Enterprise Sales Tips for Hackers

When my co-founder and I were starting out, we came from an engineering background and thought of sales as black magic. Divine the customer's deepest desires, howl a few bewitching incantations, and then—abracadabra—a contract would be conjured. Magic!

Two years of selling served as a painful exorcism. There's no magic to enterprise sales, but there's a hell of a lot of zoology. LTV, field sales, inside sales, CAC, prospects, leads, consumerization, channel sales, … the array of terms is bewildering and there's no textbook that explains how it all fits together.

But there's good news. Not only can smart hackers can learn to sell, the hacker mindset is actually an asset: at its core, selling is hacking organizations.

However, it's easy to spin your wheels unless you have some orientation. What follows is a quick primer on enterprise sales for hackers. I've tried to briefly touch on the basics. To really understand the details, you'll need to follow many of the linked posts and—of course—do some sales yourself.


Finding Initial Customers

Find the hair-on-fire customers, ignore the rest. When we started out, we were heartened any time a customer expressed enthusiasm. And then we'd follow up, nothing would happen for months, and we'd get discouraged. Ignore how enthusiastic the customer seems in a meeting. Instead, look for people with hair-on-fire problems.

And expect it to take time: if you want to find 10 hair-on-fire customers, you need to pitch 100.

That means need to qualify leads ruthlessly. The worst thing a customer isn't saying "no," it's dragging you through meeting after meeting without making a firm commitment. Don't ask whether the customer is interested. Ask whether the problem you're solving is their in their top three problems.

A great trick is to ask the customer to do a trivial amount of work; for example, sign an NDA. This will weed out people who aren't yet serious. A variant of this, for customers asking you to do significant custom work, is to request a significant up-front payment.

Where do you find initial customers? Get some warm introductions. Draw up a list of 50 customers you'd like to target, search on LinkedIn for mutual connections, and ask for an introduction. Investors can be helpful here, but introductions can come from anywhere.


Inside the sales meeting

Most of the day-to-day work of sales is takes place in customer meetings. For many hackers, these feel unnatural at first—and they certainly rest on some innate qualities like personal charisma, empathy, and poise—but like any other skill, running good customer meetings can be learned with practice and guidance.

It's the ROI, stupid. Unlike consumers, companies rarely buy on emotion. They buy on ROI. If you want to close a customer, try making a spreadsheet to show them how much money they'll make if they sign up with you.

Every big deal needs to have an advocate, an economic buyer, and technical buyer. The enterprise sales process involves multiple parties, but in every big deal, you should quickly try to identify the advocate (somebody on the inside who is pushing for you), economic buyer (person who controls the budget), and technical buyer (person who evaluates/will use your software). If you can't identify these three, you probably don't have a sale. For a great sales methodology, see Mark Suster's posts on PUCCKA.

Pitch the top line, not the bottom line. An excellent product can grow revenue by 5-10%. Almost no products can cut costs by 5-10%. Figure out how you can increase your customers' top-line revenue, and build your pitch around growth rather than cost-cutting.

Ask for the order. Most hackers are too shy and flinch when asking for money. Don't beat around the bush. Always ask for the order, even if you're not sure if the meeting when well. In one of our early customer meetings, we thought we had blown it. As we were leaving, the person said: "I'm almost offended you didn't ask me to join your private beta."  It turned out he was keenly interested in our product, and we had misread his intense questioning as skepticism. Ask for the friggin' order!


Sales Strategy

Once you have some pilot customers, take a step back and think about your company's overall sales strategy. What is your ideal customer? How do you reach them? What type of salespeople will you need to hire?

Think of your overall sales process in terms of unit economics: how much money will you earn from a customer over their lifetime (life time value, or LTV)? And how much did it cost to sign them up (customer acquisition cost, or CAC)? Generally speaking, you want LTV > 3*CAC. Otherwise, you're not bringing in enough revenue to finance growth.

David Skoll's blog has a great intro to SaaS unit economics, to which Bill Gurley provides a counterpoint.

CAC is driven by what type of sales you do, and what type of sales you do is driven how your customers buy software. Strategy starts with the customer.

That's worth re-stating: customer acquisition cost is mostly out of your control. If I know how your customer's buying process, I can tell you your eventual CAC without knowing a single thing about your sales team. So work outside-in: rigorously understand how your customers buy software, design your sales process to match that, figure out how costly that sales process is, and then set your pricing to support it.

Roughly speaking, your sales process will fall into one of three basic strategies.

The most expensive sales strategy is field sales, in which a salesperson makes in-person visits to the customer. This can cost $25k, or even $200k if you need sales engineers to build proofs-of-concepts (popular for very expensive enterprise contracts).

The cheapest strategy is self-service, where the customer signs up on your web site without requiring any humans in the loop at all. Here, the typical CAC is under $100. Stripe and GitHub are examples, but many enterprise products are too complex to be sold through self-service.

Inside sales form the middle ground. Everything is done over the phone or web, with light touch, lowering costs dramatically — roughly $1k-$10k is typical.

The conventional wisdom is that software priced between $1,000 and $100,000 is the "valley of death": expensive enough to trigger complex corporate approval processes, but not enough to cover the cost of paying a salesperson. These days the "valley of death" is shrinking due to the prevalence of SaaS, enterprise freemium, and inside sales. See SaaS survey to get a sense of today's business metrics.

A brief word on channel sales: channel sales don't work for startups. Outsourcing sales works just as poorly as outsourcing engineering. Own your sales pitch.

PR is your "air war." Press alone won't close deals, but it does open doors. When Wired and the WSJ covered us, customers who ignored us before called us back up. Press creates legitimacy that you can't create for yourself.


Closing Thoughts

Enterprise sales doesn't have to be black magic. If you're a hacker starting an enterprise startup, selling is one of the most valuable skills you can learn. Before you've hired a sales person, it'll give you great insight into how customers think about your product. And when the time comes to hire a salesperson, you'll be better able to judge candidates when you've learned to do the job yourself.


Update: HN Thread.