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This post previously appeared on the readwrite blog.
A CEO running a B-to-B startup needs to live in the same city as their business – otherwise they’ll never scale.
We were having breakfast with a former student, Erin, on a red-eye flight from New York. She built a 65-person startup that sells enterprise software to the financial services industry. Erin previously worked for one of these companies in New York and had a good reputation in the industry. As one might expect, with banks and hedge funds as clients, most are based in the New York metropolitan area.
Where are your biggest business deals?
“Customers love our product, and I think we’ve found a good product/market fit,” says Erin. I personally sold the first big deals and hired a VP of sales who was building the sales team in the New York office. The number of accounts and the deal size are growing, but we seem to be growing an increasingly small business, not heading for exponential growth. I know the odds are huge but I can’t put my finger on what’s wrong.
Erin continued, “My investors are getting impatient. They are comparing us to another startup that is growing very fast in our space. My VP of Sales and I are running as fast as we can, but I’ve been around long enough to know that if we don’t scale, I’ll be the ex-CEO.
While Erin’s main sales office was in New York, next to her top prospects and clients, Erin’s company was headquartered in Silicon Valley, just down the street from where we had breakfast. Much of her engineering team has worked remotely during the Covid pandemic. Her inside sales team (sales development and business development representatives) used email, phone, social media and leads to prospect and generate leads. At the same time, her account executives were able to use Zoom to make sales calls and close and grow business.
Here is a sketch.
At breakfast, I listened to Erin describe what at first seemed like a series of disconnected events.
First, a new contestant was launched. At first, she wasn’t concerned because the competitor’s product was only a subset of the features Erin’s company did. However, the competitor’s headquarters were in New York, and the sales VP and CEO were now meeting face-to-face with their customers, most of whom were back in their offices. While Erin’s New York-based accounting executives were selling to corporate middle-level management, her competitor’s CEO made connections with potential export workers. “We lost a couple of deals because we were selling at the wrong level,” she lamented.
Second, Erin’s VP of Sales had just bought a condo in Miami to be near her elderly parents, so she commuted to NY four days a week and ran the sales force from Miami instead of New York. “She’s just as tired as I’ve been flying up and down the east coast,” Erin sighed.
Third, Erin’s account executives were running into the usual organizational speed bumps and roadblocks that close big deals. But, by emailing them, zooming in, and solving once-a-month onboarding meetings, NY account executives say, “Hey, our VP of Sales and CEO are on the way. Can we all grab a quick coffee and talk about this? Issues that could have been sloppily and quickly resolved escalated to balloons that took on extra work and sometimes even the sales rep or Erin taking a plane ride to resolve them.
As we finished breakfast, it became clear to me that Erin had blocked her path to balance. Here is what I observed and presented.
Keep your eyes on the prize
Although Erin sold the first deals herself, she had to consider whether each deal went through because, as CEO, she could call on the company’s engineers to change the product. Were the account executives in New York trying to execute a sales model that was not yet replicable and scalable without founder intervention? Is a repeatable and scalable sales process truly proven? Or does every sale require heroic effort?
Next, setting up their New York office without Erin or her sales VP living in New York may have worked during Vivid’s time, but now it’s holding the company back. At this level of her company, the office’s goal should not be to add new accounts – but how to measure it – should be frequent. Hiring account executives in the New York office allowed Erin to believe she had it. A tested, proven and repeatable sales playbook that can grow a business fast. The reality is that she and the VP of Sales were trying to grow the startup remotely, without living and breathing the business in New York..
Early clients told Erin that her firm had built a series of truly disruptive financial services products. But now the company was at a different level – it needed Build and grow the business at a higher level. And at this stage, she had to shift her focus as CEO – from seeking product/marketing excellence to broader growth.
Extensive growth requires constant performance
Since most of her company’s customers were concentrated in one city, Erin and her sales VP needed to be there—not visiting in a hotel room. I proposed that.
- Erin had to quickly decide if she wanted to be the one to grow the business. If not, her investors were going to find someone who could.
- If so, she should know that she missed an important transition in her company. In high-dollar B-to-B business, construction and scale sales cannot be done remotely. And she was losing ground every day. Her New York office needed a bigger footprint than hers. Looking for business development and marketing people who can generate interest quickly.
- The sales VP may be fantastic, but the company is only getting her half-time throughout the journey. Erin needs a full-time head of sales in New York. Time to have a difficult conversation.
- Because she was behind, Erin needed to rent an apartment in New York for a year, and spend the next six months there, at least two weeks a month. Her purpose:
- 1) Make sure there is a repeatable sales process. No, build one
- 2) Build a New York office that can create a sales and marketing footprint without her presence. Only then was she able to reduce her time in the city.
- Finally, if the customers were primarily in New York and the engineers worked remotely, why wasn’t the company headquartered in New York?
I hate New York.
Going into these matters, I was surprised to hear her say, “I spent a large part of my career in New York.” I thought that going out to Stanford and the West Coast meant I could leave the bureaucracy of big companies and that culture behind. Covid allowed me to do that for a few years. I guess I’m just avoiding jumping back into the area that I think I’ve left behind.”
We lingered over coffee as I suggested it was time for her to review what was next. She had something unusual – a service company that offered real value for products that early customers loved. Her employees didn’t think they would join a small business, and neither did her investors. If she wasn’t prepared to build her capacity for something, what was her next step?
Lessons learned
- For a startup, after finding product/market fit, the next step is to find a repeatable and scalable sales process.
- This requires the transition to creating demand and increasing sales performance at a higher level
- If your customers are concentrated in a city or region, you need to be where your customers are
- The CEO must lead this growth focus.
- And then give it to an equally competent and dedicated team.
Filed under: Corporate/Government Innovation, Customer Development |
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