Give Your Teams Swiss Army Knives

Posted on Nov 3, 2010 | 23 comments


There is a transition in every company from a “seat of the pants” kind of entrepreneurial company to a “process driven” mechanized one.  Many people who are successful in the former fare less well in the latter.

Frankly, I’m much more of the former kind of guy and I tire of the routine process & politics required to succeed in a big company.   The reality is that you need to standardize many things in a company if you’re to scale quickly, which is why many founders depart at the time of the transition.

Others resist and continue to run companies that need to scale the same way they ran the company when it was smaller.  This seldom works.  Rarer still is the startup CEO who can make the transition effectively on their own.  The path I went down after a few years was to hire more process driven people and devolved more daily operational ownership to people running individual functions such as product management, sales management, finance, etc.

Unwillingness to devolve power is the bane of many management teams at startup companies.  I see the problem directly at many startups I know.

One of the most obvious places where you see this is in sales & marketing.  I call this “arming & aiming” your sales teams where you need to standardize both the assignment of territories, industries & accounts (aiming) as well as the process of selling, the collateral, the legal agreements & pricing.

Here are some of the tools in the Swiss Army Knife that your team needs to be armed with to scale:

(this article was originally posted on GigaOm in a shorter format.)

1. Packaging, pricing & discounts – In the early days of my first company we always had “list prices” we quoted to customers and of course we were always willing to negotiate based on who the client was, how important the business was to us, who the competition was and how well the deal was negotiated.

Like most everybody, I would prefer a world in which “the price was the price” but no matter how much we all want that world it seems the human psychology is pre-disposed to buyers wanting “a pound of flesh” so we were forced to play this game.  You might get away with “the price is the price” with your business unit buyer but then by the time the procurement departement was involved they wanted to prove that they earned their keep.  Ditto the CFO.  Let’s not even talk about legal.

It seems sort of silly but for enterprise sales at least, if you don’t have  buffer built into your price & services you’re bound to get hacked down anyways.

For the first couple of years I got involved with pricing any serious deal because I wanted to stay close to the business.  Over time I realized I was a bit of a bottleneck in pricing and I didn’t add significant value.  We moved toward more standardized pricing (e.g. less negotiating & haggling).  So if the prices of our offering was, say, $100,000 we then gave each sales rep the ability to discount up to 15% ($85,000) on their own with no approvals and 30% ($70,000) for a country sales manager and anything above that required my sign off.

Additionally, we standardized the “allowance rates” for services such as document storage, maximum numbers of users and we created more standardized packages of features that constituted an “up-sell” to a our premium offerings.  Before doing this any deal who wanted to win at a given price would just “throw in more storage into the deal.”  We stopped allowing this.

2. SLAs, T’s & C’s - When we started we had a standard service level agreement (SLA) that talked about our uptime, customer service response times and penalties if we breeched our service levels. This document was important both for giving customers confidence as well as protecting our liability in the case of outages.  The problem is that we started with an SLA that was too favorable to us.  We really didn’t need to because we had a long track-record of uptime from which to judge our ability to manage the SLA.  But we still had one that hugely favored us and made people negotiate hard to get a better deal.

Sophisticated buyers saw straight through it and knew what to negotiate for.  The original agreement called for 99.8% uptime and if they pushed we’d agree 99.99%.  We then would have to agree what constituted “uptime %” – was it % of total hours or % of “working” hours.  Once percentage was agreed we’d negotiate “service credits.”  The standard contract had no remedies in the event we didn’t meet our SLA.  Sophisticated buyers knew that an SLA with no financial teeth was worthless and would negotiate a percentage of monthly contract as a service credit.  Really professional buyers could push further.

First, I’m embarrassed now that we didn’t just start with a hugely customer oriented SLA and stand confidently on our ability to successfully manage our service.  Those were the early days of SaaS and you might remember that even Salesforce.com has major outage problems.  So we thought we were just managing our economic risks.  The reality was that we added a HUGE overhead to negotiating deals that didn’t need to be there.  In the first few years it was manageable but over time it became a nightmare.

We eventually migrated to one standard SLA for normal customers and a high-level SLA for premium customers (and 1-2 specially negotiated ones which I regretted).

Same thing with terms & conditions (T’s & C’s).  When we bought products / services I envied the companies that said “we don’t alter our t’s & c’s at all.”  It was easier that way.  At my company we let customers negotiate because we didn’t want to lose deals.  But we created a patchwork of non-standard contracts that added to the overhead of managing a business as it scaled.  When we signed the deals we were frankly only worried about getting through the next few quarters.  It seemed a luxury to think about the future.

If I did another startup I would only have standard, non-negotiable t’s & c’s (and maybe agree the occasional side letter to win bigger deals).

3. RFP Generators – Another obvious investment area.  So many of the sections of an RFP (request for proposal) are standard questions that can be templated out.  I had a fair amount of “cut-and-paste” text I would include when I wrote responses to RFPs but I hadn’t institutionalized it for the entire company.

I then noticed that our head of sales in France had created almost a manufacturing process for responding to RFPs.  He knew that he could compete for a lot more business if he could minimize the amount of time his team spent preparing these time-sucking documents.  So he hired an intern plus a junior marketing person and tasked them with mechanising responses.  His opinion was that his expensive direct sales reps should maximize their time in front of customers.  And that was my opinion, too.  And he actually did something about it.  I was the laggard.

4. Sales Decks – Most companies have a standards sales deck.  As sales teams grow and become distributed these sales decks morph over time.  Each sales person tends to slot in their own slides to win deals or to position things in their own words or style in order to win deals.  To some extent this can be good and agile.

Two things to pay attention to: 1) often when you release features that help you better differentiate from competitors these are often lost if you aren’t good at standardizing decks across your organization and 2) the local sales reps need a better way of feeding changes into management & marketing because if they have local success the chances are these will work well if you deploy them to other reps.

5. Demos – One of the things that most people are bad at and that are hard to standardize is the demo.  I have written about how to do a demo before (even though this was in the context of a VC pitch much of it applies).  A good demo tells a story.  A good demo walks the user through “a day in the life” of a user trying to do his/her job.  80% of demos I see are features, functions & benefits.  People don’t buy features & functions.  They buy solutions to their problems.  So you really need to script the story telling of your demos to talk in your customers language.  You need to train your staff to pause and ask questions & solicit feedback during the demo.  In short, you need to institutionalize your company’s demos.

7. Call Scripts / Plans – I know it’s a modern trend to want to empower inside sales departments (aka telesales) rather than having people on formal “dialing scripts.”  I understand this.  It makes for a more authentic discussion.  And if you hire super bright telesales reps you need to trust them to a degree to manage a process in the same way you trust your outside sales reps.  But too many startups stop at just hiring bright people, training them on the products, teaching them the pricing and unleashing them to start closing deals.  I know we did and it wasn’t that effective.  And without process & procedure telesales reps will be less effective.  So at a minimum they should have “call plans” that talk about the who in the organization to call, what to discuss and how to handle objections.  In some places a more “scripted” approach makes sense but certainly not somebody LITERALLY reading text.  That never works.

8. Process / Methodology – Finally, one of the most important changes we made in our organization is actually defining our sales process, hired a trainer to help us implement it and we then rolled it out and enforced it across all sales campaigns.  Just as with product releases – our strategy was to put the process out there, monitor what worked and change the things that did not.

The process in and of itself was pretty lengthy and at some point I’d like to write about it in more detail.  But essentially it boiled down to: doing a business plan with a customer, finding a champion to guide you through the sales process, identify everybody involved in the decision and what their roles were, identify the budget holder, figure out who the competition was and who was supporting them, demonstrate your USPs (unique selling propositions) relative to the competition and understanding the buyer’s decision process.  We called it PUCCKA.  That’s for another day.

9. ROI Calculators – Often you want a simple ROI calculator for early in the sales process and a detailed one as the process unfolds.  We built standard tools in Excel spreadsheets.  I spoke a bit about it in my last post on “objection handling” and there is a good discussion in the comments section.

As I re-read this post it came across as a bit dry & factual rather than some of my lively posts with fun stories.  And that’s kind of fitting.  Scaling a business is often about the boring stuff that doesn’t excite the early-stage entrepreneurs.  It’s about having rules and having people follow them.  It’s more about standardization than free-form improvisation.

Some people excel at rules & process.  And these are the people you want to find & hire when it’s time to scale your sales organization.  And if it’s not you (like it’s not me) recognize this early and surround yourself with people who are better at it than you are.

[Note: the original post in this series on sales segmentation is here.]

  • http://twitter.com/jenniferlum Jennifer Lum

    I agree 100%. Standardizing and templating (ok, not a real word) workflow process and documents makes a big difference in the efficiency of teams and quality of deliverables, especially when a team is in startup mode.

  • http://www.canvera.com Dhiraj Kacker

    Mark, as usual a great series. I'd probably summarize the process of discovering all these ideas in the following way: the CEO MUST be deeply involved in all early sales/marketing activities and MUST be PARANOID about both whether the customer is being served well (this is obvious) AND are the shareholders being served well (i.e. charging enough, defensibility, scalability etc … ) – you've talked about this earlier (flippin' burgers). The CEO and other co-founders must bring money in to the company and be confident of scale. And then, I think, a lot of these things come out very naturally, the bottlenecks emerge fast, the need for process become clear etc. The PARANOIA of serving all stakeholders well is the key.

    Keep the posts coming – really enjoy reading your blog.

  • http://twitter.com/edwinmoh Edwin Oh

    Sounds like you're what I call a “product” person not a process person http://bit.ly/d7pVin !

  • sbmiller5

    Mark, thanks for another ridiculously helpful and thoughtful post.

    I'd like to encourage all readers to think about how much they learn from Mark's free blog and go support his friend Colin Bower (http://funds.gofundme.com/ifo4) I donated with the theory, this was my payment to Mark for all the material he gives for free and which I'd definitely pay for, at this point.

  • Dave W Baldwin

    I tweeted it…maybe if enough do that others will retweet.

  • http://twitter.com/wfjackson3 Willis F Jackson III

    Another good article. I know I need to know more about sales and this seems like a good practical primer.

  • http://stonebusinesslaw.com Ethan Stone

    A couple of thoughts about the discussion of SLAs and T&Cs. Mark is exactly right that SLAs should be designed as a way to limit liability, rather than disclaiming it altogether. If you're selling to business customers, they'll look at the SLAs and know if they're a front. I hate to say it, but it seems to me that some of the ridiculous SLAs I've seen are generated by lawyers who can't think practically about the business benefits of taking calculated risks, let alone the costs savings from minimizing the need to negotiate over things that aren't terribly important from a business standpoint. As Mark points out, strong warranties signal confidence in your product. Make sure your lawyer gets this. It can help to say it a few times, rather than just grumbling to yourself. Lawyers are professional worriers, so it can change their attitude to be give express priorities. If that doesn't work, though, consider a different lawyer.

    The same goes for T&Cs. If you're selling to consumers or selling a small ticket, high volume product, by all means draft a “clickwrap” that favors you to the maximum extent. It will never be read and you'd rather not sell to anyone who isn't willing to agree. If you're selling to buyers with negotiating power, however, control your lawyers and get them to draft a document that will be acceptable to most reasonable buyers. Remember the dynamic at buyer's legal review of your T&Cs: The person who wants to do the deal will often ask legal to review and tell them if there's anything really important that needs to be changed. When I'm asked that question, I go one of two directions: If I need to change several things for substantive reasons (i.e. they're important and unreasonable), I'll often go ahead and mark up the whole thing while I'm at it, since I know I'm going to have to send out a new draft and probably negotiate it. On the other hand, if there's nothing particularly problematic, I'll often tell that to the businessperson and suggest that it might not be worth marking it up at all to save time, trouble and legal costs. You want to help me go in the second direction (or tell me to stop being silly if I try to negotiate over trivia).

    One more point on this topic from the lawyer's perspective. If you don't want people marking up your SLAs and T&Cs, make sure they're well drafted. I can't tell you how many times I've been forced to mark up a document, simply because it didn't work right. If you're going to use something a thousand times and you're hoping not to have to change it, it shouldn't be sloppy. Spend the money to get it done right.

  • http://bothsidesofthetable.com msuster

    sure, templating must be a real word! who cares of spell check doesn't recognize it! ;-)

  • http://bothsidesofthetable.com msuster

    thank you. I talked about the CEO involvement in the first post on “why seasoned sales execs might not work at a startup” – that is clear. and then when scaling starts they need to be actively involved but not a bottleneck. I think that boils down the key issues in my mind.

  • http://bothsidesofthetable.com msuster

    probably, yes.

  • http://bothsidesofthetable.com msuster

    thank you, that's really kind. Colin is important to me and has not been treated fairly by the system and is now involved at the international level, which is hard. I'm trying to help him where I can. I appreciate your support.

  • http://bothsidesofthetable.com msuster

    GREAT addition, Ethan. Agreed across the board. thank you.

  • http://twitter.com/BornToCall Mohammad Ali

    Great post Mark!

    You mentioned under Packaging, pricing and discounts that you gave reps the ability to offer a discount. Did reps who discounted sell more than reps that did not? Or, did all reps discount?

  • Clubgel

    This is a much needed and useful post (for me) along with the last sales related post and all the other ones. There are way too many startup marketing related post out there on the likes of SEO, social media, inbound marketing, PR which are all great, but direct B2B sales are still a potent weapon in the arsenal for a B2B business.

    As a co-founder of a SaaS company in the U.K for SME's across different industry verticals, my co-founder and I have got product market fit and the initial batch of paying customers on board through selling to businesses directly ourselves, by meeting them in person, getting their feedback to help formulate the product etc (Eric Ries/Steve Blank lean startup approach has worked so far for us). Now to scale the company we will be doing the usual PR, SEM, SEO as well as employing our first few sales people.

    I was watching the U.K apprentice (from the U.K myself) and although admittedly not a great show for business lessons etc. there was a dispute about closing the deal, who gets the credit/commission between the telesales caller and the person who went out to meet the business. Is it more efficient and/or better practise in terms of accountability, setting targets to have have someone generate their own leads and close them themselves or be a 1-2 effort between the telesales and physical sales rep (sorry for the football/soccer analogy).

    Agree with @sbmiller5 comment, Mark is providing massive value and having a huge impact on young people running startups like me, along with the likes of Jason twist show and andrew warners mixergy. I have learnt more reading posts like these and watching their web shows then in my entire degree in economics. As in my experience we don't really have resources like this in the U.K and a more negative, less entrepreneur friendly culture in the U.K these things are an enormous help, so thanks very much.

  • http://www.seekomega.com Mark Fidelman

    A lot of this is sound advice. I believe you can update this post to include a lot of the social sales tools that are available to salespeople today. For example, Twitter is a big lead generation source for our sales team. There are also extremely powerful tools like Marketo that are absolute game changers when dealing with high velocity sales models.

    Overall though very sound advice.

  • philsugar

    Comments like these are why these posts are so good. I don't care how much people re-tweet. Do it because you love it.

  • http://bothsidesofthetable.com msuster

    good reps sold more regardless of discounts. less good reps always discounted. bad reps always blamed the product.

  • http://bothsidesofthetable.com msuster

    thanks for the feedback – always nice to hear. there are some good folks in the uk – i lived out there for a decade. go see errol daemelin and he'll point you in the right direction. and / or saul / robin klein.

  • http://bothsidesofthetable.com msuster

    I agree but I consider those marketing / funnel management rather than sales tools. I'll that up another day. thanks for the input.

  • http://www.seekomega.com Mark Fidelman

    I can see why your first thought is that these tools are marketing related. But our salespeople use Twitter to look for people that have problems that our solutions can solve. Similarly, the Sales team uses Marketo to alert them to specific prospect buying patterns and activities that they can then act on in real time. I consider these sales prospecting activities and less Marketing/funnel management.

    Look forward to your post on the Marketing subject.

  • http://twitter.com/mikeschinkel Mike Schinkel

    “Some people excel at rules & process. And these are the people you want to find & hire when it’s time to scale your sales organization.”

    For my most successful company I did recognize it early and I attempted to surround myself with the people who were better at it than me. But I didn't do a great job of that, but it wasn't for a lack of trying. I picked a lot of the wrong kind of people. But I still don't what I should have done different. Maybe you can speak on how to identify those right kind of people at some point?

  • http://analyticasystemsinc.com/blog/ John R. Sedivy

    Hi Mark – I think you really nailed one of the largest barriers to growth, unwillingness to “devolve power.” Prior to starting my business my experience and education was fairly process-oriented, so I understood this challenge to some extent. However there is a human nature aspect that I think can limit the entrepreneur, even knowing what you should do – it's sometimes hard to let go of your baby.

    I learned the importance of standardizing SLAs and T&Cs the hard way – mainly by suffering through some initial painful client engagements that would have been eased by standardization up front. I've found that someone within the organization must own these processes and serve as a “bad guy” of sorts – this is especially true in start-ups.

    Great article and advice as usual!

  • http://twitter.com/jabacule jabacule

    hey mark,
    cheers from Brazil.
    thank you for bringing this point up.

    I'm living this moment right now at the startup I work for.