June 08, 2017
I started building the sales team at my company in the summer of 2014. Today we are a team of 15 FoS (Feet on Street), 5 people in sales leadership, 4 people in sales support and customer relationship management, and sales offices in 3 locations.
We are in the middle-single-digit-million-dollars in revenue and 85% of our revenues are from India. The last 3 years have been a roller coaster ride, many wins, many more losses and lessons learnt for a lifetime. Note that most of the points below are more suitable for an early stage SaaS startup
Setting up the team
1. Your first hire is going to be the most critical sales hire. You don’t hire the VP of Sales on day 1, but you can’t start with somebody inexperienced either. You need someone who has been in sales enough that they carry a Rolodex, 5–6 years of on the field experience, along with exposure to managing a small team.
2. Hire someone who is looking for a step-up, they should be able to scale as the organization scales.
3. Make sure that they are willing to be out in the field for the next 3 years at least. Reject anyone who wants to be manager from day 1.
4. Don’t shy away from going through a recruitment agency. They will do the skill matching, you do the culture-fit check.
5. Allow this person to build their core team. They are always connected with other high-achieving sales people.
6. Your first few hires should be from the industry that you are going to sell to. Building a pipeline is the toughest in the early days, you have no brand, and enterprise sales depends heavily on relationships and brand. You need people who have working relationships with your potential customers.
7. All the structural and strategic things listed below should be done in consultation and led by the Sales Head (ideally from your first 2–3 hires).
Sales in early days
1. The first week should be all about product training. Your early sales hire must become the product experts. One way to ensure that is by making them do the demos in sales meeting. Note: The training process changes significantly as the team grows.
2. As the CEO, commit to be out in the field for at least the first 2 years. Even if you don’t have any sales experience, you are going to be the best person to sell your product in the early days.
3. Go to every meeting with your early sales team because they need to know the mission and vision of the company and no classroom training can beat an actual field visit.
4. Don’t run behind closure. Enterprise sales in India is all about relationships. Set weekly meeting targets and meet as many people as possible.
5. Set targets from day 0. A sales guy without targets is like a cricket team chasing a target it doesn’t know. It doesn’t have to be accurate to the last decimal, any target that is ambitious but achievable is good.
6. Supplement your FoS with a couple of market research interns. Their job will be to handle inbound leads and generate some outbound leads.
7. Don’t worry too much about processes in the beginning. Excel sheets will do just fine.
8. Get weekly updates from the team. They need to tell everything — number of calls, number of meetings, customers they met, customers, number of demos, customers they closed and the customers they lost.
9. Provide the right support infrastructure to your team. You don’t want them to be struggling with the contracts, receiving payments, recording payments etc.
10. Focus more on deals lost rather than deals won. Your sales team will want to talk more about deals won but what you really want to know is what you are losing and why.
1. Put the right team structure in place as early as possible. Chaos in a large sales team can be extremely detrimental to growth. There are multiple ways to set up a team org. It could be based on the geographies, it could be based on the nature of customers (enterprise Vs SMBs), it could be sectors (healthcare Vs banks). This depends on the nature of your business but you should have a structure in place. If you have more than 5 people in the team you should set this up.
2. There must be proper hierarchy in place. Ideally hire your sales manager for a vertical before creating their team. For the first year, sales managers should carry individual as well as team targets.
3. Bring in a CRM software around the time you are more than 5 people in the team. Just setting it up is not sufficient, the entries and tracking are more important. Along with revenue targets, sales should carry meeting/demo targets — to be tracked through CRM.
4. If you have a hardcore tech product, it’s unfair to expect that every sales individual will have a thorough knowledge of the product. 50% product familiarity is a fair benchmark. This means they need someone technical to close the sales. You do this job in the beginning. Any time after 7–8 people, you should look at hiring a Product Specialist.
5. Don’t rush to scale your sales team. The biggest mistake you can make is to hire the wrong people just because you have put unnecessary revenue pressures on yourself. This happens the most in sales because sales function advocates the hire-and-fire thought process.
6. Invest in training — this is my number one lesson. When scaling the team, your biggest risk is having a poor productive sales capacity. Productive sales capacity, a term I picked from this brilliant article by Jyoti Bansal, is the part of your sales team which is operating at full capacity. It’s foolish to expect that enterprise sales guys will come in and start firing from day 1. The time to scale up can be anything between 2-9 months depending on the kind of sales. That is the time when you must train the employees on both functional (right sales methods) and technical (thorough training on your product) aspects.
7. It’s perfectly okay to hire a sales trainer/coach.
8. Don’t focus on just revenue numbers. Too much focus on revenue numbers will create a blind spot. The holy grail of sales is — consistency and predictability. If you only ask about revenue, your team will only focus on the biggest deals, and often the biggest deals are the most unpredictable. You need to quiz your team on all metrics like the number of meetings they have had, prospects in pipeline, number of demos they are doing etc. The most predictable sales strategy is always having a large pipeline with good distribution of large and small deals.
9. Customer Success — it’s very important to have some sort of customer success team. The most sustainable way to grow revenues is to have delighted customers who are willing to refer you. No matter how easy-to-use and self-explanatory the product is, customers need a touch point and the last thing you want is your sales team to be weighed down because they are required to provide customer support.
1. Measuring non-performance in sales is a highly objective process. Any person who does not meet their targets (not just revenue numbers but every metric that you care about) should be confronted and if there is no improvement, should be let go. I am not saying this because I believe in the hiring-and-firing philosophy but because you will know within the first 3-6 months whether a person is going to fit in your sales team. If they are not, it’s unfair to both, so better to let go sooner rather than later.
2. Sales skills can be divided in 2 categories — functional skills and personality traits. The former can be learned and the latter is what differentiates an average sales guy from a star performer.
3. After having done ~500 interviews over last 3 years, I have failed to find any correlation between experience in the same industry, experience of sales itself, pedigree or any other traditional signals with performance at job. Some of my best performers come from different industries, and some don’t have any experience at all.
4. As I said the functional skills can be gained with good mentoring but sales personality traits cannot be. There are only 2 qualities that I look for — hunger to grow and willingness to learn. Best sales people have this insatiable hunger to grow. You set a target for them but they set 150% of that target for themselves, they are not here to win small. They also know that they don’t know everything they need to know, so they are willing to learn. The first thing they will learn about is your product/service because they know before they go out and sell it, they need to know about it and more importantly they need to believe in it. Anyone who demonstrates these 2 qualities, I hire them, no questions asked.
5. Remember that behavioral skills are equally important, if not more important than functional skills. If they can’t work with their co-workers or respect their manager, it doesn’t matter if they achieve 200% of their targets. Wars are not won by individual soldiers.
6. Have an objective assessment in place. Give them an assignment, it could be to do a competitive research of your product, it could be a prospecting exercise, or it could be a lead gen task. It’s easy to be charmed by glib sales people, so it’s important to have an object test in place.
7. Having said all of this, interviewing is an extremely difficult skill. It’s not possible to be right every time and false negatives are more costly than false positives, so be willing to take bets on people, you must be conscious of letting them go fast if it doesn’t work out.
Compensation and Incentives
1. A simple rule of thumb is that your total compensation should be 70% fixed and 30% variable.
2. Targets should be quarterly and incentives should also be paid out quarterly. Quarterly makes them to be consistent while still giving leeway for a bad month.
3. Incentives schemes can change every year depending on what you want to prioritize. If you are just looking for coverage and are not too bothered about revenue you will keep incentive targets on customers on boarded, whereas if you want more renewals you can keep a higher incentive for renewal vs a new customer. This totally depends on your business.
4. Incentive payouts should always be on collections. They will carry a revenue target and a collection target. To earn incentives, they should meet both revenue and collection targets. The collection target could be 100% of what they booked in the previous quarter.
5. I follow a simple rule for calculating fixed salaries and incentive structure is that the total cost of sales team should not be more than 20% of the total revenue. You may not hit this metric in the first year or the second year, but you need to have your eyes on this.
6. Another model that you can explore (if you are confident about renewals) is that you can give a very high percentage of the first year’s contract but nothing on subsequent renewals. For instance, the average life of a Salesforce customer is multiple years, so they are willing to pay a high percentage on the contract value of the first 2 years. This is because they know the customer is not going anywhere. However, this is rarely the case in new companies.