Your Business Model is not your Sales Model
I spent yesterday at Launch: Silicon Valley watching companies pitch to the crowd and a panel of VCs. Lots of talk in the presentations about the business model and revenue model (“We’re a subscription-based model and we expect to hit $4.2 million in 2012 at a $2000/month price point selling to SMEs…”)
But… time and time again, the sales model went missing from each company’s presentation – how these subscriptions will be sold and by whom. Deciding that you will have a direct-to-customer insides sales team is not a model. That is a strategy. Developing third-party relationships is not a model. It is a distribution plan.
A sales model answers these questions (for example…):
- What type of salesperson will you hire – newbies, industry veterans, customer service-centric, etc.?
- How long will it take to hire and train the sales team? No, you can’t hire someone on June 30 and expect them hit your business model monthly average new account number in July. If you can, then you probably don’t need salespeople.
- How long is the sales cycle? How long will it take from initial touch to implementation for each customer? You can’t sell to SMEs via a direct sales force, launch your product in October, charge $599/month, and expect any significant revenue for 2012. $599/month for an SME is a lot of money (heck, even $59/month is a lot of money for most SMEs…). They’ll take multiple calls before they finally sign up.
- How long will it take for your Freemium users to convert from the free version to the for-pay version? How will you hold customers accountable for utilizing and implementing the free versions if your salespeople are commissioned on revenue?
- How and when will salesperson commissions be paid? If it’s a $100k enterprise sale that takes 6-12 months to close on average billed quarterly, paying weekly commissions is fruitless.
- How will you account for salesperson churn when your sales and revenue model blows up?
- How will set up account management – by geography, by customer type, alphabetically by customer name, etc?
- What sales philosophy will your company follow (ie SPIN, Consultative, AIDA, one-and-done, high-touch, 10 “yes” questions, etc.)?
- How will you track sales and the sales pipeline?
In watching these companies, it occurred to me that there’s a conceptual misunderstanding – that companies need to develop a sales model separately from their business model.