How to Turn Your Early-Stage Startup into a Revenue Machine
September 30, 2021
This article is part of a series we’re writing in collaboration with our network of Operating Partners at Samaipata. These posts strive to be useful & actionable for early stage startup founders, and cover most of the key challenges faced at this stage, ranging from tech hirings to culture growth pains. You can find them all here!
Calling out to all early-stage B2B founders — Your product seems to have a strong market fit and your founder-led sales efforts have delivered some early successes through personal connections and fellow startups. But what does it really take to scale up your sales funnel?
B2B sales processes can be an intricate labyrinth to navigate so we count on our Operating Partner Javier Llordén to shed some light on the topic. Javier has a wealth of experience in B2B sales, both running large sales teams and advising startups and SMEs on his area of expertise. We are proud to call him a member of The Hive, Samaipata’s VC platform helping our founders succeed. Javier has been a critical contributor to efficiently scaling up the sales efforts of our portfolio companies.
Our goal is to provide a simple and actionable framework to transition from founder-led sales to a structured sales machine. We want to help you build a methodical, scalable and data-driven process.
In this article we are going to focus on the top of the sales funnel, in other words, before the actual sale process begins when you are in front of a client discussing your product. This stage is often overlooked but it is key to bring high-quality warm leads in front of your product.
Deciding when the right time is to ramp up your sales efforts from a product maturity standpoint is a whole topic of its own. However, we would typically envisage a shift to a more committed and structured sales effort after validating some early product-market-fit signals. Examples of these in a B2B business would be a growing inbound dealflow, strong conversion rates, low churn, etc. Getting out there will give you valuable feedback to take your product to the next level.
B2B sales is a species of its own — applying a B2C playbook is a recipe for disaster. You are dealing with living organizations made up of dozens, hundreds or thousands of employees with different needs, responsibilities and incentives. Given the limited number of potential clients out there, the overarching spirit of B2B sales is a focus on quality over quantity.
This framework is addressed to B2B early-stage startups and can be leveraged by a broad range of business models in the space. However, many founders will find the need to adapt it to the specific characteristics of their product or their market. Or some may even need to build a tailored approach from scratch. In either case, we hope this framework is useful food for thought when articulating your sales effort.
On to it!
1. Target market definition
Defining the target markets
Depending on the nature of your product or service, the universe of potential clients globally could be huge. But on the other hand your resources are too limited at this stage to tackle this whole TAM in a structured manner.
We need to define more specific target markets to which to aim our sales effort at this stage. The target market definition should be decided in light of the early signals of product market fit you may have observed. You may need to define several target markets depending on the nature of your business (e.g. platforms) or if you want to kick off a sales effort in different segments. Take into consideration your resources to calibrate size.
As a first step, we need to translate these early signs of product market fit into a set of key generic variables available in public sources. Such variables will usually be a combination of the following:
Geography: Does your proposition have a global reach or is it anchored to a specific geography by operations, regulation, etc.?
Industry: Is your proposition tailored to specific industry needs?
Size: Is your product suited to clients of a certain scale?
Geography and industry fit — when applicable — are generally prerequisites from a sales standpoint but typically they will not affect your sales process that much beyond the initial target market definition. On the other hand, size has many implications from a sales standpoint. We will get into that shortly.
In an ideal world, databases would capture more specific characteristics and would allow for narrower filtering at the top of the funnel. However, it is prudent to keep filters high level at this stage. This might actually help you identify new pockets of potential demand.
Working on a lean canvas can prove very helpful at this stage — if you haven’t done so already. It can be a valuable resource to articulate and contextualize your value proposition. This will help you throughout the sales process, from defining target markets to refine key messages that will be conveyed throughout the sales process.
Identifying buyer personas and buying roles
Buyer personas are groups of people to whom your value proposition is best addressed due to their shared needs and pains. However, you will also need to identify buying roles, which are the different persons that can collectively trigger a purchase of your product. In order to convert a sale a number of buying roles will need to align within a potential client. A buying role can range from the actual user of the service to the purchase decision maker.
This is where the importance of size kicks in. In smaller organizations, most of the buying roles will concentrate on a few leads (even in the buyer personas), which will ease and shorten the sale process. Conversely, in large organizations, buying roles will typically be clearly separately assigned to different leads. The larger the company, the more leads we will need to tackle throughout the sales process.
Tools of the trade. Throughout the sales process we are dealing with companies but talking to leads (people). More people involved and a longer sales process lead to increased complexity. Investing time and resources in appropriate prospecting and qualifying software is key. Software should be able to capture this “who is who” — a very important aspect of the sales playbook. There is a myriad of CRM alternatives out there, but you should look for a sales-oriented solution or add-on (e.g. Salesforce, Hubspot, Salesloft, Outreach, Bloobirds).
Failing to identify the buying roles within an organisation will often lead to traps. Traps are situations where one of the abovementioned factors fails to align. Momentum is lost and the sale process stalls.
Key buying roles include decision makers, influencers, blockers, users. It is critical that you understand their different priorities and incentives, down to a very granular level. These could be very heterogeneous and specific, ranging from control (for managers) to UX (for users).
Not only will you need to identify and contact the right leads, you will also need to tailor your proposition to each of them, one-size-fits-all is a recipe for disaster in B2B sales. For instance, your approach to a decision maker who is not going to use the product should be geared towards the ultimate benefits for the organisation. Conversely, your proposition to an actual user should focus on the benefits to its day to day operations. Just as you segment markets you should segment organizations rather than approaching everyone with a single proposition.
We often see B2B startups targeting other startups as their go-to-market in the early days. While there is nothing wrong with this per se, founders should keep in mind that the nature of the sales process is radically different to a corporate one. In most cases sooner or later you will need to sell beyond the startups segment if you want to build a sizable business. Acknowledging the challenge and embracing it through a well articulated sales strategy is key to making a successful step up.
Mid-sized companies are our favorite segment to strengthen your B2B sales process-provided that your product is suitable. The sales cycle is relatively short, access to key decision makers is relatively easy and unit economics are generally sustainable. And most importantly, you will still be able to target a large number of them which will enable a fast product iteration loop. Thresholds to define the mid-sized segment depend on the specific industry, there is no one-size-fits-all approach. Of course, your choice might be limited if your product is specifically targeted to large corporations. This poses an additional challenge given the increased length and complexity of the sales cycle. In this scenario, developing a well structured sales process is even more important.
Defining the go-to-market strategy is of paramount importance. The key priority of a B2B early-stage startup should be to get the foot in the door of as many companies as possible. Later on, the focus will shift to upselling the product or service.
Case in point: Platforms. As an early-stage platform you need to build the different sides of your platforms (often demand and supply). Needless to say, the value proposition you bring to each side of the platform is usually radically different. Accordingly, you will need to develop a bespoke sales strategy for each of the sides of the platform, with dedicated go-to-market strategy and sales teams. In our experience, customer groups that are not direct sources of revenue are sometimes overlooked and end up being a growth constraint. The fact that you are not “invoicing” (as in generating revenue) one of the sides of the platform doesn’t mean that you are not “selling” (as in delivering a value proposition) to both sides of the platform.
2. Lead generation and scoring
The client takes action to reach out to the company.
Of course this doesn’t happen spontaneously, but rather as a result of actions of the marketing function. These actions must be oriented by the abovementioned target markets definition.
Inbound lead generation efforts can deliver a huge amount of leads. Often the quality of these leads will be very heterogeneous. The larger the amount, the more important it is to have a sharp lead qualification process. Leads are usually qualified by defining a lead scoring system.
The main goal of the lead scoring process is to accurately measure the degree of interaction of each individual lead with the content and the value proposition of the company. The result should be a sort of triage that derives the lead to the appropriate follow up action. The scoring should be a methodical and data-driven approach to the classic cold lead vs. warm lead assessment.
There are several tools out there that can assist in the lead qualification process (HubSpot, Active Campaign, to name a few). Powerful AI-based solutions are also being developed in recent times for companies with a large number of inbound leads.
The scoring system will identify the highest quality leads, those that are taking your product into consideration, which will be passed on to the sales function. Leads with insufficient qualification will be nurtured by the marketing function until either they are disqualified or sufficiently qualified to be passed on to the sales function.
The company takes action to reach out to the client.
In order to hunt for clients, the sales function will need specific targets. Market research is a key function within the outbound sales effort. The market research function should be in charge of putting together a universe of companies in light of the abovementioned target markets. The role is often overlooked but it is of great importance even if it may not constitute a full-time job in the early days of a startup. This universe should provide a structured framework for the sales teams to start prospecting leads. For the avoidance of doubts, the sales team should not be reaching out to companies outside the defined universe.
3. Prospecting and qualification
This is when the sales team comes into play. Specifically the Sales Development Representative (“SDR”) role is in charge of the prospecting and qualification phase. If this phase is successfully completed the Sales Representative or Account Executive role takes over the leads and the relationship with the client going forward.
This stage is when inbound and outbound leads converge. The SDRs will start reaching out to leads within the potential client in order to prospect and qualify outbound leads and to further qualify inbound leads.
For the avoidance of doubt, whenever there is resource scarcity inbound leads have absolute priority vs. outbound prospection. Imagine walking into a shop looking for a product and being told to wait while the owner is cold calling a potential customer.
Cold social selling. Cold social selling is rarely successful and definitely not a scalable practice in B2B sales. Cold contacts (usually via LinkedIn) are a legitimate way to establish a channel of communication but they should not be accompanied by an outright sale proposal. Rather, you need to provide value through insights and quality content in order to warm up a cold lead.
These early SDR contacts with the leads will allow for further qualification. Qualification at this stage can be structured through the “B.A.N.T.” framework:
Budget: Is there a pre- approved budget to find a solution for this pain? This is the least important aspect and a negative answer is just an obstacle, not a deal-breaker
Authority: What is the buying role of my lead? Is it the right buyer persona?
Need: Is there a pain? How are they dealing with it? What are the consequences of it? The pain should have been pre-screened through the lean canvas — time to get into detail about the company’s experience with the pain
Timing: Is the company actively looking for a solution now? Is it a priority at the moment?
Failure to meet A or N results in lead disqualification. It is important to decouple lead and account qualification. Disqualifying a lead does not necessarily disqualify an account — you are probably just talking to the wrong person, particularly in larger companies.
Failure to meet T leads to nurturing (see bonus track). Occasionally wrong timing could even result in difficulty to establish contact with a lead. This often is a lead scoring error — it was probably too early to prospect that lead. While this is not ideal, the lead might still be valuable. Set up the appropriate process for this lead to be transferred back to marketing for nurturing (see bonus track).
Prospecting — Meeting subfunnel
The SDRs run a sub-funnel within the funnel. Conversion rates from stage to stage need to be closely monitored and understood to identify frictions and qualification errors.
Conversion rates are of the utmost importance in B2B sales. Flaws in B2C sale processes can be plugged by injecting more volume into the funnel. This is generally not the case in B2B sales given the finite nature of the leads you can target.
Poor conversion rates can be the result of multiple errors — a poorly defined target market, not targeting the right people, approaching leads too early, to name a few. These should be spotted and remediated as early as possible. The smaller the universe of potential clients the less shots you have to iterate your funnel — use them well!
Tools of the trade. CRMs are not well equipped to deal with the prospecting and qualification process unless they are properly programmed or complemented with specific sales engagement add ons (e.g. Outreach, Salesloft). There are more specific tools available in the market to support SDRs in this process though tailored features (e.g. BlooBirds.com). These tools are very oriented to cadence of contacts and can natively capture many aspects of your sales playbook.
The reach out performed by the SDRs will hopefully lead to a qualified meeting between the sales rep (also known as Account Executive) and the lead.
Tailoring your messages to the buyer persona of the lead — as per the work done through the lean canvas — is key throughout the prospecting and qualification phase. In addition you should also factor in what the current status quo of the company is with regards to the need you are trying to address. These are called “scenarios” you may face when talking to different leads and they need adapted pitches. Is the need not addressed at all? Is it addressed through archaic means? Are you trying to replace a competitor?
Bonus track: Lead nurturing
A lead can reach the nurturing stage via two channels. Either from the marketing team due to insufficient qualification of an inbound lead or from the sales team due to a failed T in the B.A.N.T. assessment.
The goal of lead nurturing is to foster the engagement of the lead with our proposition through valuable interactions with the content generated by the Marketing team. If successful, the nurturing effort will strengthen the qualification of the lead in order for it to be funneled back to the SDRs for prospecting or follow up, as applicable.
At Samaipata, we are always looking for ways to improve. Do not hesitate to send us your thoughts. We strive to partner with early-stage founders and to support them in taking their business to the next level. Check out more ways in which we can help here or for all our other content here
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