The Sales Learning Curve

Why it’s important?

Founders, knowing which stage in the sales learning curve your company is in will cost you less pain, people error, and money.

Similar to how we launch a new product into the market, sales is no difference. It’s important to understand when are you in the “experimental stage,” where it’s necessary to invest time in order to better “learn,” i.e. understand the market and consumer, versus when you are ready to invest in the “execution stage,” building the right sales force to execute.

The execution stages requires clarity regarding the customer’s need, how they react to your process, and how the product is being acquired, in order to build out the right sales process. When you achieve this, you can invest in the salesforce necessary to achieve scale.

What startup founders need to be careful about is the rush to invest in a sales force early without having established product-market fit, as, without that step, the founder is still unclear of what the customer truly needs. In other words, you haven’t yet figured out your true customer value proposition.

Just like developing and launching new products, which requires iterations and pivots, in the early stages of the company, agility in the sales process is critical in order to gain as much information from customers as possible, use it to adapt the sales process, and adjust how the customers are being acquired.

Where the company is on the sales learning curve not only defines the rigidity of the sales process but also signifies what kind of sales skills and talent is needed.

What is it?

We can look at the Sales learning curve as having 3 phases: the initiation phase, the transition phase, and the execution phase.

(Credit photo: HBR.org)

The initiation phase

Is the phase in which we will put most emphasis on learning and experimenting.

At this stage in a startup, the founders often becomes the sales leads. They are the closest to the customers in order to learn and iterate quickly, to improve both the product and sales tactics. If you hire talent at this stage, you will require a sales person who is flexible, agile, and open to change and who can adapt the sales strategy based on the customers’ needs. A this point of the business, the company typically hasn’t yet reached its break-even point. If there are sales teams during this phase, the founders will need to be very careful and not to force a commission-based sales plan since it will inhibit learning. The process the sales areas execute is more important than how quickly sales deals made. It’s as important to understand why deals are not being made as why they are made. The data here is crucial to learning.

The Transition Phase

In this phase, the company has reached product-market fit and there is clear customer traction. What leadership should do at this stage is focus on creating a repeatable sales process, adding and training sales talent to follow the sales process. The sales team hired at this stage will focus mostly on execution and less on sales discovery and customer understanding, since this was heavily emphasized in the initiation phase. However, it’s also important to keep learning, and improving as the company scales however, therefore, the sales process should be more or less structured, and built for scale. This is also where the outcome metrics will be important to track sales leads and sales conversion.

The Execution Phase

In this phase, the company is taking off and is operating like a well oiled machine. The reputable sales process is working. This stage is the stage where we can be confident that the company is in its best health and upward trajectory to hire as many sales people to drive revenue growth as possible. This is where you can quickly build a sales force. The sales force at this point can be a traditional sales force where the sales team can execute with confidence, having a product that works, pricing, marketing materials, and a clear go-to-market strategy to operate. The sales force can depend on the company to steer them to a clear segment and territory.

Mapping the startup phase with the sales learning curve phase

What’s at stake?

Without paying attention to the sales learning curve, a common pitfall for founders is to hire a salesforce right at the initiation stage, which is often too early. The product was just launched to the market and not fully functioning; tweaks and adjustments are still needed. Having a salesforce will indeed provide good demand generation, but as a result the company will suffer from non-reputable purchases and recurring revenue because a sales process hasn’t been developed. Hiring and firing takes time, if done too early, the founders will end up paying a high cost. We’ve seen many companies having to lay off the entire salesforce because they haven’t figured the right product and the right go-to-market strategy, and therefore, don’t have the right talent on the team.

By mapping the stage of the startup to the phases of the sales learning curve, this will surely save time and resources! And most importantly the emotional toll that founders can save by having the right talent at the right time.

This article is based on ideas initially raised in https://hbr.org/2006/07/the-sales-learning-curve and https://hbsp.harvard.edu/product/R0607J-PDF-ENG discussed by Mark Leslieand Charles A. Holloway.