 was rising through the sales ops leadership ranks and working with her team to come up with an aggressive hiring plan, trying to reverse engineer the sales team capable of delivering the equally aggressive bookings numbers that their startup had set.

At the time, this move seemed in-line with conventional thinking, which was steeped in hypergrowth and the 

triple triple double double double mantra

 that drove startups to sell more, faster. But that pressure to hit those top-line growth numbers created blinders that left one side of the equation out entirely: sustainability. Like many other companies, Rhorer’s startup didn’t realize early enough that the math wasn’t supporting the sheer amount of cash they were burning in a quest for growth. And just a few years later, it all came home to roost — and nearly 40% of the staff had to be laid off.

Rhorer has carried the lesson from this cautionary tale forward, carefully avoiding a similar mistake in her roles that followed. With a career that’s stretched across consulting, finance and sales operations, she’s become one of the most structured and analytical sales leaders out there, able to craft growth and performance plans from big picture strategy right down to executing the very tactical details of implementation. She went on to successfully manage sales strategy and operations teams at 

 and expanded learning solutions in EMEA, and then moved into her current role as the customer success and sales strategy lead for 

With the experience Rhorer brings to the table, it’s worth heeding her advice, especially when it’s cautionary. Because recently, she’s noticed the same warning signs that the growth-at-all-costs sales mentality is worming its way back through Silicon Valley as venture checks balloon and more competitors emerge. In this exclusive interview, Rhorer codifies what she’s learned about scaling sales hiring across her career, hoping to help other companies avoid the mistakes that she’s seen too many startups make. She shares how leaders can push past the pressures to spin up sales quickly by walking through the four levers for sustainable headcount planning and detailing the key calculations for avoiding a painful future of upside-down metrics that burn through cash.

BEFORE POURING IN THE GAS, MAKE SURE THE ENGINE IS WORKING

It’s a tale as old as time. Founders push sales orgs for growth to hit the numbers needed for the next round of fundraising. The ask stems from a need to show product/market fit in the form of revenue. With headlines of massive rounds being raised, founders feel that if they let up on the growth pedal, their competitors won’t. The first few sales folks are hired, and instead of that releasing the pressure it increases it. All of a sudden, plans are made to double or even triple the sales team as a sort of rush-order on revenue.

But according to Rhorer, that’s exactly when you need to hit pause and crunch the numbers instead. “That kind of thinking is not going to result in sustainable, healthy startup. 

Frankly, it's a dangerous simplified headline that ends up being a simplified business model.

 many things,” she says. “Before you know it, you’re burning more cash than you expected while bookings are increasing more slowly than you projected and it’s a full-blown crisis. It’s like raising an army of soldiers and forgetting about all of the infrastructure that goes with it. You don’t want to put a lot of pressure on the system without actually thinking through what that looks like. Ignoring your cash burn to achieve growth in the short-term can lead to painful layoffs later on.”

A growth-at-all-costs mindset is a recipe for out of control burn and topsy-turvy unit economics.

Now at Atrium, Rhorer is pursuing a much more measured approach. “It's only now that we’ve figured out the sales motion that we’re going to hire one person outside of the founder to focus on sales. And it’s just that one hire, because we want to make sure that the sales motion is real and replicable before we hire a fleet of account executives (AEs),” she says. “You need to understand the fundamentals before pouring gas on the fire because you want to make sure it’s going into a working engine, not onto a conflagration that will burn through your VC money.”

To check the engine light and see if it’s time to scale up the sales team, founders and sales operators need a clear view into the gears that drive sustainable growth. To that end, Rhorer has developed a detailed process with four steps leaders can use to pinpoint the right time to scale sales hiring — and make sure they aren’t setting their future selves up for a costly fall.

1) LEARN THE NEW MATH: A BETTER (UNIT) ECONOMICS 101

Founders and sales leaders need to first clear the hurdle of fully understanding the unit economics of their go-to-market model, doing the math on the most basic elements. To tackle this meaty task, Rhorer breaks it down into four sub-steps and provides basic and more sophisticated approaches as guidance:

Elevate your customer acquisition cost calculation.

Customer acquisition cost (CAC) is an oft-cited metric to track, but there’s more to this calculation than meets the eye. In Rhorer’s experience, people usually miss the fully loaded cost of the sales and marketing efforts required to nab a customer. “Your sales people are not just their salary and commissions expense. There are also costs associated with benefits, management overhead and sales technology spend, in addition to everything on the marketing side. It’s important to include a G&A allocation that fully bakes in all of the true costs,” she says.

look at the total amount of money that’s spent on sales and marketing and divide that by the number of new customers acquired in the last quarter.

 “Of course, if you have sales reps that are both winning new customers and renewing or upselling, I’d recommend figuring out the rough portion of time they’re spending on new customer acquisition and using that allocation to estimate the percent of total sales cost to include,” says Rhorer.

: Get even more sophisticated by looking at the granular details of CAC by customer type. “If you want to go further than just analyzing your overall CAC, look at each of the customer segments you support and proportionally allocate spending. If you are selling to really unique verticals, then the cost to acquire those types of customers will be different,” says Rhorer. “For example, it may be that marketing is putting a disproportionate percentage of their resources against SMB customers because that segment is best reached at scale via marketing efforts, whereas a sales team could focus only on enterprise accounts.”

Calculate your customer lifetime value (including customer success costs).

To ensure that user acquisition is profitable, startups need to run the numbers on how much these newly acquired users will be worth. Many have touted 

the power of customer lifetime value (CLV) as a funnel analysis tool

 and Rhorer sees it as an important lever to consider before pulling the trigger on sales hiring, provided that it includes a full accounting for customer success costs.

“You’re trying to understand how much a customer will be worth during each year that they are a customer, after accounting for the cost to keep them around. People often forget this piece. They’re quick to count the revenue but then miss the spend that comes afterwards,” she says. “As a basic initial approach, 

take your average deal size, multiply it by your net dollar retention rate to get your year two expected value, and then keep doing that for the number of years you expect your customer to stay a customer to find the lifetime revenue. Then multiply that by your gross margin

 to back out the costs of supporting, retaining and upselling that customer. This can get a little complicated because what you’re functionally doing is 

calculating the present value of an annuity

Rhorer advises relying on churn rate in the explanation above in cases where the average customer lifetime is still premature for an early-stage team.. “As a simplifying mathematical assumption, if you know what percentage of your customer base churns every year, your average customer lifetime is going to be the inverse of that. So if 25% of your customers churn every year, then your average customer lifetime is four years or 16 quarters,” she says. “In place of hard numbers, start with reasonable assumptions and continually monitor to make sure that they stay reasonable. If you’re selling to SMBs and it’s a super transactional sale with lots of competitors and low switching costs, you’re probably going to have a shorter customer lifetime than somebody who does a complex enterprise sale.”

For those ready to move beyond assumptions and wade even deeper into a CLV calculus, Rhorer shares two steps to go beyond the initial equation:

 “Instead of using gross margin, look at the direct expenses for supporting your customers, such as AWS servers, and your fully loaded account management and customer success headcount and technology expenses,” she says. “Add these up to find your quarterly cost of goods sold (COGS), divide that by your current amount of active customers and multiply that by the number of quarters in your average customer life. You can then subtract this lifetime total cost of supporting a customer from your total bookings value per customer.”

 “When I was using the more basic approach of looking at overall CAC and CLV at my first startup, we missed that we were selling to three distinct customer segments with highly divergent economics” she says. “What we discovered was that the cost to acquire customers was different across those segments but not sufficiently different for the revenue we were generating from each. We ended up refocusing on an enterprise segment because the lifetime value was so much higher, in relation to the customer acquisition cost.”

Double-check that your ratios are reasonable.

After calculating these figures, leaders should take stock to see if they’re on the right track. When it comes to keeping LTV and CAC in line, there are two general industry rules of thumb that Rhorer follows: 

aim for a CLV that’s at least three times CAC

“These are popular principles for a reason,” Rhorer says. “If CLV is only 1x of CAC, that means that it only covers the amount of money that you spent acquiring that customer. So by definition, your customers are not covering any of your other business expenses. That doesn't leave any money to pay your engineers to build and maintain the product that you sold them, so that's clearly not sustainable.”

The bookend on paying back CAC is similarly rooted in sustainability. “It’s possible to be a profitable business at scale and have a long payback period in a scenario where your customers are super expensive to acquire but stick around forever,” say Rhorer. “But usually a long payback period means that you’re spending a lot of cash in order to scale.”

If it’s taking a long time to pay back CAC, that should set off an alarm that the sales motion isn’t actually working.

For the startups struggling to hit these key ratios, in Rhorer’s experience, it usually comes down to a mismatch between their go-to-market motion and 

. “If you have an SMB inside sales motion where average sales prices (ASPs) are a little bit smaller and the renewal rate for customers isn't quite as good, it’ll be harder to make the unit economics work if you're staffing a whole team against that customer. The margins just aren’t there and you need to be realistic about that,” she says.

To help make all this number crunching easier, Rhorer has created a

. Plug in your own numbers to calculate CAC and CLV, as well as confirm that the ratio and payback period are both on track.

While it’s easy to get swept up in the trap of thinking that adding more salespeople will quickly boost growth, new hires clearly don’t walk in closing deals on day one. Every new AE will always be unprofitable in his or her first few months with the company, but Rhorer has found that many leaders fail to build that burn into their financial models.

“It’s important that you know how long it takes a new hire to consistently reach full productivity so that you can account for their cash negative time period. Their ramp is dependent on what your average sales cycle looks like,” says Rhorer. “If it’s four months, then it’s going to take a new AE at least that long to ramp.”

You aren't going to get an account executive to fully ramp productivity in two months. It's just not going to happen.

In addition to the loss of productivity that accompanies a newbie’s first few months, Rhorer sees another point that others overlook. “Many just talk about how quickly can people spin up and bring cash in the door. 

But I think what’s not mentioned is how ramping up AEs efficiently frees up more management bandwidth.

 If you have a plan to shorten AE ramp time, you’ll be able to hire your next cohort of AEs more quickly or focus on other business priorities, so speeding up the onboarding here can really increase your enterprise value.”

But the line between ramping slowly and not being a fit is razor thin — and hard to spot. Rhorer offers some tips for teams looking to make the distinction:

 While passing over the reins to a dedicated sales hire can provide a sense of relief for founders, it can also be a source of stress. New hires can struggle to find their sea legs, so it’s common for leaders to be unsure of how to gauge their performance — and wonder if they made the right call by pushing the sales work off their plate. “If you have the founder selling for long enough, when it comes time to hire that first rep, you’ll already know what success looks like,” says Rhorer. “For example, at Atrium, I know how many opportunities our co-founder 

 works on at a time and how long it takes him to close them. I know what his ASP is and how many meetings he's in every week. So when we have our first AE come on board, we’ll already know those rough benchmarks in the 

. And if things are falling short, I can go back a step or two to see if it’s a bad hire or if the levers are different for a co-founder and an AE.”

 For the mid- to late-stage teams that have already started to build out a sales army, there are other markers to look for. “When you have a new batch of AEs, compare their ramp to that of other AEs when they were at the same tenure. Establish a general profile of a successful AE with benchmarks on the number of meetings scheduled, opportunities advanced and pipeline built,” says Rhorer. “Look at a new hire’s progress every month until the end of the full sales cycle. You should see the number of opportunities and ratio of initial meetings to follow-on meetings going up as the months go on. If everything’s as expected, then it’s all systems go — you can stay the course on the same training or coaching plan. If those things are falling short, then that's where you can step in.”

On the other end of the hiring funnel, it’s important to pay attention to attrition rate as well. “You don’t want to end up in a situation where the AEs you’re hiring are never actually paying for themselves,” says Rhorer. “You have to address training, onboarding or retention issues before adding any extra headcount; otherwise it’s a leaky bucket.” Avoid this headache by spending the time upfront making sure you have the right people in these roles. “Make sure your hires actually want to be doing this job. One sales leader I know has candidates come in for a trial day that they get paid for before they’re formally hired. There’s a decently high drop off rate after that trial day, but it’s a great way to weed out those who aren’t serious,” says Rhorer.

For Rhorer, the transition between sales development reps (SDRs) and AEs is a particularly important part of the sales cycle that requires tight and repeatable unit economics. New AEs need a predictable pipeline volume, so it’s key to put SDR productivity — and retention — under the microscope.

“You will always have a random bluebird outlier deal happen, but if the inputs and outputs are pretty similar over time, then you can understand what will happen when you hire another SDR or AE,” says Rhorer. Here’s her checklist for assessing SDR performance before kicking things into overdrive:

•Do you know how long it takes a newly hired SDR to reach full productivity?

•Are inbound SDRs converting marketing qualified leads (MQLs) to opportunities at a consistent rate?

•Are outbound SDRs generating meetings and sales-accepted opportunities at a consistent rate?

•Do you understand how many accounts an SDR needs to touch to generate a meeting?

Once the system is firing properly, the sales cycles become predictable and SDRs are performing, the conversation quickly turns to career pathing. There’s an inherent tension here. 

Successful SDRs are often hungry and growth-minded

 — and not eager to stay in their role for longer than 12 months, despite the significant investment in their ramping period. It often seems as though as soon as success is achieved, SDRs are promoted and the cycle of ramping starts all over again on both ends.

putting in intermediate roles so that there is a promotion point within SDR

. They can take on more responsibility or generate more income, but you aren’t losing that productivity,” says Rhorer. “Another strategy involves 

hiring a mix of those super growth minded people and people who want more predictability

 and are happy to stay in the SDR role for a longer period of time. It’s very similar to what many companies do with the individual contributor track versus the managerial track.”

It’s also important to have foresight when backfilling. Founders should plan a few squares ahead as people get promoted up the sales ladder. “One common pitfall I see is that SDRs perform very well and get promoted to AEs, but it’s only then that folks start thinking about backfilling those SDRs,” says Rhorer. “If you want to make sure newly promoted AEs are going to have pipelines of their own, 

as soon as you make the decision to promote, you need to be out there with an open SDR req trying to hire backfills

. If you had two SDRs supporting five AEs and decide to promote both of them without immediately backfilling them, then whatever pipeline they were generating before goes away. It creates a gap that will need to be made up with AE self-prospecting, as you now have seven AEs without SDR support for some period.”

You’ll have a big management challenge if you only hire growth-minded SDRs. But if you hire none of those people, you won’t have an internal talent pipeline.

Many startups take the time to understand where their pipeline is coming from today, but in Rhorer’s experience, not enough spend work out where it will come from 

 — and how a new legion of AEs will be fed with fresh leads.

“People think that hiring sales people automatically leads to more deals, but inbound lead volume doesn’t scale as you hire new AEs. If you currently have five AEs and 50% of each of their pipelines came via inbound channels, then hiring an additional five AEs means that you will have 10 AEs with 25% of their pipelines coming from inbound — unless you get marketing to commit to delivering more leads. It’s almost entirely independent of how many AEs you choose to hire,” she says.

To help keep new AEs satiated in the long-run, Rhorer offers two tactics:

 Split out where your bookings are currently coming from. “It’s important to know what percent of total pipeline comes from marketing and inbound SDRs, outbound SDRs and the AEs themselves today so that you can plan for how those proportions might shift in advance. What those ratios actually are is going to be heavily dependent on what your go-to-market strategy is and what kind of customers you're selling to,” says Rhorer. “In the future, marketing will grow based on the investment your company makes in it, while the outbound SDR leads should scale linearly with the number of SDRs being hired.”

 When it comes to ratios between AEs and SDRs or follow-up meetings to first meetings, Rhorer advises aiming for a target that matches the sales motion. “If you have a big enterprise sales cycle, it may make sense for your SDR to AE ratio to be 1:1. If you're doing more of a mid-market sales cycle, maybe it's two AEs per SDR,” says Rhorer. “It also depends on what you’re asking SDRs to do. Some organizations just have SDRs set meetings while others continue to own the opportunity so it's much further developed before it gets passed over to an AE. When it comes to the follow-up meeting ratio, it’s more about your customer segment,” she says. “In SMB or lower mid-market sales cycles, I’ve seen it be just below or at one. So, for every initial meeting you have one or fewer follow-up meetings. For mid-market sales motions, that number gets closer to two. And then for an enterprise sales cycle, the ratio can get very high, depending on how big and complex it is.”

The final step in assessing readiness for scaling sales hiring involves looking at the part that comes 

“With your sales hat on, it’s easy to forget about how this plugs in to the other parts of your organization, but you really need to diagnose how customer retention is humming along before you decide to bring even more sales folks aboard,” says Rhorer. “Account Managers (AMs) or Customer Success Managers (CSMs) may be part of your sales organization, but even if they're not, they're certainly a key component in the renewal side of the equation that drives LTV.”

Whether it’s building a practice from scratch or assessing if current efforts are adding value, here are Rhorer’s tips for thinking about the customer success piece of the scaling sales puzzle:

For founders looking for advice on how to structure customer success:

“If you do no account management or customer success, I have seen churn rates as high as 50% a year, unless you’ve built out the product to do that renewal for you. But that’s not how most startups are doing it these days,” says Rhorer. “The structure I commonly see is an AM who works with the business decision-maker and is responsible for renewal and upsell, and a CSM who works on end-user success. I’ve also seen that be a combined role. In terms of where these roles slot in, both can fit under the sales organization, but I've also seen them roll up into a chief customer officer so that the end-to-end customer experience is owned by one person.”

Of course, bringing AMs and CSMs on board generally leads to much lower customer churn rates, but there are significant costs involved in supporting that. “That's why all the math is there. If you’ve got support costs in your LTV, you can make sure that the decision to have them is worth it,” says Rhorer.

For founders trying to evaluate current retention efforts:

“When you’re thinking about stepping up your sales hiring, you need to think through how that will impact your current customer operations. How many accounts does each of your AMs or CSMs cover? Are they at capacity?” says Rhorer.

She advises taking a particularly close look at changes in staffing or the number of accounts per manager. “If you’ve been overstaffing customer success, but know that model is financially unsustainable over the long term, you should plan for some increased churn as the customer success model moves from high-touch to low-touch,” says Rhorer. “Similarly, if the number of accounts or touches per account manager has been changing, watch for how that impacts customer health scores like product usage and NPS so that you can forecast the future impact on churn and adjust your LTV/CAC calculation accordingly. But if you feel good about how the current model is working, the only thing to do is to make sure that you hire additional AMs and CSMs to go along with the additional AEs.”

Just as you want to make sure the AEs will be “fed” before you hire them, have a plan to care for customers before you acquire them.

While hitting the sales-fueled growth button may seem like an appealing shortcut to the revenue numbers investors seek, founders should take the time to understand and fine-tune their sales motion before spinning up a full-blown sales team. Understand your unit economics by 

 CAC and LTV, breaking out customer segments and more tailored costs for a more advanced approach. For sustainability’s sake, make sure LTV is three times CAC and aim to pay back CAC in less than 18 months. Build ramp time for new hires into your model and set up checkpoints to evaluate their success and ensure everything’s on track. Consider creating an intermediate promotion point for hungry SDRs and hire the right mix of superstars and rockstars to keep your sales talent pipeline stable. Feed AEs by backfilling SDRs who get promoted and matching your SDR to AE ratio to your sales cycle. Finally, don’t forget about customer success’ impact on LTV. Think through how any changes will affect churn and make sure AMs and CSMs are hired in line with AEs.

“Taking these steps in advance will help ensure that you don’t make commitments that your future self will not be able to afford. It’s a lesson that everyone really needs to learn. I keep having these conversations with CEOs who are thinking about hiring because they’re being asked to hit this growth number, but there are just so many things to think through here,” says Rhorer. “You have to look at all of the other parts of the equation to see what makes growth sustainable. When it’s working, do you really understand why? Or do you know what to look at if it's not? I’ve seen firsthand what happens when you focus on growth without having answered these questions and then have to lay off members of your team as a result. Having a focus on growth is important. But having a singular focus on growth to the exclusion of other things can be incredibly perilous — and founders that are serious about sticking around for the long haul need to keep that in mind before setting off to the races.”

Karen-Rhorer_116RT.jpg

Many founders feel the pressure to spin up sales quickly to hit growth targets, but seasoned sales leader Karen Rhorer knows that this unsustainable strategy can lead to painful layoffs down the road. Here, she shares the four levers and key calculations startups need to understand in order to scale sales hiring the right way.

Growth at All Costs is Perilous — This is How to Scale Sales Sustainably

“We were able to email 10 of our customer advisory board members, give them mockups of the new feature and invite them for an hour of usability testing — we threw in Amazon gift cards as a reward — and the results were amazing,” says 

, best known for co-founding recruiting startup 

, you essentially have a captive audience of folks who are fired up for your success, and who you can leverage on an ongoing basis to build the best product possible.”

Which begs the question: Who wouldn't want this? If you're a B2B startup founder, having warm relationships with a crowd of prospective customers is an ideal. But it can also be a reality. Today, as Kazanjy gears up his second company, Potential Energy, he counts representatives from 80 companies on their CAB.

“Your Customer Advisory Board should be an extension of your customer development process,” he says. “You're transitioning those initial research conversations into a longer-term relationship, giving you a chance to prove how awesome you and your execution on this idea are, and investing these people in your success.” Once your product works, they'll become your lighthouse customers, evangelizing to and recruiting more just like them.

In this exclusive interview, Kazanjy shares the steps any startup — no matter how small — can use to build its own, robust Customer Advisory Board. He covers how to recruit members, gather high-quality feedback, keep relationships strong, and ultimately how to turn advisors into paying customers and advocates.

What a Good Customer Advisory Board Looks Like

“A standard early-stage CAB is a group of folks who are representative of who you you think you’ll eventually be selling to,” says Kazanjy. “They have an interest in what you're doing because it could help their business, help solve problems for them in their day to day or career, help them advance their personal acumen and brand. This interest can be applied to a variety of use cases that change over time depending on where you are in your product development cycle.”

So, for example, if you're selling recruiting software, you want to gather recruiters, managers, directors and VPs of talent. If you're selling a drone camera for sports enthusiasts, you want a cross-section of skiers, skateboarders, and others who often post videos of themselves online. This doesn't have to be a small group. Just like Kazanjy's CAB now includes over 80 people, yours doesn't have to fit in one room.

When you’re setting up your CAB, you're looking to have a quorum at your disposal whenever you send out a quick survey, mockups, or paper prototypes, or when you invite people to an in-person event or dinner to provide feedback. Your goal with the CAB should be to validate whether your next move is right or wrong. There are many ways to reach out to them — Kazanjy is a fan of quarterly dinners, like taco and margarita nights, for instance — but the point is being able to ask a cross-section of potential users questions and get their opinions as you develop. A mix of in-person and online interactions is recommended (more on this later).

If you don't think you have time for this, suck it up. The alternative is building something useless.

“You want people who are going to give you candid feedback — tell you when something is dumb. And you need to help them do this, because people don’t always want to. Make it clear to them that if they don't tell you when your ideas are dumb, you're going to build something dumb, there won't be any more tacos or margaritas, and everyone will be sad.” To make this clear, you must continually remind members of your CAB that they won't be hurting your feelings. What you're building is not fragile. It's a hunch that needs to be stress tested.

“Ideally these people create a halo effect around your company — a ring of people so enthusiastic and bought in that you always have someone to provide a great testimonial or success story.”

As your company's frontier changes, your CAB needs to change with you. Early on, they should be helping you with early product development, indicating whether the pain your product solves is strong enough, and if the product and features you're proposing actually solve that pain and create the value you want them to. Once you've validated you're on the right path, you move into scale and you may ask them about pricing, new features, the effectiveness of your customer support, or breaking into a new market.

“Maybe you're having success going after a pretty uniform mix of SMB customers but you see an opportunity to go after an enterprise audience. You'd want to add 10 more enterprise buyers to your board to get their opinions,” says Kazanjy. “Make sure the composition of your CAB matches the challenges in front of you.”

Customer development interviews come first. Execute them well and at sufficient volume, Kazanjy says. For a detailed guide to running these interviews well, he recommends reading '

Get in the Van' and Other Tips for Getting Meaningful Customer Feedback

' — advice from Michael Sippey, Twitter's former VP of Product. But here are the CliffsNotes for what to do:

First, set up meetings with as many prospective customers — people who you feel have the problem you’re solving — as you possibly can. Make sure that you cover the various personas you think your product will engage. Are you building something for the enterprise that will touch executives, first-line managers, or individual contributors? Make sure to do interviews with an assortment of each persona. Same with size of organization. Have a coverage matrix that you’re seeking to fill out with interviews so you know you’re not missing something. Making sure all personas are represented ensures you have solid research and will help with putting together your CAB.

Schedule at least 30 conversations, or else you won't get to a good product. Offer them a small incentive for helping you — a $100 Amazon or OpenTable gift card does the trick. Then go meet them in person if possible. Once there, use time wisely.

•What are your top problems? (Can we verify that our target problem is a top priority for you?)

•How are you solving this problem today?

•How much are you spending to solve this problem? (If your product isn’t paid, ask them how much they care about the problem.)

•How does this problem impact your business?

 Here’s how we’re thinking of solving the problem.

You want to polish this routine to a high sheen. Present with confidence and be diligent about taking notes (recording the conversation can be good), following up with answers to any questions they had, and staying in touch as their feedback makes a difference in your product. Don’t ask leading questions. You’re trying to understand their current problems, solutions and genuine level of pain. Most importantly, ask them who else in their industry or role at other companies they should be talking to. If you've done a good job, they'll want to connect you with their friends, because you and your product might solve a big pain point for them. Phrase the question carefully: 

“Who are a couple other people who are really smart about this?”

“Your customer development interview should be a wonderful experience for the person who's helping you,” says Kazanjy. “They should feel really smart, like someone was really listening closely to their ideas and issues, like they were adding value and being helpful. They should feel rewarded for their time. They should want their friends to have the same experience.” If you do 100 of these interviews, that's $10,000 spent on gift cards — a small price to pay for all the time you'll save on product development and outbound sales later, he says.

At this stage, you want to start logging all conversations in your CRM.

 Record each person's role and the type of company they work for, rank the quality of their feedback, and note your rapport — because later on you’re going to want to query this information for forming your CAB (and other purposes). When you start asking these people to formally join your CAB, you can add specific fields for that reflecting whether you made the request, if they agreed, and whether they signed an NDA. Once all three are done, they're onboarded.

“We came up with the idea for our Customer Advisory Board halfway through our customer development process,” says Kazanjy. “So we went back to all the folks we'd talked to who were especially insightful and asked if they wanted to be a part of this elite group of people — don't call them prospects — helping us build a better product.” If you've built detailed records for people, you should be able to go down your list of customer development interviews and say, “Yeah she was smart, and he was good, check check check... oh, ugh, not him, skip skip... check check check” to build your CAB.

When you have a good data model, you can segment your CAB to easily make more targeted requests. For example, you could query your CRM to send a survey only to individual contributors in sales roles, managers in companies above 100 people in size, only women, or only VPs.

Here are the elements to include in your ask to join your CAB:

•After hours of research and talking to many customers like you, it's clear there's a lot of excitement about this type of product.

•We're putting together an elite group of people who are excited about this problem space to continue to be involved.

•Your feedback has been so valuable that we'd love to be able to call on you on an ongoing basis.

•We plan to engage with the group every so often to get feedback and learn more about their needs. We expect to be in touch once a month, requiring less than an hour of your time.

•We'll be hosting exclusive, quarterly events where food is served and you'll have the chance to mingle with people at the top of your field and who share your experience, and who were also among the best folks we interviewed. (Provide examples of reputable companies who have already joined to demonstrate a worthy group that’s enticing to join.)

•Once we launch, you’re welcome to merchandise your CAB membership on your LinkedIn profile, resume, etc.

•We’d love to have you involved. If you can’t, that’s totally fine, but let us know so we can move on to the next potential person for that spot (to create urgency).

“You'd be surprised how many people will be interested when you mention the idea of promoting their work as an advisor,” says Kazanjy. “You want the people who love this stuff— people who get really excited having access to new technology and thinking through new problems.”

When he and his co-founder were spinning up their new company, they did 150 customer development interviews. They went after a broad matrix of people at different size companies and in different positions within organizations. They spoke to people across functional areas in sales, engineering and customer service. Each time, they noted whether the person had validated the problem they were trying to solve — or not. At the end, they could see what type of people felt the problem the most intensely. These were the people they recruited for the CAB.

Ultimately, his product resonated most with VPs of sales, sales managers, account executives and sales operations leaders. Even though they had different roles, they made sure they were all represented in the CAB. This allowed them to segment and address questions as appropriate, for instance, to just sales managers or just AEs to plumb their interests and needs more in the future.

“You'll meet people who give great feedback at companies that are unlikely to buy your future product, and people who aren't that helpful at really amazing prospect companies. You have to find a balance of these attributes and be honest,” says Kazanjy. “Not everyone needs to meet your bar for quality of feedback, but their total aggregate ‘value score’ should be above the bar. If their feedback hasn't been high-quality, their company better be an awesome opportunity with a decent chance of closing.'”

The perfect person is the one who's hacked together their own suboptimal solution to the problem.

Recruit people who exhibit that kind of creativity and enthusiasm. They volunteer things like, “You know what would be really cool? If your product did X, Y and Z.” Maybe they've taken several runs at solving it themselves. They'll be thoughtful about it.

Surveys are the primary way to engage with your customer advisors. You can make them very specific around questions or problems you have, they can be very short and quick for your audience, and you can make them fun. Kazanjy and his co-founder sent a number of surveys to segments of their CAB to reduce their list of proposed features to a manageable roadmap. They then mocked up that product in Google Slides, which they sent along to CAB members with an accompanying survey, before moving on to more detailed paper prototypes and walkthroughs.

To give you a sense of how much you can rely on surveying, Kazanjy's company has used SurveyMonkey to elicit opinions about not just features, but overall product design, and even the name of the product. The key is that they don't have to be elaborate or formal. This will only hold you up and slow down feedback. You can be casual and conversational in your surveys. You're just trying to take your audience's temperature on ideas.

The naming survey was sent to the entire group. They then cross-referenced the suggestions they got against the persona of the respondent — e.g., Sales Managers vs. Account Executives vs. Sales Operations. “It was fascinating to see how different customer personas reacted to different names,” he says. “It gave us even more data points about how they perceived and what they wanted from the product.” Here's an example:

“Just don't make your surveys too long. Think carefully, 'What do we actually need to know?'” he says. The example above included 7 pages of one question each on how CAB members used their phones.

Don't shy away from sending one-question surveys. They're even easier for people to fill out, will keep you engaged at a regular cadence with the group, and can tell you a lot. “In our case, when we were thinking through our mobile app, we sent out an email that asked only, 'Can you tell us what OS you use on your phone?' Our strategy was based on a guess that there wasn't substantial iPhone dominance in our target market and we might have to do an iPhone and android app to start — but it turned out there was a huge weight towards iPhones, so we focused our dev resources there,” Kazanjy says.

From there, they were able to survey just iOS users about their experience (example above). This was a longer, more involved survey incentivized with rewards, but also with the idea that the product was becoming even more relevant to their CAB users' needs.

When you have quick questions, you might choose to survey smaller subsets of your CAB who might have a stronger or more vested interest in what you're asking. “We wanted to ask, 'What are the average contract values you guys sell?' and get a quick response, so we chose 10 of the people who have come to all our dinners and who we felt closest to. It was easy to dash off and hear back immediately.”

When you run more serious or formal surveys, there should be clear incentives. “If you’re asking someone to knock out a 30-minute survey that prioritizes 15 different features in slides, there probably should be a $50 gift card attached. Otherwise, you’re unlikely to get good completion rate,” says Kazanjy. “We typically value CAB time at $100 an hour and compensate it in Amazon or OpenTable gift cards, which makes people feel valued on top of the exclusivity of membership in our CAB.”

In-Person Experiences that Double as Incentives

Dinners and meetups are great for creating continuity for your CAB. At each event, your advisors get to see the progress being made and how their feedback is getting used.

Kazanjy's new company will invite the entire group to a happy hour or private dining experience once a quarter. On average, a smaller subset attends, making it manageable to host while deepening their connection to the product. Beyond seeing updates to the product and insider information, the draw in their invitation also includes the ability to meet and chat with other CAB members, including well-known leaders in their field or industry. They'll also invite and plan assigned seating with outside prestigious stakeholders like their venture and angel investors and sales leaders they know well.

“Every evening starts with about 30 minutes to an hour of unstructured networking,” he says. “We try to make it really nice — good venue, good food, good music, nice nametags — 

we pay attention to the details to make folks feel special

. Then, once they've been to a few in a row, they start to know and look forward to seeing each other. It becomes a community rallied around the problem and product.”

After everyone sits down to eat, Kazanjy and his co-founder give a relatively quick 15 to 30-minute presentation. Here are the components of what they share:

•The starting hypothesis they had during their earliest customer development, and a sense of where the product stood during the last in-person update.

•The fact that this idea has evolved and been refined based on the thought and insight provided by all the customer advisors in the room.

•A quick summary of what they said they were going to do after the last quarterly event, and a rundown of the key feedback received from CAB members since then.

•A review of the changes they've made in response and the impact those have had so far.

•A look ahead to the next actions they plan to take to address more feedback, weaknesses or feature requests.

We make honesty about failure and improvement central to every presentation.

“We want everyone to leave knowing exactly what we plan to do because of what they said,” says Kazanjy. “After we talk, people can keep on networking with even more fodder to discuss, that we can overhear and use. People are always stoked to see big impact made by what feels like a small effort on their part.”

Whenever possible, he likes to tie specific features or changes to individuals in the CAB. “We might say, 'Tonight we're introducing the Kelly Feature, because she shared this great idea with us and we hacked it together,'” he says. “This encourages everyone in the room to provide more feedback because people who do not only get to sit in a room with a bunch of impressive, important people, they get put up on screen and shouted out in front of a room of impressive, important people.”

Kazanjy spends hours assembling and polishing decks for these presentations. The production value conveys the care and importance his company places on the CAB. It should be clear that they're powering an amazing feedback loop. At the same time, investing in these events demonstrates to the VCs and angel investors who attend that the company is buttoned up, moving forward, and has a lot of enthusiastic interest already. It’s the beginning of a flywheel.

“Your prospects start to think, 'Okay, this is a real thing that's getting close. Me being here is valuable. I want to continue with this to see what happens, and these are certainly the kind of folks I want to be in business with.'”

Events like this generate more social capital you can spend on sending surveys and asking for prototype feedback. You start to see who comes to every single event, and they become the people you can ask for one-on-one user interviews or usability testing. Attendance should be logged in your CRM so you know how deeply invested each person is in your success and how they like to participate.

“That way, you can start your emails to some people with, 'Hey, we're so happy you've been to our last four dinners, now we'd love your help with X.' Personalization really matters,” says Kazanjy. “If people get in the habit of gathering in person, think how easy it will be later on to record video of a bunch of authentic testimonials.”

If you're not getting a high hit rate on people joining your CAB, or not responding to your surveys and invites, the likely reason is they don't fully believe the problem you're solving exists, Kazanjy says. “You'll want to review your customer development interviews to see how strongly they felt the problem. Were they really feeling a lot of pain because of it? My guess is no. You may need to reconsider what you're solving for, or how you're articulating it.”

If people said they really do feel a lot of pain from the problem and they're still not joining your CAB, then you're probably targeting the wrong persona or role within the company.

“You're likely going after folks who are too senior,” he says. “A lot of startups go in with an erroneous belief that the senior most person should be their primary customer — the SVP of Big Deal Company or the VP of No Time for You somewhere else. But this isn't actually who you want on your CAB. 

A senior person you have to convince is going to want equity. You don't want to give them equity — you want to give them margaritas and tacos.

 Change your approach and recruit the people who would be using the product every day at the director or manager or IC level. You'll get better results. They’re excited to engage — and you can even hint at how working with you positions them to be VP of BFD more quickly than otherwise.”

Deploying Your CAB As You Get Closer to Launch

Now that Kazanjy's product is no longer a paper prototype and a working version exists, his engagement with the CAB has changed. Increasingly, he and his co-founder are deploying the product to five companies at a time to do hands-on customer success interviews and validate that their problems are actually being solved.

They've also been asking smaller groups broken down by persona about pricing.

 How much would they pay for the solution? Under what conditions? Do they have the authority to buy? What needs to happen on their end first?

Following launch and traction, they plan to ask questions about the best ways to achieve scale: Do we need more marketing collateral? Where might ads be effectively placed? What additional features should we consider? How was the onboarding experience? And many more.

“You want to get into this really predictable cadence where you're 

providing updates to your CAB like you would to your company's board for a board meeting

,” says Kazanjy. “Even if people can't come to your quarterly events, you want to send out a deck to everyone that says, 'Hey, here's what we said we were going to do. We either did it and here it is, or we didn't do it because new data popped up and we decided to go a different route. Here's what's blocking us from success. Does anyone have any ideas or feedback?'”

If people miss events, be open to scheduling calls. One-on-one feedback will almost always be more helpful than what's shared in group settings. If people want to meet with you, go to them. The closer you get to launch, the tighter you want all these connections with CAB members to feel.

If you're responsive, diligent, and don't let threads drop, people will start to have faith in you — and that will translate into beta testers, customers ready to sign at launch, and evangelists from day one. Later these are the folks who will be your case study subjects and even speakers at your eventual user conferences.

Building a strong core of supporters early travels with you through each stage of your company.

“You want to create as much surface area for your CAB members to engage with you as possible,” says Kazanjy. “They should feel like they could jump in anywhere at anytime and their feedback or help will not only be acknowledged but incorporated. It should never be some big, involved exercise for them to contribute or get the information they need to be helpful.”

Right now, his company is sussing out what to do about a certain feature. He was able to dash off a quick BCC email to 10 prospective customers who've been hooked in since the beginning. “Five of them got back to me within 15 minutes, then three more the next morning,” he says. “I didn't hear from the others, but it didn't matter because I was able to get what I needed. We're able to do that and learn more every week.”

Pete.jpg

Sales leader Peter Kazanjy on creating a group that will ensure you're building a product your customers want, need and will buy.

Start Up on the Right Foot — Build a Customer Advisory Board

There can be a mystery to sales at the earliest stages of a startup. Wise counsel on 

 exists, but when it’s just an impassioned founder or salesperson drumming up leads pre-launch, advice is often ambiguous and reduced to flexing a “go get ‘em” attitude. It’s enthusiasm for an idea that’ll engage your early customers, but this isn’t uncharted territory without tested tactics for growth.

With more than a decade of startup sales experience, 

, she supports founders who need a seasoned sales executive early on. She’s currently the VP of Sales at 

, but has been in sales leadership roles across a range of startups. At 

, Sales and her team sealed 200 partnerships — including 

, Urban Outfitters and Sephora — in just eight weeks. Within a year of leading sales, she helped 

 rise to #567 on the Inc 5000. At TalentIQ, Sales has generated over $1.3 million in pre-launch sales in under eight months.

If your startup is still building its early sales function or tallying its first deals, it must approach sales differently. According to Sales, early-stage companies need to place more emphasis on their founding narrative, customize their customer stories and integrate both seamlessly into a structured prospect pitch. Here, she deconstructs each area with exercises in a step-by-step, minute-by-minute format. Let’s get started.

No customers? Pull from your beta users. Not yet? Draw from the startup’s origin story. There’s always a seed.

Before diving into creating a use case through a founder or customer story, Sales underlines two key differences around sales for early-stage startups: 

. On the former, she says, “The buyer for an early-stage company is going to be different than the one buying established enterprise products from Microsoft, Oracle or GE. As an early-stage company, you’re generally selling to a targeted group of early adopters, founders and entrepreneurially-inclined experts, who can be from small companies or larger, established organizations. You’re looking for people with a very particular mindset. You’re seeking the early adopters, people on the hunt for new, fresh approaches to solving problems in their markets. This mindset comes with a lower barrier to entry, higher threshold of forgiveness and an active feedback loop as your company finds its way. This customer is buying a product because it’s innovative, different and they want to be the first to find and test your product before others do.”

If you're a founder brushing up on Sales 101:

Growth at All Costs is Perilous — This is How to Scale Sales Sustainably

Start Up on the Right Foot — Build a Customer Advisory Board

The Three Frameworks You Need to Kick-start Sales

Here are the Scripts for Sales Success — Emails, Calls and Demos That Close Deals

The Anatomy of the Perfect Sales Hiring Process

To Build An Amazing Sales Team, Start Here First

Looking to Scale Your Sales? Seven Bullets to Dodge