2004-03-24 16:56:41

Closing the Gap, Part 1

Summary: Eric talks about the function of proactive sales in a small ISV.

At some point in the many activities of a small independent software vendor (ISV), the customer trades money for software. No column on "The Business of Software" could be complete without some discussion of this magical event.

I'll start by defining some of my terminology. Before the customer makes the purchase, I like to say that there is a "gap". This gap is the distance between the prospective customer and your product, and it looks something like this:

Product -------------------------------- Customer

In order for the sale to occur, this gap must be closed. Until that happens, the gap represents all of the issues and obstacles that are preventing the customer from making the purchase:

The customer has never heard of your product.
The customer doesn't know enough about your product.
Your product is too expensive.
The customer needs two levels of management approval for the purchase.
Your product lacks a feature the customer needs.
Your product doesn't interoperate with the customer's other stuff.
Your product isn't mature enough to meet the customer's expectations.

To continue to exist as a business, your small ISV must find a way to close this gap, over and over again. There are exactly two ways to close the gap:

Move your product to the right. Tell the world about your product. Make your product better so that people will want to buy it.
Move your customer to the left. Find people who might want your product. Convince them to buy it.

We will begin by talking about the challenge of moving your customer toward your product.

Proactive Sales

Let's define some more terminology. The word "sales" is somewhat overloaded, but in the context of a job function, I prefer to reserve this term for the process of proactively finding new prospective customers and working with them individually to try and convince them to make a purchase. A person who performs this job function is called a "sales guy".

#ifdef apology

I confess that the gender implication of this label is a bit inappropriate, but I've been calling these people "sales guys" for so long that I can't break the habit. Early in my career, it just so happened that all the sales professionals I knew were men. For years, I wondered if excellence in proactive selling required a level of obnoxiousness that simply isn't present in most females. More recently, I have come to know a number of women who are excellent "sales guys". (One in particular has a disturbingly successful track record of selling me advertising, which is something I truly hate to buy.) Anyway, if you will forgive the apparent political incorrectness, I'm going to stick with my usual terminology for this article.

#endif

To sharpen the definition, I need to clarify two things which are not included in "sales":

Marketing is not sales. Marketing is an area all its own. It includes many different activities, ranging from strategy to communications. None of these activities are sales. The sales guy is a customer of the marketing group. Marketing activities are usually "one-to-many". Sales is almost always "one-to-one". Sales is strictly about closing the deal.
The person in your office who processes incoming orders from customers is not a sales guy. Yes, he deals with "sales" in the accounting sense, but I refer to this job function as "customer service".

A defining characteristic of a sales guy is the way he is paid. The compensation package of a sales guy includes commissions. He gets a percentage of every sale he closes. The percentages vary widely based on all kinds of factors, so I'm not even going to mention any ballpark figures. However, I will point out that these commissions can really add up to a lot of money. In many organizations, the highest paid individual is a sales guy, often making more than the CEO herself.

Working with a Sales Guy

It is quite common for people in other job functions to have some resentment of the sales guy because of these commissions. For example, the lead architect who designed your product will be wondering why the sales guy gets a cut of every sale when she does not. Is the sales guy more valuable than the person who actually created the product?

Good sales guys understand this problem and work very hard to counteract it by "sucking up" to the developers at every opportunity. For example, in any situation where your sales guys and developers end up together in a bar, there should be absolutely no question about who is buying the drinks.

On the other hand, you can't allow your sales guy to spend too much time with your developers. Left without limits, a sales guy will start to routinely bring a developer with him on his customer visit. Suddenly, your overpaid coder has become an extremely overpaid sales assistant. The usual solution to this problem is to put your sales guys in a separate office, preferably in a different city. Sales guys need to be very close to a major airport anyway.

Characteristics of a Sales Guy

A sales guy needs a special set of skills. They tend to be extraverts. They are usually excellent communicators with incredible interpersonal skills. They are self-confident, sometimes to a fault. They're usually very good-looking and snappy dressers. Sales guys know enough about technology to be dangerous. They know how to handle themselves well in surprising situations. They know exactly when to move toward closure and ask for the deal.

A certain amount of variation from the sales guy stereotype is acceptable, but there is one trait that is absolutely a requirement: A good sales guy is someone who is motivated only by money. One of the most dangerous personnel mistakes is to hire a sales guy who cares about anything else.

A good sales guy will do only those things for which you have provided him a financial incentive (a commission). Everything else is a waste of time, and he is essentially immune to management influence through any other means.

Note that every coin has two sides. Although I consider this mercenary nature to be an important trait for a sales guy, there is a downside that accompanies this benefit. A good sales guy has incredible listening skills that only seem to work when he is working on a deal. When listening to a prospective customer, he will catch and understand every single detail, never missing something that might help close the sale.

On the other hand, when that sales guy's manager walks in and says:

"Fred, we need to talk. I heard a rumor from the developers that a couple of them had to buy their own beer at the pub last night even though you were right there. What's the problem here? Those beers are only going to cost you a few bucks. With the kind of money you make, I certainly think you can afford to pick up the check in situations like that."

A truly excellent sales guy will hear this:

"Blah, blah blah blah blah. Blah blah blah blah blah blah blah blah blah blah blah blah blah blah BUY blah blah blah blah blah blah blah blah blah blah blah blah blah blah. Blah's blah blah blah? Blah blah blah blah blah blah COST blah blah blah BUCKS. Blah blah blah blah MONEY blah blah, blah blah blah blah blah blah blah blah blah CHECK blah blah blah blah."

So while the greed gene can obviously create some challenges, the pros definitely outweigh the cons. Managing a money-driven sales guy ends up being simple and largely devoid of surprises. You don't have to spend all kinds of time figuring out what motivates your sales guy like you do with your developers. All you have to do is make sure his compensation is carefully correlated with the set of things you want him to accomplish.

The corollary to this principle is this: If your sales guy is doing something that you don't want him to do, there are only two possible explanations:

He is a bad sales guy, because he cares about something other than money.
It's your fault, because he is simply doing things that you have "incentivized" him to do.

For example, suppose your sales guy is rapidly closing deals with customers, but a lot of those customers end up unhappy shortly after buying the product. This usually happens when the sales guy is selling products to people who don't really need them. By the time the customer has realized this, the sales guy has already collected his commission and has moved on to his next victim. You forgot to make customer satisfaction part of his incentive, so he spends no time on it. Luckily, the solution to this particular example is rather simple. For example, you can just hold back the majority of his commission until you verify that the customer is still happy 90 days after the purchase.

Similarly, if the sales guy is spending too much time with your developers, you can just start charging him for it. Deduct $100 from his commission for every hour he spends with a coder. To be fair, give him a few hours for free, since he needs technical information to get his deals closed.

One More Mandatory Trait for a Sales Guy

Any sales guy who is offended by all the vicious jokes in this article is probably not competent.

A sales guy simply must have a thick skin. If he can't handle my caricature, how will he cope when a customer tells him "no"? Even the best sales guy is going to hear "no" more often than "yes". If he can't accept all that rejection without getting discouraged, he's probably in the wrong job.

Reasons to Have a Sales Guy

A good sales guy is worth his weight in silicon. Yes, he gets paid an awful lot of money in commissions, but he brings in even more, by definition.

Still, not every organization needs a sales guy. The decision to hire one is a toughie, and needs to be considered very carefully. Hiring a sales guy will forever change your company. Don't do it unless you really need to. Here are a few common reasons why you do:

Reason #1: Nobody really wants your product

By their very nature, some products require a lot more effort to sell. Some products are just basically not any fun. For example, nobody really wants to buy life insurance. People buy life insurance, but not with the same enthusiasm they show when buying a hot new movie just released on DVD. This is why you can't swing a 5-iron anywhere in America without hitting an insurance salesman. Without these guys, far less insurance would ever get sold.

Similarly, some products are targeted at people who don't realize they have a problem.

If your product solves a problem that is not a strongly felt need, you've got to have a sales guy to help your prospective customers realize how miserable they really are. This tactic is called "creating dissatisfaction with the status quo".

If by chance you are just getting started with a new small ISV, now is the time to avoid these bugs. Start out with a small gap. Choose a product that people know how to get excited about.

Reason #2: Your product is very expensive

More expensive products are far more likely to require a sales guy to help the customer through the decision. Cars and houses are usually (but not always) sold by sales guys. Expensive software products face a similar cycle. Big purchase orders are big decisions, and most organizations will need a lot of hand-holding before they finally pull the trigger.

Reason #3: Your product is no longer being improved

As a software product matures over the years, it tends to gain sales guys and lose developers. For a product that is nearing its twilight, it is not uncommon to see a company with lots of sale guys and no developers at all. The reason for this is reasonably intuitive: The product is no longer moving toward the customer. Closing the gap requires us to constantly be dragging customers over to the product.

(I am dying to name a few examples of this phenomenon, but my editors at Microsoft have been working very hard to teach me some manners. I'd like them to get the impression that their efforts are having some sort of an effect.)

The "No Sales Guy" Approach

Most small ISVs are better off not having any sales guys at all.

I realize that this opinion will be considered heresy in the church of conventional business wisdom, but I'm sticking to it. The bishops of that denomination already don't like me very much anyway. If I could ever find out where their cathedral is located, I plan to grab some Groucho Marx glasses and go dance on the altar.

As usual, I am happy to admit that there are exceptions to my rule. However, too many companies start looking to hire a sales guy before they should do so.

Moving customers is very difficult to do, especially for a small company with very little clout. Customers are heavy and unwieldy. They don't want to be moved, and they often get offended when somebody tries. It is easy to spend a lot of effort trying to push the customer toward the product without ever successfully closing the gap.

All that effort is better spent on the other side of the gap. Improve your product. Moving your product toward the customer is a lot easier. Listen to your customers and give them what they want. Keep your customers happy (they'll tell all their friends how great you are).

Focusing your efforts on the product side of the gap is an approach with two very nice features:

It is entirely within your core competencies. You know how to make your product better. More specifically, if you don't know how to make your product better, your ISV is going to fail anyway, and the presence of a sales guy will not save you.
It is a leveraged activity. When you make your product better for one customer, you are making it better for others as well.

The Bottom line

Somewhere along the way, somebody is going to tell you that you're not a real company because you don't have any sales guys. Horse hockey. Don't get forced into this until you're ready.

Next month, in Part 2 of my "Closing the Gap" miniseries, we'll talk about the importance of making it easy to buy your product.

Eric Sink is the non-legendary founder of SourceGear, a developer tools ISV located in Illinois. Eric is not a sales guy, although he has at times tried to imitate one. Eric's weblog is at https://ericsink.com/.

This article originally appeared on the MSDN website.