Dec 7, 2017
Nail it and scale it. That term is thrown around loosely when it comes to building out successful startups and companies but what really goes into ‘scaling it’?
We’ve surveyed seven successful Real Estate tech entrepreneurs to understand the key operational moves they made which allowed them to successfully scale and grow their sales and marketing operations. The founders surveyed represent every major type of business model you can think of: B2B, B2C, Marketplace, SaaS and etc. In this research paper, we will discuss the key findings which should provide a roadmap of the key things to do when entrepreneurs move from finding product market fit to scaling their sales and marketing efforts.
FINDING #1: CEO’S BETTER BE SELLING! THERE ARE NO EXCEPTIONS TO THIS
It doesn’t matter if you are technical or not, the CEO must represent the person on the team best suited to sell. They must have a holistic view of the organization so they can organize teams to develop the product as needed for customers.
Seven out of seven entrepreneurs surveyed said they were in charge of sales in the early days, lending credibility to the early stage customer. Furthermore, early on the CEO should be the point person for product feedback and they usually know the pain point the strongest. The CEO has a few milestones that they can use to help them measure their product. The first being sales and will you get someone to pay you for the product? Second, can you find a way to replicate that? Third, can you outline the process so it can be handed off to someone else to execute?
FINDING #2: SUCCESSFUL EARLY SALES TEAMS HIRE GENERALISTS
Although it is tempting to hire a senior sale executive early on, a startup has limited resources in the early days (money, time and structure) and as a result, it needs people who can be flexible to handle a number of key functions.
Six out of seven CEOs brought in a junior hire to replicate theirs sales process once they had figured out the first version of how to complete a sale. A sales generalist for these teams would cover a number of different functions: prospecting leads, making cold calls, qualifying leads, setting up client meetings, accompanying CEO on client meetings and ultimately having the responsibility to close business themselves. In addition, these generalists are responsible for the Account Management work once the initial relationships are established. Interestingly, for some of the companies surveyed, 99% of the revenue occurred right at the time of the initial sale. For others, 99% of the revenue came after the initial sale as the company expanded their footprint with the organization.
Another interesting finding was that the generalists were usually junior hires. VTS hired very junior (a year removed from college) and put them through a real estate bootcamp where they learned everything they needed to sell successfully. They were then responsible for the whole sales process. My company, SpotHero had similar employees who were mostly under the age of 24 and responsible for similar deliverables.
FINDING #3: LANDING ONE BIG ACCOUNT IS A GAME CHANGER
One big account can change the trajectory of an early stage company.
Five out of seven entrepreneurs surveyed said that the turning point in their business was closing one big account. The consensus feeling is that credibility is key in scaling a business and one big account can be the difference between making it and not. Here are a few examples of landmark deals that changed the direction of a few of the companies surveyed:
FINDING #4: SUCCESSFUL TEAMS SPECIALIZE LATER IN THEIR LIFECYCLE
Although generalists are key in the early days, after a startup has traction, it is important to specialize sales team.
Six out of seven entrepreneurs surveyed said that they split the sales function up into specialized components at later stages in the company lifecycle. There was no single specific point at which they did this, however, it does seem to be the case that as generalists started to become overwhelmed with work that it started to make sense to slowly specialize roles to help the organization keep up with the growing amount of work.
On a high level it seems like sales teams will inevitably split into a few of the different functional groups listed below:
- SDR (or Sales Development Reps) - Prospect and qualify leads
- Insight teams / Sales operations - Demo the product and gather preliminary information for sales reps
- Inside Sales - Sell products over the phone
- Account Executives - Sell products in-person
- Sales Operations - Gather data and help support the Inside and Outside teams to be ready to go when it comes to meeting time
- Account Management - Handle the account once the relationship is closed. Their goals are sometimes revenue growth of existing book of business or client satisfaction
FINDING #5: FOUNDERS HAVE INTIMATE KNOWLEDGE OF THE PAIN POINT
Three of seven founders surveyed had previously experienced the pain point in their professional life. Nick Romito from VTS was an asset manager who built the product for himself, Michael Mandel from Compstak was a broker who knew the frustration of trading data and Doug Chambers, from Fieldlens, was a Project Manager for a decade before founding his startup. The other entrepreneurs learned the pain points as consumers. Caren Maio from Nestio had been through the apartment search process near a dozen times and Jeremy Smith from SpotHero had accumulated $5,000 in parking tickets before each of them started their companies. If someone feels the pain, is trying to build their own solution because the market doesn’t have anything good and/or they are willing to pay money now for that solution are usually good rules of thumb to identify if the problem is worth solving.
FINDING #6: FOUNDERS ARE OFTEN NOT TECHNICAL
It was also very interesting to see that all of the founders surveyed did not come from technical backgrounds. It could very well be that not having as strong of tech background limited the entrepreneur’s abilities to pivot into different business models the way other teams might. With that said, intimate knowledge of a pain point not only seems to help build the solution but it seems to help in the process of selling. If you’re coming from industry then you might know the key decision makers involved in a process or how to position a solution. It’s up to the entrepreneur to determine how much industry experience is needed to succeed but it’s clear that there are benefits of knowing how all the stakeholders are impacted by a product and why they need it (or not).
FINDING #7: MANAGING TEAMS
Every team is going to have to determine their culture and managing style as they scale. It seems like meetings are a great alignment tool (when executed effectively) and should be a way of keeping your teams working toward the same goals. There is not one specific formula for how to manage teams but we’ve aggregated a few different approaches to help to provide a starting point on what to do.
For the entrepreneurs surveyed, the team meetings are a lot more thought out than the one-on-ones. Since they take up multiple people’s time they need to be and have a formal structure. A team lead will call a meeting and will serve as the point person and might also be responsible for the follow up that comes from the meeting. There’s also usually a goal to these meetings. A team might use OKRs, or Mspot or any number of different goal setting methodologies but almost universally there is something to keep everyone focused on. Lastly, teams are mindful of who is in attendance. Having the people who are critical to accomplishing the goal of the meeting is a good starting point. Just ask yourself, “Given the goal, should this person be here?” as a starting point for determining if they should be there or not.
These are meetings that happen directly with a team lead and their direct reports. This is not just for CEO and direct reports but for VPs on down. The frequency is usually once a week. There is all different feedback on how to run the meetings. Some teams like to have the person requesting the meeting send out the agenda, others like to have their subordinates prepare an agenda ahead of time and then there are those who prefer a less structured free-flowing discussion. Reading between the lines, it seems like this time can also be used to understand how someone is feeling about things outside of work. Some teams like to have once a week, purely social meetings and others like talking about some of these social items in the one-on-ones.
All in all, there are a number of ways to build a successful business but a few things really hold true. Of the companies surveyed, each CEO had the responsibility of selling the product. For a majority of the companies that are bias toward sales led the company to making one large sale that ultimately changed the trajectory of the company. A number of the other milestones for the businesses surveyed came after having some of these early first customers, so it’s important to not overlook the importance of sales in the early stages. Later stages of these companies lifecycles are about specialization and getting the right people in the right places to be successful. Hopefully these lessons can help you figure out the blueprint for your next successful startup venture.