Given the importance of the sales department to the overall success of a company, relationship problems and miscommunications between sales and senior management are a surefire path to going out of business.
General management axioms like "avoid micromanagement" and "promote employees on the basis of management potential" are as relevant to this business relationship as it is to any other, but this article also discusses more sales-specific ways that CEOs can lead, including carrying a full sales quota in the first year of business.
Good management involves getting the whole company chasing the same goals, metrics and types of sales leads. Through simple pricing, favorable comparisons with the competition and selling to key decision-makers within the client organization, the sales team can keep the sales cycle as short as possible. This saves time and money and builds good will with senior management.
Give The CEO A Full Sales Quota
Most founders try to hire their way out of the emotional rollercoaster associated with bringing in new business. They tell themselves that they need to focus on "more important tasks" like product development or raising money - but all too often this is a ruse to avoid picking up the phone and pitching to potential customers. It's easy for CEOs, in particular, to think that a 30-minute meeting with their sales team or VP of sales counts as doing a good job.
Nothing could be further from the truth.
Good SaaS founders understand that they need to be personally selling for the first 12 months of their company's life to grow their business. There is nothing glamorous about the work of a startup CEO! If you're a CEO reading this, you'll know that no-one understands your product, your industry - or your passion - as well as you do. The feedback you get from early customers will be immensely valuable as you finalize your MVP, devise a sales strategy and determine pricing.
But a full sales quota?
No-one is above quotas, and the CEO should be prepared to lead by example on this one. A quota gives the CEO the accountability and credibility he or she needs to carry the company forward. Ideally, you want your CEO to be your leading salesperson in the first year of business. After all, there is nothing more inspiring to a SaaS sales rep than the sight of a CEO smiling at having closed a monster deal!
After the CEO has got the ball rolling, they will have the pleasure of seeing their best reps start to challenge them and eventually overtake them altogether. But this cannot be an excuse for passing the baton prematurely.
Don't Make The Best Sales Rep The VP Of Sales
David Beckham and Pele are two of the greatest soccer players of all time, but neither of them has had an illustrious coaching career. This is not due to a lack of talent; managing people is simply a different skill set. The same applies to SaaS sales. Despite closing deals left, right and center, most top sales reps don't make a good VP of sales.
CEOs without a sales background need to understand that being VP of sales is fundamentally different than being a sales rep. It requires the ability to:
- Hold others accountable, and
- Give performance appraisals
These are not skills that you need in order to hit your SaaS sales quota month after month. For example, coaching other people requires patience, humility and empathy - as opposed to the charisma and drive often associated with a top salesperson. Not having someone with these qualities as VP of sales inevitably leads to tension with top management as quotas go unfulfilled.
For the very best sales reps, selling is in their blood; it is a natural instinct. This killer instinct is not always possible to pass onto someone else through coaching. A natural manager is a much better fit, even if that person is the sixth-ranked sales rep instead of the top one.
Another unintended consequence of making the top-performing salesperson the VP of Sales is the loss of revenue from your former top rep!
Ensure Alignment On Metrics And Overall Goals
To run a successful SaaS sales team, the whole business needs to know what it is working towards. Senior management, marketing and sales need to have the same goals and the same way of measuring progress towards those goals. This is a way of preventing awkward discussions between the CEO and the sales team in which the CEO is angry about sales missing targets that were neither realistic nor helpful. The formulation and company-wide communication of these goals is ultimately the CEO's responsibility.
Typically, marketing administers the marketing automation platform (MAP), while sales is in charge of the customer relationship management (CRM) platform. Without close collaboration between the two teams and mutual awareness of activities on the other side of the sales funnel, alignment on metrics is impossible.
Appropriate metrics to monitor vary from business to business, but here are some ideas:
- Proportion of marketing qualified leads that are accepted by the sales team
- Proportion of initial inquiries that are qualified by marketing
- Ratio of marketing qualified leads to overall sales revenue
- Conversion rate of individual marketing sources, such as blog, email or social media
- Length of the sales cycle
- Proportion of sales leads that are handed back to marketing
To reduce the chances of marketing qualified leads being rejected by the sales team, it is essential for the whole organization to agree on what constitutes a "sales-ready lead."
Define Sales-Ready Lead
Typically, marketing is responsible for acquiring and qualifying new leads. Once a lead is deemed sales-ready, the sales department assumes management of the relationship between lead and company. It is the CEOs responsibility to define this term for his or her business and spread it across the whole company. Failure to do this creates unnecessary tension between sales and marketing and slows the sales cycle down, costing the founding team time and money.
Definitions vary from company to company, but a sales-ready lead is traditionally somewhere between a raw inquiry and a lead that has been fully qualified using standard BANT criteria. By raw inquiry, we mean a someone who responded to an outbound lead generation campaign or filled out a sign-up form on your website. BANT stands for:
- Budget - the client has the required capital to pay for your product or service
- Authority - one or more of the key decision-makers in the client's business (or the breadwinner in B2C sales) is strongly interested in becoming your customer
- Need - the client has stated that your product or service meets one of their needs
- Timeframe - the client has given an indication of when they intend to purchase and, where appropriate, has set out a timeline for negotiations
In practice, a sales-ready lead:
- Is in the right industry, in the right location and has enough capital to become a paying customer
- Genuinely needs the product or service that you sell and conveys a sense of urgency about buying it
- Has the necessary authority to make the purchase
- Is willing to speak to a salesperson
Shorten The Sales Cycle
Since sales staff are often the most expensive employees in a given business, the sales team should go to great lengths to shorten the sales cycle and streamline the sales pipeline. This proves to the CEO that they are worth their salary, and helps to build trust.
Communicating with someone with decision-making power in your target organization is the single best way of speeding up the sales process; you should avoid individuals with no influence or authority. In a small business, the key decision-maker is often the CEO or COO. Aim to make this executive a champion of your product or service. The benefits of this approach include:
- Avoiding gatekeepers: mid-level managers who prevent you from meeting their boss
- Better alignment with the lead's purchasing cycle and filtering out leads who lack interest or budget sooner
- Faster rapport: since they have no-one above them, CEOs are typically much more interested in sharing information authentically than in office politics
- Skirting barriers to sales in the client's procurement, legal and technical review departments
- Better post-sales support: building a successful relationship between the client CEO and the SaaS sales team is a good way to ensure your product gets the training and rollout support it needs
In order to more quickly convince leads to buy from you rather than a competitor, it is often worth offering a feature-by-feature product comparison as part of the sales process. You should be able to justify why your product is better than the competition and refute any similar statements made by your competitors.
What about pricing?
In most cases, a lower price point means a shorter sales process. On the other hand, if the price is too low, it might raise questions about why the price is so cheap. In the mind of the customer, low price equals low quality. To save time, your pricing model should be simple enough that your rep can explain it on a single PowerPoint slide.
Avoid Micromanaging The SaaS Sales Team
In the long-term, CEOs can get great results by hiring the best sales staff and giving them space to perform to their best. More day-to-day, the CEO should ensure that senior management interacts with the sales team in such a way that reps feel like they are working autonomously. This requires good listening skills and a willingness to let the sales team set its own goals.
Bad CEOs are useless at delegating, preferring instead to dictate every step of the sales process and look over reps' shoulders to make sure that they are following orders to the letter. Even if a rep has performed a particular task well in the past, they repeatedly check up on them, never allowing them to take full ownership of their work.
If reps' performance is not up to the CEOs standards, he or she may simply take over the project personally. The more competent the rep, the more demoralizing this management style is.
Being a hands-on manager looks very different. A better CEO will set clear expectations about what success looks like for the sales team and measure their progress against well-defined metrics. Rather than doing the reps' work for them, it is more effective to spend time clearly communicating initial expectations, creating accountability and checking progress. A regular weekly meeting is more efficient and less infantilizing than looking over reps' shoulders every five minutes.
Effective CEOs also adjust their management style to fit the context, managing less experienced reps and more important projects more closely than the VP of Sales or clients with a small budget. If a rep is not closing any deals, it might also be a sign that closer management is needed.
If this remains the case for a prolonged period of time, it is better for the overall health of the sales team to fire the underperforming rep and delegate their responsibilities to a new hire who is a better fit for the role. The alternative - prolonged scrutiny by senior management - is frustrating for the sales team and wastes the CEOs time.
Ultimately, a good relationship between sales and the CEO is all about mutual respect. Rather than micromanage their team, successful CEOs lead from the front by closing sales of their own, or ensuring company-wide alignment on key metrics and terms like sale-ready lead.
Effective managers set clear expectations of sales reps and give their team the autonomy they need to meet them. In return, the sales reps should chase the targets they are given and work to close sales as quickly and efficiently as possible.