A CEO running a B-to-B startup in needs to live in the municipality where their merchantry is – or else they’ll never scale.
I was having breakfast with Erin, an ex-student, just off a red-eye flight from New York. She’s built a 65-person startup selling enterprise software to the financial services industry. Erin had previously worked in New York for one of those companies and had a stellar reputation in the industry. As one would expect, with banks and hedge funds as customers, the majority were based in the New York metropolitan area.
Where Are Your Biggest Merchantry Deals?
Looking a bit bleary-eyed, Erin explained, “Customers love our product, and I think we’ve found product/market fit. I personally sold the first big deals and hired the VP of sales who’s towers the sales team in our New York office. They’re growing the number of finance and the deal size, but it feels like we’re incrementally growing a small business, not heading for exponential growth. I know the opportunity is much bigger, but I can’t put my finger on what’s wrong.”
Erin continued, “My investors are starting to get impatient. They’re comparing us to flipside startup in our space that’s growing much faster. My VP of Sales and I are running as fast as we can, but I’ve been virtually long unbearable to know I might be the ex-CEO if we can’t scale.”
While Erin’s main sales office is in New York, next to her major prospects and customers, Erin’s visitor was headquartered in Silicon Valley, lanugo the street from where we were having breakfast. During the Covid pandemic, most of her engineering team worked remotely. Her inside sales team (Sales Minutiae and Merchantry Minutiae reps) used email, phone, social media and Zoom for prospecting and generating leads. At the same time, her worth executives were worldly-wise to use Zoom for sales calls and tropical and grow merchantry virtually.
There’s a Pattern Here
Over breakfast, I listened to Erin describe what at first seemed like a series of shredded events.
First, a new competitor started up. Initially, she wasn’t concerned as the competitor’s product had only a subset of the features that Erin’s visitor did. However, the competitor’s headquarters was based in New York, and their VP of Sales and CEO were now meeting face-to-face with customers, most of whom had returned to their offices. While Erin’s New York-based worth execs were selling to the middle tier management of organizations, the CEO of her competitor had ripened relationships with the exec staff of potential customers. She lamented, “We’ve lost a couple of deals considering we were selling at the wrong level.”
Second, Erin’s VP of sales had just bought a condo in Miami to be next to her white-haired parents, so she was commuting to NY four days a week and managing the sales gravity from Miami when she wasn’t in New York. Erin sighed, “She’s as worn-out as I am flying up and lanugo the East Coast.”
Third, Erin’s worth execs were running into the typical organizational speedbumps and roadblocks that latter big deals often encounter. However, solving them via email, Zoom and once-a-month fly-in meetings wasn’t the same as the NY worth execs stuff worldly-wise to say, “Hey, our VP of Sales and CEO are just lanugo the street. Can we all grab a quick coffee and talk this over?” Issues that could have been solved casually and quickly ballooned into ones that took increasingly work and sometimes a plane trip for her VP of Sales or Erin to solve.
By the time we had finished breakfast it was well-spoken to me that Erin was the one putting obstacles in front of her path to scale. Here’s what I observed and suggested.
Keep Your Eye on The Prize
While Erin had sold the first deals herself, she needed to consider whether each deal happened considering as CEO, she could undeniability on the company’s engineers to pivot the product. Were the worth execs in New York trying to execute a sales model that wasn’t yet repeatable and scalable without the founder’s intervention? Had a repeatable and scalable sales process truly been validated? Or did each sale require a heroic effort?
Next, setting up their New York office without Erin or her VP of Sales physically living in New York might have worked during Covid but was now holding her visitor back. At this phase of her visitor the goal of the office shouldn’t be to add new finance incrementally – but should be how to scale – repeatably. Hiring worth execs in an office in New York let Erin believe that she had a tested, validated, and repeatable sales playbook that could rapidly scale the business. The reality was that without her and the VP of Sales living and zoetic the merchantry in New York, they were trying to scale a startup remotely.
Her early customers told Erin that her visitor had built a series of truly disruptive financial service products. But now, the visitor was in a variegated phase – it needed to build and grow the merchantry exponentially. And in this phase, her focus as a CEO needed to transpiration – from searching for product/market fit to driving exponential growth.
Exponential Growth Requires Relentless Execution
Because most of her company’s customers were well-matured in a single city, Erin and her VP of Sales needed to be there – not visiting in a hotel room. I suggested that:
- Erin had to quickly decide if she wanted to be the one to scale the business. If not, her investors were going to find someone who could.
- If so, she needed to realize that she had missed an important transition in her company. In a high-dollar B-to-B business, towers and scaling sales can’t be washed-up remotely. And she was losing ground every day. Her New York office needed a footprint larger than she was. It needed merchantry minutiae and marketing people rapidly creating demand.
- Her VP of Sales might be wonderful, but with the all the travel the visitor is only getting her half-time. Erin needs a full-time throne of sales in New York. Time to have a difficult conversation.
- Because she was behind, Erin needed to rent an suite in New York for a year, and spend the next six months there and at least two weeks a month without that. Her goal was to:
- 1) Validate that there was a repeatable sales process. It not, build one
- 2) Build a New York office that could create a sales and marketing footprint without her presence. Only then could she cut when her time in the City.
- Finally, she needed to consider that if her customers were primarily in New York and the engineers were working remotely, why weren’t the visitor headquarters in New York?
I Hate New York
As we dug into these issues, I was pretty surprised to hear her say, “I spent a big part of my career in New York. I thought coming out to Stanford and the West Coast meant I could leave the setup of large companies and that culture behind. Covid let me do that for a few years. I guess now I’m just lamister jumping when into an environment I thought I had left.”
We lingered over coffee as I suggested it was time for her to take stock of what’s next. She had something rare – a services visitor that provided real value with products that early customers loved. Her staff didn’t think they were joining a small business, neither did her investors. If she wasn’t prepared to build something to its potential, what was her next move?
Lessons Learned
- For a startup, the next step without finding product/market fit is finding a repeatable and scalable sales process
- This requires a transition to the relentless execution of creating demand and exponentially growing sales
- If your customers are well-matured in a municipality or region, you need to be where your customers are
- The CEO needs to lead this growth focus
- And then hand it off to a team equally capable and committed