Almost everything in startups is sales. Finding customers — obviously sales. Hiring talented people — sales. Raising capital — sales. Sales is life and life is sales in startups. There is much that can be said about sales. What I have been thinking about a lot recently is focusing on multiples in your sales motion, not basis points. What do I mean by that?
Multiples are things in a sales process that you can double, triple, quadruple with additional effort. They tend to be the boring raw inputs to a sales funnel. Multiples tend to be crucial early in a startup as your sales funnels will tend to have low denominators. For example, when you first start selling your product to customers you may be booking 3 customer calls a week. Doubling your total customer calls is 6 calls. For young companies, increasing multiples is almost always just a function of effort — therefore it’s quite easy to augment. For a large company with hundreds of thousands of customer sales calls a week it becomes harder and harder to double, triple, quadruple that effort. Bigger companies naturally have to start focusing more on basis point optimizations.
Basis points are things you can move by fractions of percentages with additional effort. They tend to be the conversion rates through the stages of a sales funnel. Basis point optimization tend to create very little impact for young companies, but can create massive impact in large companies. If you are doing 10 sales calls per week, getting your closing rate from 5%-10% is half an additional customer. For a company that is doing 100,000 sales calls per week even a 1% increase in conversion is 1,000 additional booked customers per week. Basis point optimization tend to take a tremendous amount of effort to create and sustain, and only create meaningful impact when applied to large denominators.
I often see Founders fall into a trap where they focus too much on trying to move basis points and ignore the areas they can effect multiples. I think the main reason behind this is silver vs. lead bullet thinking. It’s much more pleasant to trick yourself into thinking there is a silver bullet out there that will close 50% of your sales or fundraising calls — there’s not. The reality is you just have to fire a ton of lead bullets, which means maximizing pure, boring, mundane effort. Let’s talk about an example:
You are starting your seed fundraise. You are currently booking 10 pitch calls per week with a 5% conversion rate, so you are closing an investor every two weeks on average. If you double your meetings to 20 that’s 1 investor a week, 40 that’s 2 investors a week. In order to get the same impact if you focused on basis points you would have to increase your pitch conversion rate from 5-20%, which is much harder to do. No amount of work on your pitch deck is going to give you a bump like that.
What’s the takeaway? Do the hard stuff, don’t get into the weeds on the conversion rates early on. Need to grow revenue faster? Double or triple the amount of customers you pitch. Need to raise money faster? Quadruple the amount of VCs you are meeting. Need to hire better people faster? Spend more time interviewing candidates. Don’t trick yourself into thinking you are one pitch deck adjustment away from glory, just go do the work. Startup success is mostly a function of effort, not intelligence.
Eventually you will earn the right to work on basis point optimizations.
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