Monday, October 4, 2010

Every CEO needs to have carried a bag

Usually we CEO's spend most of our time carrying a can ... among other things, but it's really important for any CEO to have been a sales guy at least once in their life. Any entrepreneur is always in sales, selling simultaneously to team, customers, partners, investors and service providers. One of my favorite CEOs started life with a telephone book and cold calling to generate revenue--tough way to start, but what a great grounding in human nature and the importance of making numbers. The idea of meeting a quota is central to the needs of a startup, especially a bootstrapped one that is always months, weeks, or days away from Chapter 11. I know of one CEO who carried his bag all the way to Las Vegas, because he couldn't make payroll, and put what money he had on 11, and made payroll for the year ;-) Not what I mean, of course!

A classic founder situation happens when the investors come into the company and drive hiring of new executives with more experience than the founder to go out and carry his bag from him. Often, this does not work because the founder has an evolved DNA for selling exactly this product and deeply understands and has earned the trust of these customers. The experienced sales people, as good as they may have been elsewhere, just can't deliver the level of customer intimacy that selling to feed your family for years has instilled in the founder. Sometimes, this simply doesn't scale. Now it should be possible to teach this skill to the experienced sales experts, providing of course that they can get over their ego and let the founder help them learn, but of course this is the opposite of what the investors wanted to happen and may not sit so well with them and their egos ;-)

The other great thing about carrying a bag is that it gets you in front of your customers. If you are the founder you are likely to be more strategic than the typical sales person, and this gives you the ability to do that magic that the managers of really great sales people dream of--the strategic upsell. Because you are deeply involved in your customers' problems you have the ability to see solutions where they see only problems. And because you have their trust from your history with them, they will listen to you when you patiently explain why they need to step back and see the entire problem, and while they may buy this one single component today to solve this week's problem, they will have you back in every month for the next two years to buy other components and after all that they will have the entire solution cobbled together from all these transactions and gee wouldn't it make more sense to take a little more time now and solve it all, so they can spend the next two years on making money?

To be sure, this is really hard to do, and it can easily slip into the Osbourne effect (where customers don't buy anything because they are always waiting for the next big innovation to solve all their problems). But, when it does work, the result moves from transactional selling in $10-50k chunks, to $1-2M sales with recurring revenue over multiple year commitments, and the business scales from these repeatable, upsold, presold deals.

What's really fascinating about this, is after the VCs have pulled the founder back from the road to let the professionals fix the messed up sales process, the founder invariably gets put back on the road to save the business and sure enough can reengage with their beloved customers and start bringing home the upsell deals again as those customers welcome him back with open arms and where have you been all this time? Invariably, the reward for this success is that the investors then start searching for a new professional CEO to manage the business so the founder can focus on what they do best--now was that selling the product, or saving the business ;-)