Streamline Sales Due Diligence for Businesses

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today's topic is due diligence gets us to sales and marketing so what is the brand look like this is this is one another one of my pet peeves one of the reasons why I love accelerators as we bring in companies they got pretty obviously terrible they don't have great brands they haven't picked the right name they got a logo that they just grabbed off of some clipart they don't look like a fully funded professional company and people treat a fully funded professional company at least one that they think is fully its fully funded they treat them different it's much easier to make sales for those companies that the customers don't see in the yellow flags so when you're looking to invest in a company as an angel right is this the brand you want to be associated with you want to put their logo in their name on your LinkedIn profile right or not and if not you know I personally I just give them the hard truth and and sit them down and tell them what I think of their of their marketing presence or their website or their business cards either I just seen some terrible business cards over the years that to me is a yellow flag that they don't understand how to do marketing like if they can't even get a business card right how BIG's the marketing team who's doing the marketing it's often one person it's sometimes the founder even when it's a early company with with a little bit of revenue it's often one of the founders do again do they understand customer segmentation have they thought about the persona of their customers can they describe those segmentations as people can they describe them as actual people or made-up people what are their channels what are their top three channels for reaching out and getting awareness how are they storing all this information about all their marketing and sales do they have a database for that I think is is that a well-run piece of org is it gonna scale one of the things we're looking for here is if they take your money then they're promising you that they're gonna grow by factor 2 factor 3 factor of 10 well what are the internal processes look like to manage that level of growth how much are they spending and what's the ratio of dollars spent on marketing versus revenue and so you can just see whether or not that is a whether that's a number that's trending upward or downward and when you look at the past numbers and the current numbers same thing on the sales side so how many of the sales people are carrying a bag is that how its talked about in sales world so how many people are out there picking up the phone or sending out email or doing something to initiate conversations with potential customers how many acts of active salespeople are there and what are they bringing in in revenue per month or per quarter or per year step back and think about a company after after its raised the money from investors all the money that's gonna come in to this company from thence forth is going to come from customers that's what makes a company work revenue from customers nice and simple so the only people in the company who talked to the customers to get them to send the money are the salespeople so I have a friend of mine who was VP of Sales at to my startups his joke is everybody works for sales and everybody would laugh when he would say that but it's true right so the marketing people exist to get the sales people's life easier to bring in that money and the product people's life exists to make a great product so that the salespeople have an easy time selling and the finance people's life exists to take this money and bring it into the company all right to actually bring in the POS or just process the PayPal's or whatever like everybody and the company's all wrapped around down to this this point of the sphere of salespeople closing sales and even if it's on the web like a human being is sitting there tweaking the website to try and get that sales process as quick as possible so that those those payments come in so how many people are doing that and how much money are they bringing in is a really important measurement Lily quick question for you here or while you're where you're going yeah I get the feeling that most if not all of the companies that we're talking about particularly fledglings have so few employees that there is rarely gonna be someone dedicated to these strategies how have you talked with them about outsourcing some of these capabilities in the past is that realistic or just not even a chance based on the revenues that they're they're making yeah okay great it's pretty uncommon for a start-up to successfully hire an outside marketing company so back to the opening before the recording started we were talking about the Lean Startup hypothesis model hypothesis test how about this launch test loop well when you're in a start-up you don't know what marketing is gonna work you don't know what words are the best words to use to describe the company you don't know what channels are the best ones to bring customers and you don't have any money to go and hire a bunch of professionals to do that for you so typically one of the founders is decent at marketing or one of the early hires is good at marketing and they're figuring that out so almost always 99% of the time marketing is done in-house on the sales side it's even more important so when you're out doing sales almost every customer says no this is an important piece that unfortunately entrepreneurs don't get until they're me deep in trying to close customers when you're out researching a company and talking to potential customers about a potential business almost everybody says yes 90% or more will say that's a great idea you know I'll buy it when it exists and then when you turn around and have the product and go and make sales a 10% close rate is great and a 5% close rate is not unheard of and when you're just at the very beginning you know closing one or two and a hundred is happy days and so you have all this know out there you have all these knows and you need to understand why they're saying no that is the most important thing in a start-up even more important than than bringing in revenue because if they if you can find out why they're saying no you can fix it and you can increase the closer and then you'll get more sales later so you can't outsource the sales you have to be talking your people in your company have to be talking to the customers because an outside sales force won't do that for you and that's also why the founder has to be on sales calls whether he's that he or she is the the sales person or not he or she has to be listening in on that part of the conversation and all that information has to get back to the product team so they can fix the product and has to go back to the marketing team so they can fix the marketing so unfortunately no it has to be done in-house this is why even when the long term expectation is that it's a channel sales let's say just take a product that's gonna sit on a retail shelf so imagine you're making bottles of honey well you don't get to sell a lot of bottles of honey face to face you're gonna at scale sell them through a distributor get them on the supermarket shelves and you don't get to talk to the people in the supermarket's unless you're doing demos so a lot of the companies here in the states that are like that organic food companies they actually start in farmers markets on purpose so they can talk to customers face-to-face and see why they're not whether or not buying grab the people and ask ok you know thanks for coming but can you just tell me why you didn't buy it today like that that's gold so unfortunately that's just the reality of startups all right so then as the companies get bigger you wind up with sales teams instead of salespeople and the question is well how are they organized so as you as you start to invest in companies with no two or three people selling how are those two or three people splitting up the customer base it's never like everybody on the seams it's it's almost never pick a name out of the Hat that's your said that's your prospect it's usually split some other way like geographically or or customer segments or something we press them in the accelerator to think about how they're gonna organize it when it has ten salespeople however long that is from now think about now how are you going to organize your sales team when it's at scale so that you can organize your sales team now as you're building out to ten people so you get it right how's the sales team compensated is it's a commission business are they just on salary even if whether it's commissioner salary do they get a quota do they have to sell a certain amount of money or they get fired are there bonuses for selling beyond the quota other bonuses for other things and again we talked earlier about how long is the sales cycle so how long did it take from the very first email or phone call or what not until the customer said yes on average and are you measuring that as a company and if so is that getting better from quarter to quarter in year from year and then the last one one of the that will talk about KPIs at some point not today but a key performance indicators inside the sales team a key performance indicator is what's the average price per sale and is that going up