Ease Up on Sales Button For New Ventures

New ventures would be wise to go slowly with the initial sales effort and carefully manage the “sales learning curve (SLC),” according to two Stanford Graduate School of Business faculty members.

Charles Holloway, professor emeritus, and Mark Leslie, lecturer, in a published article in the Harvard Business Review, warn that ramping up sales too quickly can be fatal to a new venture.  They write that young companies typically go to market and push sales before they are really ready, which means they often burn through valuable start-up cash, fail to meet expectations and jeopardize the venture.

Holloway and Leslie point out the need for the entire business organization to learn how customers will acquire and use the product or service being offered.  This knowledge will enable modifications of the product, the marketing strategy and the sales approach.  All this is part of what Holloway and Leslie refer to the Sales Learning Curve, a similar concept to the manufacturer’s learning curve (MLC).

“When you finish product development, you actually have to go through a market development cycle,” said Leslie in an article in the September, 2006, StanfordKnowledgeBase on-line newsletter.  Holloway adds that “It’s too late to get involved in sales strategy when you notice a gap between what you think your sales people should be selling and what they actually are selling.”

Hollway advises the fledging firm to initially employ a small cadre of sales people rather than overstaffing the sales force on the front end.  This small sales cadre will allow the sales unit to work closely with customers and product developers to smooth out the glitches that the new product encounters when it enters the real world environment.  Holloway says “at this stage you should also be looking to hire salespeople who are comfortable with ambiguity.”

The sales learning process, according to Holloway and Leslie, requires a total company effort from executives to engineers as well as sales and marketing people. While the MLC might determine what parts of the product offering are incomplete and need bolstering, the SLC will focus on identifying, communicating and selling the targeted market.

Leslie, a former entrepreneur who founded and was CEO of Veritas Software, points out that management of the SLC in the go-to-market stage will result in significantly less wasted money and time.  “The time to break even will be a little further out, but the cash to break even will be much less,” he said in the StanfordKnowledgeBase article.  “You will not be wasting money on expensive salespeople who are not producing what you hoped.”   Under Leslie’s guidance Veritas became a billion-dollar company and was part of a $13.5 billion merger with Symantec.