There is nothing more magical and mystifying than the fine art of pipeline management in a start-up. In many cases, a monkey throwing darts at a dart board would have more accuracy than the company’s sales team (hmmm…might have an idea there). The problem is that accurate revenue visibility drives activity across the entire company ranging from hiring/firing, infrastructure investments and fundraising. However, it is a slippery black box. CEO’s go through the annual process of setting plan and then grind through monthly reforecasting as the year goes on. While this is an imperfect art at best, here are some best practices from our portfolio companies.

1) Pipeline Monitoring: this sounds basic, but it is essential to get the right tools in place to monitor and drive your sales team. This includes tools like Salesforce.com, SugarCRM or even Excel. More importantly, it is the processes and disciplines that you put on top of these tools that are critical. I am a firm believer of not just showing the handicap bucketed sales candidates by month (90%, 75%, etc) but also using color coding and such show a) upward and downward revisions (by customer) in dollar amount and b) delays or accelerations in timing of closes. Most firms just pump out the static shot of their pipeline. More valuable is the movement in this snapshot from the previous month for trends.

2) Gap Analysis: compare your monthly, handicapped forecast to your plan. I suggest using only leads that are ranked about 70% in the calculation since having $10m worth of potential leads at a 25% probability is not really a likely $2.5m month. However, $3m worth of 90%’s are. Too much fluff low down as sales folks just throw down names they are talking to. Attached is a sample pipeline

that a number of our companies use (Download pipeline_tracker_sample.xls

)
. As a rule of thumb, you want to have a 3 to 1 ratio of handicapped prospects to budget for any given month.

3) Realism: too many pipelines are simply wish lists with limited connection to reality. Look at historical experience on customers regarding time to contact, time to pilot, time to full deployment and assume that this will remain constant. Flag the key indicators (sending out RFP’s, have identified funding source/budget, have champion, etc) and determine which are your best predictors (and which sales methodology works best for you). Assume the law of 2…twice as long and 1/2 the amount. I am a fan of looking at the pipeline from 6 months earlier. How many of the deals closed as expected in terms of time and amount? One quarter of your 25% deals and half of your 50% deals should have closed. If not, redress your forecasting or, see if individual salesmen are off and work with them.

4) Accountability: evaluate the accuracy of estimates/handicaps by salesman. Is the issue impacting across the company (change methodologies, tracking variables. etc) or is it specific to a handful of reps (work with them individually, involve other salesmen,etc). If they continue to mispredict and underperform, prune quickly.

5) Reduce the friction/cycle: the longer and more complex your sales cycle, the more difficult it is going to be accurately predict the future. Accuracy decays exponentially with time. Find ways to get "light" versions of your product/service into customers’ hands, including pilots. Strip down the implementation process to be as rapid as possible. Address key delay factors in your product that keep holding up sales or pilots.

While pipeline forecasts will never be easy nor accurate, there are a lot of things you can do to greatly improve your process. Too many firms assume that it is a blackbox and take misses to plan too easily/lightly. Monitor, add accountability, analyze and adjust constantly. Either that or pay up for some quality dart throwing monkeys…

Everyone will go on, song and verse, about how important people and hiring the right additions are. However, when you push a little deeper, you realize that this is the largest blind spot for new entrepreneurs (and many vets).

Recruiting is the biggest black box. How do you find and hire the right team members? Unfortunately, there is no set playbook since every company I have been involved with has approached this from a different angle. Here are some of the best practices I have witnessed:

1) The A Philosophy: Marc Andressen said it best…”A managers hire A lieutinents and B managers hire C lieutinents” because they are threatened. Layout the core elements of your culture and your key success differentiators. Make certain that culture is maintained and the factors dramatically enhanced.

2) Take Your Time: this leads to point two. Be deliberate in your hiring process. You will feel an incredible pressure to get positions filled. However, you are making a covenant with a new hire and the rest of the team when you bring someone on. Settle for “good enough” and a) you will get C-type hires below them and b) will suffer a very disruptive process should you have to unwind them, their hires and their strategy.One simple test…if you feel comfortable giving a major project to your lieutinent and have confidence it will get done perfectly without your intervention, you have the right person. Too often, you will have a deep dread about this and either get pulled back in or find it necessary to intervene (just make certain this isn’t you being a control freak…). If you are cleaning up a lot, you have the wrong person. Listen to your gut.

3) Spread the Net: the key to recruiting is getting a wide funnel set. Your best source of leads will be your current employees and close friends/advisors. Continue to build this out and leverage it for help. One of the simplest strategies is to offer a $1-3,000 bounty to employees for sourcing new hires. Figure out the best potential firms to raid from in your world and network (and have your employees network) aggressively into them. Use trade shows, business deals, etc to get to know as many people as possible. Dice, Monster and such are fine, but generally lack the quality you need early on for impact players. These candidates are often out of work which is usually not a good sign.

4) Delegate: the other side of the coin is that Founders often do not bring in the right lieutinents in early enough. They feel a need to have a finger and control in all aspects of the business. There is either a dread to increase burn (good thing) or a guilt about passing on core responsibilities (bad thing). Be careful about burn, but also make certain you have the right lieutinents in place early enough, especially in areas that they bring skills that you lack but need. Start the process early and it will give you the luxury to be demanding.

5) Cut Bait: give your lieutinents clear goals and milestones, give them the resources they need and move quickly when it is clear they are unable to deliver. The start-up is too fragile to act as a training ground at the senior level. Too often, entrepreneurs are too patient with underperformance and it eventually brings the firm down.

6) Let them Shine: if you have hired the right people, let them become the face of the firm. You will cover more ground and build more resilient managers. Divide and conquer on the speaking circuits, the interviews, etc. Let the world know about the depth of your team. You obviously don’t do this if they are not strong enough to doo this (however, this fact indicates if you have brought on the right players).

6) Pass the KY: runa rigorous diligence process. Have candidates meet all core managers and potential direct reports. Culture is key and you want to make certain new hires fit in or things will likely fail for non-performance reasons. Also, listen to your (and your team’s gut) on hires. If something bothers you, it won’t go away and will usually fester into a cancer.

While entrepreneurs will pay lip service to the importance of recruiting and hiring, many, if pushed, are unable to layout the process, culture and specific criteria for key hires beyond rather generic answers. More importantly, the most frequent error is in hiring the “good enough” person because you have either not been demanding enough in your specifications or been to rushed in filling the spot. Wait for the right pitch before swinging.

"I didn’t want to repeat my parents’ life. I saw in their lives a routine and a lack of dreaming, a lack of the possibilities, a lack of passion. And I didn’t want to live without passion."
     — Hugh Hefner

What makes an evangelical entrepreneur. He/she is a staple image of the technology world. They are everywhere, willing new worlds into being…Gates, Ellison, Jobs, Sergey & Co, the list goes on. For most entrepreneurs, day to day existence is much more practical and mundane. What drives this difference and what is the dangerous other side of that coin?

I came across the idea for this post in church this past Sunday. The sermon was on "Which Excellence" and started by diving into the escalating issue we all, as parents are facing…the race to the lowest denominator in which we uber-program our children earlier and earlier. A local Winnetka Wall Street Journal writer is quoted as saying:

"Every weekday morning this summer I have dropped my granddaughter off in front of the New Trier High School, in posh Winnetka, Illinois, with a slight feeling of depression…Yet I feel a slight sadness when I contemplate their (students’) energy, their too-early-in-life resume building, all devoted to a path of success set out for them by others."

He goes on to talk about the Lutheran and Puritan work ethics that drove the initial creation of the country (matched by equally disciplined ethics from other religions and cultures over time). "Americans have always worked harder than everyone else, believing that their identity and self-worth depend on it." Entrepreneurs have this in spades as they are one step ahead of the undertaker in the dog-eat-dog worth of technology.

Hard work, discipline, maniacal focus are all key to successful entrepreneurship. However, evangelical entrepreneurs have something else, something that shields them from the daily grind and frequent disappointment. They are driven by a deep care, passion and moreover, often, love for what they are doing and, better yet, hoping to achieve.

Before you cast off this post as another 20,000 ft high touchy, feely drabble about passion, let me be specific. I am not saying that you need to be passionate about what you are doing because you likely are. I am saying that you need to be clear about what it is, exactly, that is the heart of that passion. Why did you jump into your current endeavor and what is the impact on the world that you hope to leave? Remember this, write it down and revisit because, just like the high school senior, as you get into the bowels of execution, very quickly it will become about small tactical achievements. It will become about amassing a resume of pseudo events and successes…many being defined by others. Inevitably, you will lose sight of what originally got you into the business to begin with and it will become about closing the next customer, getting the next press release and trying to make as much money as possible.

The issue here: just like with our kids, you risk burning out, losing touch with yourself and ending up winning the battle and losing the war. My simple advice is to care. Care about what you do. Care about the impact your business has on the world around it. Care about your employees. Care about your family. Care about helping others (you can still "care" about crushing your competition also…). Remember what drove the initial passion and why your cared about it. Most entrepreneurs, within a matter of a couple of years, lose sight of this. You can see it in their eyes. They have lost the Northern Star and are just grinding it out. They have little resilience and often, at this point, they burn out. They can often grow bitter of the "lot" that fate or the market cast their way. This does not need to happen if you continually revisit, remember and refresh. That Northern Star will drive others to see you more in an evangelical role than as a grinder.

Of course, this still leaves open the question about our kids and what society (and parents) are doing on that battlefront. I am torn daily between pushing my kids as hard as possible to succeed in an increasingly competitive world and letting them set their own pace and appreciation for what they do and what they care about. But, alas, that is for another post…