Startup India: How to hire your first head of sales – part 2
There a time in every startup journey when the founder(s) consider bringing in a head of sales. This is the second part of a two-part series on how to go about hiring your first sales head as an India startup (Click here to read part 1 here).
How to run a good selection process?
If you are a direct sales model tech startup in India, you don’t really have a choice but to look at a pool of candidates from two buckets. The first is medium-to-large established companies in the target vertical. The second would be generalist sales talent from well-known sales programmes such as Oracle, Salesforce, SAP, and Google. The former is likely to have a lot more domain knowledge while the latter is probably better at running sales processes in a disciplined manner.
It’s a good idea to have your recruiter source candidates from both pools to get a sense for fit. Use the six points to assess the candidates and make your shortlist.
For the top two or three shortlisted candidates, request a summary sales plan and ask them to pitch it. This is a great way for you to get a sense for what they want to accomplish in the first year, how they think about go-to-market, the types of hires and budget, and lead-to-closure activity levels needed. Your feedback also helps the candidate assess their resourcing and ability to execute.
The pitch can tell you a lot. For example, does the sales plan make sense in terms of sale structure, revenue targets, leads, and close rates? You don’t have to be an expert, but you know more about your business than anyone else. A run-of-the-mill presentation is not a great sign and you want to move forward with candidates who show both the potential and interest in making a difference.
How should we measure performance and think about compensation?
More than any other function, sales is a performance business. Most packages at funded startups are a combination of base comp, performance bonus, and equity.
The smaller the startup, the higher the desired fixed pay component for candidates in India. This is counter-intuitive, but a data point on the state of the ecosystem. A typical mix is 50–70 percent base and a 50–30 percent bonus that is linked to targets and equity. The performance bonus is often set based on minimum attainment – say for example 75 percent of the annual target revenue number. It often scales linearly from there with accelerators for exceeding the target. There is a lot of variation in the mix across companies so treat these as just ballpark guidelines.
One thing to keep in mind is that you are not necessarily hiring for the next five years. You are hiring for this phase. The reality is that most startups go through two -three sales leaders as they evolve from an idea towards traction with a few dozen clients (<$10 million in revenue) and then to a scalable, repeatable business ($20 – 50 million+ revenue). There are heads of sales that do scale across phases and that’s a great outcome if that happens.
Performance as a sales leader is pretty black or white. The company revenue target is usually the metric. There are instances where this can be tied to EBITDA as well as revenue. This is usually for a more mature phase. The one common question is around the head of sales owning an individual quota (that is having a personal selling target). This is usually a bad idea. A hands-on sales head will need all the time to hire and coach sales team members, work on sales process, metrics, and go-to-market. It is a lot more effective to link payouts to the total revenue number and remove any conflict with the sales team.
In an emerging startup environment like India, you may need to be a bit more patient in terms of results. By and large, you should start seeing a marked improvement in the way your sales operates within the first six months. If it involves building a sales team from scratch, it is going to take between 6–12 months to see a differential revenue impact. However, within the first six months, you should be able to see measurable improvement in how you go about lead generation, qualification, sales pitches, quality of meetings, and closures. All of this will ideally be a huge jump from the way it was being run before.
What is a Founder/CEO’s responsibility?
First-time founders do struggle to give up their prior role as the person leading sales efforts. It is important that the founding team consciously allows the new sales head to take over. Early on, there may be sales reps, account managers, or other functional heads that circumvent the sales leader and reach out to the founder on key issues. A simple example would be an email regarding a deal without copying the head of sales. This has to be nipped in the bud immediately.
You could respond by copying the individual and head of sales, and making it clear that all sales decisions are handled by the new leader. Giving up control is not easy for founders, but it is critical if you want a senior hire to feel trusted and succeed.
That said, it is the job of your sales head to demonstrate steady improvements discussed earlier. If you don’t see progress towards meaningful results in three to four quarters, it is time to re-evaluate. It is harder when the results are middling. It may be a bad year, but you should see enough improvement in your entire sales approach that you are willing to continue. It could be that there was significant sales turnover due to product concerns or it was just a terrible year for the whole industry. It is your responsibility to take these into account, discuss with your board (if you have one) and part ways, if you have to, in a professional manner.
Every startup faces its unique circumstances, and there are few cookie-cutter solutions. I am hoping this discussion at least provides broad pointers on how to think about the issue. Please do add your thoughts, as there is a need for shared experiences and learning that can help an emerging eco-system such as what we have in India.