Book Review: Sell More Faster
Broadly applicable lessons from a guy who builds sales organizations
Sell More Faster is written by Amos Schwartzfarb from Techstars. Techstars is a startup incubator similar to YC, so the book is targeted to “VC scale” tech companies. But I found many nuggets that are applicable to all businesses.
The website for the book claims it is:
A comprehensive playbook to identify product market direction and product market fit
Expert advice on building a diverse sales team and how to identify, recruit, and train the kinds of team members you need
Models and best practices for sales funnels, pricing, compensation, and scaling
A roadmap to create a repeatable and measurable path to find product-market fit
Aggregated knowledge from Techstars leaders and industry experts
I rate this book a 5/5. Per our rating scale, that means it is “highly enjoyable, looking forward to reading again, would highly recommend it to others.”
As with nearly all books I’ve been reading recently, I checked this out through my local library with Libby. I would classify this as a reference text. I am considering purchasing a hard copy. It is full of step-by-step instructions that will be helpful if I ever end up doing the SMB acquisition thing in the future.
The book is also useful to me as a minority investor. I don’t have firsthand experience running a business so learning about problems faced “in the trenches” is a good way (though not a replacement by any means) to absorb some of that experience. There are a few themes/concepts that stood out to me in this book: customer focus, measurement, iteration, incentives, and churn.
Theme: Customer focus
The first element of the book is focused on understanding your customer. The author asks three questions: Who are you selling to? What are they buying? Why do they buy? These are easy questions on their face, but a proper answer to each is critical to getting the most out of your sales organization.
Who are the customers? Be as granular and focused as possible. You want to narrow the scope of your market and identify who you should be pitching. Who makes the buying decision for your customer? Is this a C-suite level sale? Are you solving the problems of line employees or middle managers that already have a budget to allocate to your solution? Is there a procurement organization to navigate?
The answers to these questions will help you build customer lists and your sales model. If you are Texas Instruments or Sigma Aldrich and are selling to lab scientists or engineers who are operating their own project budgets, you will have a completely different model than if you are selling an Oracle ERP system to a Fortune 1000 company.
What are the customers buying and why do they buy? These questions are answered by finding out what problems your customers are actually trying to solve. This is NOT limited to your product’s business use case. It includes how you can help your target customer meet their own performance goals and obligations to their company.
If your customers are digital marketers who are compensated based on new web traffic, then it makes sense to optimize your product and sales pitch to collect a wide funnel of users. If the customers are primarily compensated on sales driven through a website, then it makes sense to tweak your product towards delivering warmer leads with greater purchasing intent. These factors are important in identifying product market fit and are probably underappreciated by minority passive investors.
Theme: Measurement, Testing, and Iteration
SMF suggests CEOs “guess, test, iterate.” This requires taking actual measurements of sales process efficacy (how successful you are at moving potential customers through each stage of your sales funnel) and how your product adds value to customers. These involve modeling and making estimates.
The first case (sales efficacy) requires you to build an actual sales model at a granular level. This is really ground-up stuff. Sales value ($ and units) per closed deal * close rate per LOI signed * LOIs signed per demo * demos per first meeting * first meetings achieved per prospects contacted * number of prospects contacted per month = monthly sales rep productivity * number of sales reps = monthly revenue. This is not exact, but you have to make these explicit estimates so you can track where your actual sales force is varying from plan. Knowing these variables enables you to focus your marketing efforts on improving parts of that funnel and improving sales rep productivity. This is hard to do as an outside investor and may not be worth spending much time on. However, as the actual business owner or sales leader, this is the core of the job (when you’re not hitting the phones).
Focusing on measuring customer value and utilization will help identify the highest value customers and can lead to insights about how to make the product more valuable to those users. Knowing the value you add to customers also informs your pricing, which is a key input into your sales organization productivity.
Theme: incentives matter
Sales force compensation structure determines behavior. According to the author, most sales compensation is low base + high contingent comp based on productivity (commissions). But what counts as a “sale”? There are ways to tweak rep compensation to encourage them to act in the company’s best interest. For instance, if most customers that make it past three months of subscription stay for over three years, it makes sense to pay the majority of an earned commission after that three month period. If you’re selling capital equipment or consumables, a flat percentage of order value makes more sense. If your company is valued on ARR, having some compensation be paid for retaining customers is also important. Paying reps on Total Contract Value (TCV) can incentivize signing multi-year agreements and lower your annual revenue per contract, but comp driven by Annual Contract Value (ACV) will drive the sales outcomes you want. I like this section because it walks through multiple compensation models for different kinds of businesses. This is super useful for SMB owners and is one of the reasons I want to get a hard copy in the future.
There is also a larger point here. Aligning incentives improves the odds of positive outcomes for investors and managers. Sam Zell’s autobiography is one long example of this. Management teams with no stake in the business and with compensation that is driven by revenue or EPS growth targets will pull the levers needed to hit those targets, even if they are misallocating capital long term. The median tenure of S&P 500 CEOs is only five years - why would they make good long-term decisions when that is their time horizon?
Everyone “already knows this” but the book was a great reminder that incentives drive behavior throughout an organization. I know firsthand how investment organizations can mess up incentives. One well known mega manger comps its sales employees on gross assets won, regardless of retention or fees attached to those assets. No surprise, the result is that a lot of bond funds get sold at the expense of higher-fee equity products. Oh well!
Theme: Churn
The author believes CEOs do not appreciate the importance of managing churn and that “customer success” should be a top priority. Most managers think of CAC as a “speed limit” for how much they can spend and how fast they can grow. However, the impact of a LOST customer is important too because incurring the same CAC is required to “stand still” on a volume basis year over year. In this way, organizations may be misallocating their resources or leaving money on the table if they are letting customers churn too easily.
From a purely mathematical standpoint, churn is an input to MRR/ARR and customer LTV. It is assumed that managers will focus on balancing CAC and LTV appropriately. This can be hard to do when the LTV is uncertain in the earlier days of a company’s growth trajectory. This is actually an “incentive alignment” problem in its own right - if you’re a startup founder and are valued based on your revenue and customer growth, you’ll focus more on growing that number even if your LTV and “real” business value suffer from starving your “customer success” function.
Most resources I can find online measure CAC as total marketing spend in period / new customers, but it is probably worth looking at CAC on a net basis as well. I’m not a SaaS analyst or anything and I’m sure there are some problems with doing things this way. The point is that it is expensive to lose customers and companies that focus on customer success and retention will have more capital to invest in growth, which will create more value over the long term. As an investor, this section pushed me to focus more on what happens to the customer after they give a company money. The way companies treat EXISTING customers says a lot about management’s understanding of its market and can be an early warning sign for problems with the company’s model.
Bottom Line
I really liked this book. It is a very easy read and I may read it again next year. Would definitely buy it for study if I owned or ran a business.