Bear with me through a short fishing metaphor…
Unbounded
Imagine a tranquil village nestled against a vast and fruitful ocean. One day, the villagers develop rudimentary fishing equipment (boats, rods, reels, fishing line, etc.)
The early fisher-people use really big hooks to catch really big tuna.
As more people join the bonanza, the fisher-people become more and more skilled at finding the big tuna.
Over time, a couple of problems arise. The fisher-people have to wake up earlier to get to the choicest spots and they have to travel greater distances to locate the big tuna.
Moreover, new fisher-people struggle to catch enough tuna to eat, let alone to sell, since they have not developed the requisite skills and their seasoned peers are not about to give away their secrets. The salty old dogs are especially wary of telling the truth to the fishing trainer who was hired to help the
Territory-Based
The mayor of the village wants the village to grow. For that to happen, she needs to do something to make sure that new villagers are able to make a living.
One morning, she goes to watch the fishing boats heading out to sea. She notices that all of the boats head northeast since, as any good captain knows, that is where you are most likely to find the biggest tuna. Sure, there is plenty of tuna to the southeast, even some whoppers, but the fisher-people don’t bother heading there since it is not believed to be as bountiful.
The next holiday, the mayor, who wields considerable power, puts the names of all the boat captains in a hat. She draws them out one-by-one, alternately giving fishing licenses out for the northeast then for the southeast.
Though the southeast zone turns out to be good, the original problems eventually crop up in both fishing zones. The mayor she refines her approach by giving each captain license to fish only with the boundaries defined by four GPS coordinates. This works nicely for a while.
Account-Based
Eventually, it becomes harder and hard to catch the big tuna. The mayor, brilliant woman that she is, updates the fishing licenses so that each captain can only bring in one species from their assigned patch of sea.
The captain grumble at first, but quickly adapt by using different sized hooks, different bait, and new fishing techniques.
Okay, the metaphor is a little silly. However, aptly describes what happens as startups grow.
They start out with AEs who target only the best-fit accounts. Over time, the early AEs get really good at finding and working those accounts. However, they need to get more and more sophisticated at finding the accounts so they can claim them before their peers do. In addition, the experienced AEs churn accounts quickly, esp. if they have a target account quantity limit.
As new AEs ramp, they struggle to achieve quota.
Eventually, everyone starts complaining that there are not enough accounts.
In an early stage startup selling into SMB or the mid-market (or even selling to the enterprise with only a handful of AEs), the unbounded approach is perfectly fine. The ocean, as it were, is effectively infinite. You want AEs to find and close the best and biggest accounts regardless of where the targets are. Territory- and account-assignment is not only wasteful, but it is also downright harmful.
However, the startup eventually gets to the place described above where the unbounded approach starts causing problems that impede growth.
Though I prefer writing about and reading about “how-to” do things, I’m compelled to digress momentarily into the “why,” the benefits of territory- and account-assignment that offset the costs:
- Align sales capacity with the available opportunity (to avoid everyone chasing the best accounts and ignoring the rest which your competitors will invariably go after)
- Improve win rates, esp. when segment knowledge makes salespeople more effective
- Ensure more persistent account engagement (to prevent AEs from dropping prospects that are even just a little hard)
- Increase selling time by decreasing the amount of time AEs are spending trying to find accounts
- Increase selling time when selling into diverse geographies (an east coast AE loses 3 hours per day of time when they sell into west coast accounts)
- Give new AEs, who have not yet developed account-finding skill, a chance to succeed
- Streamline travel efficiency (for field and esp. inside salespeople)
Enough “why”; back to “how.”
When the time comes, the today’s nearly universal approach is to jump straight to account-based; that feels right to me. I’m sure there are some contexts where making the intermediate stop at territory-based makes sense but those situations are not dawning on me just now.
Even with account-based, you typically see at least two segmentation criteria: size (SMB, mid-market, enterprise) and geography. Next, you may layer in:
- Vertical market (esp. if the use cases
, benefits, etc. vary by vertical) - Product (esp. if the product suite is sufficiently complex that you cannot expect one AE to grasp the full breadth and esp. if the products are sold to different buyers; if the products are sold to the same buyers, then use product specialists)
- Account status (typically current customer vs. prospect)
Sorry to leave you hanging, but I’m going to stop here. If I had more time, then I’d go into more of the mechanics of segmentation and territory assignment. Suffice it to say, you’ll need dedicated humans in Sales Ops to:
- Manage ever-shifting account assignment, incl. handling when people leave/join
- Source new accounts as the ICP shifts and expands
- Enforce minimum and maximum account holding periods
- Ensure reps are given a set of accounts with equal potential (or at least appropriate potential to match each AE’s OTE and your target cost-of-sales).