Without customers, your product is just a hobby

Categories: Customer Research

Written by Laura Bosco

Doug Johnson doesn’t have a typical sales background, but that’s exactly what makes his approach so interesting.

Johnson started out in engineering and he sees the world as a system. More accurately, he sees the world as a system containing millions of other systems.

When he landed at a high-growth software company, this mindset served Johnson well. He worked in a sales operation role where he saw “how a software company grows operationally” and what variables contribute to that growth. Things like compensation plans, territories, how you train and interview someone, where you send money in marketing, and what words you use to attract interested parties. In short, he saw the whole picture.

This gave him critical insight into early-stage companies, particularly those with an unsophisticated sales process. Those companies, Johnson realized, usually face two major stumbling blocks.

The first one is a lack of internal knowledge. Johnson says most startups with unsophisticated sales don’t know how to build sales in an efficient and effective manner. The second big stumbling block is management related. Many startups struggle to communicate with and manage sales people—something that would be much easier with the right data collection and operations in place. With his systems mindset and firsthand experience, Johnson saw a clear opportunity to remove these hurdles.

He created an efficient, engineered approach to early-stage sales that forms the bedrock of ScaleUp. And this approach is sparking some serious results for ScaleUp’s clients: results like $8 in revenue for every $1 spent and a 50% increase in pipeline generation per person.

ScaleUp Homepage

Doug Johnson serves as Managing Director for ScaleUp, a company founded on the belief that sales development is an identifiable and solvable challenge.

With results like that, it’s no surprise that Scale Up is actively growing and that Johnson stays plenty busy. However, we were able to snag an hour with him, and he graciously agreed to tackle some questions that’ve been driving us crazy.

So, when it comes to sales, what do most B2B companies get completely wrong? #

Doug Johnson: The thing that they get completely wrong is not addressing the pipeline generation process with the focus and attention that it deserves. There’s an assumption that it’s “going to get done” by the new head of sales—who may or may not have built a sales development representative team, who may or may not have operated in this early stage environment. So they get the pipeline generation wrong, and it’s a function of them assuming someone else will do it or assuming that it’s not that hard.

The second thing they get wrong is not putting the necessary infrastructure in place early, from a revenue operations perspective, so they can make informed decisions—about how to evaluate talent, or coach people, or which market segments are most profitable—within the first couple of years when they’re putting millions of dollars into sales.

And the reason they don’t set up infrastructure is because they don’t realize the immense value in doing so. You can’t go back in time to collect data. Setting up collection early will help you make future decisions you don’t know about. There’s a widely known concept about data warehouses and data lakes. A friend and I were discussing the concept of a data pond—it’s a data lake but for much smaller groups.

Is it important for a founder to sell first before they consider bringing on a sales rep or sales executive? #

Yes. It's imperative that a founder communicate with the market themselves, so that they don't operate in a vacuum for too long. Now, they might not be adept at opening up doors and gaining interest in initial conversation, so that might not be their strength. But yes, they have to be a part of the sales process in an initial call and understand what challenges and objections the person has. They have to feel that.

A founder has to... "understand what challenges and objections the person has. They have to feel that."

And when would they even start thinking about those kind of hires? #

There are a couple different hires. There's someone who can run a full sales cycle. And there's someone who can generate interest and open up doors. I would err on the side of not hiring an account executive until that founder has walked through—I don't want to give a number—but has walked through six months to nine months of deals.

They [founders] are not going to be working full-time on sales, but when they're spending 10% of their time on new deals, and 20% of time on product, and 10% of their time on existing customers...at that point, you know what existing customers like and don't like about you. You know what prospective customers are confused about, what they like about the product, and what objections they have. That's the point where you can bring on someone to help with that.

The flip side is that sometimes there'll be a founder/co-founder where one of them is a sales driven person, so all I said just then goes out the way, because out of the gate you've got a team. That's another viable solution, to have 2 people or 3 people do it, where they all have different specialties.

Thinking about hiring a sales rep? ScaleUp has 7 requirements you should consider.

Do you think that sales is more art or science? Because you have this engineered approach but you also recognize sales isn’t innate to every founder. #

I bias myself toward thinking it’s more science than art. The art component, some may say, is the word that you use. So it feels like art to a lot of people—that’s because they can’t describe why the recent iteration of their messaging strategy is working. They don’t know, scientifically, what is happening between the sender and receiver in the communication loop.

The sender encodes the messages and transmits it via a medium of choice with a bunch of noise. The receiver decodes the message and responds to it. The sender interprets that response as positive, neutral, or negative, and guesses as to why. This is a communication feedback loop.

"...it feels like art to a lot of people—that’s because they can’t describe why the recent iteration of their messaging strategy is working."

—Doug Johnson

There are plenty of books on decision-making processes, and there are very scientific explanations of how we make decisions.

Other things that are fairly scientific include how many people you need and what curriculum you need to train them on, for example. When it comes to the value proposition, listening, and that one-on-one conversation...that’s where people tend to say that it’s art based. But the reality is: even that is a trainable, coachable skill.

Wow, I was a Biology major and this makes me want to go buy a ton of books on decision-making. #

Yeah, there are some really good ones that I’ve read. I find it fascinating.

Yeah, no kidding. Okay, if you were starting a SaaS company today, how would you think about getting your first 10 customers? #

As you acquire your first ten customers, you’re going to have a lot of conversations with people who do not become customers, and that is as valuable as those first ten customers.

So I would think about what market segments I am talking to. Who are the personas in those, who am I going to have to sell to, what’s the decision-making process there, do I need to involve multiple people in that prospect’s company, am I able to get ahold of them directly or not, do I have to work through someone else, how are they responding to my initial messages (via LinkedIn, email, social, phone call), and how long is it taking me to get ahold of them.

"As you acquire your first ten customers, you’re going to have a lot of conversations with people who do not become customers, and that is as valuable as those first ten customers."

—Doug Johnson

But once I get ahold of them, what I’m doing is validating my opinion on what their pains are and validating whether or not the solution I’m proposing solves this pain. And I’m understanding where it stacks in their other pain points, to understand if they will make a decision to buy my stuff or someone else’s stuff.

So I’m thinking beyond the first ten in two ways. One, what are the market segments beyond that and then, two, what can I learn along the way so that, when I acquire customers 11-50 and then 50-100, then I can get more effective and efficient at it.

When should a startup start thinking about sales strategy? Is it before they even exist? Or, you know, once they have 10 or 100 customers? #

There are two types of people. There’s the type of person who doesn’t think enough about it [sales strategy] and then there’s the type of person who thinks appropriate amounts about it. I don’t think there’s a third person that thinks too much about it because ultimately, the product is nothing unless you can sell it—unless you’ve got users.

I would urge founders to think about their acquisition strategy very early on. Before they’re raising friends and family money.

And, a sales strategy, is it kind of like a recipe, where certain ingredients will always make a good strategy? #

That’s my belief. I mean that’s what I preach and what ScaleUp supports: there are components of a sales strategy that, at various times, need to be prioritized versus deprioritized.

When we engage with groups to determine if it’s a good fit, we review 9 categories inside of their revenue operations. You can see the engineered approach here. Each category has between 3 and 6 criteria that we look at. We ask an open-ended how/what question that allows us to understand how effective they are today and how impactful it would be to the business if they were excellent at that criteria.

So when you have both of those data points, you can start to plot out—of all the different components—which are really important for them to address now and which will be important later on. Then you’ve got your recipe.

ScaleUp partners with clients to initiate more efficient, profitable, and scalable sales operations.

Sales is a system that has components...or ingredients to stick with the cooking analogy. And some of them are important now and some of them are important later on.

Are you able to share any of those components with me, or do you keep those behind the veil? #

I do not keep anything behind the veil. My message to the market is that it’s a system that’s trainable. This is not a secret sauce; it’s a knowable entity.

So, here’s an example. One of the categories we look at is messaging strategy. And one of the sub-criteria is the value proposition, and the strength of the value proposition specifically. So, we go through an exercise where the client determines if it’s a direct-impact value proposition or indirect-impact value proposition. So, would you have a guess on what direct or indirect would be?

Mmm, I’m thinking, direct adds immediate value to the customer and indirect impacts more of their business ecosystem…? #

I would change a couple of those words and we’re nearly there. Direct impact hits a financial statement, for example, revenue. Also savings in operating expense, cash, or de-risking. Sometimes de-risking can be a direct impact if the alternative to that risk is a substantial loss. Whereas indirect would be time-savings or customer satisfaction. Is your value proposition direct, indirect, and can you move it along the spectrum from indirect to direct?

Because the farther along you are, and the closer you are to direct, the easier it is for that prospect to have a conversation with their internal people that they report to, or internal stakeholders, without you being present. Because they don’t have to connect the dots.

"Is your value proposition direct, indirect, and can you move it along the spectrum from indirect to direct?"

—Doug Johnson

They can say, “this directly impacts our revenue and here’s why” versus “this indirectly impacts our revenue and here’s why.” The latter requires a person to be a conduit for your message where you hope they are as clear and convincing as you are. They never are. So the sales cycle lengthens and win rates go down if it’s indirect.

Yeah, okay, that makes a lot of sense. #

And there’s a bunch of other ones. There’s, you know, 35 or 40 other things that ScaleUp reviews.

What's the number one thing you wished you knew about sales operations when you first got started? #

I wish I knew how impactful and valuable properly run sales operations could be to a company. I didn’t understand how impactful it was to revenue and the company valuation. And, we’re on a mission to help groups realize the same thing. I also didn’t realize that it would take me years in each function, marketing, sales and customer success before I truly understand how it all worked and optimally use investors’ capital.

In the past few years have you seen any big changes to how B2B companies are approaching sales? #

Yeah. There's been a shift back to a "account-based" marketing approach, or an account-based sales approach. This is not new. There are books that are 25-30 years old about account-based sales approaches. The Power to Get In, by Michael Boylan, was published in 1997.

The Power to Get In book cover

Some trends, like account-based sales, aren't new.

It’s just circled back around. #

Yeah, it's full circle. So it seems like a new thing to people. It's not new. There are some technologies that allow you to reach them [customers] more intelligently at a better scale.

Recently, some groups are adopting what's claimed to be AI-based or machine learning-based sales. I seriously doubt the applicability or feasibility of that in early-stage companies. It's never going to happen, because you don't have your messaging sorted out, and you don't know enough information to define a program to run sales for you. That's going to be adopted by larger enterprises where there's not as much variability in the equation because they've figured everything out.

For a founder who wants to learn more, are there any books you’d recommend? #

What Got You Here, Won’t Get You There is a good one. That one is very applicable for me in recognizing that there's only so much I'm going to learn technically. But a lot of what is helpful beyond a certain stage, is how you work inside of a team and how you prioritize your time. It's one of the best books I've read.

Scott Voigt, the CEO of FullStory (a product I highly recommend), turned me on to a book his Wharton professor, Stuart Diamond, wrote. It’s called Getting More and it’s different from all the other negotiation books that I've read. Some negotiation books walk you through a very detailed, McKinseyan-consulting style approach of negotiating, and it's great. But this one takes negotiation and sort of smooths down the edges so that you recognize you're negotiating constantly in your life. That was a good one.

Is there anything else you want founders to know? #

Yes. Don't spend so much time on the product that you neglect the opportunities you have to spend with the market. That can misdirect your product creation and waste time. And do your best to not be afraid of the feedback, because feedback is a gift. If you can handle it, feedback is a powerful gift.

Don't be like a lot of founders who find solace in creating a product, because a product without the customers is an exercise and a hobby. That's it.

"If you can handle it, feedback is a powerful gift."

—Doug Johnson

Note: ScaleUp will be running free, action-oriented workshops in startup communities around Atlanta,

Charleston, Denver, Research Triangle, and Charlotte. If you’re in one of those areas, keep an eye on your local startup community events.

This interview has been edited and condensed for clarity.

Krit’s key takeaways for early-stage SaaS founders #

  • Most early-stage B2B companies de-value sales strategy and sales infrastructure. That’s a mistake, because this oversight cripples revenue and decision-making down the road.
  • Selling doesn’t come naturally to every founder, and that’s okay. But don’t think this gives you a “pass.” You still need to learn the market, have customer conversations, and figure out how to sell your product before you hire someone in sales.
  • The conversations you have with potential customers are extremely valuable, even if most of those prospects do not become your customer. Feedback is a powerful gift if you know how to accept it.
  • While parts of sales may feel like art, a lot of it is science and systems.
  • Think about acquisition very early on, before you even raise friends and family money.
  • Direct value propositions usually have a shorter sales cycle. Look for ways to move your value proposition from indirect to direct.
  • There’s room for AI in the future of sales, but it won’t be in early-stage startups.
  • Don't spend so much time on the product that you neglect the opportunities you have to spend time with the market. A product without customers is just a hobby.

A big thank you to Doug Johnson for taking time out of his day to talk with us and share some of his rich experience and insight.

To learn more about Johnson, ScaleUp, and the work they’re doing with B2B companies, check out https://scaleupondemand.com/.

Laura Bosco is a writer and people person. She helps tech startups do tricky things, like explain who they are and what they're doing. Ping her on Twitter to say hi.