VC Due Diligence: Does Your Sales Process Map to Your Customers’ Buying Process?

This is the third post in a series about the things venture capitalists look for when they perform due diligence of an expansion stage company’s sales organization. To read the intro to the series, click here. To read the first and second posts, click here and here.

If you’ve been keeping tabs on this series (if not, check out the links above to catch up on previous posts), you’ll remember that I’m exploring the handful of things that venture capitalists look for in a startup or expansion stage software company’s sales process when they perform due diligence prior to making an investment.

So, let’s say you’ve hit a home run with the first two: your company possesses a clear understanding of its target market segments and it’s studied or defined key buyer personas and their buying process.

That’s fantastic. You might have some VCs salivating to sign a term sheet with you.

But the truth is that market segmentation and buyer personas are just two important steps in a truly efficient, buttoned up sales organization. While they show that a company understands its customers, their buying process, and the key markets they reside in, the next big question is what the company is doing to sell to them.

Does the business’s sales process map to its customers’ buying process? And are the company’s salespeople capable of supporting and successfully executing the things that will progress a sale from opportunity to close?

Those are absolutely critical issues relative to a growth stage company’s ability to drive revenue and scale efficiently. When I look at a sales process, I want to see one that shows milestones, probability, and times frames between each stage that align with the sales cycle. And each of those things need to correspond — or map — to the target market’s buying process.

From there, I like to explore how a potential investment is applying its organizational resources — its people and marketing content, for example — to the process itself. And has the company’s previous success been the result of a fantastic product? A needy market? Outstanding salespeople? Or maybe a little bit of all of those things?

One way venture capitalists can answer those questions is by studying the company’s top sales performer.

What are their behaviors and what things have they done to become so successful? Can that person’s activities and behaviors be replicated? Are they focused on hunting? Unafraid to cold call? Accurate (90 percent is a good baseline) with quarterly forecasts?

Ultimately, the more aligned a company’s top performer is with its sales process, the more it confirms the business’s market segments, buyer personas, and organizational sales approach. And that’s a very, very good thing for expansion stage companies hoping to land venture capital.

Because when it comes to scalability and driving revenue growth, the more we can clone and replicate top performers without having to overhaul the sales process and perceived buyer profile, the better opportunity there is for long term success.

To summarize, I’ll borrow some thoughts from Bill Stinnett, a respected author and sales consultant, who explains in a post on his blog EyesOnSales why mapping the sales process to the buying process is so important:

“Many of the world’s best sales forces are the best because they have codified and developed a documented sales process. Having a map of the things we as salespeople have to do to make a sale provides a framework for sales planning and activity that reduces mistakes and shortens new hire ramp-up time...

…(And if we’re) armed with a thorough understanding of the steps and stages of our customer’s buying process, we can plan our work accordingly. Then every single move we make can be made with the specific intent of enabling or empowering our client to take the next step they need to take in order to buy.”

The bottom line is that, at the expansion stage, venture capitalists are betting on real revenue and the future ability to scale, rather than an idea that could deliver those things.

So, if we see a company that has structured its sales process around key target market segments and buyer personas, and has mapped all of that to the buying process, the due diligence process will be about as pain free as you could hope for.