So you’ve identified your product/market fit, created a business model and you’re reaping revenue from your first customers. Congratulations. Now you think you are ready to conquer the world? Think again.
74% of high growth internet start-ups fail because of premature expansion. Why do they expand too early then? Because they face increasing pressure to do so from investors and markets. The former demand high growth rates in order to receive high return on their investment as soon as possible. The latter, due to increasingly shorter product life cycle times for IT vendors, require new companies to maximise the small window of opportunity quickly before the technology or market becomes obsolete. As a result, it is easy to see why start-ups are often tempted to give in and expand too soon.
So how can you avoid falling in this trap?
The only way to be ready for total expansion is to become scalable and this needs time. Of course, if you wait too long, you will miss the market, but if you rush into expanding without preparation you will lose as well. Just like an eagle mother pushing her child off the nest when it doesn’t have the wing power yet to fly, expanding when you are not ready will end badly as well.
Thus, the key is to find the right balance. This means, you should invest time in preparing for scaling, but once you are about 60% ready you have to start going to the market at full speed. Additionally, the upside of this approach is that as investors see you have a proper and scalable business model, their risk of investment and expected ROI will improve and your company will become more attractive for receiving external funds.
But how can you actually achieve scalability?
For that you need to create repeatable, consistent and predictable processes in every aspect of your business ranging from accounting over HR to IT. Of course, all aspects of business are important, but the most crucial scalable business field lies in sales, as this is where the money will come from to pay your loans, investors, team and yourself. Just as you wouldn’t bite the hand that feeds you, you can’t ignore the stream that keeps you alive. Thus, the key, when focusing on vending, is to establish a scalable sale team and sales model simultaneously, as one does not work without the other. Having the best team at hand without a waterproof sales model will fail as much as having the best sales pitch in the world without the right people.
Scalable Sales Team
In order to create a scalable sales team, you need to do two things: to hire successful people repeatedly and to train them in a consistent and measurable way. Recruiting fitting and best talents consistently is achieved by first analysing the most and least successful sales people in your team in order to create a clear and measurable target profile based on your findings. For instance, you might identify that your best performers are talents with excellent grades from the best business schools, with successful backgrounds and high character traits in regards to coach-ability, competitiveness, ambition and work-ethic. Then, once you have set up a clear profile, you can concentrate your HR efforts on searching candidates that tick all the boxes and test them against your success indicators. In the end, this process will help you establish an inflow of consistently great sales reps.
However, merely hiring the best prospects is not enough if you can’t get them up to speed in an efficient, effective and consistent way. For that you need to form a standardised on-boarding process consisting of theoretical and practical training that can be monitored by numbers and tested objectively. Additionally, this process needs to not only be focused on sales skills and techniques but it also has to put emphasis on new recruits to understand the benefits of collaborating with the team and to buy-in and believe in the sales model. Otherwise you might have the best sales reps and model but nobody who is taking advantage of that.
Scalable Sales Model
As mentioned before, boasting the best sales team is not enough to ensure consistent success if you don’t have a scalable and proven sales model. Think of a rowing team consisting of the best athletes but with no standard process, everyone will follow a different beat and the boat will move in circles. Thus, in sales the key is to first identify a repeatable process to get paying customers efficiently and in a profitable manner and, secondly, to make your team use it.
Regarding the former, you have to continue working on and refining your marketing and sales operations to discover the most scalable and profitable channels. This can be easily done by taking advantage of CRM software such as Hubspot, Sugar or Salesforce as this will allow you to objectively measure and analyse the success rate of different approaches and channels. In particular, you would be looking for methods that show high customer life value return on client acquisition expenses, as these processes would indicate very high scalability for expanding your sales operations. For example, let’s say you are spending 4000 € to obtain a customer and the client is going to pay an annual fee of 1000€ over an average customer time of 3 years, expanding this model would soon put you out of business.
After discovering the best methods, the focus shifts to applying them in your team through standardised processes in your marketing and sales operations. Thus, by having clear rules and designed processes for activities such as feeding the database with unified terminology, utilising a structured marketing inbound process, and closing leads, you are beginning to create consistent and predictable sales operations. This in turn, together with scalable teams, makes you ready for conquering the world.
There are three takeaways from this blog post: firstly, even though IT Start ups are pressured to expand early by impatient investors and short product life cycles, you should not dare to fly without being ready for it. Secondly, scalability starts with sales, as this is where the money is coming from to keep you alive and growing, so make sure you put sufficient emphasis on it. Thirdly, a great sales team without structured processes will move forward as effectively as a rowing team working to different beats.
More articles about B2B Business Development:
Why polar bears don’t eat penguins?
Startup Genome Report Extra on Premature Scaling