Founder and CEO of Talentbin
Founder of Modern Sales
Founder-Led Selling: Enterprise Value Creation and Selling in B2B Startups
Pete Kazanjy: Alright. Don't be too excited guys. Woo. Oh, hey, you did. All right, let's put our slides on here. Boom. Okay. Hey everybody. We're going to combat the after lunch. A kind of lethargy here we're going to rip through. This isn't an abridged version of a slide deck. I present, uh, pretty frequently that focuses on what I refer to as founder. Led selling is a design pattern for, um, early stage go to market. It's applicable for a founders, pms, technical founders, business founders, et Cetera, et cetera. But it's talking about, um, how to really nail the initial parts of your go to market, um, in a stepwise fashion, stepwise iterative fashion. So we'll, we'll spend through this and then we'll have time for questions afterwards. Goal. So why you should listen to me. This is a little bit of background on me. I'm not a sales leader by background.
Pete Kazanjy: I actually come from a product marketing and product management background. Uh, Adam Zimman, who's not here, not sitting in here right now, but he works at a LaunchDarkly and I worked with together at VMware way back when, uh, doing product management and product marketing. Then I started a company called TalentBin was a recruiting software company. Uh, that was kind of the place where I went from being a non seller to like figuring out how selling works and how it go to market worked. And then after that, uh, I did a variety of different things. TalentBin was acquired by monster. Uh, I wrote a book on sales for founders, essentially cataloging all the learnings that I had accidentally manufactured painfully during the TalentBin, uh, talent bins, uh, existence. And it started at the canonical sales operations, sales leadership community, uh, modern sales and then founded a software company called Atrium that's focused on a really bad ass analytics for sales org, uh, sales organizations.
Pete Kazanjy: So that's why you should listen to me. This is like my, my credentials as to why I know things about being both like a product person and a product marketer and also a, a sales leader. And so one of the things that, um, I see a lot is that founders are frequently founders and product folks frequently have a miscomprehension of how sales actually works and it's much to their detriment because they then as a result like avoid it, which is obviously very problematic for an organization because most organizations are in the business of making money. Um, so these are some of the reasons why you can understand why people might have an antipathy for sales. A lot of the reason kind of the root cause here is that they actually don't know what it's about as opposed to they understand that they have been trained through stereotypes and other information in the world as above as opposed to actually understanding like how go market works.
Pete Kazanjy: Um, there's another thing that kind of lies to founders in a product managers, uh, and folks like that as well as you have these organizations that say, oh my God, we don't have sales people. We just published documentation and people come and buy, right? Or like we don't have salespeople. We're Dropbox or we're Slack, we're Palantier whatever rat poison that is generally speaking, total bullshit. So if you go and you look on in LinkedIn and look for sales titles for Twilio or stripe or square or what have you, yet early on maybe they, you know, they had a bunch of developers they were buying, you know, self-service, but like in order to get to the world killing companies that they are right now, they have a lot of sales order, a lot of salespeople and of course like organizations like Palantir just call them business development, but they still have like 500 of them.
Pete Kazanjy: So like, don't, don't be seduced by this. It's bullshit. Uh, there's some other kind of anti-patterns that then people end up kind of being induced towards there based on some of these, these miscomprehension like one is that you can just hire somebody to do it for you. I call it sprinkled some sales on it. Like, oh, I'll just like hire a sales bro or sales bro at and it'll be, it'll be fine. Another anti-pattern is m o s. And the problem with this, this anti-pattern right here, we'll get into a little bit more, is that usually that doesn't work out because salespeople are in the business of repeating somebody else's, like develop sales motion. They're not somebody who's going to concoct and debug and, and design a sales motion. And then the other anti pattern is like, hey, cool, let's just do a bunch of revenue swaps because of the series.
Pete Kazanjy: A: investors won't know any better. Right? The problem with that is that it just shows up in your turn 12 months later when all those people that you sold to turn out because they're actually not using, they're not getting value, et Cetera, et cetera. It's fake. So where does this, uh, where does this disconnect come from? And I think a lot of the people such and told me that for the most part, this is primarily a product management conference. I think. So I think that this will probably resonate with a lot of folks here. Founders come from technical backgrounds, product management backgrounds, things like that. So these are some of the, the backgrounds. And the aptitudes, um, that, those, that those folks have. And then importantly, these are some of the app, the aptitudes that are missing there. And I actually, I count myself amongst this before I got into the business of selling.
Pete Kazanjy: Like I'm not the guy, I'm the guy who goes to the corner of the party and just kind of hangs out, likes to have one on one conversations as opposed to having like being the, the life of the party. Um, so I, you know, I have empathy for the fact that the, these are the aptitudes and kind of the missing skills that that founders and product managers have. And then you also have to understand where sellers come from as well in order to understand why you have to do this first as opposed to just sprinkling some sales on it. Salespeople have a tendency to come from, and you know, there's, there's exceptions to this rule, but people get into sales not because they took econ or cs or you know, double the year or what have you. They got, they got into sales because they graduated from college and they had a degree in business or they had a degree in communications or a degree in history or what have you.
Pete Kazanjy: And like they were good with people and they were in the Greek Greek community, they're an f in athletics. And so like they were looking for something that they could do professionally and those skills were valued in sales where they didn't have our, you know, process engineering metric [inaudible] design, things like that. And so the problem with having these, like the downside associated with these confusions is, is potentially com company killing in nature. Uh, AB folks. Could you guys, uh, flip the timing on for me? Okay. Um, so these are some kind of examples of why this is problematic. This is a conversation. I had a Twitter conversation I had with a founder of a company called cover and, um, you know, I think Nepal, Robert Kahn tweeted something like completely more on like, like if you cold email people, like you should kill yourself or something. And, and then this guy was like, yeah, totally right.
Pete Kazanjy: You own 100%. I was like, you know, that's pretty much the way that like grub hub and Yelp's go to market is built and these are like billion dollar companies. So like maybe you should reconsider their note or no referrals or how we do it. So what I did was I set a calendar reminder for myself for two years later to share, sorry, a year later to check in on what was going on with the company. Of course his company was dead as opposed to Grubhub and Yelp and OpenTable and all these other organizations who sold in the same market and had muscular go to like muscular sales, go to markets, which, you know, ran counter to that. So like that's the downside associated with not getting this right. Uh, another anti-pattern here, so this is one anti-pattern which is kind of like failure to launch another anti-pattern associated with founders, not quite getting sales is, is what I refer to as sloppy [inaudible].
Pete Kazanjy: Zenefits is a good example of this where a miscomprehension of unit economics and successful go to market will eventually kill that company. It's just kind of like bouncing along at this point. Uh, and so I think one of the things to understand there is that there's a delta between what sales used to be about and what it is about now. So previously sales was about by virtue of the fact that like there wasn't a lot of data, there wasn't a lot of CRM information, things like that. It was about these things that a lot of times people have kind of had a, haven't had a historical activity for it. Whereas now it's more about sales. Sales nowadays is more about um, really well done business consultation and where the consultant in question happens to have a predilection for one type of solution, namely yours. Right. And I think if it was talking about this earlier with respect to LaunchDarkly where like they're just a feature flagging company, they happen to be, they happen to sell a feature flagging as a service, but they are in the business of educating people about why feature flagging is important. And by the way, if you don't want to build the hammer and instead you just want to buy it, here it is right here, we make the best hammer
Speaker 3: [inaudible]
Pete Kazanjy: so there's a better way of dealing with this. And I think one of the things you have to understand is in startups is that it's actually not smooth value creation over time. This is a misunderstanding that people have with respect to how value is created in early stage organizations. That's going to also be if some of the folks who are here working later stage organizations, this can also apply to a new product in a large organization as well. And so specifically it's not linear over time, which you know, you can be. It's understandable why people mistake that because you know, people think people index off of things like this, whereas very, very early on value is created through what I like to refer to as business. Uh, business, uh, inflection points where our business motion inflection points where you've proved a thing, right? So for instance, do we know what problem we're solving?
Pete Kazanjy: Grind, grind, grind, grind, grind, grind, grind. Yeah, we do. We actually do know what problem we're solving and people actually, you know we have validated that people have this problem as opposed to building something blindly that people may not actually have a problem for. Cool. Does it actually work? Did we build the thing to solve that problem? Grind, grind, grind, grind, grind, grind, grind, ship. A lot of products, ship a lot of product. See if the get get Beta adoption. Oh my gosh yes. It turns out that people will use this and it actually delivers the value to solve this problem right here. Cool. Will someone actually pay for this or is it just like a nice to have and so these are the step wise is this motion inflection points that you have to go through in an ordered fashion. You can't just like jump to like this one right here. Hey can non founder syllabus. Let's like sprinkle some sales on this. Wait, we actually didn't do our customer development to figure out if people actually had this problem or actually we did do our customer development. We didn't prove that value is being created
Speaker 3: [inaudible]
Pete Kazanjy: And so not these stages are not necessarily created equal in so far as some of them unlock the ability to create way more enterprise value than precursors. But the problem is is that you still have to go through them all. So for instance, as soon as you can figure out that some, this is the stage of my company's that right now, like I'm the founder seller. And so I've sold a couple of dozen deals, you know, single digit million dollars of of Arr. And so that's cute, but I'm only one human right? And so now I'm proving the fact that I can other account executives who then I can pour my brain into and now we can parallelize out. So that's a way more powerful than like me selling, you know, 80 hours a week, which is like not possible because I have a 16 month old.
Pete Kazanjy: So these are the stages here and we're going to talk, we're going to spin through the different stages and Co and the things that you ought to be working on and the things that you ought not to be working on during those stages. Right? Again, you don't want to jump ahead because jumping ahead is a recipe for Zenefits and yourself for instance. Um, you see this a lot, right? You know, and there's a yeah, you see it a lot. There's, there's reasons why that happens. Um, but the more you know about these stages, the, the better. You can be in that board meeting and someone's like, okay, well why don't we just hire a 10 account executives right now? I'm like, let's go crazy. Come on. It's working as opposed to like, well, actually why don't we hire two account executives and see if they have the same win rates and average selling prices that I as a seller, how before we go in, like take on a $150,000 a salary expense burn per month.
Pete Kazanjy: So we're going to spin through some of these, these stages here really quickly. And then we'll do questions at the end. So first, what problem are we solving? I'm not going to talk too much about this because this is customer development. This is what product management does. Uh, and but importantly, you know, being done by a business founder or I guess a pm in an enterprise, you know, in larger organization environment, but importantly, understanding, like engaging with potential customers, understanding that they actually do have this problem that you're trying, that you, you have a hypothesis that you're trying to solve. And then the exit criteria here is when you've heard enough from these people, like, yeah, I have that problem. Yeah, that problem. Yeah, I pay for that, et Cetera, et cetera. You know, statistically significant sample size there. I'm not an expert on that. I'm like, okay, at that, these are some my favorite resources for by people who are really awesome at this. This is like the abridged version. Michael Sippey from Twitter and Medium wrote a article for first round of, you call it getting the band. I love it. Uh, it's a really great kind of primer on doing good, uh, customer development. Good and structured customer development interviews.
Pete Kazanjy: Next. Cool. Does this work? So once we know that we hit like we're solving a problem that people actually have the next stages, does it actually work? Does it deliver the value that we set out to, to provide? The way that I like for folks, the way that I recommend folks do this is elicitation of a couple of a couple of dozen Beta customers who are going to partner with you in order to understand that they, that that the, the thing that you shipped to that is probably bug ridden and like feature por actually delivers the value that they're looking, uh, looking to acquire. And the good news is is that if you, your customer development right and you keep track of it and you kind of earmark the people who are legit, those people are going to be the, the set of folks that you can draw your Beta customers from.
Pete Kazanjy: So again, this is being done by the founder or I guess the PM. And so the, the exit criteria here is demonstrate like demonstrable proof that the thing you built delivers against the KPI, delivers the value that you set out to deliver against some sort of measurable KPIs. So in the case of like LaunchDarkly for instance, you would say, hey, look, look at, look at the meantime to resolution on bugs on production. It went from an hour to three minutes and that happened this much across these set of Beta customers. That's awesome. We know that we actually are delivering the value that we set out to to achieve there. Uh, the anti-pattern here of course would be jumping past proving that you've actually delivering value to, again, hiring a salesperson to figure it out and kind of like throwing the product over the wall and saying, yeah, you guys go figure out if this actually happened.
Pete Kazanjy: Usually this is still done by the individual business founder. Oh, and the, these are some, these are some materials that you guys got. I, I tweeted the unabridged version of this deck earlier. So if you just look for a Peter Angie on Twitter, it's the first link. Most reason, like I tweeted, am I going to talk about these now? But there's in this deck, there are a bunch of resources on a per stage basis that like link out to other stuff. Cool. Will someone pay? We've, we've proven that we're delivering value to people and so we're now going to see how much money that they're going to pay us that they'd be willing to pay us in exchange for this value. Uh, again, this should be done by the individual and the exit criteria is going to be a set of customers that are paying you in exchange for the value that you're, you're delivering.
Pete Kazanjy: Obviously pricing early on is going to be a, an iterative process. But if you know, if you have this right here, so proof of value that you're creating. So in the case, again, in the case of LaunchDarkly, if you can prove that you're avoiding this amount of downtime and you're selling to an e-commerce provider where you understand that this, the cost of downtime is this amount of transactions, Lo and behold, what we can do is, is price on a w we could potentially price on a, on a proportion of saved revenue from outages for instance. I don't actually think that's how LaunchDarkly prices, but like that would be an example of like an argument that you could make once you understand what the value is that you're presenting. Another thing you can do is you can just index off of pricing in the market and just start with that and then keep raising your pricing until your win rates get to the point where you know they're okay that you're, you're still winning deals but you're not. Um, but you're not just winning every single deal because you're probably pricing too low. So the individual, the individual business founder is still doing these things.
Speaker 3: Click [inaudible]
Pete Kazanjy: Well. Many people paid for this. This is the point at which now you're trying to assist them at ties this. So w we have the beginnings of a sales motion. So the sales motion is this kind of a sales term of art that really just describes the series of things that you do and the and the people that you interact with in order to get a sale across the line. Um, one way to think about it as product managers or, um, or engineer's is kind of like sales software. Like what is the, what is, what is the runtime that you're executing as a salesperson? In this case, what we're doing is we're now just like scaling that up and doing lots of repetitions in order to find edge cases as, as we sell. One way that you can help with this is by adding a sales, someone to help set appointments for you as a founder.
Pete Kazanjy: So like a sales development rep, a junior, junior salesperson who can put appointments on your calendar. Uh, there's another design pattern here. This is the more common design pattern. Another design pattern would be in the, in the case where, you know, maybe you're really well networked in the environment. So, you know, I'm kind of an example of this right now with atrium. I run the nation's largest sales operations and sales leadership community who we sell into. So it's pretty easy for us, for me to get meetings with qualified qualified prospects. So I don't really need a sales development rep, but what I did do need is cs people so I can toss new customers over the wall to cs so I can spend my time doing more selling behavior. This is a less common pattern here, but it's still kind of an important one to, to understand.
Pete Kazanjy: Um, so at this point what you're doing is you're taking the thing that was like very, very Beta itself. Like your sales motion was very beta. And what we're doing is refining it. And as we're doing this, what we're, what we're doing is we're preparing, we're packaging this for the point where we can hand it over to somebody else. Again, to use a software metaphor like we're developing on our local. And eventually what we're gonna do is we're gonna push it to the data center. We're going to push to AWS or we're going to scale it out across a bunch of machines. Those machines in this case happened to be account executives. But what we're doing is we're still thinking about like how do we package this such that another person can consume this and, and run the, the program themselves. So that's things like messaging, qualification criteria, email outreach, materials, et cetera, et cetera.
Pete Kazanjy: So all the stuff that you've done, kind of ad hoc starting to formalize that implementation, uh, playbooks, et Cetera, et cetera. But again, this is why you know what these things are because you have been the one who has been doing it. And so now you are the person who is codifying it such that somebody else can can pick it up. If you just try to hand this to somebody else and be like, okay, cool. I just, I've, I've sold two dozen deals. Can you go? Can you do this now? But you haven't actually packaged all of this that that's going to be terrible.
Pete Kazanjy: The exit criteria here. So this is when we and my co founder were analyzing me as a sales person. We're like, okay, cool. We're at this stage right now because Pete has sold a couple dozen customers. We have a repeatable sales motion here. Uh, there's documentation of sorts. Uh, and now is the time where Pete's going to start spending some of his time interviewing account executives in order to pull people into the organization to drop this sales. This now develops sales motion into click. So this is a really important kind of stage in terms of scale out. Where can someone who's not the founder or not that that early pm sell this, this is what the organization kind of structure will look like there where you're probably still selling because you're going to be selling alongside these other folks. It's not just kinda like, okay, I'm done. Have Fun. Uh, but instead you're selling alongside these folks and and managing a book of business yourself while at the same time riding along with these folks, onboarding them, training them, et cetera, et cetera.
Speaker 3: [inaudible]
Pete Kazanjy: The big thing here, the big delta is going from being primarily a doer to being a doer slash trainer, which can be potentially an anti-pattern, especially in the next stage where if you only spend all of your time selling or continuing to sell, that's not terribly helpful from an enterprise value creation standpoint because there's only 40 or 50 or 60 hours in a week for you as a seller. Whereas if you can parallelize yourself out across six account executives, that's way more leveraged than you're ever going to be able to do by just get by, just selling more. So that that's where spending time, hiring, training, and managing folks is, is really important here. And the exit criteria when you know that this is working is that you've got a set of people who are not you, who are selling as efficiently as you were, or maybe even less, a little less efficiently than you were. Because even if these, these account executives have a win rate of 15% or f or 20% whereas like yours was 2020 5% or 30% because like you're so bad ass or what have you, you still can compete with an army of, of five to 10 account executives. So the important thing is, is that is getting those sellers to, to success.
Pete Kazanjy: Cool. Uh, this is the last stage we'll talk about specifically here, but this is the point at which you're now kind of off of selling and your PR. Now what you're focused on is the beginnings of managing the machine that you've built. So this right here, you've got a, a unit of revenue production, right? I mean, this is like one example of this. So sales development rep to account executive cs, it might be, you know, two SDS to two Aes to one cs or whatever ratio. The ratio is may be different predicated on your specific market. But the important thing is that you're out of the business of selling day to day and you're now in the business of managing this thing in preparation for handing off that management harness to an actual professionalized sales leader. Uh, so key activities here are refinement and management.
Pete Kazanjy: Maybe you're, you're, this is where you're putting together a metrics harness and really instrumenting, um, the success of this revenue pod right here. Um, and so that's like where things can get really, like if you, if you can go through all of that, you've, you've now put yourself into a situation where you can scale that out in a way where if we just, Casey was kind of talking about this earlier and we just add more money to Google ad words or Facebook ads or we just hire more SDRs or what have you. We actually know that we're union economically positive because we have these account executives who have a win rate of 20% and an ASP of 25 k but they only cost us 150 k a year. So, you know, they're just machines that just pump out money at this point. But the only reason why we were able to get there was by going through all of these stages in a stepwise fashion to get the sales software right.
Pete Kazanjy: So like this is the next stage after that where you now have handed it off to professional sales leadership. Maybe you've added sales operations there to make sure that the machine, someone specifically is focused on making sure that the machine hums along. And then the next step is like even more abstraction out, so on, so forth. Cool. So that's founder led selling. This is an abridged version of the deck that I normally present. The long version is on, uh, is on my Twitter profile. The deck itself has kind of a arts and crafts pictures and words version of that. The book on sales for founders, founding sales, which is linked right there. It's not published, but it's linked to a, a, a bunch of Google documents that are interlinked with each other. So it's kind of essential like open source right now. So you're welcome to play around with it. Questions
Speaker 3: [inaudible]
Pete Kazanjy: Yeah. So the minimum revenue per customer in order to justify the cost of the sales funnel, a usual rule of thumb there is, um, you want to have a, about a anywhere between a 20 or 30% cost of sales. So depending on what this, let's go back here. Depending on what this unit looks like right here. So I actually don't consider customer success for that because that's for considering renewals. But let's say that like your unit of revenue production is an SDR plus nick to Aes and maybe like an se, um, take whatever that is, whatever that salary is and it, and the total amount of bookings that they should be able to do in a year probably shouldn't be less than like three times that. Right. So let's say that you have full-stack, so you work at Adobe, right? Where do you work?
Speaker 3: I'm a farmer. [inaudible]
Pete Kazanjy: Yeah. Okay. So I mean the way you want to think about it is, so you have a, say you have an account executive, it costs $150,000 a year without a SDRs. And those founders are just very sorry that that account executive is just selling, you know, full stack without like setting his or her own appointments or what have you. W if you have a $150,000 account executive, you probably want to see them bringing in, I don't know, $600,000 a year in bookings at least cause otherwise like they have to throw off money to pay for engineering and real estate and all these other things as well. So that's just kind of like a rule of thumb. But then if you add an SDR, say that account executive needs an SDR as well who costs $80,000 a year, now it's one 50 plus 80 so two 30 times four blah blah blah.
Pete Kazanjy: Make sense? Yeah. I have one more question. Uh, what does the typical ratio for number of [inaudible] number of account executives? It really depends. So it depends on, it all depends on, on your sales motion, like physics so to speak. So if it's really easy to get meetings in your, in your market, maybe you don't even need us here. I mean they kinda gives, I can just can do it for themselves. If account executives, if it takes 20 meetings in order to like close the deal, well then account executives probably aren't going to be, have any time available for them to do prospecting behavior. So it really depends on the nature of your sale and then you back, you back it out from there. Uh, I think there's a model hyperlink from somewhere and in here, but unfortunately there's no like hard and fast rule. Really what you want to make sure is that your account executives are fully, fully utilized.
Pete Kazanjy: So, you know, there's 40 hours in a week and a normal human being probably has four or five meetings a day. If you're having more meetings in that, you're not, you don't have time to do followup or prep for those meetings. And then you don't have enough hours in the day to do pipeline management. So if your account executives aren't having 20 meetings a week, that means that you have under utilized account executives. That means you could probably raise up the number of strs that you have in order to fully utilize. I mean, think about it. Think of it in terms of, um, cylinders and an engine and, and fuel injectors. Okay. Other questions?
Pete Kazanjy: Nope. Okay, cool. Well, if you guys, so the, uh, this stuff is interesting to you. Check out the book on, um, on, yeah. B2B sales for dummies primarily founders can also be pms. That's another genre of dummy besides founders. Um, and then, uh, you know, if you have a sales organization, atrium makes really Badass, uh, analytics software for four year sellers. And then if you have sales leaders in your sales operation, sales leaders in your organization who would like to be able to ask questions and have them be answered by other sales leaders and sales operations people, that's what modern sales for. Did you have a question?
Speaker 4: Yeah. [inaudible]
Pete Kazanjy: Uh huh. That's actually the entirety of the company is just describing. It's just you just change what you're grinding on.
Speaker 4: [inaudible] little bit work and [inaudible].
Pete Kazanjy: Yeah. So it really depends on your market. I would recommend you read the chapter on prospecting and outreach and appointment setting and founding sales. They're linked from the deck in question. I'll also email materials on how to write, um, outbound email. I think it really just kinda depends on how easy it is. What market do you sell into?
Speaker 4: Easy, fast [inaudible]
Pete Kazanjy: Engineering teams. Okay. So don't cold call cause engineers hate being called. So don't do that, that's for sure. Um, so it really depends on the market. So if you're selling to sales operations, there's a certain pattern of, of prospect engagement that those folks are into. Generally speaking, engineering organizations don't like being sold to proactively. Maybe kind of related to some of this stuff wherever the slide is about getting shoved in lockers. Um, so the most successful sales motions or developer sales motions are typically inbound in nature wherein we go, um, inbound in nature where open source is the best example of this where you have some sort of like free legos that exist in the world that people can start downloading and playing with themselves. So David Skok from Matrix has done a lot of writing on this. Probably the earliest example of this was jBoss.
Pete Kazanjy: So jBoss was jBoss was able to disrupt, what was it? WebLogic by virtue of having an open source, um, at least like lead gen model and then they can price way lower than, than WebLogic. Red Hat has this model as well, but it doesn't have to be open source in nature. You can also have like, Xamarin is a really good example of this where people can download it, start playing around with the you instrument. The level of playing around this that's going on. Snowflake is another example of this as well. And then predicated on how much playing around this is happening. And also while this person downloaded it and they go to school at like UCI go away versus like this person downloaded it and they're playing around with this and they work at Lockheed. Hi, I'd like to talk with you. Um, so I would read up on, um, uh, sorry, software or developer sales motions. Also, I think heavy bit publishes a lot on developer centric sales motions as well. Don't go call, they download and you call them. They're never, ever, ever going to be your customer. Anything else? Cool. Thanks guys.
Keep me posted on Empower 2019.