The CEO <> Sales Relationship
Leaders who understand and appreciate the role of sales have a big advantage
A CEO’s relationship to their sales team is really important- oftentimes, it’s nonexistent, and that is a big missed opportunity.
As I thought more about this problem, I realized the CEO <> sales relationship develops very differently in bottom up vs. top down businesses, so we will try to break down the differences below.
As a reminder:
1. Top Down - where decision maker touches product before end users
2. Bottom Up - where end users start deriving value from product before decision maker ever engages in a buying conversation
In this article, we will explore the CEO’s relationship to the sales org in both types of orgs- because they do differ in subtle ways.
First: CEO’s relationship with sales in a bottom up company
The typical venture-backed, bottom up, B2B SaaS company typically follows a predictable origin story.
Company started by someone technical (typically an engineer, or at least, someone highly product focused)
First 5-10 employees are in this founder’s network, also typically builders (ie- engineers, maybe traces of product, growth, or design expertise)
Employees 10-20 may include someone responsible for basic GTM (sales) motions- onboarding, answering tickets, assisting with warm inbound deals, etc.
Once it’s clear that early phase is going well, this type of bottom up company will bifurcate into two camps:
Camp #1: Builders (the people focused on “product led growth”)
Camp #2: Sellers (the people responsible for turning organic growth into bigger, paid contracts)
It’s very easy for a class system to develop where the “building class” is treated like heroes, and the “sellers” are viewed with an ever so slight condescension. As a leader within a bottom up company, you should be aware of this tendency and try to prevent it from occurring.
As a seller myself, this ‘second class’ dynamic had a net positive impact on my career- Josh Wolfe summed it up well when he said, “chips on shoulders put chips in pockets.” Feeling like a member of the second tier, selling class put a chip on my shoulder, and instilled a healthy sense of “if you’re not producing, your job may not be secure.”
The goal of this article is to highlight the risks of a CEO or company leader allowing (or even promoting) this type of class system, and to help illustrate why it develops in the first place.
Why are builders and sellers seen as separate classes within bottom up companies?
In a bottom up company, the product itself becomes a deity of sorts - it is the provider of life. It is the provider of product market fit. It generates media interest, and praise, and users, and a viral loop of more and more users (some people refer to this as “product led growth.”)
The product is a deity in a bottom up company showing early signs of success, and the people who build that deity (engineers, product, growth marketers, etc.) directly are perceived as the most important people in the company.
Warren Buffett once said “if you don’t find a way to make money while you sleep, you will work until you die.”
Similar logic applies to startups reaching escape velocity around growth. A bottom up product is a self serve machine that can help you make money while you sleep. The product/website becomes a (seemingly) endlessly scalable device to sell to anyone in the world, add users without a human spending time with them, onboard these users without a human spending time with them, and to get these users to invite other users (again, without a human spending time with them.)
This type of traction is intoxicating, and can sometimes blind a CEO (and other members of the early team) from the reality that a bunch of small teams signing up for your product may actually be creating a sneakily brittle business.
Without big deals, and big enterprise contracts, your “b2b” business actually resembles a consumer business, which is typically plagued with low levels of loyalty, small average contract values, high degrees of replaceability, and high degrees of churn. You risk building a long term leaky bucket- because it’s so early in your product’s life, it’s hard to anticipate these risks.
The key point is that when you do everything self serve and without salespeople, it creates a feeling that the company is invincible and has discovered the recipe for endless self serve money. And that’s simply not the case.
What happens next
Here’s what typically happens once the successful self serve stage picks up steam:
1. The board (or other close advisors) of the company advises that the CEO start to build a sales team
2. The CEO reluctantly agrees- it seems like every successful company like them has a sales team of some sort, and it’s inevitable, so might as well start now.
(by the way, Pete Kazanjy just wrote an excellent post on how to do this step by step for Lenny Rachitsky’s newsletter: Layering Sales onto a Bottom-Up Self-Serve Product)
3. The CEO has never worked with salespeople before or built a sales team, so they try to delegate the task to someone else better suited to “own” this process. The the CEO typically becomes slightly removed from it.
4. The person assigned the task comes back with the projections for costs, both in cash and equity, and it’s eye popping
5. Beyond that, the payback period on justifying these salaries and equity packages is staggering. Sales seems insanely inefficient- because it is, at least at first. You have to recruit, you have to outcompete other startups, you have to ramp, you have to learn a product, you have to build a sales playbook, and often times, the current iteration of the product cannot support the big deals you want to win.
This combination of factors is extremely unhealthy
If you take a step back, you realize this is a really unhealthy start to a CEO’s relationship with sales- it’s a hurricane of attributes that [can] combine to create a lot of ill will towards a function that doesn’t exist yet.
The CEO isn’t bought in. The CEO doesn’t understand why they even need a sales team. The CEO overestimates how easy their product is to use and understand (because they have been thinking about this product nonstop for several years and built everything about it), and doesn’t see the value of actual people helping. The CEO hates how expensive a sales team is. The CEO hates how inefficient it is. The CEO doesn’t advocate for the “enterprise-grade” features that make selling bigger deals possible.
The CEO meets the sellers and doesn’t have anything in common with them in terms of personality or skillset. The CEO doesn’t feel like the seller will understand their product enough to do it justice in a conversation with customers. The CEO notices how loud and boisterous the sellers are and sees that they are slowly changing the entire culture of the company.
Again, a highly toxic series of events. From there, executive resentment and/or distrust of the sales team can develop- along with a sneaking suspicion that the company would be better off without them. It’s really hard to hide this feeling even if it’s a secret- CEO disdain of sales typically reveals itself when a CEO doesn’t make an effort to connect with, or speak to, their sellers.
It’d be like if a parent spent all their time coaching one child’s basketball team, attending their games, helping them with homework, building a relationship with them, and then ignored their other child because they can’t play basketball.
What can a CEO do?
First, a CEO needs to educate themselves on the long term value of sales. It’s the same reason the phrase “do your own research” or “DYOR” exists in stock investing. If you don’t understand the value of what you’re buying, you’ll be the first to capitulate when the investment turns against you, while the well educated, disciplined buyer will know to double down.
EarlyGTM post number 1: “Does my SaaS company even need a sales team?” Yes.
Again, you need a sales team because small transactional deals are brittle, and hide a bunch of tail risk. A sales team can grow your avg. deal size, help you better understand your buyers’ needs, contribute to successful deployments, fight against your competition, and can grow lifetime value of your customer base substantially.
CEO setting a vision that sales buys into
Once the CEO understands the reason for adding a sales team to their bottom up product, they will be more patient for the payback period the play itself out, and is in a position to be far more friendly and supportive towards sales.
Though it may not seem like it to a non seller, sales is a really tough job. It’s mentally taxing, stressful, and carries with it a maxim of “you’re only as good as your most recent quarter.” The scoreboard is constantly resetting at zero. There’s a sense that if you don’t hit your quota for a couple quarters in a row, you’ll be fired. You’re constantly trying to control the uncontrollable, and bridge a gap of a customer who wants features that don’t exist within your early product yet.
Because the day to day job of selling can be so brutal, it’s imperative for a CEO (and the rest of the leadership team) to build a culture and mission that your sellers can buy into.
They need to want to fight for your idea, your mission, and most importantly, they need to want to fight and win for YOU as a CEO. If your sellers sense that you don’t care about them, mistrust them, or don’t value them, you’re creating a ticking time bomb that will detonate as soon as your startup starts to lose a little bit of its luster.
Practical steps
-As a CEO, you should not insulate yourself from the sales team, or completely designate sales to be managed by someone else. You must force yourself to care, to be empathetic towards your sellers, and most importantly, strategically understand what they need in order to be successful
-As a CEO, you should build relationships with your sales leaders and individual sellers. It doesn’t mean that you should be best friends with everyone on the sales team, but talk to them on a monthly basis. Speak at the sales all hands. Applaud your top performers. You may not like it or realize, but your attention and love towards the sales team is its own valuable currency, and it costs you nothing (aside from time) to spend it.
-As a CEO, if you’re upset with or frustrated with your sales team, you should funnel that frustration directly to the VP of Sales or Chief Revenue Officer- you cannot allow it to seep into the sales org in more passive aggressive ways.
-As a CEO, you should try to learn about the sales job- what it entails, why its difficult, and what it looks like when done correctly.
-As a CEO, you absolutely must listen to sales calls and even talk to customers. Try to understand trends for why you’re winning and losing deals. And do NOT hyperfocus on what is going right at the expense of what could be improved.
-As a CEO, celebrating the builders as essential and sellers as expendable can erode accountability within the builders. If builders start to feel like sellers aren’t smart or good at their jobs, and are the reason for the product’s failures within the market, that dynamic can chip away at the urgency to build key new features, or listen to customers. To achieve at your fullest potential, both builders and sellers need to operate with chips on their shoulders.
Does the same thing happen in top-down companies?
Not nearly as much. The simplest way to think about a “top down” company is to envision a “talk to sales” or “demo” call to action, without the ability to create a free account.
Top down companies take this approach not because they want to or choose to, but because their product is either:
a) too technical for an end user to simply get up and running on their own
b) the audience is too small/specialized- it can’t be used by just any end user, it has to be used by a specific person within a company
c) there’s no logical way to get value out of a free version of the product
In that world, without sales, top down companies often start as “CEO led” sales- where the CEO is a charismatic, natural seller who has been working with prospects from the beginning to sign their first deals.
Top down companies do not generate any revenue until a decisionmaker blesses the purchase, so a top down CEO is immediately more empathetic and knowledgeable around the role of sales.
After a while, top down CEOs aren’t building a sales team because some outsider has advised them to do it- they’re building a sales team to reduce the burden on themselves and make the process of finding paying customers more scalable.
However, the first class/second class builder/seller dynamic can still develop within top down organizations. The advice for CEOs to be more interested in sales, empathetic towards sales, to be more present amongst the sales team.
Stewart Butterfield, Slack’s CEO, often attended the sales team’s offsites- he may not have realized it, but that gesture meant world to us. It was motivating and conveyed a sense of belief in what we were doing- Stewart also made himself available for customer calls and on site meetings, again, hugely important decisions.
There are two main functions within a company: (1) building (2) selling
At the end of the day, there are two main types of roles within a company- you’re either building, or selling (or, as a third option: supporting one of these functions.)
Companies would be well served to make these building/selling subcultures as cohesive as possible- all too often, the builders look down on the sellers, and the tone is ultimately set by the CEO.
Again, the natural evolution of most companies (especially bottom up companies) creates a perfect storm for a CEO to not be excited about the sales function. If you’re lucky enough to be a leader within a company with a strong bottom up engine, try to reject some of these natural suspicions towards the sales function, and find a way to embrace your sellers.
Your culture will benefit, the lifetime value of your customers will benefit, and ultimately, you’ll build a much stronger culture and revenue base.
Summary:
Top-down companies rely on sales to close all revenue, so the value of the sales team is better understood and more clear to everyone within the company.
Bottom-up companies make money while they sleep because of the viral, self serve nature of their product. That causes a psychological phenomenon where those in the “building” class (including and especially the CEO) can subtly resent and mistrust sales, which can lead to a whole host of issues.
It’s possible to create a culture that simultaneously keeps sales accountable to strong product knowledge and strong quota attainment, without making them feel like a separate, lesser subculture within the company.
If the sellers feel inferior to the builders, they will only stay at the company as long as it’s scorching hot. If a seller doesn’t feel like the CEO buys into their team, and doesn’t feel like they are strategically important to the mission of the company, they’ll leave as soon as the job becomes a little bit tougher.
Thanks for reading EarlyGTM post #4!
Mike Marg
Principal, Craft Ventures
(for more thoughts on go to market, and occasional sports-related frustration - @mikemarg_ on Twitter)
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