Link to Podcast. Link to Transcript. 15 December 2022. Unless specified, all words are by Pete Kazanjy.
Sajith: Relevant for founders of early stage SaaS / B2B companies as well as sales managers or leaders. Pete Kazanjy is well-known for his book Founding Sales which recommends that in early-stage companies, the founder(s) should take a lead in selling because at this stage, what you are looking for is insights and feedbacks that help you further refine the product and iterate to PMF, and the fastest feedback loop is when the founder is in front of the customer. In the podcast, Pete Kazanjy expands on the topic, and details how founders should set up and run the sales org (start with 2 junior folks who support you and then after 20-25 accounts are in and there is some consistency of closure, get a mid-level manager with experience), and importantly evaluate performance of the sales hires. In addition he explains why remote working is bad for young sales folks (weaker delayed feedback loops), what the scales for sales is (rapid rapport building) and finally his fave books (I didnt expect one of them to be The Goal).
I wrote a book on sales for founders and other first-time sellers, it’s called Founding Sales. Mainly, it was the book that I wish I had, rather than having to learn by a narrative from the first round capital portfolio and what have you.
The way that I think about the book, Founding Sales, I like to think of it as the sequel to Eric Eric Ries’s The Lean Startup or Steve Blank’s Four Steps to the Epiphany or Startup Owner’s Manual or whatever, where if you think about the stages, and this is all B2B, if you think about the stages that a product goes through, it’s one, you’ve got to know what problem you’re solving and validate that…That’s customer development, that’s customer research, and that’s more of a product management function. And then there’s building the minimum feature set in order to prove that maybe technology can fit to this problem and solve it.
generally speaking, it is to contingent on your sales motion, but it’s going to be that you can reliably, at a pretty okay win rate, so maybe 15% or 20% or 25%, turn first meetings into eventual customers and do that in a reliable fashion.
So, it’s at the point where it (founder sales) feels like it’s statistically significant (conversion), it feels like it’s repeatable, because what you’re going to then do is now it feels like it’s a safe bet to try to abstract that out to somebody else.
Why founders should sell
Lenny: One is figure out what you should actually be building, that’s a reason founders should be selling, two is learn how to position and pitch and sell, three is figure out what you could teach your salesperson when you hire them.
Pete: …as a founder, it’s going to be way easier for you to get good, or minimally viable good, at selling by having interactions with non-friendly parties and having commercial conversations and asking for money in exchange for the value delivery. It’s going to be easier for you to do that than it is for some third party to become as expert at the subject matter that you’re tackling that you are.
Doing founder-led sales
Generally, what you want to do is you probably don’t want to start with a VP of sales to start, a sales leader, and there’s a couple of reasons why there. Even if you figured it out yourself, that’s required, you have to get to that minimum sufficiency of 10, 20, 30 customers yourself first. But then the reason why I advocate for folks to hire a couple of sellers or a couple of AEs to start is because, again, you have that software in your brain. Unfortunately, there is no GitHub for sales motions, and so it’s in your brain, it’s in your documents, et cetera, and so now, you’re going to teach these other folks. So, what you want to do is you want to hire a couple early-stage pioneer sellers to take that sales motion.
The downside of seeking to hire a VP of sales or a head of sales, or what have you, who actually is a head of sales is coming out of an organization where maybe he or she is a manager of managers or manages eight reps or something like that, is that person hasn’t been selling for a hot second. I think actually Jason Lemkin had a pretty funny tweet about this the other day where he was like, “Hiring the VP of sales who’s been there and done that before, why exactly does she want to do it again?” Like, “Oh, you scaled up a Datadog or Figma or whatever, you should come to my crappy little startup,” it’s like, “I’m professionally rich.” So, instead, the great folks to look at are the deputies or those early-stage sellers.
…early- stage selling takes early-stage sellers or people who have been there, because you’re not going to have all the collateral, slides and scripts and whatever aren’t going to be all buttoned up and with a bow around them, and so looking for those early-stage, grimier, grittier sellers is a more effective way of going about that. Those are the folks that you want to look for once you’ve gotten to that statistical significance of your own selling capacity.
Lenny: To make that just even clearer, the suggestion is if you’re, say, a Series A founder, what’s a profile of a person you look for? You said it’s a deputy at a successful sales org?
Pete Kazanjy: …say you’re doing some sort of design tool, I would go look at the Figma sales organization and I would look at some of the earlier sellers who were there maybe two years ago or three years ago or what have you, maybe you could consider getting a sales manager there who’s not super far from selling….someone who’s not too far from having sold and is willing to roll up her sleeves, but ideally, that would probably be the person who you’d want to hire after you’ve hired those couple of sellers and gotten them to success.
(this person’s) probably going to look at your organization and be like, “Cool. Prove to me that your product fits the market, because I don’t want to necessarily take a bet on you,” and then you would say, “Well, in addition to having a 25% win rate with me, I have these two sellers right here and they both have 20% win rates and you can see that they’re both closing $50,000 of bookings a month, all I need you to do is scale it up.” In which case, that early stage head of sales is like, “Let’s do it.”
So, if you have done that and you’ve sold 20 or 30 deals, you know it can be done, we have an existence proof of this. So, if someone else can’t do it the way that you do it, and this is why hiring two folks to start is effective, you don’t want to hire just one, maybe three, but four, it’s like, “Ugh, that’s a lot to manage,” at least to start. So, if you have done that and the person, their win rates are poor or their activity levels are poor, things like that, those are usually indicators that it’s not work out, that they’re not getting those second dates, they’re not getting those third dates, but importantly, they have to have the materials in question.
Did you create the slide deck? Did you take people through and did you give it to them? Did you take all the discovery questions that were in your brain and write them down into a Google Doc or a Notion page or what have you? Do you have a demo script for them? If those things are not present, then probably no one’s going to be successful, or at least they’re going to have to rederive all that stuff that you already did. But if you have all those precursors and it’s not sticking for someone, that’s probably a good leading indicator that they’re not going to work out
Evaluating sales performance
Lenny: How much time do you give these folks before you make a decision?
Pete Kazanjy: This is why it’s so, so, so important to look at leading indicators. This is something that we just think about all the time here at Atrium, from a instrumentation and data-driven sales management, is if someone’s not having customer-facing meetings, if they’re low activity, you’re never going to win anything. If you have a 50% win rate on two opportunities in a month, that’s probably still not going to be super helpful unless you have a very, very, very high deal size. So, looking at those leading indicators like, “Are they having first meetings? Are they having second meetings? What does their email volume look like? Are they progressing things through, are they getting things to proposal, and then eventually, are things closing?”
…looking at those leading indicators like opportunity inflow, “Is a person putting meetings on their calendar, are they progressing them? Are they being active in the meantime?” Those are all really good leading indicators. If somebody’s not getting first meetings on the calendar, you know within a month, it’s like, “Cool, this isn’t working out.”
Now, if they’re not getting to second or third meetings, but they are getting those first meetings, well, now you know you’ve got a different problem, which they’re getting those first dates, but they’re not getting a second date and they’re not getting a second date the same way that you were, maybe that’s a coaching issue or maybe it’s just a behavioral problem that’s that you’re not going to be able to surmount. But the point is having instrumentation on the most leading indicator possible gives you eyes onto whether or not things are working or not and you can make judgements fast, because the worst possible situation is nine months in, you’re like, “Man, it’s not working.” It’s like, “Man, I bet if you looked at the leading indicators, you would have known two months in this wasn’t working.”
In the first month, maybe you spend that time onboarding the rep, teaching them, going through mock discovery conversations, mock demos, et cetera, having them ride along with you. In the second month, we would expect them to have 10 first meetings or maybe 20 first meetings and we would expect 50% of those to get to the second meetings, and we would measure those things. In the third month, we would expect some subset of those first meetings and second meetings that happened in the second month to get to a proposal, to get to a commercial conversation, and then maybe we would expect some of the deals in that month to close to win, or maybe the next month.
It’s essentially like you’re looking at the leading indicators in the appropriate timeframe, such that if someone is in month three and they’re getting a bunch of their deals to proposal, you can’t declare victory yet because the money is not in the bank, however things are looking good. So, if you get to month four and lots of things are getting to proposal, but nothing’s closing in month four and nothing’s closing in month five, you still can’t say “Olly olly oxen free,” you should still be very concerned. But if the leading indicator is at the right level for the right period or right interval in ramp, then you can feel confident, but not declare victory yet.
Why remote is bad for junior sales folks
(Sajith: Pete feels it is best for junior salespeople to work out of a physical office as they can get quick feedback on their call performance, and learn from senior sales pros.)
The new sellers, they need to learn the sales motion and then they need to be audited, instrumented, so the faster the loops are on that, the better off you’re going to be. If the loops are once a day of listening to their calls or maybe even a longer interval, then just the correction loops are just going to be way too slow, versus if you’re sitting next to somebody or you’re sitting amongst three or four people and listening to all their calls concurrently and then they get off of a call and it’s like, “Hey, that was really good, correction here, correction here, correction here, correction here. Here, run it back to me.”
Now, the loops, the speed with which you’re able to update their software and make sure that the sales motion is running appropriately on them, is quite high. In early-stage startups, that’s the only thing that matters, it’s a race against time to make sure that you get to success, so you can raise your next round of financing or get to profitability or what have you, and so having asynchronous distance is really problematic for that, especially for junior folks, like SDRs, junior AEs, all of that, it really is problematic. Once that sales motion is baked and can be distributed, that’s potentially a different situation, but very early on, having someone being able to sit side-by-side with your sellers, t’s hard to beat.
the way that B2B startups scale, is it’s not WhatsApp or Twitter or Airbnb or whatever, where you have this scalability via marketing, the way that B2B organizations scale primarily is by adding more salespeople who then have customer-facing meetings with prospects.
so sales motion is a fancy-pants way of describing just all the things that you do in order to take a prospect and bring them through the sales process and then eventually close them. One helpful way to think about it is kind of like software and what you want to be doing is constantly updating it. Oh, that was a really interesting question that the prospect asked right there, I didn’t have a good answer for it and moreover, I didn’t have a slide for it.
You know what I should do? I should make a slide that handles that objection so I can show it to them visually and also, it’ll help give me guardrails and a talk track and that’ll be nice. Now, my sales motion has been updated.
So, generally, there will be different stages depending on the sales motion. So, use Atrium as an example, we sell on customer data. It takes five minutes to turn on an Atrium account, it’s really helpful for folks. They just sign in, they OAuth with Salesforce, great. So, a really important stage in our sales motion is, we call it data light, has data been lit up? So, that’s a stage, we have a discovery stage, we have a data light stage, we have what we call a preview stage, are we previewing it with the staff? Then, we get to a commercial discussion.
So, you can measure how you’re getting to those stages, which is somebody lands on whatever page that Lenny was in charge of at Airbnb and did they click on the right thing and do they get to the next thing and did they get to the next thing, get to the next thing? So, in sales, it’s kind of the same thing. So, the more sophisticated version of this is looking at stage conversions, what have you, the less sophisticated version of it, which early on, I think is an appropriate way of doing it, is like, “Hey, man, are we getting second dates?”So, just metaphorize it to Hinge or Coffee Meets Bagel or whatever the more recent one is, it’s like, “Are we getting the second dates? Are we getting the third dates? Because if we’re not getting the second dates, probably something’s amiss there.”
Dropbox and not getting sales religion
…the most famous example of an organization that maybe didn’t get sales religion as quickly as they should have would be Dropbox. Dropbox has phenomenal early sales leadership. There’s all these just absolutely fantastic Dropbox folks, but the problem was is that the organization, from a product standpoint, never put all as many calories behind product development that would support the ability to sell to across an entire organization.
never mistake your lead gen for your business…Because it turns out that people paying 19 bucks a month or 29 bucks a month or what have you is really great, but getting to a $50,000 or a $100,000 or a $250,000 contract, that’s where big ARR numbers start racking up, and organizations want to talk to a human in order to navigate that.
100% of B2B companies end up building a sales team. It’s more of a question of when versus if, so even the really famous ones like Atlassian. Atlassian, they had a sales organization, they just didn’t call it a sales organization and they went pretty far without a lot, but instead what they did was they just priced the product breathtakingly low. I think developer tools can oftentimes do this, where because developers are pretty technical, they can adopt product, they don’t need handholding in order to adopt a product that is complicated enough to be valuable. Datadog’s a good example or New Relic or AppDynamics, but even those guys very early on had meaningful sales organizations. There’s a lot of reasons why Datadog ended up winning that market, but their sales organization is no joke.
His number one tip for getting better at sales + scales for sales
The first chapter of Founding Sales talks about what I call sales mindset changes….in sales or anything customer facing, what ends up happening is you’re meeting multiple new humans every day, if you’re doing it right, and that just is such a mindset shift. You’re not going to be able to remember everybody. You’re going to have to write it all down. You’re going to have to use the CRM for that. You’re in the starting blocks on the track. You’re in the starting blocks and you have 90 seconds or a couple minutes to form rapport, to make somebody feel like they should trust you and they want to be honest with you.
an ideal salesperson’s calendar or a founder who’s doing sales is 2, 3, 4, maybe 5 customer-facing meetings a day with different humans. And then moreover, then you’re having incremental interactions with those folks later on, like later that week or the next week or what have you, so then you have to keep continuity of these multiple parallel conversations.
one of the things I challenge my staff to do is I call it turbo rapport, it needs a better name. But think about people that you interact with in the world who maybe are a little shields up, they’re probably used to interacting with people who are not going to be super nice to them, maybe it’s bartenders or a flight attendant or a barista, or fill in the blank. Think about how quickly you can become friends with them, how you can break that down, because that’s going to be a really good skill for you to have when you’re interacting with a prospect.
My friend, Brett Burson, had this great tweet one at one point where he said, “Think about the things that you do in your day-to-day that are like a pianist, like a piano player, playing scales like, ‘Da, da, da, da, da, da.’ What is the version of that for selling?” That’s rapid rapport building.
Asking good questions, asking follow-up questions, being willing to ask uncomfortable questions, all those sort of things, and asking for money and then shutting up and waiting for them to answer, all these are very uncomfortable things, but the more you do them, you’ll just get good at them.
Lenny: If someone’s listening to this and they’re like, “I want to get better at sales, what’s one thing I could do differently tomorrow, this week, to improve my ability to sell my product?” What would that be?
Pete: There’s the non-complicated version and there’s the complicated version. The non-complicated version would just be just walking down the street, make eye contact with everybody, and then every person that you stop next to at Starbucks or the crosswalk or whatever, just strike up a conversation with them, figure out a mechanism by which you can start a conversation with them. Compliment their shirt or their shoes or remark on something. Don’t use the weather, because that’s lazy, but figure that out, so that’s the first version.
Probably the more sophisticated version is just be very, very tight on your ICP, just be very, very, very crisp around who has your problem and why. Being more crisp around that and then having that understood is a great way of making sure that you’re not wasting time on people who don’t have your problem and that you’re doing more of those loops with people who are right in the white-hot center. So, one is a behavioral thing and one is a more thoughtful thing.
I think probably the biggest thing is, the thing that I just like to encourage founders and product managers and what have you, is just don’t be afraid of sales. There’s a lot of people out there who would love to tell you a story that it’s magical or like, “Oh, you’ve got to be a born seller,” or things like that and it’s really not. Those people are just talking their book, if you will, and so just getting good at those behaviors, it’s going to benefit you in a myriad of ways. Even if you don’t want to necessarily be an early-stage founder, even as a product manager within an enterprise organization or even a consumer organization, selling behaviors and good communication and persuasion and always thinking about what’s in it for them, et cetera, those are really good skills for internal selling, for external selling, if you want to interface with customers, et cetera. All these skills are very important and impactful for a myriad of personas.
Modern sales vs old-school sales
The old-school sales thing is like, “I’m going to sell something to a mark,” or the best example of this, “That guy’s a great sales guy, he can sell ice to an Eskimo.” It’s like, “Man, if you’re selling ice to an Eskimo, you’re an asshole. What is wrong with you? They don’t need ice,” unless they’re visiting Southern California.
So, as a seller, the way that I like to frame it to people is that you’re a consultant that has a particular predilection for a given solution, your solution. Use Atrium as an example. Atrium’s minimum ICP is probably SDRs plus AEs in an organization should probably be at 10 all the way up to 300. So, if someone shows up and they’re like, “Man, I’ve got to get really good at sales, I need to buy your software, Pete,” and I’m like, “Cool. How many salespeople do you have?” They’re like, “I have one.” I’ll be like, “Man, I’m not going to sell you Atrium. You’re just going to be unhappy, it’s going to be dumb, it’s going to be a waste of our customer success resources, you’re going to churn,” all those sort of things.
But if instead what you’re doing is you’re saying, “Hey, I’m going to go out in the market and I’m going to find the people that have a high proclivity that our technology solves and then I’m going to talk with them about how they’re solving that problem right now, and ideally, through a series of questions, I’m going to reveal that to them that they’re doing it probably not great. And then once I’ve revealed to them the fact, through this directed questioning, what’s known as discovery, that they have this high magnitude problem, that it is causing them lots of money, that it is a pain in their ass, and then I reveal to them that there is a better way of approaching it and magically enough, I happen to be a representative of that solution,” well now that’s an ideal transaction and everybody wins. And then scale that up across an entire economy and you can see why I was saying that sales is the grease that makes the economy work like that and also importantly, brings new technology to the market in a way that makes everything better.
Books he recommends
The books that I recommend the most, there would be The Goal by Eli Goldratt. There are two books that inspired Atrium, one is the Goal, which is essentially is a novelization of the Toyota lean manufacturing system, so it’s a process engineering book written as a novel, it’s really fantastic. Sales organizations are just revenue factories, so if you want to think about systems thinking and processes, but in a way that’s not a textbook, it’s absolutely fantastic.
And then the other one is a book by Bill Walsh called The Score Takes Care of Itself. Bill Walsh is a really famous football coach for the Stanford Cardinals and the San Francisco 49ers and he just broke down how you can’t worry about the score in the football game, you can only worry about the things that are in front of you, that you can control, and that if you do a high quantity of high-quality actions, whatever your position is, as a quarterback or a linebacker running back or whatever, then the score will take care of itself. That’s very applicable to sales, as well, if you focus on those leading indicators and make sure that you’re doing it in a high quantity of high quality way, then the score will take care of itself. So, those are two great books I like to recommend to folks.