The perils of sales led software companies

I’ve spoken to a number of PM’s recently who are frustrated because their B2B orgs (usually early stage start-ups but not exclusively) are sales led.

What do sales led organisations look like?

• Customers agree to buy the product but on condition that X or Y feature is built for them
• Roadmaps are either entirely composed of client requests, or if non-client features exist in the roadmap they are continually getting pushed back (or never get shipped at all)
• Engineering teams are constantly under pressure and behind
• Tech and UI/UX debt builds up quickly
• PM’s are really just project managers pushing work through the team

The problem with being sales led is that software companies make money by selling the same thing many times over. They don’t make money on the first version (because the investment to build the feature is 10x the contract value).

So if you are constantly charging people to essentially build a feature specific to them, you are actually running a consultancy and selling your time. In this scenario revenue is constrained by the size of your team and the number of hours they work.

The second issue with being sales led is that it hides the fact that your product probably either doesn’t have product market fit yet, or that you’re selling it to the wrong people (positioning is wrong). If you had those things nailed you wouldn’t need to commit to custom requests in order to close sales.

So how do you fix it?

1. Stop signing contracts on condition of features getting built 🤯! This is a hard habit to kick especially for founders / C-Suite and the sales team who (understandably) are laser focussed on growing customers and revenue. Often people don’t realise things have got so bad. It’s easy to convince yourself that because customer A is asking for this new feature, other customers will likely want it as well. However, as stated above, the economics of selling software is such that contractually committing to features for a specific customer will kill your business.

2. Identify your happiest customers and why they love your product. How does your product remove cost / time or add value to their business. Do these customers have similar characteristics? Are there other potential customers in the market who share these characteristics?

3. Start doing proper product discovery. Shadow customers, run customer journey exercises and really dig into customer requests to understand what the real pain is behind those requests.

4. Identify value based metrics for your product and obsess about ‘moving the needle’ on those metrics

I’ve been in early stage startups trying to get to product market fit and show the board that sales are happening. I understand how hard it is when a big name shows up and promises to buy, so long as you build feature x for them. I also know that sometimes you have to say yes to these requests.

However, these situations absolutely must be the exception and not the rule.

Somebody much smarter than me said “there’s only one circumstance you should build something because a client requested it. If they offer you a ton of cash, and if you had it on your short term roadmap anyway.”