How B2B startups can create a repeatable sales cycle

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A lot of VC investments into B2B companies arrive at the “growth” stage (I put growth in quotes because growth capital is a term used a little differently in the private equity industry). That means it is effected when the startup has a mature product that is ready to sell (think beta and after), alongside support, marketing, and engineering groups.

Astute startups spend a fair amount of time carefully analyzing the key levers and economics of each sale transaction. This analysis is extremely valuable for planning future operations and to effectively communicate with investors.

For VCs, a fine-grained analysis of each sale transaction means satisfaction of the holy grail in the industry—a good understanding of use of proceeds.

For VCs, a fine-grained analysis of each sale transaction means satisfaction of the holy grail in the industry—a good understanding of the use of proceeds. In scenarios where the economics of each sale is available, VCs have great visibility and predictive ability in terms of how their investment is being put to use. And this is something that greatly enhances the attractiveness of a startup and makes it more “investable.”

Let’s look at an example. A cloud-based CRM vendor is able to easily and confidently articulate the important elements of a sales cycle:

“We sell to VPs of sales at medium and large companies globally. An average sales cycle is three months and involves two to three cold calls from our inside sales team, one WebEx demo, and one in-person meeting with our sales director and sales engineer.

Leads that progress from cold to warm are also addressed by our marketing automation platform that sends valuable pricing and competitive analysis information. In a typical cycle, a prospect receives two such emails.

The median deal is US$2,500/year and the lifetime value of a customer is US$10,000.”

If executed well, a pitch like this would charm any VC for it automatically translates to believable financial projections, paths to profitability, and defendable valuation estimates.

A well-oiled sales machine is also tremendously beneficial to an organization’s morale. It boosts a company’s ability to hire qualified people and help attract follow-on rounds of funding. It also helps scale the sales organization and even supports functions like marketing (yes, like it or not, nothing trumps sales in B2B startups).

Creating a sales cycle nirvana

Startups that essentially haven’t figured out their target market start meandering into different and unprofitable directions early on. Investing in such companies is typically a recipe for disaster, with money spent on just identifying the right buyer and appropriate sales channels. It’s a very cost-prohibitive proposition for investors, highly demotivating and frustrating for startups, and unflattering for “downstream” actors (i.e. potential employees, channel partners, future investors, etc.).

Startups can take multiple steps to create a repeatable sales cycle. For one (the most obvious but often hard to achieve), clearly identify the pain point you’re addressing. And do it in a way that identifies the buyer in good detail.

So instead of saying, “We are addressing the inefficiencies in B2B marketing products,” you can say, “We are enabling marketing groups to overcome the inherent lack of efficiencies in attracting and nurturing large lead pipelines.” This allows you to build tools for marketing organizations inside a corporation and, by extension, for a decision maker (who is most often the VP of marketing).