Avoid 3 common sales mistakes startups make during a downturn

More than 150,000 workers lost their jobs this year as layoffs swept across the tech landscape since June. Constant news cycles have analyzed every aspect of these staff reductions for meaning and lessons. How did we get here? How are companies managing employees? Are there more layoffs on the way?

And, critically, what’s next for tech? Investors are now demanding profitability over growth. This extreme change in the business model investors want has left companies with difficult decisions ahead and no playbook. Without the liberty a low-cost capital environment affords, for investors, new ventures that promise uncertain returns are a thing of the past, or at least, a much smaller focus.

What every company needs now is efficient sales.

But there is a big difference between knowing that you need efficient revenue and knowing how to get it. Leaner teams, fewer resources, and a tough macro environment mean that CROs are forced to make big changes to budgets, staffing and how they market and sell.

But maintaining revenue while the CFO is cutting costs by 5%-20% is not an easy task for anyone — and doing more of the same won’t get you there.

The unfortunate truth is that unless you move beyond the same old buying group, you won’t move the needle.

The biggest mistakes to avoid

Preliminary data from Databook shows that an unusually high percentage of companies globally are in the midst of shifting their strategic priorities. Since these are typically multiyear commitments, this unprecedented shift dramatically changes the sales landscape for tech startups.

Holding tight to traditional sales incentives and levers won’t yield the step change that is needed to win.

Don’t raise pricing

Most startups are reliant on VC funding, and in today’s market, VCs are looking for a clear path to profitability. One seemingly “easy” way to improve margins is to increase pricing.

This is a fix you can only try once; you don’t want to keep raising prices in a competitive market. This is a temporary workaround at best, and it can easily backfire, as higher prices during a downturn can erode customer trust over the long run. It can also result in fewer renewals when there is less budget available.

Don’t increase quotas

Startups must find ways to get more from less in a down market. One option is to increase sales quotas and adjust compensation plans, but this often ends up being a short-sighted and costly mistake.

Firstly, compensation plan improvements aren’t realized for 12-15 months, so it won’t dramatically impact sales in the near term. What’s worse, they have a negative impact on employee retention. You need to keep your highest-performing sales reps, who have the best chance of success in a challenging market. An excellent sales professional who truly understands your technology and sales process is priceless.

Don’t equate more lead generation with more sales

Many startups fool themselves into believing that more meetings will result in more sales. The unfortunate truth is that unless you move beyond the same old buying group, you won’t move the needle.

Instead, startups need to reach higher-level buyers who have more spend and more responsibility for moving business priorities forward. This requires a different mindset, approach and skillset — both for your marketers and sellers. This environment calls for spear fishing rather than the use of a net.

So what can startups do to renew and sustain growth?

The biggest gains can be found with strategic selling to address the specific pain points of your buyer. In a downturn, your entire sales team must be able to speak to executive priorities, opening the door to higher-level contacts.

These C-suite conversations engage buyers who are closest to the financial case for change and the strategic needs of the board. More CxO conversations are key in late-stage deals to align on the business case, including both hard and soft benefits. It’s also imperative to tie your solution to key use cases, and where possible, help your customer rationalize spend.

Startups and their buyers are both facing the same pressure to hit revenue and cost-saving targets. Starting a deal cycle at the end of a budget cycle is likely to cause deals to stall or be delayed by several quarters, so it’s important to know precisely when companies are executing fiscal year budgets and key decision periods.

In addition, buyers and champions are not immune to layoffs and job migrations, so be prepared with a backup plan: Develop multiple champions and run more than one motion with one line of business.

The biggest message for 2023 is: Make real change to meet your buyers needs. Use the macroeconomic backdrop to make the necessary sales productivity improvements that drive long-term sustainable growth, and engage at higher levels, more strategically by consistently attaching your solutions to business outcomes.

A CRO who knows what to do differently will shield their companies and teammates from the worst and be positioned to emerge with strong customer advocacy and fuel for growth.