If there’s one aspect of business that I’ve found technical founders struggle with, it’s sales. A lot of us don’t like it, don’t feel comfortable doing it, and don’t think we do it well. We commonly have a fervent desire to make this someone else’s problem.
Some founders implement this desire by hiring a “real” salesperson so they can go back to writing or designing code. They place great store in the relief and security that’s sure to result (they’re convinced) from hiring a sales savior.
But from what I’ve observed, this strategy results in high turnover of sales people, wasted time and money, and occasional exposure to existential company risk. To be clear, I don’t believe the problem is with the sales people. I have nothing but respect and admiration for people who are great traditional sales people. I just think they are unlikely to find success in selling the services of consultancies.
I’ve come to believe that selling an abstract, complex service such as software product development requires a non-traditional approach, both in who does the work, and how the work is done.
While I am a technical founder, I’m not one who’s tried the sales savior route. I succeeded in sales, and have seen my success replicated by my colleagues, by designing the process and practices of sales around who I was, not how sales was supposed to be done, or would be done by a more traditional sales professional.
I like solving problems, and I like helping people. Our sales approach is designed around these traits. In this post I describe what’s distinct about our sales process (it’s marketing-led, done by makers, and focused on problem solving), the advantages I believe we derive from that distinction, and the cost of our approach.
The Foundation: A Marketing-led Company
Critical to making our approach work is being a marketing-led company, rather than a sales-led company. That means we rely on marketing channels—former clients, our website and blog, street presence, employee referrals, events, sponsorships, word of mouth, partners, etc.—to bring potential projects to us. A sales-led company, by contrast, may use marketing for lead generation, but employs dedicated sales people who are actively seeking clients and projects. Being marketing-led means our sales approach is reactive, not proactive.
It also means we spend more than twice as much on marketing as we do on sales. See “The Cost” below for more on that.
The Team: Designers & Developers
Being marketing-led doesn’t at all mean sales is easy or mere order taking. Sales work in our company requires both technical and general business knowledge, as well as the personal traits of curiosity, empathy, persistence, and creativity. You need to be a great communicator, and you need to be able to build trust quickly. What makes a good salesperson at Atomic doesn’t match the (inaccurate) stereotype many of us have of salespeople.
That’s one of the many reasons we build out fill team with developers and designers. Our approach is built around the question, “How can we help?” And our makers are the best prepared to have an informed conversation around that. Sometimes the best solution is a recommendation of an off-the-shelf application, another firm, or simply “Sorry, we can’t help.” But we always want to put them on the right path to solving their problem.
Having makers on the sales team also means we consider their interest in the sales process—we have a bias toward interesting and challenging projects. We could help people put up simple WordPress sites, automate a business process with Trello, or adopt an ecommerce platform. But those projects don’t take best advantage of our makers’ skills and expertise. They don’t challenge and help them grow.
In addition, with a dedicated sales team, it would be much too easy for an us/them division to grow between makers and sellers. We actively work to keep this barrier as low as possible. Having former makers sell helps with this, and tightly coupling sales and scheduling is important, since it means that salespeople hand projects directly to makers, and makers have more of a chance of understanding the challenges in sales.
The Approach: “How can we help?”
Our sales approach has evolved over time to help us focus on problem solving, rather than selling. Here are the major important components:
- Salespeople are makers or former makers
- Salespeople have broad responsibility for an office
- We talk to every lead, even if they’re “unqualified” (under-funded or a poor fit for our company and services)
- We give away a lot of value through what we call pre-project consulting
- With unqualified leads, we help identify alternatives to our services
- We invest time educating our clients on custom software development projects
- We are fully transparent with the work behind our budget recommendations
- We don’t use variable compensation for sales (i.e. no commissions)
- We don’t set an artificially high hourly rate and plan on negotiating
- Sales and scheduling (mapping people to projects and dates) are tightly coupled by being the responsibility of the same people
- We’ll risk losing a project by providing a responsible estimate, versus “winning” an under-capitalized project
- We’ll commonly involve makers in the sales process, through demonstrating their work, offering their expertise, or helping with the budget
- We pair on most sales opportunities
- No one is dedicated to sales
The ultimate measure of success in sales is maker utilization—a primary driver of profitability. Our profitability track record of a 24% average margin, and 22% revenue CAGR indicates that our approach works quite well, and has done so through both up and down economies, consistently over 16 years.
Specific advantages and accomplishments of our approach to sales include:
- We’ve never had layoffs (letting people go for lack of work)
- We have had no turnover in sales people
- We have a consistently healthy backlog of projects
- We receive approximately 250 new, warm client leads a year
- Our sales work builds a reputation for being generous and helpful, contributing to our brand
- We spend spend comparatively little time or money on sales
- We are appreciated for our honest advice and level of transparency
- We almost never get pressure to negotiate our rate
- We have long-term relationships with clients
- We have very low bad AR or write-offs
- We start each project with a positive balance in the relationship account
The Cost (Marketing & Sales)
In the last year, ten people were regularly involved in sales. Together, they spent 2,900 hours on all of our sales activities, including intake, initial calls, client meetings, travel, budgeting, proposal writing, MSA negotiations, and team scheduling. Those hours, fully loaded with benefits, cost in the neighborhood of $175,000. We spent an additional $11,000 on travel and entertainment.
All told, our sales expenses were 1.7% of the $10,000,000 in revenue they represent.
Consistent with our marketing-led approach, total marketing costs in the last year were $380,000 (3.8% of our revenue), and 2.2x what we spent on sales.
Marketing people expenses break down as follows:
- $160,000 in marketing team salaries
- $24,000 in time spent by Atoms as event ambassadors (including recruiting)
- $55,000 in time spent by Atoms writing for Spin, our company blog
We also had marketing expenses of $140,000, with media, event sponsorship, and philanthropy making up about half of that total.
Marketing and sales together were $550,000, or 5.5% of our $10,000,000 revenue.
Our approach to sales is distinctive, authentic, values-aligned, lean, and effective. While it originated in my personal approach to solving a problem for which I had no formal training, and was likely influenced by my 10 years of being a professor, it’s been successfully learned, applied, and extended by at least six other Atoms.
In my next post I’ll share what’s hard about living it.
- A framework to define and describe organizational culture - January 21, 2020
- Atomic Ownership, Part 6: Lessons Learned - November 26, 2019
- Atomic Ownership, Part 5: Distributions - May 1, 2019
- Atomic Ownership, Part 4: Financing employee ownership - April 4, 2019
- Atomic Ownership, Part 3: Valuation - January 2, 2019