August 1, 2022 • 11min

Breakthrough Lessons: The Sales Learning Curve

Pattern Breakers

In this episode of Starting Greatness, Mike Maples Jr. discusses Mark Leslie's sales learning curve framework and its importance for startups in achieving product-market fit. The sales learning curve provides a vital heuristic for assessing a startup's progress and avoiding common pitfalls in scaling sales teams prematurely.

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Key Takeaways

The sales learning curve is a crucial framework for assessing product-market fit, especially for B2B startups
Startups often make the mistake of ramping up sales teams too quickly before achieving true product-market fit
The sales learning curve has three phases: initiation, transition, and execution
In the initiation phase, focus on reaching sales rep breakeven with a small team of "Renaissance" salespeople
In the transition phase, aim for traction with "enlightened" reps who can adapt to an evolving sales model
Only in the execution phase should you rapidly scale the sales team with traditional salespeople
Tracking progress along the sales learning curve helps startups objectively assess their product-market fit
The key to growing faster is reducing the time it takes salespeople to reach target yield in each phase

Introduction

In this episode of Starting Greatness, Mike Maples Jr. discusses Mark Leslie's sales learning curve framework and its importance for startups in achieving product-market fit. The sales learning curve provides a vital heuristic for assessing a startup's progress and avoiding common pitfalls in scaling sales teams prematurely.

Topics Discussed

The Importance of the Sales Learning Curve (1:18)

Mike Maples explains why the sales learning curve is such a significant concept for startups:

It helps startups avoid the temptation to immediately ramp up sales teams upon product launch
Prevents the vicious cycle of burning cash too quickly while failing to meet revenue expectations
Recognizes that the entire organization needs to learn how customers will acquire and use the product before efficient sales can occur

"Every startup has a sales learning curve. Before a startup can sell its product efficiently, the entire organization, not just sales, needs to learn how customers will acquire and use it."

Components of the Sales Learning Curve (2:51)

The sales learning curve involves multiple aspects of the organization:

Product development: Determining valuable features, usability, reliability
Marketing: Analyzing product positioning, market segmentation, messaging
Sales: Determining distribution channels, developing sales models and pitches

Mike emphasizes that this process is iterative and path-dependent, with problems often revealed sequentially as earlier issues are resolved.

The Three Phases of the Sales Learning Curve (4:31)

Mark Leslie's framework breaks down the sales learning curve into three distinct phases:

Initiation Phase
Transition Phase
Execution Phase

Phase 1: Initiation (5:11)

Key characteristics of the initiation phase:

Begins when the product is ready for market
Lasts until sales rep breakeven point (revenue per rep equals fully loaded cost per rep)
Requires "Renaissance" salespeople with specific skills:
- Ability to communicate across the organization
- Tolerance for ambiguity
- Deep interest in product technology
- Resourcefulness in developing sales models and materials
Focus on learning about customers rather than pure revenue generation
Avoid assigning large quotas or heavily commissioned pay plans
Keep the sales team small (3-4 people) to facilitate learning and keep costs down

"A smaller sales team keeps cost down and is more effective in making key learnings visible to other parts of the company."

Phase 2: Transition (7:26)

Key aspects of the transition phase:

Begins after sales rep breakeven is achieved
Lasts until the product achieves real market traction
Traction is typically defined as sales yield reaching twice the fully loaded cost per sales rep
Requires "enlightened" or "transitional" salespeople who can:
- Contribute to an evolving sales model
- Adapt to changing conditions

Phase 3: Execution (8:06)

Characteristics of the execution phase:

Begins when the product has achieved clear market traction
Focus on improving efficiencies until each sales rep can absorb all company expenses
Requires traditional salespeople who need:
- Defined territories
- Established sales plans
- Pricing models
- Marketing materials
Allows for rapid hiring of sales reps within management and financial constraints

"Once sales management is confident that the product has achieved traction and is entering the execution phase, sales reps can be hired as rapidly as the company's management and financial constraints allow."

Common Pitfalls in Scaling Sales Teams (8:53)

Mike shares his experiences with startups that scaled sales teams too quickly:

Early success with initial customers creates a false sense of security
Companies ramp expenses rapidly after raising funding
Revenue targets are missed and burn rates increase dramatically
Organizations often blame marketing or sales leadership rather than recognizing the lack of true product-market fit

Using the Sales Learning Curve to Achieve Growth Goals (9:53)

Mike emphasizes the importance of the sales learning curve in achieving ambitious growth goals:

Focus on reducing the time it takes for salespeople to reach target yield in each phase
Compress ramp time in the sales learning curve one phase at a time
Avoid skipping steps in hopes of moving faster

The Sales Learning Curve as a Heuristic for Product-Market Fit (10:21)

Mike explains why the sales learning curve is one of the best heuristics for tracking progress towards product-market fit:

Startups often lie to themselves about achieving product-market fit
External pressures can lead to overly optimistic assessments
The sales learning curve provides an objective measure of progress
It helps startups transition from validated learning to early traction to efficient growth

"Understanding precisely where you stand in the sales learning curve is how you keep yourself honest. It's a way to transition from validated learning about customers to early traction to efficient and ultimately profitable growth."

Conclusion

The sales learning curve framework provides startups with a powerful tool for assessing their progress towards product-market fit and scaling their sales teams effectively. By understanding and respecting the three phases of the curve - initiation, transition, and execution - founders can avoid common pitfalls and build a solid foundation for sustainable growth. The key to success lies in focusing on learning and adaptation in the early phases, gradually increasing efficiency, and only scaling rapidly once true market traction has been achieved. By using the sales learning curve as an objective measure of progress, startups can keep themselves honest and avoid the temptation to prematurely ramp up their sales efforts.