With COVID-19 spreading unabated, most startups are hunkering down and evaluating possible cost-cutting measures. Boards have given their sobering views on the coming economic nuclear winter and the need to reduce expenses.
Revenue is dropping while fixed costs and salaries suck up cash. The typical response would be to take a hard look at all functions and reduce expenses while waiting for business conditions to improve.
One of the frontline areas that often comes under the axe is the sales and marketing function. Largely poorly done, this is an expensive mistake that often costs more over the intermediate-term, and with significant loss of competitive advantage.
So what should the response be?
Leverage changes to build a strong sales platform for post-crisis growth
This is not the first time that businesses have faced an existential crisis, and it won’t be the last. As the crisis ebbs, some can limp out of it, while others are in a position to thrive.
Rather than looking at your sales function as just a number which can be used to reduce expenses, you can smartly use this period to reset, build a best-in-class sales team, and a revamped go-to-market strategy.
When business is growing, it hides many flaws and inefficiencies. To lay a roadmap, you need to determine what is working and what needs to change.
One of the things that a crisis does is put everything on the table. Take a hard look at your overall sales data over the past 12 months – deal sizes, product mix, sales performance by rep, customer churn, cost of acquisition, and metrics that are specific to the business. While every area looks terrible right now, you would want to isolate the middling parts of your pre-crisis business.
In one company I worked with, deal sizes were always an afterthought. In the enterprise B2B business, it often costs as much (sales rep time, duration, pre-sales support, and marketing) to close, say a $50,000 deal, as it does a $500,000 deal. In this case, the $50,000 deal was unprofitable and there was a range of people resources and marketing supporting this segment. This is not to imply that small deals are bad, but, in this example, they were a drain on the company.
Debate the question – “In a post-crisis world, what is the ideal sales mix and go-to-market strategy for the organisation?”.
In the prior example, they preferred targeting larger accounts, and higher deal sizes versus the mix they continued to support. Use such analysis to isolate what you want, and identify what can be dropped. The latter should be cut because it was never an effective part of the business, or because it does not fit the future market environment. You’ll have a more intelligent approach to reducing costs with such a framework.
Horses for courses – hire the best you can find
I ran global sales for a startup focused on financial services during the 2008 crisis. It was a terrible time to be pitching – let alone selling and closing deals – as clients were in full-blown cost-cutting mode with no visibility into the end of the crisis.
We had to cut costs as a firm but, as a management team, we decided to invest in some high-quality sales people, a small but top-notch pre-sales team, and in thought leadership. While we shrunk overall, we did so with a plan to invest in our future. It paid off in spades as we emerged from the crisis.
So while it’s counterintuitive, a crisis is the best time to find a handful of superstar sales reps, assuming you have a go-to-market framework in place. These people need to fit in the future state of your organization, but most likely, they can make an immediate impact on your current position in the market.
If there is one thing you can invest in right now, it would be finding a couple of top-tier sales people to bolster your firepower and lay the platform for take-off when the market turns.
In the current environment, you would have to take into account the core sales team you want to be at the frontlines with – one that can handle changes to the environment (digital pitches and not as much face to face), yet reaching and influencing decision-makers. It’s about quality and not quantity. It’s a great opportunity to get your foundation right and be ready to gain market share when the crisis softens.
Focus on deep customer relationships
Just because there is a freeze on budgets and sales cycles, it does not mean there is nothing to communicate. The best sales teams use a crisis to build differentiation and sharpen value proposition. In the current environment, decision-makers have both the time and inclination to listen to ideas that can make them and their organisations better. They may not be buying but they are learning, and it’s a great time to make a deep impression. It always surprises me how little India’s B2B early-stage startups invest in thought leadership. It’s even more crucial during a crisis.
As the market recovers, enterprise customers would naturally gravitate towards companies that displayed vision in terms of the evolution of the solution, shared customer success stories of transformation, engaged in a discussion of value measurement metrics, and have sales people who built deep relationships to discuss all of the above. Easily measured and relevant metrics for these strategies can help you track whether you are making the most of the downturn.
In the era of Zoom meetings, it’s even more important to have a sales organisation that can leverage a forced new channel but still address the basics of what it takes to close sales cycles. Take that into account when making changes to the sales team.
Align your sales, account management, pre-sales, and marketing organisations
As a founder or head of sales, it’s important to have a clear view of your desired sales goals during the crisis and your future state. This makes it a bit easier to figure out the interlocking functions.
There is a lot of room for mistakes that can hamper recovery. To reduce costs, you may saddle your best sales people with more account management work to pick up the slack. Or let go of the sales people and have account managers (who cost less) to work on frontline sales roles. While dire circumstances may require such actions, in most cases, it indicates a lack of thoughtful implementation.
To achieve the goals we outlined earlier in terms of customer engagement, CXO level relationships, and sales, you still need your best sales people out there building bridges or closing deals. It’s sub-optimal to change their roles.
My experience has been that you are much better off with a smaller, very high-quality team across all functions – sales, account management, pre-sales and marketing – rather than try and force-fit people in wrong roles. If it did not work during the good times, they’re likely to deliver poor results during a crisis and handicap you on the way up.
To summarise, focus on these three things to ensure a thoughtful approach to sales realignment: 1) isolate underperforming areas based on actual data; 2) selectively hire the best sales people; and 3) ensure alignment between sales, pre-sales, and marketing while making adjustments.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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