Sales or marketing: what should come first at your startup?

When building your first company, the pressure to grow revenue and find quick wins can be debilitating. You probably have a bank account that is slowly draining, investors studying your every move or competitors that seem to have it all together (side note: they don’t). In the early days, many companies answer the pressure by investing in hastily hiring a salesperson to hunt down new customers. Be careful. This quick fix to revenue can be a mistake.

Am I suggesting that sales during a startup’s early days is not important? No. But I am saying that if given a choice, investing in marketing is usually more important. So, when is it time to hire your first salesperson? Ask yourself a few questions before pulling the trigger.

As a founder, are you selling enough?

I recently sat down with a founder who told me their investors were pushing him to hire a salesperson. My assumption was that he had so many leads that he couldn’t keep up.

Truth: he didn’t feel comfortable banging the phones for his own business. As a founder your first sales “team” is you and your partners. Put yourself in the role and figure out what it takes. What objections do you get? How long does it take to convince someone to verbally agree? How about how long it takes for them to actually write the check? Study your own ability to sell your product. If you can’t do it, a sales hire definitely can’t.

While you’re on the phone with prospects, study everything and learn everything you can about the sales process for your product. Before you spend money on your first sales hire you should be confident that you can train them to be effective. Handing them the keys with no GPS doesn’t work with even the most seasoned salesperson.

Inside or outside sales? Which is right for your company?

Does your product’s sales cycle, price point or market pressure demand for an inside sales solution? If you’re selling a SaaS product for a relatively low contract value – think less than $5,000 year — you won’t be sending reps out on board room visits. The economics just don’t work. This is very common with today’s sales teams. If you’re going to scale, you’ll be bringing sales reps in house and, hopefully, feeding them leads. 

It also means that your sales process will be a large number of deals with short sales cycles. You can’t have sales reps being a part of a prospect’s entire relationship with your company. They should instead be relying on marketing to get your prospect 80% of the way down the funnel. Great inside sales teams are designed to navigate that last 20% of decision making for a prospect. Hopefully, that translates to 80%-ish less time a salesperson needs to spend with a prospect, too. This is just plain cheaper when your product’s price says your cost to acquire a customer can’t be high.

For this reason, you’re going to want a great inbound marketing strategy. In the early days of a company, marketing is more of an investment on the future than any salesperson. You often don’t see the fruit of marketing strategy until months or even years later. However, if your founding team is the sales team then spend the little money you have on content marketing, ad experiments, building a website that converts or even a great brand.

In the first year of your company, your goal should be to figure out how to convince people to raise their hand and say call me. If you expect to take your monthly revenue growth from x to 5x down the road, you need to prove a marketing funnel is possible, as soon as possible. 

Are you creating an empire or a village?

My partners and I often describe our approach to building a company as creating an empire. What does that mean? It’s mostly an appreciation for the long term vision of investing in the future of the company. Are you setting out to create a long term, sustainable, scalable business or are you trying for a quick win? As a founder, I hope your answer is the former. That may mean having a hard conversation with your investor who isn’t seeing the numbers she expects this month because you spent a lot of recent energy on building a marketing process.

My partners and I made a seemingly crazy decision in our first year of business. We hired a full-time writer to manage our then mythical blog. Sales wasn’t even in our vocabulary at the time. We were looking at what we would need in two or three years: a provable marketing strategy with inbound leads flowing in. Our strategy was content (which I’m a huge fan of) but yours may be different. The important part is that marketing in most SMB software companies is the first step to repeatable growth. 

Here’s a fun test. Think about what the perfect picture of your company looks like in three years. Now focus on what your well-tuned marketing and sales process looks like? Your dream likely has a website getting great organic traffic, people filling out demo requests every day and salespeople with phones ringing off the hook. Looks good right? Now, specifically take your dream of organic traffic flooding your site. Do you really believe you can make that happen by launching your first blog or content strategy a year from now? Two years from now? Can you really keep a large sales team busy two years from now if you don’t invest in lead flow now? You can’t.

Okay, so when do you hire your first salesperson then?

This is still a great question and it is undoubtedly different with each startup. 

Approach sales and marketing in the early days of a company like so:

  1. Focus on getting your product to sales-worthy. 
  2. Build a repeatable marketing process – even if it has a lot of clear holes. (Answer the question: Can you spend $x and produce a lead?)
  3. Bolt on a sales process to your marketing system.
  4. Shift your focus to filling the holes and improving efficiencies.

When you are finally ready to hire a salesperson, your next challenge will be to answer the question: What type of person will be most effective as salesperson #1? I like HubSpot’s approach to framing this question. One thing holds true for all first sales hires: they are being handed a duct taped together process that begs for improvement. They have to thrive in an environment that has more questions than answers.

In your quest for repeatable revenue, do the above and your grumpy investor will thank you later.

 

1 Comment

  • Micah Yost says:

    Great stuff, Rick. My experience in sales tells me that the sales cycle, and the distance you can get a prospect with inbound marketing strategies, depends greatly on the product. You seem to touch on this here as well. High dollar sales are very relationships driven with long cycles. Nobody is going to buy a $35,000 medical device from a Facebook add. At the same time, inbound can customers much further down the funnel before they hit a person with smaller dollar purchases and shorter commitments.

    To this end, for higher dollar products, I’ve found it effective to offer smaller commitments that will turn prospects into customers faster. You may not buy a $35K medical device from a Facebook post, but you may purchase a book or a service plan or a seminar. This allows high dollar, often B2B, businesses to create customers with a much faster cycle and then allows the sales team to do their job – up sell.

    Just some thoughts. Thanks for writing. Looking forward to following this blog.

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