Startup Sales Due Diligence Basics: understand the two-mode Sales Model - Developmental and Systemic Sales
A startup is a race and a journey. It is a race to get to a repeatable sales model before running out of cash. And it is a journey of understanding and development of a sales model that can sustain the company. However, many startup founders lack the experience and acumen to build a sales process from scratch, which will seriously hinder their ability to complete the startup race.
At the Exponential Boot Camp for Startup Sales, to help founders better understand and navigate the sales journey they are on or have ahead of them, we introduce and train them on our two-mode sales model. The model highlights the different selling and hiring efforts and activities they must undertake at various stages along their journey. We have named these two sales modes, Developmental and Systemic Sales.
The selling and hiring activities in these two modes are vastly different. Understanding these differences helps entrepreneurs plan their journey with more foresight, better manage their cash resources, engage more effectively with prospects, and hire more astutely. In short, it helps them make sales decisions with more clarity and purpose.
If you are an angel or early-stage investor, looking at deals through the two-mode sales model's lens helps you understand how well your founders appreciate the task ahead of them.
It will also help you better guide your portfolio companies. Moreover, this model can save you countless hours of grief and millions of dollars of wasted effort. If you are anywhere near a startup, you should understand this model well.
The developmental sales mode is where startups figure out their north star and how to use it to navigate to the promised land. Learning is the core driver at this stage. And here, they learn the value of their offering and how to sell it.
The process begins with a startup forming hypotheses about the who, what, and why around their professed customer. They then proceed to try to prove or disprove their theories through the act of selling. This systematic and scientific approach to early selling helps a startup evolve its sales process quicker and more cost-effectively and with more precision and customer focus.
Developmental sales is different than customer discovery. It is one thing to do customer development interviews to discover a market's interest. It is totally different to engage in a conversation where you ask a company or person to trust you and your offering to solve their problems while paying you money to do so. This act of testing of worth and customer interest through engagement and an exchange of value is at the core of the developmental sales mode. A startup cannot move on to Systemic sales until it does this work and prove its theories! If it shifts to a Systemic sales mode before it is ready, it can hamper if not cripple its growth prospects.
The Systemic sales mode is where a startup takes all the learnings from the previous phase, builds out its go-to-market playbook, sales performance guides, and develops a hiring model for its sales team. The core driver at this stage is sales performance and the refinement of the sales process. This is also when a startup's sales efforts transform into a more traditional sales practice.
For early-stage investors, understanding this model will make the due diligence process around sales a bit easier. Easier to understand how well the startup grasps who their target customer is. Easier to understand if they hired correctly for the stage they are at and are entering. And easier to know if they comprehend and are planning for the significant amount of work ahead of them.
For the startup, its success hinges on how skillfully it can navigate the different sales modes while applying the associated tools and evolving its sales efforts to sell more and more of its product.
Every business goes through its unique learning process, and each industry, company, and product have a different set of drivers. However, even with these differences, the two-mode sales model can help entrepreneurs and investors better understand and plan for what they need to do to develop an idea into a growing business and then act on that plan. Or in other words, understand the course the race will take and be ready to run and win the race.
Click here, to learn more about the Exponential Boot Camp for Startup Sales,
Written by Tim Bates
Copyright Tim Bates/Exponential Group 2020