CEOs running B-to-B startups must live in the city where their business is located.
I was having breakfast with a former student, Erin, just off a red-eye flight from New York. She launched her 65 startups to sell her enterprise software to the financial services industry. Erin had previously worked for one of these companies in New York and she had a good reputation in the industry. Not surprisingly, banks and hedge funds were the customers, mostly based in the New York metropolitan area.
Where are your biggest deals?
With a few tears in her eyes, Erin explains: I personally sold my first big deal and hired a VP of Sales building a sales team in our New York office. They’re growing account counts and deal sizes, but it feels like they’re slowly growing a small business rather than headed for exponential growth. but I can’t pinpoint what the problem is. ”
Erin continued, “My investors are starting to get impatient. They’re comparing us to another startup that’s growing much faster in our space. The VP of Sales and I I’m working as fast as I can, but I know full well that if I can’t scale, I could be a former CEO.”
Erin’s main office is in New York, but next to her main prospects and customers, Erin’s company is headquartered in Silicon Valley, just down the street from where we used to have breakfast. It was in During the Covid pandemic, most of her engineering her team was working remotely. Her Inside Her Sales Her team (Sales Development and Business Development) used email, phone, social media and Zoom to develop and generate leads. At the same time, her account and her executives were able to use her Zoom to make sales calls and virtually close and grow their business.
Here is the pattern
Over breakfast, I listened to Erin describe what at first seemed like a disjointed series of events.
First, new competitors have emerged. Initially, she wasn’t worried because the competitor’s products only had a subset of the features her company did. But the competitor’s headquarters were in New York, and the VP of Sales and her CEO were now meeting face-to-face with customers who were mostly back in the office. Erin’s New York-based account was selling to the organization’s middle-tier managers, while competitor CEOs were building relationships with potential client executives and her staff. She lamented, “I lost some deals because I was selling at the wrong level.”
Second, Erin’s VP of Sales had just bought a condo in Miami to live next door to her aging parents, so she commuted to New York four days a week and sent her sales force out of Miami when she wasn’t in New York. I managed. Erin sighed.
Third, Erin’s sales reps faced the typical organizational speed bumps and roadblocks they often encounter when closing big deals. But solving problems via email, Zoom, and her once-a-month fly-in her meetings was not the same as saying her executive at the NY Account said: Why don’t we all have coffee and talk about this? Casually, what could have been a quick fix turned into a problem that needed more work, sometimes requiring the VP of Sales or Erin to get on the plane to solve it.
By the time we finished breakfast, it was clear that Erin had put an obstacle in front of the road to the scale.
Keep an Eye on Prizes
Erin made the first deals herself, but as CEO she could ask the company’s engineers to pivot the product, so she had to consider whether each deal went through. Were the New York account executives trying to execute a sales model that still lacked repeatability and scalability without founder intervention? Was a repeatable and scalable sales process really validated? Was heroic effort required for each?
Second, setting up a New York office without Erin or her VP of Sales physically living in New York might have worked during Covid, but now it’s hampering her company. At this stage of her company, the office’s goal should be how to scale rather than incrementally adding new accounts. Having hired an account executive in her New York office, Erin believed she had Tested, validated, reproducible sales playbooks that can quickly scale your business. The reality is that she and her VP of Sales don’t live in New York and run a business, so they were looking to scale their startup remotely..
Her early customers told Erin that her company built a series of truly disruptive financial services products. But now the company was in a different phase. Build your business and grow exponentially. And at this stage, her focus as CEO had to shift from pursuing product/market fit to driving exponential growth.
Exponential growth requires constant execution
Most of her company’s customers are concentrated in one city, so Erin and her VP of Sales had to be there instead of in a hotel room. I suggested that:
- Erin had to quickly decide if she wanted to be the one growing the business. If not, her investors were trying to find someone who could.
- If so, she had to realize she missed an important transition at her company. And she was losing her ground every day. Her New York office needed a bigger footprint than she did. We needed a business development and marketing person to rapidly generate demand.
- Her VP of Sales may be great, but she travels so much that the company only gets half the time. Erin needs a full-time sales manager in New York. Time to have a difficult conversation.
- She was late, so Erin had to rent an apartment in New York for a year, spend the next six months there, and then spend at least two weeks a month after that. Her goals were:
- 1) Validate that you had a repeatable sales process. Not so, build one.
- 2) Build a New York office that can create a sales and marketing footprint without her. Only then could she reduce her time at City.
- Finally, if our customers were primarily in New York and our engineers were working remotely, we had to consider why the company’s headquarters wasn’t in New York.
I hate new york
As we delved into these issues, I was quite surprised to hear her say: By coming out to Stamford and the West Coast, I figured I could leave behind the big corporate bureaucracy and culture. Covid has let me do that for a few years. I think now I’m just avoiding returning to the environment I thought I left. ”
We lingered over coffee as I suggested to her that it was time to consider what to do next. A service company that delivers real value with products that early customers love. Her staff had no idea they were in a small business. Neither did her investors. If she wasn’t ready to build something to its potential, what was her next move?
Lesson learned
- For startups, the next step after finding product/market fit is finding a repeatable and scalable sales process
- This requires constant demand generation and a transition to exponential growth in sales.
- If your customers are concentrated in a city or region, you must be where your customers are
- CEOs must lead this growth focus
- and hand over to a team of equal competence and commitment
Filed under: Corporate/Government Innovation, Customer Development |
