Stream Elixir Fountain 6.5.15 - Guest José Valim by The Elixir Fountain from desktop or your mobile device
John Roderick and Merlin Mann’s exclusive interview with Asher Vollmer, creator of the diabolical iOS game, Threes.
Dr. Drang returns to explore his background in computing from the late 1970s to today. Along the way we discover what happens when you mess up a punchcard, what Linux was like in the early days, why he uses a Mac today, and his perspectives on the near future of computing.
30x500 Alumni Scott Hurff joins Alex Hillman. They talk about how Scott’s approach to building products has changed, and what he’s learned from both of his launches.
By his own measures, Scott’s first product - a technical course for designers wanting to use Quartz Composer - was far from "perfect". But even without perfection, his launch still exceeded his expectations and earned him $10k on launch week.
Then, when he improved his launch by incorporating ebombs & our 30x500 launch sequence technique, Scott more than tripled his launch revenue.
Also, like a lot of us, money isn’t the only motivator. Scott’s learned that there’s some amazingly good feelings that come from being in the business of helping people succeed.
Tune in and learn a whole lot from Scott’s experience. Check out his blog at scotthurff.com.
I recently met Steli Efti, founder of Close.io, in Palo Alto, and did a podcast episode with him. Transcript and links below as per the usual.
Sidenote: I listen to a lot of podcasts and have been using Marco Arment’s Overcast app recently to do so. It was the best $5 I ever spent. Give it a whirl.
[Patrick notes: The transcript below has my commentary inserted like this, as usual.]
What you’ll learn in this podcast:
Why engineers speak a different language than sales people.
How we can get over our reluctance to do sales to sell more software (without selling our souls).
Tactics for getting over the pain of rejection when doing sales calls (and sales generally).
How to qualify prospects so you don’t waste time pursuing deals which you’d never, ever close and can instead concentrate on the deals which your personal attention will cause to close quickly.
Why Steli shuttered a multi-million dollar consultancy to focus on Close.io’s SaaS product.
If You Want To Listen To It
MP3 Download (~80 minutes, ~54MB) : Right-click here and click Save As.
Podcast format: either subscribe to http://www.kalzumeus.com/category/podcasts/feed in your podcast reader of choice or you can search for Kalzumeus Podcast in the iTunes Store.
Podcast: Play in new window
Transcript: High Touch Software Sales
Patrick McKenzie: Hi, everybody. I’m Patrick McKenzie and this is the — I don’t even know what this is – episode of the Kalzumeus podcast. Thanks for staying with us.
Keith, unfortunately, can’t make today. He and his wife and daughters are having fun back in Japan, but I am here in sunny Palo Alto, California with a buddy of mine who founded a company. We’ll talk you a little bit about the story later, but he founded a company, which these days, it’s Close.io, a YC funded company. Meet Steli.
Steli: Hey, guys. I’m super excited and honored to be on the podcast, a big fan of it.
Patrick: Steli, can you tell us a little bit about your background? I’m more from the engineering side of the house and you are… not.
Steli: I’m originally from Greece, born and raised in Germany. I’m basically a high school dropout that has no credentials whatsoever, completely unemployable, and never had a real job in my life. I’ve been an entrepreneur my whole life.
A lot of times I joke that the entrepreneurial super power that I use to move things forward is the hustle in sales. I love communicating. I love people. I love moving things forward, on the business end of things. I’ve been an entrepreneurial salesperson my whole life.
For the first few years, small businesses, boot-strap businesses back in Europe, and then seven and a half years ago sold everything I had, bought a one-way ticket to come to Silicon Valley, follow the legend of becoming a tech entrepreneur with the mission to be the stupidest person in the room. I’ve accomplished that every day since. [Patrick notes: Silicon Valley sometimes seems to have almost Japanese norms with regards to modesty among founders, where the more self-evidently untrue statements like that are, the more you have to say them.]
I first built a business that spectacularly failed in a very painful way. This is the second venture, which took a few turns left and right, and we’ll talk about that, but that, thankfully, today is doing really, really well.
Patrick: One of the reasons I wanted to have Steli on the program is that Steli is one of the most successful sales guys that I know. I know it’s a personal weakness in myself that I’ve learned enough about sales and marketing to be dangerous, but I tend to always reach immediately for the low-touch sales, for things that can be automated, that play to my strengths.
Doing search-engine optimization, working on copywriting, working on scalable email strategies, lifecycle emails, that sort of thing, with the goal that I never get on the phone with anybody, and that I send as few emails as possible. That’s worked out pretty decently for my business.
But there are definitely times where I’ve thought, back when I was doing consulting, that, “Man, I just totally botched this opportunity for a $50,000 consulting gig because I was insufficiently aggressive following up with folks.”
Or, when I’m working on an Appointment Reminder, where the top-level accounts [Patrick notes: I’m speaking about the publicly available Office plan which costs $200 a month, not enterprise sales] have lifetime values in the $6,000 region that would totally justify me getting on a phone, and then yet I think like a lot of people listening to this, I have no idea of where that even starts. I think we want to talk a little bit about ales for software entrepreneurs and how you can use this to make your business better.
Maybe before we do that, talk a little bit about the elephant in the room which is that all engineers are socialized from a very young age to hate sales and everything it stands for. That Hacker News anecdote was priceless. These guys launched Close.io which is a CRM basically for sales guys for sales guys. It launched on Hacker News, what was it, two years ago?
Steli: January 2013.
Patrick: January 2013. The first comment on Hacker News was about your pricing strategy. Not about…not about the pricing strategy, it was about the pricing. It was like, “$125 a seat, that’s outrageous! I could build this in a weekend!”
One of your engineers actually wrote back and said, “Well, you shouldn’t see $125 in the context of that’s a lot of money to pay for software. You should see it in the context of if each of your sales reps was getting even one more lead closed a month into a deal, this would be worth much, much more than $125.”
I wrote back on that, “This is how a smart sales guy answers a pricing objection. Value-oriented pricing, it’s a wonderful thing.” Turns out that was a lot of the engineers, actually.
Steli: He was super proud that Patrick called him out as a sales guy, as a smart sales guy, he’s like, “I’m not even a sales guy!”
Patrick: Yeah, we’ve got this unfortunate and inaccurate socialization in the Dev community that all sales guys are like the characters on Glengarry Glen Ross, it’s the, “Always be closing! First prize is a corvette, and second prize is steak knives, and third prize is you’re fired!” Caricatures of sales guys. I’ve never seen the movie, my understanding is that intended as a caricature but some people idolize it. [Patrick notes: You can see an analogous thing with Social Network, where Mark Zuckerberg is in the text of the piece designed to not always be a sympathetic character and yet some of the incidents which are supposed to make the audience wish for his comeuppance are things which developers really connected to.]
But be that as it may, that’s not actually what sales is about. You’ve talked a little, a while ago you guys basically did sales consulting for software companies. You would either tell them how to set up sales operations for software companies, or you would actually be the guys who would man the phones and sell the software to various prospects. Talk a little about software sales, how it fits into the picture of a software company, and the picture of the buyer’s company.
Steli: Maybe even before I comment on that, on the whole sales versus engineering culture clash between the two groups. I have just a few thoughts and observations that I’ve made over the years. I do think that engineers in general and sales people speak different languages.
Steli: Therefore, there’s a lot that is lost in translation when they interact with each other. What I’ve seen is that building up empathy between the two groups can be incredibly valuable, educational to the individuals as well as to the company as a whole.
We would have retreats where we would have engineers do sales training, and they would have to pitch the product or do simulated cold call and a sales person would be a very difficult customer. Have them go through the pain of what makes sales difficult, so they can empathize more with it and then also train them on how to get better at it, and vice versa.
Have sales people be in small product brainstorming sessions and actually make them understand that you can’t just say, “Can we make this faster?” Or, “Could you just make, quickly just add this little feature that does this?” But actually have them think through all the implications of product development. How little is not really little, or this easy feature is not really that easy, and have them understand from an engineering point of view what it takes.
Once these two groups know a bit more about how each other’s work looks like and what is hard about it, and what it easy? Magical things happen.
Improving Software Sales: Low Touch vs. High Touch
Patrick: Definitely. I also think that there’s opportunities that are under-explored in a lot of software companies to make the sales team’s life easier with software. Most of the time when I’m talking about things that I build say in my consultancy or for my own products it’s using engineering to achieve marketing outcomes.
But you can also have engineering to achieve sales outcomes. Building, like you guys have built an internal CRM that you’ve spun out into a product.
But even those companies that already have CRMs or they already have an existing sales process, it’s amazing what you can do with a cronjob and 100 lines of logic in a Ruby application just to smooth that process along, or systematize it a little better.
Maybe we can talk about that in a minute. Let’s talk about for the folks here for don’t have a “sales function” at their software company yet, it’s just at solo-founder, they’ve got a website, people come to the website, they probably buy SaaS and in business we have a distinction between low touch sales and high touch sales.
Low touch is the 37signals model. You have a website that does most of the selling for you. Folks are brought to the website via some combination of search engine optimization, paid acquisition, etc. They get to the website, the website tries to get them into a free trial. The free trial is going to be the primary sales channel, and then maybe there’s some email that’s getting fired back and forth generally in an automated drip-email kind of fashion, or lifecycle emails.
Occasionally, the founder will write emails, but the understanding is that the founder isn’t really making the sale at that point, it’s convincing someone who has already convinced themselves on the software to get over the last hump.
High touch sales is the other end of things, where folks are broadly speaking, they’re getting on the phone, getting on emails, writing person to person communications with particular decision makers at the company. Man, there’s a lot of art and science in this guys. It runs billions upon billions of dollars in business in the economy. But in the SaaS industry specifically, there’s tiers of sophistication of software, where it makes sense to have high touch sales.
At the way high end we have large-scale enterprise sales where you’re selling to literally Boeing. That process takes between 6 and 18 months. It’s going to require typically that you send out the sales guy plus a support engineer who can answer all the technical questions.
You send them out to the office, they do a custom presentation that they’ve built specifically for Boeing’s use case. The presentation happens, and then go and take them out to a steak dinner where business is actually contemplated. Then this continues for several months and then maybe that deal happens, maybe that doesn’t.
The new innovation in the SaaS industry is that typically speaking the account manager, let’s make it the sales guy, the account manager/sales engineer team is only really viable for sales that are in the $75,000 plus, plus, plus region a year. You can read the classic essay by Joel Spolsky called Camels and Rubber Duckies. [Patrick notes: Still one of my favorite Joel on Software essays. One of my bucket list goals is that someday folks cite individual essays of mine by name ten years after publication. Maybe in a few more decades.] He says that basically there’s no software priced between $500 and $75,000.
Why is that at $500 you can convince a single person to put it on their credit card, $75,000 you can send out a sales rep and a support engineer to their organization and do the PowerPoint dance to get the 15 different decision makers on the same page. The interesting thing that’s happened in the 10 years since Joel wrote that essay, is that SaaS arrived, and the wonders of monthly billing in that you can actually get accounts with lifetime value between $500 and $75,000.
My understanding of it, is that after an account gets to maybe $80 a month in value to a $250 range, if you model it out as having a term-rate in the five percent or less region, then we’re talking about $1,500 to several thousand dollars of lifetime value. Then it suddenly starts to make a lot of sense to have somebody call them. Does that make sense to you?
Steli: Yeah. I do think that the volume frequency matters, so if you’re on the low end — let’s say the customer lifetime value that you have is, let’s say 2K, you can’t have a sales person call tens and tens of leads that don’t fall into that, to close one of them. You would have to have a high close rate and a high frequency rate of people that are in that bracket.
Everything that is above 5-10K is probably a more comfortable space in terms of customer lifetime value, so you want it to be in the few-hundred dollars a month range, ideally. But that dramatically varies on your market, your churn rate; like how long you actually are able to retain customers, how high is the volume of these leads that you’re getting.
All that needs a little bit of mathing and experimenting and exploring around, but typically I would say if you can estimate that a customer is worth a few thousand dollars, it’s definitely the right spot to try out inside sales and inbound sales, and see what magic you can work there.
Patrick: “Inside sales” is something that a lot of folks might not have heard before. Typically, there’s a distinction between inside sales and…I think it’s “outside” or “outbound” sales?
Steli: Outside/outbound. This is complicated, you’re right. There’s inbound and outbound sales. “Inbound” describes selling leads that are coming to you — signing up for webinars for your product trials, whatever it is. “Outbound” describing you cold calling, knocking on doors, going out to people proactively. That’s inbound and outbound.
Then there’s inside sales and field sales, “inside” being any sales person that doesn’t leave the building to do their job — so email, call, webinars or web conferencing. Then “field sales,” the people that actually have to get on a plane and fly to Boeing and spend a week there to make the deal happen, or the door-to-door sales guys, whatever that is.
Patrick: Inbound sales are probably where most of the SaaS companies, who might be listening to this, are getting it started with sales.
Patrick: Somebody’s come to the website. They’ve signed up for the free trial of the software, or they are on our email list. What is the next step for us, if we want to get started with inbound sales? I know that it’s easier than we think it is, but…
Steli: But it’s also harder.
Patrick: …to just hear somebody say it.
Steli: It is actually very easy. There’s two channels where you can communicate with somebody that comes to your website and signs up, either for your trial or your demo or your eBook, or whatever you do.
One is, if all you have is their email, you send them an email. The purpose of that email can be to learn more about them, qualify them further and sell them — although I would say that email is typically better for giving people information, maybe scheduling a call.
If you actually want to convince somebody to sell somebody on something, a phone call or in-person meeting are still a lot more richer environments, more successful environments, to make that happen. You could use an email to try to get on a call with somebody, or if you’re asking them for a phone number, you can pick up the phone and give them a damn call, which is something too many startups don’t do.
Patrick: Amen. Totally guilty of this myself, but it’s probably…in a good month I do maybe 10-15 calls regarding Appointment Reminder. If I was based out of the US and actually operating better — like if I was in sales and marketing mode for a week — I could very easily do 10-15 a day.
Steli: Most people that run a SaaS business and bootstrap or single-founder, their minds would be blown to even consider talking to 10 people. They’ve built the entire business in a way that prevents that interaction on that level to happen, because phone calls are seen as old-school, non-scalable.
Also, for people it’s a lot more comfortable to write their thoughts and have time to articulate that in writing. If rejection happens or something else happens, or they don’t hear back, it’s much more comfortable to have rejection happen in your Inbox than actually have it happen live, in real time, from another human being.
Patrick: Yeah. My first exposure to the distresses of being on the phone, I wasn’t in a sales job. I was a customer service representative at an office supply company, which you would use to buy things like paper or… staples.
Patrick: Anyhow, I was the guy that you would call and say, “Hey, I want 400 pens,” and I would have to figure out what that actually was in the system, type up the order for you, and hit Go.
Occasionally, I would get phone calls about the fax orders. It’s not a sales job. It’s literally calling to follow up about an order someone has already placed. Maybe you said you wanted 400 pens, but what color do you want? What sort of a point? Or, “You said you wanted 400 black pens. Do you want 400 black pens like the BIC model, or do you want 400 pens of something that’s branded, or what?” I would give folks phone calls.
Often, if you call an office and say, “Hey, I’m Patrick McKenzie calling for — name of company here,” you immediately get, “We don’t want any,” and they slam the phone on you, and, man, I felt so bad when that happened.
Patrick: I actually got a bit of a thick skin about it for those two years, and then promptly lost that thick skin when I started a software business.
Patrick: Yeah, rejection is tough.
Constructively Dealing With Rejection
Steli: Yeah. Let’s talk about that a little bit, because I think that the whole point of rejection is probably one of the things that I see most common between sales and entrepreneurship in general, having to reprogram ourselves on how we respond to rejection. Because if you live your life in a way that tries to design for avoiding as much rejection as possible, there’s very little things you can do. Almost nothing in sales, and very little in entrepreneurship.
Here’s a couple of thoughts on the rejection piece, and then I want to give some, “How do you get started, and how should I call somebody who just signed up for a trial? What even do I tell them?” Let’s talk about those two things.
On the rejection piece, for whatever reason, we’ve all gotten here with whatever programming, social conditioning, our little bags of DNA, our character, whatever that is. Everybody dislikes rejection. There’s not a single person on earth, no matter how awesome they are, that likes to be rejected.
The question is, how can we figure out a way to deal with that rejection in a way that’s not too horrifying, too painful, too emotionally taxing? Early on, there are a couple of practical tips that I have, that are kind of super-hacks for our own brain, that are easy to do but can make a big difference.
One simple thing is to reprogram the scoreboard to, instead of focusing on the wins, understand that the losses are your stepping-stones towards your wins. We’re all SaaS people, conversion rates, metrics — so let’s say that you figure out that if you call 100 signups, that only 10 of them on average will actually want to speak to you, have a great conversation, and then end up buying the product.
That doesn’t seem that exciting. “I’ll have to call 100 people, and only 10 people will say yes.” Let’s say that the math works out, and that’s a good investment of your time, just as an exercise. Most people would focus on that. They would say, “Well, what I have to do is get 10 people to say yes every day.” They focus on the success.
You have a good day and bad days, and days don’t average out equally. Sometimes you have a good day and you get the first 10 calls, all of them say yes, they love it, and they buy from you, and you lean back and say, “All right, that’s it. I got my quota for today. I’ve got 10 wins. Let’s take the rest of the day off.”
Then you have another day where you have a bad day, and out of the 100 calls, nobody buys, and all of a sudden you’re off quota.
Instead of focusing on the 10 wins, what you can do is focus on the losses, and say, “I know that for every nine noes I get, I will get a yes.” I’m not trying to earn the success, I’m trying to work my way through the failure. Let’s say you put together a little scoreboard every day, and you make 90 little boxes. Every time somebody tells you no, you check off a box.
Patrick: I like this.
Steli: It gives you the satisfaction of progress, you check off boxes — that always feels good. Now all of a sudden, every time somebody says no to you, it’s not just a no, but it’s actually another check for your box, so you’re progressing your day.
If you focus on that, just going through that number of calls and that number of rejections, success just happens automagically, by itself. You don’t even have to keep track of it.
If you know your numbers better — if you actually knew how much revenue you would make per call — you could have a little box, and pennies, and every time somebody tells you no, you throw in two dollars into the box, and you know, “I earned another two bucks, because it brings me closer to a win that’s worth X thousands of dollars,” whatever it is.
If you use these little programs to focus on taking rejection for what it is, which is a stepping-stone towards your end goal. Then all of a sudden it’s important because you have to take all these steps to get to your end results, versus trying to avoid them and make big jumps to only have successes, only have people saying yes.
Patrick: Yeah. I think this morale management for the day-to-day grind of entrepreneurship is really important.
It comes up in a lot of circumstances too, not just sales — A/B testing, for example. A/B testing, if you’re doing it right, probably 75 percent of your tests close with a null result and you “learn nothing.” Neither a win nor a loss on the test. If the remaining quarter, half of them are a win, half of them are a loss, versus what you had before.
What I always tell people is, “You’re not learning nothing if you get a null result on the test. You learned on more thing that was not the best thing you could be focusing on right now.” If you’re getting no, it’s not just “no.” There’s a little bit of signal attached to the no, like “No, we’re not in the market for this,” or “No, I don’t have authority to buy this,” or “No, the price is too high.”
Then you can drill down into these later. If you’re always getting, “No, price.” “No, price.” “No, price,” then maybe you need to think on your pricing strategy, or the positioning of the software, to add more value.
Patrick: Although, people won’t be telling you, “No, price.” Charge more!
Steli: [laughs] Always double your prices.
Patrick: I got out my catch phrase for the day. We’re done. We can stop recording.
Patrick: We have a low-touch SaaS business. We have leads coming in.
Steli: Yeah. We ask for the phone number.
Patrick: We sent them an email. How do you ask for somebody’s phone number?
Steli: You can have it as part of the form — and we all know that means that conversions will go down — but in the early days I would recommend you to do it regardless of conversion going down or not, because those phone calls are going to be very educational. This is customer development.
You call people, and you actually learn from them. How did they find out about you? What do they like? What do they not like? What’s important to them? You get a real chance to interact with people and learn, beyond just the clicks on a website, beyond even when they send you an email.
In an email, I can just write words, but there’s a lot of context missing through tonality. I could write saying, “This is not for us right now.” Now, you don’t know anything about how exactly I mean that. Did I say [hostile tone] “This is not for us right now!” or did I say [casual tone] “Eh, this is not really for us right now.”
These two things point to different opportunities. One seems a lot more hostile, somebody that doesn’t want to be bothered. The other one seems a lot more friendly, maybe a little hesitant, even, about his own judgment. There’s different reactions which, in an email, you don’t know.
Patrick: Right, and since it’s a synchronous kind of contact, you can drill into that rejection right now.
Patrick: Is that, “This is not for us,” like “We will never be right for this,” or is that more of a timing thing? Did something happen at work? I can empathize with that — I run a small business, myself. Would it be better if I got in touch with you two weeks from now?
Steli: Exactly. Or even if you just say, “Oh, how come?” and the person says, “Well, your website promised X, but I found out your product does something totally different.” That’s valuable. Wow, if you hear that more than once, you know you’d better change the wording of the website.
Patrick: You’d better change the website!
Steli: Versus, if you only get two emails that say, “It’s not for us,” you have not really learned that much. There’s still a lot of assumption that needs to happen. You have to assume and interpret what that could mean.
Patrick: Particularly in less technical markets, I find that. I sell to office managers for a large portion of Appointment Reminder, and these are not naturally loquacious-on-the-Internet kind of people. They tend to write very short, clipped emails, and when I get cancellation reasons from them — which I ask for when folks cancel the trial — it’s often two to three words.
If they could write less than that, they would, but it bounces their castle if they don’t write at least 10 characters.
Patrick: Folks will write, “Didn’t work for us,” or “Too expensive,” or yadda-yadda. It’s like, “Wait. We’d love to have a deeper conversation about this.” Which, if I was on the phone with them we would, by the nature of that, be having a deeper conversation.
Steli: Yeah. In the early days, I would actually tell everybody to ask for a phone number, and don’t worry about the conversion rate so much. Then call these people, and have a conversation with them. Welcome them to the trial.
Patrick: OK, we’ve called folks. We’re welcoming them to the trial.
Steli: Yeah. Then you can do some very simple things. You can say, “I want to welcome you to the trail. I saw that you just signed up. I just wanted to hear, how did you hear about us? What do you want to get out of the trial? What’s your primary goal?
“I want to make sure that you get the most out of the trial. I want to make sure that this is going to be a success for you, that you’re going to get value out of the trial — out of the investment of time in our product.”
Then you have people tell you, “I heard about you from a friend,” or “I heard about you from this or that website.” That’s always good to know. Then they tell you, “Our situation is, we’re looking for a product and it needs to do this and this, so we wanted to check it out.”
Usually, the first bit of information you get is really valuable, but there’s so much more to dig into. We sell sales software, so they say, “We’re just ramping up our sales efforts, so we’re looking into systems.”
That’s obviously not enough information for me to really know who they are, understand if our product is a good fit, and see if I can point them in the right direction for them to get the value out of it and become a customer.
I would ask, “Tell me about it. What kind of sales do you guys do? How many sales people do you have? What are some of the challenges, some of the goals that you have? We’re going to dig into this to really understand your situation.”
This is not just about selling them. It might be that you find out, “Oh, wow” — within the first three minutes — “you should not be using my product. This will never work for you.”
This is a great opportunity to turn something negative around and do something positive, and tell somebody honestly, “Listen. After hearing what you’re telling me, you shouldn’t be using us. Our product is better for a different use case, but here. I’m going to point you in the right direction. I’m going to give you a recommendation for something else.”
Patrick: Yeah, I’ve had this. I’ve done this before, and it’s both the right thing to do — it buys goodwill with people — and you’ll be surprised how often folks will try to toss you a bone on that sort of thing. I had a customer, a prospect for Appointment Reminder. I was on a phone call with her. Let’s say that I largely sell to little fish and then trout, and she was like, “Yeah, I represent a whale. A big, big white whale.”
In the first three minutes it was like, “We don’t really whale-hunt here. But I happened to know there’s a well-regarded company that’s our main competitor. They go after whales, and that’s all they do. I know one guy at that company socially. Let me give you his direct number, and you can give him a call. I’m sure he can set you up with something.”
She was really happy about that. She’s in a medical profession, so she knows other people in the medical profession, and when her friends who are not whales say, “I called the big 800-pound gorilla and they didn’t even want to talk to me,” she’s like, “I know somebody who will take care of you,” and she sends them an email and copies me on it. It’s like, “Hey, meet Patrick. He’s the best guy in this. He will take care of you, blah, blah, blah.”
Telling her, “This is not going to work out. I’m not going to waste your time on this, I’m just going to get you a more successful resolution with my loyal competitor here…” Telling her no has raised my sales by like $300 a month, these days.
Steli: I’ve seen this work at so many different companies. People are just blown away when you tell them no. When you tell them, “You should not buy,” people are so positively surprised by that interaction that they’ll try to do something good for you. It’s crazy, sometimes people will not take that no for an answer.
They’ll say, “No, but I really think we qualify for this and I really want to buy this now from you.” You say, “Whoa, whoa, whoa. I’m trying to do what’s right for you,” and then they’ll try to convince you why they will qualify for the product in just a little bit of time.
Sometimes we tell people, “Hey, if you have less than X amount of leads a year, just use a whiteboard or a spreadsheet. You don’t need a CRM at that stage.”
Then they’ll challenge us on that and say, “Well, but we communicate a lot with our customers and we’re going to grow, and I want to use the right solution. You guys are awesome.” They’re going to fight you to buy your product. Sometimes we turn people down and then we see them just self-sign up, just put in the credit card and buy it regardless.
People are not used to that, and it will make a big mark. It will make a big difference — and it’s the right thing to do.
For a SaaS business anyway, you don’t want customer that are going to create a lot of support and then churn a few weeks after, because it’s not worth it.
Patrick: I think this is the fundamental thing that engineers do not get about sales. It’s not about just extracting moneys from people’s pockets unwillingly. That’s theft. That’s a great business model until you’re thrown in jail…
We’re doing value-creating businesses, and for a lot of markets, a lot of customers, they don’t naturally seek out stuff. The classical SaaS model, where it’s just low-touch and they have to generate all the forward motion in the relationship, doesn’t result in success for them, doesn’t result in success for their companies, doesn’t get them the best solution that’s out there on the market — so we need to nudge them in the direction of success a little bit.
That has, as a side effect, nudging a little bit more money towards your pocket, but it’s money that you’re getting for providing the value-creating service that, yeah, is the business we’re doing, and for creating the best outcome for them.
Oftentimes, the job of sales guy at a company isn’t so much…there’s the selling the person you’re talking to, but often you have to organize them a little bit about how to buy the product.
An example, something I did over email — and it’s something that I automated later — was somebody said, “I’m going to be the end user of Appointment Reminder.” They never used those words, but the “end user” is someone who’s actually pushing the keys and they input data.
“I’m going to use this. I’m the person who’s going to own the system, but my boss is the person who has the credit card, and my boss has said, ‘If you want to buy this software, I need to see the ROI for it.’” The office manager says, “I, not being a businessman myself, do not really understand this ROI thing, or how to calculate it. I Googled it. Wikipedia was kind of confusing. Can you calculate the ROI for me?”
I said, “Well, I am a businessman, and I love math. Sure, I would be happy to calculate the ROI for you.” That gets her over an internal objection. I’m not selling her. I’m basically selling her boss, by proxy, by giving her the ammunition she needs to make that sale to the boss. That’s kind of sales 201 — empowering people to be your champion internally.
How To Do Sales Without Feeling Like You’re “Doing Sales”
Steli: Yeah. Empowering champions internally to go through, to successfully navigate the internal sales process, to enable the organization to purchase your product.
I think, going back to that initial call, even if you’re like, “Well, I know nothing about sales…” You don’t need to. All you need to do is pick up the phone, call people, be nice to them. Say, “Hey, welcome.” “Welcome” is all it takes. “Welcome to our product. Welcome to the trial.” Then ask them what their goals, what their motivations, what their needs are, and try to really get to a level of understanding.
I think engineers are actually really good at that — better than the average person — of not just taking the first layer of information and being satisfied by the dramatic extrapolation of that that they make in their own mind, but actually asking, “What does that mean? What do you really mean by that? What do you guys really try to accomplish with this or that?” and get to a point where they didn’t just paint the outline, but they actually painted the entire picture for you.
Now, once you know who the customer is, what they need, what they want, what they’re trying to accomplish, what internal challenges they have, selling should be its easiest, enabling them to accomplish all these things with your product.
Telling them, “Well, you came to the right place. I’m happy to tell you, if you do X and Y, you’re going to get Y outcome, which is what you really want, what you really desire, and I can help you accomplish that. Here’s what we need to do to get that done.” That’s all it takes to be successful at sales. Or telling them, “Well, you came to the wrong place, but let me help you get there anyway.”
Patrick: In the happy case situation, where our product is a good fit for them, we’ve talked a little bit about, “OK, I understand” — by the way, echoing people’s words at them is a really effective communication technique in general, and works in sales as well.
Say, “Yeah, I understand that you’re really looking to decrease your no-share rate by adopting this software. I understand that you guys run a sales process which has 25 people in three time zones, and the management is getting crazy. I understand that…” whatever the pain point is.
“As it turns out, our software is actually a great fit for that. We have features X, Y, and Z, which will get you up and running pretty quickly, and I’m happy to assist you with doing that.”
Then the scary part is the engineer comes up to me, “Uh, there’s that closing thing?”
Cliff notes on every sales conversation ever — it’s like, “Conversation, conversation, conversation,” and then what we would call in marketing a call to action at the end. In sales, they have the thing but they call it the “call to close” instead. What is closing, and how do we do it?
Steli: It’s a great question. First of all, let me tell you if you ask for the close — which is basically asking the other party to become a customer, commit, give you the credit card number, whatever it is; the transactional point in which they become a customer.
If you ask them for that, if you proactively verbalize, “Do you want to become a customer? Do you want to purchase our product?” you’ve separated yourself already from the majority of the market, or even the majority of sales people that do “sales,” but are afraid of asking the question because they are afraid to hear the rejection.
There’s two simple ways to do it. One is just to ask for it. Let’s all do it together, “Do you want to become a customer of our product?”
Patrick: Do you want to become a customer of our product?
Steli: There you go.
Patrick: Wow. I think I must have said something like that for consulting engagements over the years. I think I’ve probably said it only twice for Appointment Reminder. It’s kind of crazy.
Steli: It’s crazy, right?
In certain cases where it’s clear that they’re not going to be ready to answer yet — it’s the first call, they tell you they have a 200-person team, and it’s a bigger customer, and you’ve just answered a couple of basic questions — they’re not yet there, to be able to say yes or no to that question.
What you ask instead, which is one of the most powerful questions you could ever ask, is, “What is it going to take for you to become a customer of ours?” It’s a very important question, especially for startups, especially when you’re early in the cycle.
Too many times I see founders talk to a bunch of “potential customers,” do their customer development — lean startup — and then they come back and they say, “Oh, I got all this great feedback, people loving this idea. They’re totally going to buy it.”
More often than not, just because I was nice to you doesn’t mean I have real buying intent. Just because I visited your site and liked an article doesn’t mean I’m going to purchase the software, so asking me, “Hey, what is it going to actually take for you to become a customer?” is going to do a couple of things.
Number one, if I have zero buying intent, I’m going to probably say it. Either I’m going to have a really weak answer to that like, “Eh, I don’t know” — that’s a red flag. How could you not know what it would take for you to buy? Or they say, “Well, I really like what you do, but we wouldn’t buy before 2018. Our budget is already allocated for the next few years.”
Again, you know, “Nice guy, but I shouldn’t probably waste my time on this.”
Patrick: Or one of the other classic things is, “Yeah, we don’t have budget. We’re a startup, too. We’re trying to get to a round of profitability. I just can’t justify $50 or $100 or whatever.”
You’re like, “Yeah, great. It was great talking to you.” I’m not going to work myself into a conniption if we don’t get the sale here.
Steli: Yeah. We’re not going to schedule three follow-up calls, each an hour, and send you 10 emails and case studies, to then realize what we could have learned in the first 20 minutes — that you are not in the market to purchase something.
Patrick: This process, by the way, is called “lead qualification.” You can do very automatic lead qualification, like lead scoring for example. SaaS companies typically will do two things. If, in the free trial, they’ve done X and Y and Z, then they have a higher score. If they’ve done nothing, then they have a lower score.
Or maybe demographic-based lead qualification, like if they work for Boeing a higher score for enterprise sales lead qualification. If they work for a flower shop, you’re probably not going to sell them a $100,000 software solution.
Anyhow, you can qualify stuff with a phone call, and then rather than feeding into some sort of magic state machine, just use your human intuition and your human brain, and take next steps appropriately.
Steli: Yeah. Important with that question you ask, “What would it take for you to become a customer?” is to actually follow up on that question until the virtual event happened, where they purchased.
Let’s say they say, “Well, I really like this. I will bring this back to my team and we’ll talk about it and see what they think.”
“Oh, interesting. What would happen if they actually like the initial outline of what you gave them? What would happen next?”
“Well, next we would probably schedule another call and have some more stakeholders participate and ask questions.”
“Cool. Let’s say I answer those questions to the satisfaction of all the stakeholders. What usually happens next?” You don’t just stop at some point. You actually continue asking, “What happens next?”
“Well, next you would have to talk to the legal department and go through a procurement process.”
Most people at some point instinctively want to just take that and run with it and go, “OK, cool. Thanks for all the information.” They hang up and they think they already know everything. Don’t. Fight that urge.
Ask, “Right, so we go through legal, we go through procurement. By the way, have you done this with any other provider that’s similar to us in the last one or two years, successfully?” That’s a good indicator that they actually…
Patrick: That is a great qualification question. You never want to be someone’s first SaaS provider. You also probably never want to be someone’s first consultant. Your life will be very difficult.
Steli: You don’t, so say, “Have you done this before, and what was the process like? Is there anything we can learn from that? OK, let’s say we do these things. What happens next?”
“Well, then you have to go and talk to my grandmother, then the palm reader…” until they say, “Yeah, then we’re in business.”
Cool. What you’ve accomplished now is a couple of things. Number one, you’ve seen if there’s any red flags in that process that you know will never work out. Number two, you mentally put them in the mind space you want them in — a future where they’re a customer. This is the kind of future you want them to be thinking about.
Patrick: They’re already visualizing that there exists a possible alternate universe in which they write you a check or give you a credit card.
Steli: Yeah. That’s a good thing.
Then, the third thing is, they’ve created together with you a roadmap of the buying process, so now you know everything it’s going to take to make that deal happen. Do you know how many times founders or sales people will come to me and they will say, “Next week we’re going to close this defining-moment deal. This is going to change our lives, and everything is ready, and I know it’s going to happen next week…”
Then the next week, it’s crickets. Silence, so I send them an email and say, “What happened with the deal? Did it close?”
They say, “Well, there was this thing that I didn’t anticipate. They actually also want me to go through the procurement department…” How could that be surprising? What that means is you didn’t do your job qualifying them, understanding the buying process — so every step of the way you’re surprised that there’s one more thing you have to do, and you get frustrated by these evil customers that want you to do these unreasonable things.
Patrick: If you could see me now, guys, I’m face-palming because I have been that guy.
Calibrating Your Expectations and Pipeline Management
Steli: Yeah, we all have. We all have been there. Nobody’s above that mistake. The question is, there’s a simple solution to that. You need to go through those steps. Ask somebody, “What will it take for you to become a customer?”
Have them tell you so you have a real understanding, “What will it take for me to close this customer? Am I willing to go through all these steps, invest all this time?” Have a realistic picture of what it’s going to take.
Or, if you think they’re already ready, and they love what you’re doing, just ask them a question. “Hey, it seems like it’s a great fit. You’re excited, I’m excited. I think this is really a good solution. Are you ready to become a customer today? Should I take your credit card? How are we going to do this?”
This is uncomfortable for folks, because it’s kind of confrontational. You might have to confront the other person, or be confronted by the person, saying “No,” or “I’m not ready,” or “I don’t think I’m going to buy.”
But the great thing about that is that it shouldn’t be about you winning everything and never being rejected. It should be about you learning as much as possible, and also about creating outcomes. Sales is a lot about just creating outcomes. Yes/no. Just build an outcome. “Maybe” is a deathtrap. “Maybe” doesn’t point in any direction or any timeframe. You know nothing, and it occupies mind space and mindshare.
Yes and no are equally good. They are a result. You can learn from it, you can check it off, you can put a number somewhere, and then you can move on in life. For entrepreneurs, it’s so important to be able to move forward and not have things that are in constant limbo, “We don’t know about this” space, which is a deathtrap.
Patrick: This is one of the fundamental things about pipeline management. Pipelines are to a sales process what a funnel is to a marketing process, where some amount of folks are in the tap.
With sales pipelines it’s like you have a certain number of stages that go through our customer’s typical buying process.
We have customers who are in any given stage in the buying process. We have 20 people who we have initial calls scheduled with. We have six people who we have follow-up calls scheduled with. We have three folks who we are under contract, two folks who we are providing services for, and then one person or firm service has been provided, we have cut them an invoice, we’re waiting on payment.
The job of the sales team — and the rest of the organization, really — is just pushing people from the left side of the pipeline to the right side of the pipeline. One of the reasons the pipeline thing is important is, if there’s a bubble at any stage in that process…
We’ve got folks who we’re having initial conversations with. We’ve got folks who we’re talking to the purchasing department. We’ve got folks who we’re providing the stuff for. We’ve got folks who our invoices are out.
We have no folks who we’re having follow-up conversations with right now. You can kind of figure that bubble is going to percolate towards the right side of the pipeline, and that sometime in the near future there’s going to be a month with no revenue in it, and that’s going to suck.
When you start to identify those bubbles early in the pipeline you’re like, “Oh, guys. Make an extra special effort to get those early conversations happening, to push people into…get a yes or get a no, but get stuff on the calendar for having the follow-up conversation so that we can push them through the rest of the pipeline.”
Steli: Yeah. If you manage your pipeline well, you kind of see the future, which is part of the beauty of SaaS anyway. With subscription revenue you can project what’s going to happen next month and the month after.
But the other thing is, one thing that I find beautiful about sales is that it really rewards people and processes that are results-driven, and it really punishes activity-driven people and processes. Too many times, I talk to people that will be like, “Well, we have all these great deals in the pipeline.”
I say, “Awesome. Tell me a little bit more about that.”
“Well, there’s this company, this company, this company.”
“Cool. How long have you been talking to them, and what are the next steps, and when do you foresee closing these customers — or not closing them?”
That’s when it breaks down and they’re like, “Well…” They’re so happy about creating conversations and having meetings and hearing from people that they like what they do, that they don’t want to move over to the uncomfortable part, which is actually creating the outcome, the yes or no.
They are very happy about the, “I have three logos I can put on a PowerPoint presentation and then say, ‘We’re in early conversations with these folks,’” rather than having just one — or no logo – and, “We’ve learned that this didn’t work, but we tried,” where we had a real result. They bought, they didn’t buy.
Sales really rewards outcome-driven activities, and managerial pipeline is all about, “Are things actually moving from left to right?” Because you can have thousands of things in every stage, but if nothing has moved, your business is dead. That’s it. You’re not getting any new customers.
Patrick: In addition to sale rewarding outcome-driven cultures, outcome-driven businesses, outcome-driven individuals, also traditionally sales guys stereotypically are smarter than the average bear with regards to numbers, but the numbers are typically tied up in, “What’s my commission going to be?”
But sales at companies which are very metrics-focused, where we know to a T that if we get 100 initial consultations, we’re going to get down to 20 meaningful conversations with decision-makers, which is going to result in five proposals that we sent out, and we’re going to close three of them…folks who have that level of understanding of how the math shakes out for the funnel, or for the sales pipeline, they do very well in life.
Since that’s copacetic with the engineering skillset that a lot of people have and the numerical inclinations of a lot of engineers…if you’re a product person, talking to people about their pain points and then saying, “The pain points which you have just articulated map up with some things we have made. These things we have made can make those pain points better…”
It’s not actually rocket science. This is something you can learn to do, and learn to be — knock on wood — a little less uncomfortable with, and you can often find out that you’re really darn good at it. I don’t do it enough for my software products, but in my consulting career pretty darn good at the sales…with the exception of the ones where it was just a total face-plant.
Like you said, that’s the cost of doing business. Face-planting is better than perpetually, “Will I, won’t I? Will I, won’t I win that engagement?” Get to no.
Steli: If you’re not face-planting once in a while, no matter how good or successful you are, you know that you’re not learning anything. You’re not pushing hard enough. You’re not trying things that are daring enough, because you’ve got comfortable, and you’re just operating within that comfort zone which is the borderline of your growth now. You can’t go beyond that.
No matter what you do, if you don’t get rejected once in a while, you know you’re in an unhealthy place. You’re in a place where not enough growth happens, because you’re confined within what you have accomplished in the past, and what you’re now good at.
Patrick: This reminds me of a conversation I had with one of my father’s buddies when I was six or seven. He was a lawyer. I had a vague idea that, “Lawyers take cases to trial.”
He said, “Yeah, I’m a very good lawyer.”
I said, “Oh, do you win all your cases?”
He said, “No, of course not. If I won all my cases, I’d be a very bad lawyer.”
This was very confusing to the seven-year-old me. I asked, “Why?”
He said, “Well, there’s this thing called making a deal before the case gets to trial, and if you’re winning all your cases, you’re making too many deals on cases that you would have won, so you should be a little more aggressive about taking stuff to trial.”
Similarly, if you’re winning all your sales conversations, something is going wrong either with the number of leads you’re pushing through the sales pipeline, or your lead qualification thing. It’s possible to win all of your sales conversations by only taking the folks who are deepest in your ecosystem. They’re your truest and best fans, totally the sweet spot for the app. It was an easy layup to get the sales, and you get all those easy layups.
But, you could maximize revenue for the business by going, “OK, what’s one ring out from that?” Maybe it isn’t someone who’s been reading my blog for five years. It’s someone who’s been reading my blog for five months.
You do sales, SaaS, so I assume you sell to a lot of other SaaS startups. You sell to startups selling to tech companies, or whatnot. Then at some point you realize, “We could also sell to startups selling to medical. That has new challenges. Let’s see if we win those deals, or let’s see why we lose those deals. We’ll feed that back into the marketing of the product, get into a place where we can win those, and take the lumps because we know we’re learning from them.”
Steli: Absolutely. First call, you pick up, you welcome people, you ask them a few questions to really understand them, and then you either ask them if they think they’re going to buy, if they’re ready to buy, or what it’s going to take to buy. If you do these things, it’s a perfect sales call. You’re 10 out of 10.
Patrick: …and you’re already better than 90 percent of the market. It’s insane.
Steli: Oh, yeah. You do that for a while, and maybe you want at some point to test what would happen if you don’t take their phone number in the form, but you actually email them and ask them for a call, and look at the numbers. But in the early days, I would always use that form.
Either way, if you have a SaaS business and you have a way to make more than just $10 a month on a user, using the phone as a way to onboard them, activate them, and close them, is going to be an amazing tool. If you don’t use that, you’re literally leaving thousands, millions…
Patrick: A lot of money on the table.
Steli: You’re losing a lot of money, leaving a lot of money on the table.
Patrick: Right. An additional thing there, by the way, relevant to your interests. If, like me, you’re pretty time constrained on the SaaS business, I specifically architected my business when I was early on, to never require sales calls. I was employed over in Japan, and didn’t want to do sales calls at 2:00 AM.
I still don’t want to do sales calls at 2:00 AM, but let’s say I can push myself to make five a week — not as many as the leads I’m getting. You can just choose to only call X percent, and then do scalable approaches on the remainder and see, “For the folks I talked to, did I close more than we closed on the folks that we don’t talk to?” If not, red flag on the play.
Figure out the sales process. If you closed more, then that’s either an argument with yourself or with the rest of the business for, “We should be focusing a little more of our attention on active selling to the rest of the folks,” or it’s an opportunity.
Atlassian does this. They have a sales team. They say they don’t have a sales team, but they have a sales team; people who call and get closes.
But if a medium-touch approach for them in a given month converts a higher percentage of trials than the low-touch approach — the totally scalable automated thing — they file bugs against the low-touch approach.
They say, “something has happened, such that our standard medium approach is answering more customer questions, resolving more customer objections, getting more customers successfully onboarded than the low-touch approach, which means the low-touch approach is broken. Fix it.”
Then they fix it until the numbers go back to parity again. Then they focus on that, because that’s the part of the business that they really enjoy/institutionally like.
Then a couple of months later it’s like, “OK, we’re going to pull 10 percent of the trials off the rack and give them a call and see what the conversion rate is. If it’s at parity with the low-touch group, that’s great. That’s where we want it to be. If it isn’t — if the sales reps are effective at doing their jobs — that’s a bummer.”
Steli: I love that. That’s a great hack, organizationally. That’s cool.
Patrick: I think that’s why they say they don’t really have sales teams. They do have a sales team…I love you guys, but you have a sales team. But maybe they think it’s not a permanent sales team. They’re bug scouts in the organization, who happen to do sales for a bit of that bug discovery process.
Anyhow, I think that wraps up our conversation on getting started with sales for SaaS folks.
You guys had a very interesting trajectory, and it’s one that I think resonates with a lot of people here. You had a Y Combinator-funded startup that was in kind of an unrelated space, and then you pivoted over to being sales consulting as a service. Then from that consulting business, you pivoted into the current product business, which is Close.io with the CRM.
Why Steli Shuttered A Very Successful Consultancy
Patrick: Can you talk a little bit about your consulting business? That was a pretty good business, right?
Patrick: Just hum a few bars for me on that one. How many people did it get up to, or yadda yadda?
Steli: We had probably all in all, in-house plus the people that work from other locations, 60, we were on trajectory to cross the three-digit very, very soon. We’re a multi-million dollar business that was growing really fast. Basically, what we did is we built what we called a secret sales lab in the heart of Silicon Valley, who we would work with Venturebeat startups that at least had a series A, and we’re doing B2B.
The vast majority, 80 percent of all customers were SaaS product. Many of them, products that you guys know, have bought.
We would either do sales consulting, what we would call sales exploration, help you figure out how to go from a few customers and some revenue to a model that’s both predictable and scalable, where you can just plug in salespeople and you know exactly what should come out of that.
We had these customers, it was a lot of consulting, helping them, exploring, testing different sales strategies, generating numbers and then looking at that and figuring out what the right model is for them, and th
We celebrate our 200th episode with this mega-sized installment. We discuss what it means to have geeky enthusiasms (and whether we should grow up), and then listen to some reader feedback. Plus there’s a draft, some beer, and special guest stars.
June 27, 2014
with John Siracusa, Serenity Caldwell, Dan Moren, Erika Ensign, Monty Ashley, Greg Knauss, Steve Lutz, David J. Loehr, Dan Benjamin and Glenn Fleishman
On our special 100th episode Aaron Patterson joins Ben from RailsConf to talk AdequateRecord, frustrations in software, bulk meat discounts, the finer nuances of cat-naming and the importance of scientific thinking in web development.
Jenn Schiffer On Why PHP is the Best Conference Subject [ 28:54 ] Play NowDownload
AKA: podcast title link bait!
Also hear about how Jenn’s writing has turned into invites to give satirical talks! She’ll also be emceeing CSSConf. How cool is that?!
Episode 20 with Jenn Schiffer
Jenn thinks code, art, and jokes are a slam dunk, and tries to apply all three to her everyday life. She is the creator of make8bitart.com, amongst other code/art projects, and writes tech satire on a number of mediums.
Before joining Bocoup, she was a senior front-end developer at the NBA and, before that, taught and evaluated computer science education at Montclair State University. She is the organizer of JerseyScript, a front-end developer meetup based in New Jersey – one of several ventures she has become involved in to attract and retain more people in the web development community.
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