By Dan San, founder of Silicon Alley Consulting
Mark Cuban once said, “Sales cures all.” Yet in the startup world, I see many companies raising venture capital money in the hopes of creating a viable product while ignoring the part where they actually create a business model and sell to a real customer base.
I've personally generated over $3 million in revenue for three different startups while keeping the cost of acquisition extremely low by understanding how to effectively negotiate and sell. As a founder, it's crucial that you understand sales and build a strong team to keep your business alive.
So, how can you start?
Understand the nuances of sales.
First, you need to understand that marketing is about positioning your product or service in the marketplace. Selling, on the other hand, is about identifying which customers need your solution, determining if they are qualified and then helping them make a decision to solve that problem with your offering.
Let's talk about business-to-consumer (B2C) versus business-to-business (B2B) selling. B2C, or business to consumer, means selling directly to the end consumer and can be done via your e-commerce site, a marketplace like Amazon, a direct sales team, etc. B2B means selling to a business such as a retailer, distributor, Fortune 500 or small- to midsize business.
From my experience, the psychology of how B2C and B2B purchasing decisions are made is fundamentally different. In B2C, purchases are primarily made out of emotional gratification, while in B2B purchases are made with a focus on return on investment (ROI), integration speed and the bottom line -- and decisions usually involve multiple stakeholders. For example, a person will buy a new home based on how it makes them feel, while a real estate business purchases a new investment property based on the cash flow or capital gains it anticipates to receive from that purchase.
Adapt your selling strategy.
Both B2B and B2C selling involve people, but how you find, qualify and close deals for them is different. With B2C sales in a retail environment, you want to quickly grab consumer attention, build rapport and appeal to their emotions. Start with a greeting and quick qualifying question that leads into a demo in which you gauge their interest and continue qualifying them. Next, acquire their contact info -- they may even purchase the product or service right then and there.
In B2B, transaction sizes are generally much larger and sales cycles are longer. Sometimes it makes sense to select one core person within an organization to approach first; they can operate as your internal champion who you work with collaboratively over a period of weeks or months to scope out and close deals with the internal stakeholders of their company.
Hire early sales employees with the right mindset and skills.
Inside salespeople with no field or startup experience are skilled in their own right but often have no idea how to build a successful sales foundation for a startup because they’ve never had to identify a customer base, create and test pitches and build a sales process all from scratch. That's why it's important to hire early sales employees with a growth mindset.
Your first salespeople are field researchers on the front lines who will not only sell but also work with product/R&D, marketing and customer service. Hire people with proven experience in sales for early-stage startups versus established companies. Personality traits to look for include creativity, agility, ambition and leadership potential. From there, compensate them in a way that aligns with driving growth and producing results by offering commission.
Compensate your sales talent accordingly.
After building a team of the right talent, compensate them accordingly to see results. How you compensate your salespeople will vary by your vertical, your product's wholesale/retail price and your stage of growth. Below is a general guideline:
- Base + Commission: best for early-stage and growth-stage startups
- Base + Bonus: best for large and established corporations
- Commission Only: best for contracted brokers and direct sales reps
It’s standard to compensate early employees with less cash upfront and with equity in the company due to a tighter budget. If you plan on selling your startup, I recommend rewarding your early team members vested stock options with a one-year cliff and three-year vest. Considering the insane amounts of funding many tech startups receive, they can afford to give some equity. Use Glassdoor to check local salary market rates for the roles you’re hiring for.
Remember, great startup salespeople aren't made in colleges or big companies -- they are made on the front lines. When it comes to going from seed to scale, look for sales leaders who have startup experience and the right mindset. From there, only the sky is the limit.
Dan San is the founder of Silicon Alley Consulting. He’s generated millions for multiple startups. Learn more at siliconalleyconsulting.com