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Outsourcing Startup Sales

19.04.2014

Don’t do itbaby

Some years ago, I wrote about the challenges of finding others to do your sales for you (see http://www.telekta.com/blog/2009/10/practical-sales-outsourcing)This past year, I have found myself more involved with startups and identified an additional insight that all experienced startup professionals agree on, but most technology-based new startup founders miss.

Startups might be able to outsource engineering and operations (not without difficulty), but they should not even think of outsourcing initial sales for at least three reason: 

  1. The All startups (or breakthrough product launches), if successful, will make at least one and perhaps three or more business pivots (Business Genome Project.http://blog.startupcompass.co/).  For those not familiar with the term “pivot”, in this context it means a significant change in product features, target customer, business model, or market position.  For a founder, it also means recognizing that a major assumption in the master plan was flawed and that all the work associated with that part must now be trashed.  Put this way, it is not all surprising that founders (or product owners in a non-startup context) would be slow to pivot based on feedback from a supplier, especially if it is filtered through a third party.  A founder must hear this disappointing news directly from his customers and acting quickly, come to the realization that action must be taken.  At this business stage, agility is one of the founder’s only advantage.  A channel partner or hired gun salesman is at least one step away from being able to take action which slows down the feedback loop so much that it is often too late to pivot effectively.
  2. The second reason not to outsource sales in the early stages comes from the nature of what is being built.  Read the annual report of any mature software company (simplest example since it has not cost of goods) and you will see that the cost of engineering is typically 15 to 35% of costs while the cost of sales is around 50%.  This means that a product company must be good at engineering management but great at sales management in order to succeed.  Moreover, founders must be good enough at sales on their own to be able to select, drive, and know when to fire their new VP Sales when they enter their scaling phase.
  3. Lastly, founders typically exude enthusiasm for their products, an enthusiasm that can excite the customer to action, especially when the customer knows that they are dealing with the head of the company. This can often push them to buy the product even when the lack of references and lack of proven value might otherwise hold them back.

For all you technology guys who have been designing your dream product over many long nights and weekends, welcome to the world of sales.  In the war for early sales, Generals only lead from the front.  Get help (especially from those experienced in “first sales”), but repeat after me: “I am the main salesman.  Every week I talk with perspective customers before I do anything else”.

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