Building Startup Sales Teams: Tips For Founders
First off, just to be clear, I’ve never been a sales person. All the points below have been pulled from startup
sales teams that I think work pretty well (including the team at my marketing software startup).
Building Startup Sales Teams
1. Don’t hire sales people too early. In the early days, the founders
should be able to sell (and should be selling).
2. You don’t need sales people, you need sales. Don’t think VP of
Sales — think “Revenue Engineer”. (Not the greatest analogy, but just like you
won’t hire a development “manager” as one of the first 5 people in a startup,
you shouldn’t hire a sales “manager” either). Don’t get caught up in fancy
titles — focus on dollars in the door.
3. Don’t hire several sales people at once. Your goal is to figure out the
“pattern” of what kinds of people are best based on what you’re selling and who
you’re selling it to. You need some feedback from the system so you can
continue to iterate on your hires.
4. If you’ve never hired or been around sales people before, be prepared for
a bit of a shock to the system. They’re not bad people, they’re just
different. If you're an introverted geek like me, it's helpful to remember that your startup needs to sell stuff.
5. Resist the temptation to create complicated compensation plans. If it
requires a spreadsheet to figure out the commission, it’s too hard. You’ll have
plenty of time to confuse sales people later — start simple.
6. Agile methodologies can work in sales as well. Iterate! Refine your demo script, your
slides, and any other collateral information. Capture the lessons learned by
the best-performing people and spread it to the rest.
7. Sales people will generall act in mostly rational (but often surprising)
ways based on incentives. The rules of the game defines the behavior of the
players. You were warned.
8. ALWAYS connect incentives somehow to ultimate customer happiness. If you
reward just “deals getting done”, you’ll get deals — but at too high a
price. You might get push-back that sales people don’t control/influence
customer happiness, but they do. They “pick” customers, they set expectations,
they control the degree of “convincing” applied.
9. Make sure you understand the economics of your business. Figure out your
total COCA (Cost of Customer Acquisition). This includes sales people,
marketing people and marketing campaigns. Quick example: Lets say you paid a
sales person $10k, a marketing person $10k and you spent $5k on Google AdWords
(for a total of $25k) last month. If you sold 10 customers last month, your
COCA is about $2,500. Different businesses have different needs in terms of
sales vs. marketing spend. Make sure neither is too far out of whack.
10. Your life-time-value (how much revenue you expect to generate per
customer) should be higher than your COCA. No, I did not need a degree from MIT
to figure that out. Once your LTV is a multiple of your COCA, you’re ready to
start turning the knob and scaling the business a bit (hiring more sales
people). But, if your LTV is way lower than your COCA, proceed with caution.
If there is no hope for LTV getting higher than COCA, you’ve got a
problem. Don’t try to hire additional sales people until the economics sort of
make sense. If the car is pointed towards a brick wall, hitting the accelerator
is not a good idea.
11. Track data maniacally (even if it’s just in a spreadsheet). Information
you will want includes: What was sold, who sold it, when, for how much, etc.
This data will be invaluable later as you start to scale. For example, you
should be able to answer the question: We had 14 customers cancel last month —
who sold those customers? Is there a pattern? In the early days, you likely
won’t have the volume (or the time) to analyze the data — but you should at least
capture it for future use.
12. Your pricing should be in line with your sales structure. For example,
you can’t expect to have an outside salesforce (that meets with customers in
person) if your average deal size is only $10,000. The math won’t work.
13. Once you get beyond three or so people, running your sales in a
spreadsheet will become painful. Start looking at CRM systems (like
Salesforce.com).
14. Start watching the shape of your “funnel” as early as possible. How
many leads are you getting a month? How many turn into opportunities? How many
of those convert into paying customers? Once you understand your funnel, you
can slowly start tweaking your system to fix the “leaks”.
That’s all I’ve got for now. For those of you that have built early-stage
sales teams, what are your ideas and insights?