3 Things Sales Won't “Fix.”
There's an old saying that "sales fixes everything." The idea is that as long as a company is selling, everything is a-ok. But for startups, the reality is that sales won’t fix everything. Robust sales do two things. First, the sales revenue extends the runway - more revenue means more money to cover operating costs and re-invest in the business. Secondly, sales actually provides the opportunity to fix some things that have yet to be addressed. If a company doesn't solve those things, no amount of sales will save the company.
When startups first launch, getting to product-market fit is paramount. Without it, absent a VC cash infusion, the company stands a good chance of biting the dust. The problem with only focusing on sales as a company scales from product-market fit to a solid business is that some fundamentals get overlooked. Those fundamentals will always come back to bite the company, especially when sales start to slow down.
In our experience, the three core fundamentals ignored in favor of short-term, increased sales are company culture, brand, and unit economics.
Sales Won’t Fix Company Culture
A lot of folks in startup land don't quite know how to think about company culture. Founders and CEOs know that they need to address it, but when asked, some describe their culture as "fun" or that "they like to win." Or worse, they say it's "like a family." But what company doesn't want to be fun? And which company likes to lose? As for being like a family, well, as Airbnb recently found out, that idea doesn’t hold up when rough times hit. No, the reason those aren't good answers is that that's not what company culture is all about.
Company culture exists to let employees know what to expect from each other, what to expect from the company, and what the company should expect from employees. It's almost like an operating system for businesses as they grow. A great example of a codified company culture is Netflix.
Absent a codified culture, even successful companies start to unravel. Bad actors internally begin to behave in ways that are, at best, not helpful and, at worst illegal or discriminatory.
Sales Won’t Fix Brand
Photo credit: Business Insider
Brand is the total of everything a company does, how it acts in the world, and how the world perceives it. But much like company culture, brand needs to be codified as well.
The way a company shapes its brand is via a brand position. Brand positions are comprised of (at the very least) a brand promise, brand attributes, and brand story. When appropriately created by using consumer research, these come together to guide both the consumer and the company of how people should think and feel about the brand.
Without these defining principles, companies become a collection of siloed executions. Each initiative is trying to outshine the other instead of focusing on building the brand across the company. It also provides a resource for understanding how a company should react to a crisis. Even one of its own creation like in the case of Uber.
Sales Won’t Fix Unit Economics
A prime example of sales not “fixing” unit economics is the company Brandless. The direct-to-consumer company backed by SoftBank to the tune of $240 million, launched in 2017 with a relatively straightforward concept. Take the money usually spent on packaging, design, or any of the things that companies typically spend their money on in order to build a brand, and pass the savings on to consumers. The end result was the ability for consumers to buy anything in their online store, from paring knives to peanut butter, for just $3. The thinking was that their supposed target audience, “millennials*” didn’t care for “brands” and just wanted good products at good prices.
And for a couple of years, they seemed to be doing well. Until they weren’t. As it turned out, the pricing model didn’t work with the unit economics of their products. The proof of this is that, just before shuttering in February of 2020, they broke with their “everything is $3” model and raised prices on a number of items in an effort to right the ship. But by then it was too late.
So, Sales Won’t Fix Everything but…
When is the best time for a company to codify company culture, establish the brand position, or fix unit economics? Now. The answer is always now. But the degree to which a company can allocate resources to them will vary company-to-company.
Often companies focus exclusively on growth. And to be fair getting to product-market fit is essential. But these critical components that help a company scale are also important. Focusing on them can be postponed but only for so long. The longer they are ignored, the steeper the price to be paid.
* It should be noted that using the term “millennial” to describe a target market is akin to saying “generation x” is your target market. All it does is convey an age range and does nothing to speak to the psychographic aspects that should be used when defining a target market. When psychographics are used, it can cut across generations which is why using terms like “millennial” is not a great idea.