What Founders Get Wrong about Sales and Marketing

BRIAN KENNY: Welcome to this bonus episode of Cold Call, where we are going to tackle a topic that we just don’t cover enough, and that is sales. In the for-profit world, it’s the ultimate metric, the thing that supports every other part of the organization. It’s an occupation that’s not for the faint of heart. A survey by online career database “Payscale” revealed that sales was ranked as the second most stressful job just after firefighter. And in a totally meta move, Salesforce, the company that is, installed meditation rooms in every office location. So, today we’ve invited someone who knows a lot about sales to help us understand why it’s so important to get it right and why that’s easier said than done. Today on Cold Call we welcome Mark Roberge to discuss the case, “Entrepreneurial Sales and Marketing Vignettes.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network. Mark Roberge teaches about entrepreneurship at Harvard Business School, and he previously served as the SVP of Global Sales Services at HubSpot, where he scaled revenue from, I’m going to try and get these numbers right, zero to 100 million and grew his team from one to 450. Mark, welcome to the show.

MARK ROBERGE: That’s a lot. Thank you so much.

BRIAN KENNY: That is a lot. Yeah. And listen, for our listeners out there, we call the show Cold Call, but to be honest, I always send the questions out to our guests in advance so they have a chance to read up on them and think about what they’re going to say, because we don’t want it to be a total cold call, but today we’re breaking that mold. This is a real cold call. Mark, are you ready for this?

MARK ROBERGE: Hey, it’s the sales episode. Cold call. Let’s go.

BRIAN KENNY: That’s right. And you wrote this case. So, we’re going to reference the themes in the case at a high level, but really, I mean when I say we don’t talk about sales enough here, and it’s such a critically important function within any organization. So why don’t we start by, I want to ask you, how does sales rank in an entrepreneur’s list of priorities? When somebody’s thinking about starting a new enterprise, where does sales factor in?

MARK ROBERGE: It depends if they’re experienced or not.

BRIAN KENNY: Yeah.

MARK ROBERGE: So, for the experienced entrepreneurs who’ve been out there, it is way up there. They come back and say, listen, this is just not about acquiring customers. This is about acquiring employees. This is about driving your team. This is about motivating. This is about selling people on a vision. So, they’re like, I’m always selling investors raising money. Every aspect of my job is sales and you need to know this stuff.

BRIAN KENNY: Yeah, it’s funny I had a conversation one time with one of our better known alum, a guy named Jim Koch who started the Boston Beer Company, which is Sam Adams beer.

MARK ROBERGE: He’s come to my session.

BRIAN KENNY: Has he really?

MARK ROBERGE: So, when I was a student at MIT, that was when I first met him and saw him, and then a couple of mine, he’s been in the audience. I’m like, “Jim, thank you so much.”

BRIAN KENNY: Well, I did ask him one time, because I was doing an interview with him and I said, “What’s the one thing you didn’t learn at HBS that you really wish you had learned?” And he went off on sales for about 10 minutes because he’s a firm believer in how important it is, and he didn’t feel like he got enough education in it here. So maybe this is the start of something new, a new movement at Harvard Business School. What do you want entrepreneurs to know about sales?

MARK ROBERGE: Yeah, so that’s where we start off in teaching is we get these amazing Ferrari minds in the class and we’re like, what is sales? And they just think it’s this really provocative presentation and they have this picture of what these salespeople are, and we have to take them through this journey of like, no, that’s not what it’s about. If you read all of the rigorous research on great salespersonship, it’s really about understanding your buyer. So great salespersonship is about, I say, you want to get good at this, here’s the exercise you’re going to do this weekend. You have a networking event, you have something going on where there’s a bunch of strangers you walk into a room. Walk up to someone that you don’t know and see how long you can ask them questions before they get annoyed. If you can do that for 20 minutes, you are well on your way in sales. And I joke with them. I’m like, I can do that pretty well. I can literally go to a wedding and walk up to a complete stranger, and all I told them was my name. And we talked for 30 minutes, I ask them questions. At some point they were like, wow, no one’s asked me that before. And I know at that moment I’ve rewired their brain a little bit through that provocative question. That’s really the essence of sales. If you go look at anything that’s rigorous and you talk to the folks who’ve been out there and done that, this is all about developing trust to earn the right to ask open-ended questions so you can understand what the person across the table cares most about. What’s keeping them up at night, what are the opportunities they’re excited about, and decide whether you can help them. That’s sales.

BRIAN KENNY: Yeah. The case that we are talking about today, focuses on three different vignettes. And one of the challenges that seems common across these vignettes is that the founders are thinking about what kind of a person do I bring in? Because I think entrepreneurs have a vision for what they’re creating, whether or not that they’re able to convince other people in the way that you just described about how important that vision is and why it should matter to a potential client, that requires a certain kind of person to be able to spark that conversation. Can you talk a little bit about what founders should be looking for in their first salesperson?

MARK ROBERGE: Yeah, so there’s multiple layers to this conversation, because there’s the first piece would just, let’s just demystify what selling is. This is not about provocative presentations. And so the case is really talking. We get into the head of a founder, you’ve built the product, you have a couple beta customers. Now we have to professionalize a sales team. That is a whole new set of riddles. Starting with what you’re saying, Brian, which is: who do we hire first? What a mistake so many founders make. And unfortunately, their most mentored voice is usually their angel investors or their VC investors. And that guidance isn’t good either, because what they say is, Oh, go find one of the top reps at salesforce.com. Let’s give them equity and bring them on. Terrible first hire, because when they joined Salesforce, they went through two months of rigorous training on proven methodologies with the pitch decks and the objection handling, and they were handed a quota and they were handed a list of accounts and a bunch of leads, and they were told just follow the playbook. You’re two founders with a product and you’re engineers, you have no playbook. And furthermore, the most important outcome of that first sales hire on those first hours or days of work is not the customers, it’s the learning. This is your first hire that’s going to talk to your market 30 to 40 times a week. So fine, we bring in whatever, four or five customers that month, we bring to you a 120 conversations and learnings. This first hire needs to be a combination of a product manager and a salesperson. They need to have the sales skills to be able to go talk to strangers, do the dials, run a closing sequence, but they also need to know looking back on a week of 30 conversations, see the patterns and communicate those effectively to the engineers so we can iterate on the product.

BRIAN KENNY: So, I’m putting myself in the founder’s shoes now, how much attention do you have to pay to build up that trust in that individual that you’re bringing in?

MARK ROBERGE: Well, I think that’s part of the interview process, is are you going to be fine with this person representing you out there? That’s what sales does. And so that’s my favorite part of sales interview is you got to role play. I’ve never seen a sales hiring context where you’re not going to role play and you’re going to role play multiple times like, Hey, Brian, let’s do a role play. You’re going to sell my product. Let’s go. And I’m going to give you feedback, because this is interview one. And if I like you, we’re going to do interview two in two days. We’re going to do this again, and I want to see you get better. And by the way, here’s a bunch of literature about our product. Go read it and get better. So by the time I’m done with the interview, I should be very comfortable that you’re going to go out there and represent me.

BRIAN KENNY: Yeah. What would you tell the potential salesperson who’s listening to this conversation about what they need to do and what they need to bring to the table?

MARK ROBERGE: They just need to do their research. Some of the best hires I’ve had during the HubSpot days, you mentioned the team size, and of course you have turnover. So there’s a lot of hiring that I had to do. They brought a binder to the interview, literally a binder like, this is who I am, and this is what I know about HubSpot. They are just overly prepared. One of my favorite steps in the interview is I walk up to you in the waiting room. Hey, Brian, how are you doing? I’m Mark. Are you like, Oh, hi Mark. How are you? Or are you like, Hey, of course. How are you, Mark, how was the flag football game this weekend? Did you do your research?

BRIAN KENNY: So, you go off book, you got to really know who you’re talking to.

MARK ROBERGE: Exactly. You got to be ready.

BRIAN KENNY: Yeah. We did talk about your time at HubSpot, and I just want to delve a little bit into some of the things that you learned as you scaled this really from the ground up. So you were a first person to be in the sales function at HubSpot. It’s now a very large successful organization. How did you even think about scaling that? And this leads a little bit to your podcast. You’re a fellow podcaster. You host a show called Science of Scaling, and I want to understand some of the things that you’re trying to convey in the podcast.

MARK ROBERGE: Yeah. So, the Science of Scaling, I actually don’t think about it that much as being rooted in HubSpot, but we definitely fell into this trap, and this was more rooted in my post HubSpot days. I had a five-year journey between leaving HubSpot and I was teaching here, hadn’t quite started stage 2 Capital, my venture capital firm yet, and I was fortunate the phone ran a lot and it was to help startups with their sales team. Great. That’s my passion. I love that. And I was very careful not to take on too many. So, I basically chose one startup a quarter to spend a day a week with, and they were all about the same stage. We have a product, it works. We need to now professionalize sales. So I would go in and I would help them build their sales team, design the comp plan, et cetera. I did it with 15 companies. Asana went public, Drift sold for a billion, couple are worth a billion, bunch went out of business, bunch went flat. So, it was just a remarkable time in my career to look back and be like: Why did some go like this, up? And why did some crash and burn? And those reflections came back to two critical strategic questions and how they handle them. When are we ready to scale sales? Scale revenue, and how fast? And as I look back in those journeys, I was like, wow, are we operating at a kindergarten level on those questions. It’s literally some board members sitting there and like, Oh, yeah, I was an early investor in Snowflake. And in year one they did a million, year two, they did four, year three, they did 15, year four, they did 30. So that’s your number without any analysis of what this company does, what this company is capable of. And so that’s really what my work, the Science of Scaling is about. It’s a framework that boards and senior leadership teams, founders can use to calculate using their data. When are you ready to scale revenue and how fast are you capable of?

BRIAN KENNY: What are some of the indicators that founders should look for? How do they know when they’re ready?

MARK ROBERGE: I ask audiences that, and everyone says product-market fit, which is a great answer. Then they ask, what is product-market fit? You get a hundred answers, a hundred different answers. That was a movement for us to be better entrepreneurs. But now you even read the Wikipedia page for product-market fit. Half of it, it’s about feelings. How do you make a strategic decision off of a feeling? You just know when you have it. So, this is about truly quantifying product-market fit for your business. A lot of people when they do quantify it, they’re like, Oh, it’s when you’re at a million in revenue. I could not disagree more. If I can sell ice to Eskimos. It doesn’t mean ice has product-market fit for Eskimos. That just means you can sell. That just means you have market-message fit. Product-market fit means it delivers on the value that you’re promising. And so, for me, the metric is customer attention and satisfaction. Now, unfortunately, that’s a lagging indicator, that could take a year for say, a subscription revenue business to surface. So, I have codified the leading indicator of retention as a critical measure of product-market fit. So, what is it when you acquire customer, what is it in the first month that they would do, achieve, whatever? That if they do that they will be with you forever, be really satisfied, love your product, and if they don’t, they’re going to hate your product and leave? So, there’s documented examples of this–Slack. It was like if they send 2000 messages in the first month, for HubSpot is we had a 25-feature platform. If they use five or more in the first month and every month, the retention and success and happiness was extraordinary. So that’s the first step is really studying your lead indicator of retention and setting your first North Star metric, not on getting to a million in revenue, but getting 80% of your customers to achieve that event.

BRIAN KENNY: And it takes a lot of customers, I would imagine, a big sample size to really zero in on that. And that’s probably a moving target. You don’t get it right the first time necessarily.

MARK ROBERGE: Yes or no. It’s circumstantial. We’ve got two ends of the spectrum where you have say, freemium product-led growth businesses like a Dropbox or an Asana or an Atlassian or something like that, where it’s like, yeah, you snap your finger, you have a thousand users. That’s cool. That’s very easy to assess that, and they don’t even have to be paying. They just have to be using the product. Then you got, let’s say you were starting a Workday type product, which is like an HR suite to manage all your benefits. That’s a big implementation. I’ve had investments where they sell to customers and they’re over a million dollars in revenue. And in that case, you still have to study it, but in that case, it’s almost like a multidimensional metric for the single customer, because they’re so valuable. But in most cases, you’re selling something for 10 or $20,000 a year, you’re bringing on three or five customers a month. You do that for three months, the greens and reds are lighting up. It’s pretty cool. You don’t really need that many customers.

BRIAN KENNY: Yeah. Another common issue that seemed to play across the vignettes case was compensation for salespeople. And I’m wondering what some of the issues are that founders run into when they’re trying to figure out how to put together a compensation package for a new salesperson.

MARK ROBERGE: The sales comp plan might be one of the most powerful tools in a CEO or founder’s tool chest that they don’t even use.

BRIAN KENNY: Yeah.

MARK ROBERGE: So, we will unravel this in two dimensions. One is you’re a little further along, you’ve got dozens of people, you maybe have a sales team moving along, and you’re the founder C, and you’re like, I want my team to focus on this, go into a new market, sell a new product, sell it more in a healthy way around retention, whatever it is I’m trying to drive. Can I do that through the sales comp plan? That’s what we have to ask ourselves because most founders hire a sales leader and delegate the comp plan design to the sales leader, and most sales leaders use the comp plan from their last company. Terrible. This is something that needs to shift, especially in the early stages, to be aligned with the needs of the business. Now, let’s go back, Brian, to what we were talking about. Your first North Star metric should not be a million in revenue, it should be getting 80% of your customers to do that leading indicator of retention, in Slack’s case, send 2000 team messages. This is a beautiful startup sales comp plan that very few people use. Brian, welcome to the team. You’re in sales. Here’s how your comp plan works. You get whatever thousand dollars every time you sign up a customer, I’m going to pay you half. When the customer signs the contract, I’m going to pay you the other half when they hit that lead indicator of retention. So if you were selling at Slack and be like, pay you half, they sign the contract, I pay you the other half when they sent their 2000th team message. And you know what happens? If Slack had a free trial at that moment, the salesperson would get them to send their 2000th team message before they even sign up as a customer. How comforting is that as a founder? So that’s a case in point, coming right into this context of a very startup orientation is, you should use the sales comp plan to drive your strategy as founder CEO.

BRIAN KENNY: Let’s go back into the salesperson’s shoes though, because in that scenario, you need to be pretty confident that this product is going to catch that customer’s attention to the extent that they’ll take that leading indicator, that they’ll meet that 2000th message on Slack. So how do you even begin to assess that if you’re a salesperson going into this situation?

MARK ROBERGE: I guess if I had to say the quick answer, I would pay close attention to the consistency of customer value they’re creating. And to drill right into your question, Brian, of as a seller, you better be confident that’s going to happen if that’s half of your comp. Yeah, it’s more than just that. Do you want to be out there hacking something that you don’t believe in?

BRIAN KENNY: Yeah.

MARK ROBERGE: That’s your relationship, that’s your reputation. And so yeah, I think especially for sales, they have to believe in it, and they need to know that if they’re going to convince someone to buy this thing, it’s going to work and it’s going to deliver on the value they promised.

BRIAN KENNY: Yeah. Now, you mentioned the fact that you now have your own venture company. You’re probably looking at a lot of product and business ideas. I’m wondering if you know within the first 30 minutes when you sit down with a founder, this just isn’t going to work? There’s no way you’re going to be able to build a sales funnel that you need to succeed in this.

MARK ROBERGE: So, I don’t know if after an hour I can say, I’m definitely investing, I definitely want to do this with someone, but you can definitely disqualify it. Because a lot of the disqualifications are more like, this market’s not big enough for a venture investment. There’s no defensible moat, there’s too much competition. I would say that probably is the big thing right now on the sales side, is the competition. We’re just seeing a lot of AI right now, and it’s boring. I happen to think that we’re in this big 20-year tech disruption that hasn’t happened since 1997 with the advent of cloud. We’re just in the B2B software world. We’re moved from client server to cloud. Now we’re moving from cloud to AI. But what’s happening right now is everybody’s using the AI to fuel the old workflow without realizing that this workflow is about to change. Everyone’s like, Oh, yeah, you’re going to make your salesperson more productive. You’re going to allow them to be able to do research faster and build a cold call list faster. It’s like, yeah, but we don’t need salespeople anymore. That’s where we’re at.

BRIAN KENNY: But how do you get the passion, like we just talked about, a salesperson really needs to believe in a product and needs to be out there pushing that customer to get to that 2000th Slack message. How does AI do that?

MARK ROBERGE: What are we doing in sales? We’re training someone who went to college, studied something else. We’re training them to ask open-ended questions, to understand what’s in the head of the buyer, and to decide if I can help them, and if I can help them to tailor the description of my product that resonates best with the individual. Today’s AI could do that better than most humans.

BRIAN KENNY: Yeah.

MARK ROBERGE: Hey, I don’t mean to… The economic effects of this is scary, and it’s going to take a while, but I’ve seen examples of this where the person on the other side had no idea they were speaking to AI, and the AI performed better than 80% of salespeople I know.

BRIAN KENNY: Wow. That’s amazing. Mark, this has been a great conversation as I suspected it would be with a fellow podcaster. Tell us a little bit about the Science of Scaling.

MARK ROBERGE: It’s co-produced with HubSpot in their startup sales product line. And I try to go out and find the first sellers, the first sales leaders at these great businesses. So, I had Aliisa from OpenAI who talked about a remarkable first year of selling at OpenAI, had the first seller at Figma that just sold for 20 billion, had the first seller at Asana. The sales leader of Atlassian. Brian Halligan, the founding CEO of HubSpot, came on. So, I try to take these folks who’ve seen the whole journey, but we go back to the early days and try to unpack what they did to hopefully create some education for this new generation of founders.

BRIAN KENNY: It sounds great. Mark, thank you for joining me on Cold Call.

MARK ROBERGE: Thanks, Brian. Been a pleasure.

BRIAN KENNY: If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, and Women at Work. Find them on Apple, Spotify, or wherever you listen, and if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you. Email us at coldcall@hbs.edu. Thanks again for joining us. I’m your host, Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.