Ask for a little bit more of an extension of that original pain proposition, so that you really understand what they’re trying to solve as opposed to saying, “I’ve got this thing, it can solve your problem.”Lou Shipley
For instance, for a B2B customer, the length of time required to get a product to market may be a pain point. After hearing that, follow-up with open-ended questions such as, “Oh, that’s interesting. Can you share more about how that impacts your business?” After listening to that answer, ask additional follow-up questions like, “Can you tell me a little bit more about that? Or was there a time when anyone else in the organization had the same issue?”
Additionally, you can ask them to talk about other solutions they’ve tried. Then inquire about the pros and cons of those methods. That way, Shipley recaps, “you start to learn more about how they’re already dealing with the problem. You’re understanding all the dimensions of it before you say, ‘I have something for you.’”
Understand the Sales Learning Curve—Prepare for Productivity Dips
“One of the biggest problems sales organizations have” Shipley observes, is misinterpreting signals. Asking questions can help you forecast more accurately. For instance, a salesperson may “have a conversation and think they have a qualified lead because they talked for an hour.” Often, a lead goes into the funnel and sits for a long time because the salesperson failed to followup on the qualified lead. “Before you know it,” Shipley states, “you’ve missed your forecast.” But “asking the questions to really understand the pain the customer’s in” can help prevent those missed opportunities.
Understand and Anticipate the Sales Learning Curve
Other common mistakes include making widespread assumptions about sales after acquiring an initial customer set. Many founders assume that if they hire X number of salespeople, sales will increase proportionally. They hire a sales team prematurely, ahead of the real demand. Before long, most realize that they “haven’t covered their costs and so that they’re spending way more on sales before the market is really ready.” This mistake can be mitigated or avoided, Shipley notes, by better understanding the sales learning curve.
Made popular in 2006 by Mark Leslie and Charles A. Holloway, the sales learning curve identifies three primary times during which a learning process must occur before you can accurately forecast sales for your product. These three primary times are: when a startup1) introduces a new product, 2) changes route to market—from direct to indirect or indirect or direct or 3) launches into new territory.
Anticipating Productivity Dips in the Sales Curve
Typically, “once a company’s established, it usually takes six months or so for somebody to be fully ramped to the point where they’re more than paying for themselves,” Shipley learned. Before then—during the sales learning curve—”productivity in terms of sales per salesperson is really low.”
The Y axis of the sales learning curve represents your sales yield. It entails calculating when you hire a salesperson and the return you expect to receive that person’s efforts. The X axis is time. To determine how long a productivity dip will last, look at “Time over yield, or yield over time.” Then look at the slope of the curve.” Shipley cautions, “if you don’t know where you are on that curve, and you hire too many sales resources before you know where you are on that curve, you can end up wasting a lot of money.”
Create a Sales Process
Shipley observes, “What I’ve seen the best companies—and founders can do this even with small companies—is invest in this notion of sales enablement.” This allows you to reduce the duration of low productivity time during the sales learning curve. Even reducing a period of low productivity from six months to four months can make a significant impact.
The best way to do that is to create a sales process. Myriad online resources and tools, such as HubSpot’s Ultimate Guide to Creating a Sales Process, walk you through the steps of formulating an effective sales process. Having the process helps you identify which steps “people are struggling with the most and develop content to train around those sticky parts of the process.” After flagging problem areas, “you try and shorten and eliminate” them. He notes, “new problems will pop up. But you’ll have shortened the time in that process to get to a sale.”
Build & Maintain Trust as You Sell
Shipley reflects, “the founder’s journey is a lot about enduring relationships.” He encourages founders to think about the enduring nature of customer relationships. “When I think about the companies I’ve worked at, I’ve gone back to some of the same customers and they’ve moved on to different businesses.” Trust enables you to build a strong relationship and may foster customer loyalty.
To establish trust, he recommends being authentic and not overpromising. “Ultimately you’re going to deploy to the customer” and if the product doesn’t work as promised, that creates problems. “Or an employee is going to be told come to this startup and it’s going to be great. And they get there and it really isn’t, or an investor is going to see at a board meeting that you haven’t made the progress you promised.”
For more concrete tips and methods for understanding customer pain points see Customer Interviewing Techniques That Uncover Your Users’ Unmet Needs. For more insights on sales, including launching your product in a new geographical territory and culture, see Shipley’s full-length interview.
HubSpot’s Sales Plan Template is a free, downloadable tool created to help you outline your company’s sales strategy in one simple, coherent plan. The template includes sections for Company History & Mission, Team Structure, Target Market, Tools and Software, Positioning, Marketing Strategy, Prospecting Strategy, Action Plan Goals, and Budget.
“The Ultimate Guide to Creating a Sales Process,” created by HubSpot provides an overview of the sales process and why you need to have one. It walks you through the steps of creating a sales process for your team to use when converting any prospect from a lead to a customer. It outlines tactics to “create and map a sales process tailored to your business that works for both your sales team and target audience.”
Now a classic, “The Sales Learning Curve” by Mark Leslie and Charles A. Holloway reviews the common mistakes the authors have witnessed in 25 years of working with start-ups and new-product introductions. This includes hiring a full sales force prematurely which can “burn through cash” and lead to missed revenue. They advise that, before a startup can effectively sell, “the entire organization needs to learn how customers will acquire and use it, a process we call the sales learning curve.”