Read this eGuide: 8 Tips to Conquer the Sales Learning Curve and Successfully Scale Your Business covers eight things entrepreneurs can do to hit the sales learning curve head on, successfully scaling in the process.
8 Tips to Conquer the Sales Learning Curve and Successfully Scale-Your Business
EIGHT TIPS Your Business
to Conquer the Sales Learning Curve
& Successfully Scale
No one starts a business with visions of failure, but it is no secret that many startups
never make it. There are numerous reasons for startups’ failures, not least of which is a lack of
understanding of what Mark Leslie and Charles Holloway dubbed the “Sales Learning Curve.”
In their Harvard Business Review article by the same name, the two break the curve into
three phases: the initiation phase, the transition phase and the execution phase. They
then highlight the need to approach the sales process differently throughout, cautioning
that, “Hiring a full sales force too fast just leads the company to burn through cash and
fail to meet revenue expectations.” i
“If start–ups apply conventional sales wisdom to new–product launches and add
sales capacity too quickly, the result is often disappointing revenue growth and a cash
shortfall,” they wrote. “That’s because the conventional wisdom fails to address a number
of challenges involved in creating markets for unfamiliar products: the time required to
educate customers about the offering and learn how they will use it, the inevitable
design modifications needed to deliver a robust product that will fully satisfy
customers, the identification and resolution of service issues, the development
of a repeatable sales model, the selection of appropriate market positioning, and
the design of effective sales incentives.” ii
This eGuide will cover eight things entrepreneurs
can do to hit the sales learning curve head on,
successfully scaling in the process.
The essence of the sales learning curve is to keep spending in line with revenue and
to know when to ramp and when to keep the status quo. Consequently, it is extremely
important to keep a close eye on the numbers. After all, as the old saying goes, “You
cannot manage what you don’t measure.”
For those in the SaaS space, Bessemer Venture Partners has identified the most
important metrics to monitor and measure as Committed Monthly Recurring Revenue
(CMRR), Cash Flow, Customer Acquisition Cost (CAC), Customer Lifetime Value
(CLTV) and Churn. iii (For more information, read our August 2013 Article: How SMaaS
for SaaS Helps You Play Moneyball with the 5 C’s)
All startups, however, must track (and keep a lid on) the sales, general, and
administrative costs (SG&A) that it takes to acquire and service customers. They must
also have a solid understanding of how long it will take for the assets these costs are
covering to bear fruit so as not to nip them in the bud too early.
“Working with a sales
and marketing as a
service partner allows
you to push your
expenses “into the
cloud” and budget
your sales and
as a fixed, rather than
In his May 2013 Harvard Business Review cover story, “Why the Lean Start–Up Changes
Everything,” author Steve Blank promoted his idea that early stage companies can move
faster and reduce their chance of failure (citing the current start–up failure rates at 75%)
by moving towards a leaner model that “favors experimentation over elaborate planning,
customer feedback over intuition, and iterative design over ‘traditional big designs up
This concept intersects with the sales learning curve at the very early “initiation” phase—
the point when the value of the information gained by conversations in the market is
almost as great as the value of a direct sale. It is a model that encourages getting “feet on
the street” sooner rather than later. These feet, however, can be virtual. Thanks to today’s
technology, inside reps can cover a lot of ground without ever leaving the office.
At NuGrowth, we’d also argue that it is also a model that substantiates the value of the
sales and marketing as a service offering—a fully built, fully staffed sales and marketing
team, and all the tools they need to execute.
As the authors of Bessemer’s Top 10 Laws of Cloud Computing and SaaS, wrote
in “Law #1: Drink Your Own Champagne,” “Your cost of capital is also likely very
high, making upfront hardware and license costs unnecessarily expensive for a young
company. By pushing as much as possible into the cloud, you avoid management
headaches and make these expenses variable.” v
Working with a sales and marketing as a service partner allows you to push your
expenses “into the cloud” and budget your sales and marketing expense as a fixed, rather
than variable cost. It also puts you in a better position to pivot if necessary.
Hiring the right individuals is essential when you are trying to grow your business.
Hiring business development staff is a science as well as an art, and few early stage
companies do it well. It is very important to have a well–vetted process for bringing
new sales reps into the fold. The downside is too great not to pay close attention to this
area. Because human capital costs will always be one of your biggest expenses, it is very
important to get it right the first time, otherwise you could end up burning through a lot
of money and inflating your CAC just by blowing through sales reps.
“Hiring without a good sales infrastructure,
direction, process, and plan in place is a risky
proposition with no guarantee of effectiveness. ”
While hiring is exceedingly important, getting the right person on board is only half the
battle. Without the proper tools and support structure, that person will have a difficult
time getting up to speed. Not only does this slow the sales cycle and increase the cost
of customer acquisition, it decreases job satisfaction and increases employee turnover.
Hiring without a good sales infrastructure, direction, process, and plan in place is a risky
proposition with no guarantee of effectiveness.
Suggested support structures include sales coaching and management, a solid training
plan, a defined territory management plan and system to attack the market, a fully built
CRM system, strong prospect lists, a marketing automation tool to leverage the power of
digital lead generation.
By investing in a system, you will increase the effectiveness of your reps, and decrease
In an early–stage company, knowing your market is easier said than done—a fact that
makes it all that much more critical to have processes in place to collect, record and
distribute information throughout your organization. Knowledge gained can be used
to build out your sales plan, define or adjust territories and, if necessary, modify your
product or service offering to better fit the needs of the market.
It is the need for this knowledge–gathering phase that serves as the basis of the Sales
Learning Curve. Rather than hire high priced sales representatives that will “burn
through cash and fail to meet revenue expectations,” the better option is to invest in
resources that will not only sell, but mine for information. This can be done through
a combination of digital marketing and high volume critical conversations in the
marketplace. Because speed
and cost containment are
critical at this stage, it makes
sense to consider an inside
sales model coupled with
a strong digital marketing
program. Well–trained inside
with a fully–built CRM
system, and backed by a good
lead gen marketing team can
cover a lot of ground faster and
more cost effectively than high level
There are many ways to reach out into a market—from tradeshows and events to industry
associations to outbound calling, email marketing and full–blown content marketing
plans. Each of these activities requires a different level of investment. Some are human
capital intensive and others are not. Each will provide a varying rate of return. The key
is figuring out which will provide the greatest return for the least investment, and, if a
combination of tactics is required, how best to utilize your resources.
One key example of this is the inbound vs. outbound debate. Do you sink all your
money into inbound marketing to “pull” prospects in, or do you invest in
the resources and infrastructure needed for an outward “push” strategy?
There are some who would argue that since statistics now show most B2B buyers are
well on their way through a sales cycle before they ever talk to a sales representative, all
business development money should be spent on content marketing, website development,
online webinars and demonstrations, and other inbound tactics. There are others who just
want to pick up the phone book and start calling until they find someone who will “bite.”
The optimal scenario is a mix of outbound and inbound efforts. At the very early stages of
the sales cycle, inbound tactics work wonders for building a brand and getting interested
parties to self–identify, in essence warming the conversation for the business development
rep. Couple these tactics with outbound email campaigns and a strategically focused
phone strategy with all results captured in your CRM, and you’ve got the first stage of
the cycle covered. The further you get through the cycle, however, inbound marketing
becomes less important and critical conversations become more important.
Know when to hold and when to fold—and when to let marketing take over. There are
so many hours in a day. It is important that your business development representatives
spend their time wisely and focus their efforts on the deals most likely to convert.
Establish a set of standards by which to evaluate the prospects they are talking to, so that
less time is wasted on talking to prospects who are not ready to buy. Determinations
need to be made about when to continue calling, when to disqualify a prospect
altogether, and when to turn over the prospect to marketing for “nurturing.” NuGrowth
typically recommends 7-10 touches before turning a prospect back over to marketing.
It may sound simplistic to say it, but a key part of growing and scaling your business is
customer retention. First, it costs much less to keep a customer than it does to find a new
one, and second, happy customers are an excellent source of referrals, while unhappy
customers tend to be vocal in expressing their displeasure with your brand.
There are many facets of customer retention, only one of these facets is providing a good
product. Service is critically important, as is consistent, open lines of communication.
In his blog post, “SaaS Sales Management Tips | Organization Strategy,” Chaotic Flow
author Joel York writes that most early–stage companies start off at a considerable
advantage over their larger competitors from a service standpoint simply because their
clients truly are a name not a number. “However, this advantage will be forfeited,” he
writes, “if you fail to establish a strong service culture and back it up with the right
sales support systems, including your web site, communications infrastructure, sales
automation, selling tools, training and interdepartmental cooperation, so that your sales
team can deliver the goods.” vi
To best serve your clients as your organization continues to grow, start splitting your
sales team into different groups, specifically designating a team for
account management and one for new business development. Continue
to market to your current clients, albeit in a different way than you do to your prospects.
Newsletters, loyalty programs and referral incentives are just a few examples of good
customer based marketing.