excellent prescription. Using a virtual sales team will let you accomplish this without incurring the $10k per month per sales professional.
Point #4 had me in hysterics. Great article.
Excellent comments on the basics. Most imptly, KISS (keep it simple, stupid) and, as mentioned above, always make sure your incentives (commission, flex time, etc.) align with your sales goals. Note that many people are incented by more than $. Especially for women, the ability to work from home, have flexible hours, etc. can play a large part in sales incentives.
I am a big believer in the Sales Learning Curve methodology. Don't hire a team untill you know exactly what the market will accept.
Love your humor...especially in point #10. Good article!
Good piece Dharmesh. When the time comes to find a sales person, make sure they are well connected with the industry you are selling to. Once the startup is underway and the owners have been "selling", the last thing you want is to hire someone that needs to figure it all out and add more time to the process.
Very thoughtful and helpful for the new entrepreneur, especially those without a business background. I worked alongside sales people at one point, and I can tell you, they will work the comp plan over, so make absolutely sure that you are rewarding and incenting behavior that is aligned to the company's goals. Sales people will do what you pay them to do, so pay them to do the right things.
One of the most important items to build is a sales model. This is the best way to figure out when to hire additional sales reps and how good you are doing toward your sales goals. This sales model should also be included in your overall financial model
. That way, all your numbers tick and tie.
Excellent article! Very helpful for me as I set up my sales team for my new website and magazine.
Thank you for sharing!
Great post dear. I am quite happy that you placed the most important point as your first point. Incase if we cant sell our dream No salesman on this earth can. Convincing power and Salesmanship needs to be there in a budding Entrepreneur.
Good article .. .being in sales for years now and working for small companies, I completely agree with your points!
Good post and points, Dharmesh. But I think you left some things out. A compelling value proposition, a strong website, a good lead generation program. I agree on not hiring a bunch of salespeople up front. Marketing needs to come first.
I often wonder how Drivers and Expressives can even get along..
As one of those crazy Sales Oriented people I would like to comment..
Sales in art not a science..
I believe it is very important that you find an influencer within the sales force that can lead and be led.
Once you have that person form a team around the influencer..
always have that person involved in the success of the company and you will see a greater return from the sales force..
While I hope we don't actually need this in the near future, this is tremendous advice and will be very much appreciated by a number of entrepreneurs I know.
BTW - I think we still need an authoritative resource for self-service SaaS companies with recommendations of this quality. They're hard to find!
Good article Dharmesh!
Another rule you can put for hiring sales people in a startup is to hire "Poor and hungry" individuals. Poor as in, not someone who has reached the peak of his/her career; but rather someone who really wants money. Hungry as in having the hunger to deliver mode. Given an opportunity, in most cases, these guys fare better than the rest.
Interesting, simple and true. Well described.
I work with a lot of start-ups and you are right, a sales team comes way down the list.
I am also an advocate of getting an administrator first, over the money person.
An administrator who is strong in process and people, over bean counting.
As far as building a sales teams, I recommend a team approach, and kind-a go along with your slow hire. I do encourage they are one of the last hires, but when you do hire, base it on the business plan.
I suggest hiring a five person team. Two Bird-dogs (drumming up the business), one closer, and two maintainers. The team shares the sales commission if there is one.
However, I do like straight salaries over commissions, and reward with stock ownership.
As always, just my two coconuts worth.
Gene E. Moore, SPHR
AKA Bro Kini
Ah -- one of my favorite subjects. Having been a Sales VP in many a start up before becoming a partner in a search firm, i enjoyed the summary. I think one thing listed that i would like to underline is the development of a Top Performer Profile (in other words, what are you expecting, what are the right behaviors etc.) only then will you know what you are looking for when you go out to add to your team. Lastly, you need to look deep under the covers of all candidates --- and spend some time figuring out how they perform in bad times vs. only the good times. Many a client today is staring at non-performing "superstars" who dont know how to work in this new post bust economy.
Great column! I posted an article on our escapades and adventures of building our sales team over the last 14 years, as we have bootstrapped our firm from $57K to $10+ million. We hired at least 15 sales reps over the years.
Here is the link - with lessons and strategies for everyone:
Use of a virtual sales force is a compelling strategy for start-ups, especially those with limited resources to hire and manage a sales team.
There are systems in place to help you ramp up quickly, Repfolio, for instance -www.repfolio.com,
which will put you in touch with reps that already have pre-existing relationships with your target customers, and give you the tools to manage their activity and sales.
It is an "art" that takes a certain skill- The leader of the organization had better understand the true value of the sales team. Without the sales people, you will be without sales.
Don't over analyze your plan. The early days are the defining days and should be looked at that way. Don't get discouraged when you sales numbers don't hit your exact spreadsheet plan- They rarely do in start-ups. Look for activities that lead to future sales - Are we doing the right things at the right time for the right people.
Dharmesh: Great comments - A lot of Sales VP's at start-ups should read this, they need it!
"Revenue Engineer" VS Sales VP is right on..
With all the social media and automated CRM's available today, I was beginning to think that there was no longer any need to hire salespersons. But I guess I was wrong.
Either ways, nice post. Thanks
Thank you for share this excellent article!
Amazing advice - and that it is not from a salesperson is even more amazing.
Our company specializes in helping launch sales in a startup environment for owners who are doing the sales themselves.
Incenting the right sales person for the right process is key. More over finding the right people for the right process is even more important. Back to point one...Neither matters if you don't understand your own sales cycle as your expectations will be unrealistic. One last bit of wisdom, if you want to be sure your sales people will not make solid business decisions, implement a 100% comission plan or something like an 20/80 salary to commission. You may feel like you're paying for performance but the performance you'll get will not be what you're looking for
With all the social media and automated CRM's available today, I was beginning to think that there was no longer any need to hire salespersons. But I guess I was wrong.
Either ways, nice post. Thanks
Read SPIN Selling by Neil Rackham. This book will take the "mystery" out of sales for business owners, techies and professional sales people and allow you to better manage/recruit a sales team.
Valuable information, Dharmesh! I wish I’d had it a year ago, it could’ve saved me a lot of frustration.
Do you think COCA-to-lifetime value ratio is more relevant to startups with a subscription revenue model? For companies that sell products, I wonder if it’s more useful to track the cost of an order versus the average order size?
My question is partly motivated by the lazy programmer in me – I can easily compute the cost of an order and average order size programmatically. It’s not quite as easy to determine new customer orders and lifetime customer value in a product based company.
Really nice article, I have many experience in sales, Before I become a entrepreneur, I was salesman and after it I was Manager of a Sales Group, and it's incredible how difficult is to create a sales team, nice tips, some of them I will use in my next reunion. Thanks again!
Great article! Instead of hiring an FTE for sales, I thought it'd be most cost effective to contract with a national sales manager and have her set-up rep groups across the country for my new gift/game product. While I factored in their commissions, I didn't count samples and shipping. And then there's tradeshow fees. Plus travel, meals and hotels for my NSM when she works a booth... It's an expensive learning curve! But at least we've got sales in this economy so I'm thankful. And Christmas is coming...
This was a great Blog. Thank you.
Another way to expand sales of a start up is by using an Outsourced Sales Management consultant to connect with experienced sales representatives. Being independent business people, all of the reps income is derived purely from their connections with customers. The reps will work with your new start up if you can show them how they will generate revenue for their firms. Training of the reps is also a key factor in their long term success.
Great article Dharmesh. I heartily agree with point 8 and tying incentives with customer happiness.
One of the best articles on the topic of start up sales I have read... and we publish this stuff all the time!
Excellent article! A good checklist to get sale started.
I am a partner in Altus Alliance, a venture consulting firm that specializes in Revenue Process Optimization and the Sales Learning Curve. You hit a number of the key points in getting a successful sales operation off the ground, but I'll add two more that provide good discipline around your numbers 1, 2, and 3. Thats is, don't hire your second sales person until the Sales Yield exceeds your Cost of Sales. This will help keep you solvent. And the second is don't hire "Coin Operated" sales people early in your companies life. Hire "Renaissance" sales people. The difference is that the latter is more interested in the ntellectual challenge and concerned with integrating VOC with Prod Mgmt so that you can effectively iterate (your #6, but for product) where the former is more interested in the comp plan and concerned with driving deals and when they can buy their next car ;>)
Excellent, the ABC for beginers
I found this was an excellent collection of sound observations. I would like to add to this caveat that principals must make sure that the new Sales resources talk the same language as your marketing people want to have conveyed.
Too often I see a disconnect in early stage companies, especially at the stage when the offering is sophisticated and requires further refining of the customer value messaging through an iterative process.
Sales approaches must be on the same page as marketing to be able to effectively test how the market perceives these values. Only by doing so can marketing further fine tune its messaging for optimal impact in its communications. Once achieved, this will make both the new sales person's job easier, reduce cost of customer acquisition and enable you to ramp up quickly a more productive sales force.
Very timely! I just put an offer out there for my first salesperson after 10 years. These are some great points and I will keep them in mind as I'm finalizing the agreements. Thank you!
We sell a very specific Web 2.0 business presence Package and have been successful with me, the founder, selling. I am now about to go to a virtual sales force. What I found is me selling and fulfilling cannot be done, too much to do!
Thanks for the tips, great site BTW.
Nice article. I believe that many of your comments are spot on, but there are also a few that I think are a little off. In full disclosure, I am a sales and marketing person who has started two sales forces - so I might have a bias. Your article and advice is very situational for the product or service you sell. If you are selling software and you will be talking geek to geek (your words not mine) then I think the founder can indeed be successful in this selling situation. If it is a tad more complex and you have multiple call points, positioning angles, competition, and folks to influence then I have repeatedly seen the founders fall flat on their face. They drink there own cool-aid. A sophisticated professional sales person has the ability to show great confidence in a product while featuring its benefits to the multiple call points without coming across as a this product or service being their baby. The can also manage the complexities of the cycle and will have experience with the different channels of acquisition, the committees for approvals, etc.
The other point you leave off it the demand that your VC will have on you to ramp sales right away. I agree that the best route is to hire a competent sales leader and possibly 1 or 2 more sales folks (depending on your model) and really learn the market, but I have yet to see a VC believe in this strategy.
My experience tells me that everybody (especially CEO and founders) think they are Sales and Marketing experts. Let me assure you they are not. I am sure you have noticed that most companies (not all, but most) take off after the board replaces the founder or the founder hires a competent CEO and stays out of day to day operations.
What is hiring a sales team is out of question ? Let us say there is a boot strapped start up in which personal funds were put in to get it going . Now where is the scope to hire sales people ?
Assume that no body has funded the company yet
Fine, but a bit complicated. If I had to know all that, I'd never have started anything.
May be I've allways been inconcious.
"most every thig worthwhie is borne of some dreamer's dream" (Lord austin of Longbridge) Founder of the Austin car factory
Timely article for me. We (founders) are just starting to focus on sales, a bit late though. We already made one mistake mentioned in the list- #2. We thought we would learn from our "VP of Sales" since we are geeks (albeit sort of extrovert). But we were wrong. We quickly corrected our mistake ...:-) And realized that we need to do #1 and #3.
Hi, I've been a high tech salesman for over 20 years, at least half of that spent working for start-ups. I our own defense, we are really not all that strange a breed. Many in the tech sales field hold engineering degrees and have also gone on to get business degrees. While I know there are some out there that try to "work" the system to get the most out of their commission plans, many are simply motivated by "the win". Yeah, money helps, but after facing rejection from potential customers for many months, just getting one to say "yes" (and then send you a purchase order) is very satisfying. One other note regarding manufacturer sales reps: I can tell you from personal experience, it is getting harder and harder to sign one up to promote your start-up product. Many of them have spent enormous time, money and energy to help take a marketing story to their customers, only to have the start-up run out of money and shut down. Reps have nothing to show for any of their effort in these instances except an empty gas tank.
Interesting column; it appears that most 'geeks' don't realize that "direct sales" is part of the businesses 'promotional mix'. A strategic marketing element. I offer 'strategic sales development' as part of my consulting services. The sales mix that a startup develops will be strongly influenced by the "type of startup" they are (see my book Business Genesis). Sales are all about relationships, it is very unusual that a startup would have any B2B relationships at the beginning. Sales rep's are sales people with established relationships, outside of selling on the web, most other businesses would be well served by looking at Reps as the major element in their sales mix. A good point about the CEO or founder being a sales person; that is a must.
I enjoyed both the usefulness of the content and its humor. As a manager of a professional angel group, I see too many promising technologies led by people who (like me not that long ago) who have no idea about sales. Your simple tips are a great starting point.
I also recommend people check out Shamus Brown's Website
for some insightful sales tips.
Good points, but for me the most important thing is...if you are an entrepreneur, you have to be your best seller...
I actually found this article to be very helpful. Thank you,
Great article Dharmesh!
It is important to focus on the REVENUE, all the sales activity means nothing if we don't have revenue, soon very soon, I have worked with sales guys with experience in working with large companies and big roledex, where just dropping names and dragging sales cycle for several quarters without bringing in any revenue.
Yes, "Compensation drives behavior"
Good wise advice.
Now I have one for all interested, I find myself in the unique position, that gives me a chance to create what will be an enormous business no doubt in my mind, I am a now 10 years retiree, 75 years young, that will enjoy this back to work enterpreneurial adventure, I am confortable enough financially that I can take my time and put together thiscompany, starting from the very inception.
As you noted I am sure it deals with the environement, my future clients will be ,international in scope, governments,individuals that own a craft,pleasure or otherwise.While I have been in businesses of many kinds, I never had to confront anything of this magnitude ,this,if I play my cards, right ...should be fun, how ever let me the first to say HELP!!
Gentlement how would you like to participate in starting something that will be rewarding eventually perhaps very rewarding... starting at the beginning, I will have a marketable ready product, within 60 days, I dont' want to rush it so time is not of essence, 3,4 months is fine with me,let us see what we can put together
Boris (Bo) Del Mar . firstname.lastname@example.org
Very insightful article. The points made can be useful to a number of people, including myself.
For those who would like to share there insight with others, check out uwemp.com. There are a lot of interesting articles, and by registering, you can communicate with many others with a wide range of questions.
15. Careful of hiring a "Golden Rolodex". At the pace corporate decision makers switch jobs this rep's contacts might be worth nothing, and they should have the skills to source their own names & contacts from scratch.
16. Be willing to PAY! With the number of sales careers out there, there has to be a reason for an accomplished career salesperson to leave a cushy well-established company and hop on board your untested startup. Create a comp plan that pays out generously on bookings.
17. Look for startup / entrepreneurial experience. So many salespeople are asked to take presentation A and deliver it to contacts on list B in territory C with pricelist D, that they've grown accustomed to leaning on marketing and sales support for every issue that pops up. Salespeople with startup experience already understand they might be a one-man/woman selling/marketing/support machine.
Lots of good comments here, but I didn't see anything about the hiring process. The questions to ask, how to find the right person etc. Remember, hiring the wrong person can cost you $1 M or more in salary, expenses, benefits and lost sales. I am a firm believer in the adage, "hire slow, terminate quickly."
And also remember, revenue generation is a company responsibility, n0t just the role of the sales team.
Lots of very sound advice and information. Every situation will be a bit different, but I have seen great sales people become frustrated and bored when brought into startups before the value proposition and delivery capabilities are defined. Two more points: Don't get hung up on the existing Rolodex. This tactic rarely works in predicting successful salespeople at startups. Great sales people can build industry contacts quickly. Secondly, virtual sales teams are attractive, but understand what competing and alternative solutions are in the salesperson's "bag". You may be competing for their time and energy and not be the primary focus with your best prospects. Good salespeople manage the number of decisions they put in front of each customer. In other words, you still need competent sales or channel management. Very good article and comments
Lots of good comments here, but I didn't see anything about the hiring process. The questions to ask, how to find the right person etc. Remember, hiring the wrong person can cost you $1 M or more in salary, expenses, benefits and lost sales. I am a firm believer in the adage, "hire slow, terminate quickly."
And also remember, revenue generation is a company responsibility, not just the role of the sales team.
Great article. Thank you for the pointers especailly nine and ten. I've been a sales person all my life and a business owner for the last five years so undertanding what makes an "introverted geek" tick is my achilles heel.
The one thing I've found over time is that channel sales play a key role as you can only knock on so many doors as a small shop. Growing sales organically at first makes sense as your solution may need tweaking but as your product or service becomes more commercially viable you need to get it into the channel. Our channel partners have anywhere from 1 to 100 salespeople so you can imagine how many contact points and opportunities we can leverage via the channel.
Since there have been quite a few generalizations about salespeople, let me make one about Founders who are "tech people." I've found they make the worst sale people for one simple reason - they focus on what the product does and not THE PROBLEM THE PRODUCT SOLVES.
Demonstrating complex technology doesn't impress prospects. They just want simple solutions.
Another provocative and important discussion topic! My thoughts:
1) You do need to frame what you sell (as stated) and who your target customer is. Sales personnel are required when you sell larger ticket items and/or more complex opportunities. If you are selling a web service for $45/month you can’t afford sales people. The bigger the price and the more complex the sale the greater the importance of sales over marketing.
2) Founders can certainly sell. On the other hand Justin makes a great point about the complexity and needs of your sales process. Often it is better to add a sales leader to the core team – someone aligned with the company goals and incentivized based on how the company does.
3) Managing sales people takes time and knowledge. For my business – a fairly complex sale (multiple decision makers, higher price tags) I plan on 8 hours per week of my time to add a sales person at this point. If you don’t have time to support a sales person they stand a great chance of failing.
4) Leaving out product and market, successful sales teams are built by hiring the right people and managing them well. Consider using some of the online sales profile testing to filter out candidates – as well as people with experience to interview them.
5) If you have never sold or know little about it you will be challenged to manage sales people. Forget personalities - they operate in a very different world than engineers, marketing types, and financial types. If you don’t understand their world and what it requires you won’t be able to gain their respect.
6) Aligning marketing and sales is good to a point. As important is aligning all of the components in your company required to sell. If your sales process requires engineering support, services, business management then they all need to be on the same page required to sell. If the rest of your team hasn’t been part of a sales process consider training for them on what the sales process requires. A good sales person works to make sure you deliver internally during the sales process as well as bringing in the new customers.
This is a very good piece, than you for sharing. Any leads on how to find a good sales person without your industry?
Great article Dharmesh, thanks. A couple of additional points I’d add:
1. Good sales people are difficult to find. Fortunately their output is easy to measure so measure them by their targets. Failing sales staff will always look for an excuse as to why the product isn’t selling.
2. Reward heavily (cash and kudos within the organisation) but do not be afraid to sack under performers quickly and regularly. My experience is that good sales teams enjoy “survival of the fittest” attitudes.
3. Let your best salesman choose your next sales hire. Like hires like, especially if the new guy is contributing towards the experienced salesman’s bonus
Finally, stay on top of the numbers. This is the lifeblood of your business!
Absolut sense! Especially points 1,2,3,10,11. A must-RT :)
Very insightful and to the point. Can't wait to hear you speak in Boston.
Where's the printer friendly version? Very basic info but is a good reminder to keep focused on the fundamentals.
#2 can not be more true. Not only for your business but other sales guys you have on the team as well. I was in a scenario where a sales manager was put in place due to his tenure in the industry even when I sold more than him. Along with that decision in a list of many bad ones that sales company is now in shambles. I went on to start my own and dong well at it.
Do some homework to make sure the sales person's leads are genuine. In my startup, we had a sales person who made large predictions. However, all his leads were middle to lower level managers, who did not have any purchasing authority. Once a sale was made to his lead, the entire cycle had to start again at the next higher level, and this continued until we reached a person with authority.
Needless to say, the sales cycle was not too effective.
Fraz, you make a real good point. You have to make the right hiring choices and this goes for the CEO position on down. You cannot take a senior executive from a Fortune 500 and put them in a start-up environment and expect rapid results. They typically are not equipped to handle that environment unless they have been there and done that at least once.
As always, smooth shootin', Dharmesh. I could not agree with all the points more. Having done more than my fair share of tech start ups, mostly founded, run and maintained by engineers and the rest of us geeky types, I see a common, related and sometimes fatal, mistake. It is far too easy to let the tail wag the dog.
Even if the founders do grok the product, the market, how they are going to save the world, jump over buildings in a single bound, etc., there still is a tendency to think that sales people know *much* more about sales, and to equate it to a dark art. Once sales people get in place, the founders forget that they were slinging the sales way before the product was stable, or that they paid the overdue electricity bill. I have fallen into this trap many, many times.
While sales people and rainmakers are the real lifeblood of the evolution of a startup, they are just one way to get the job done. And we need to remember that. Our agility got us this far, no? Ok, I'm off to go sell some stuff....
Consider using ZOHO atwww.zoho.com
for CRM and web meetings - they have other excellent applications. It's free and very robust software! Great for a start up - has worked excellent for us!
One of the more thought provoking posts I have read in some time. Thank you. As a long time startup sales person, I could not hold back my 2 cents (not that we typically do). My thoughts are here - http://bit.ly/duByV
Darmesh, your posting is right on spot! A few comments:
1) Sales people ARE strange. Effective founders are always good sales people. If you don't understand sales then you cannot possibly bring your service or product forward ...someone else will take your idea and run with it. There is nothing wrong with that situation so long as you are willing to part with the lion's share of the recognition and compensation. The torch bearer always garners attention.
2) The entrenched establishment intrinsically fears disruptive technologies. Entrepreneurs embrace disruptive technologies because they give us opportunities to leap frog over the well-financed, complacent market astandard bearers.
3) The 80/20 Pareto Principle is alive and well. Trim your [payroll accordingly and fight to insure you are part of the 20% of businesses that will capture 80% of the market...
3) Put methods and performance ahead of your heart. Good idea people are not necessarily good sales employees. A Harvard MBA is a poor substitute for sales ...I know!
4) An MBA from Wharton/Harvard/Sloan/Marshall/Kellogg/Fuqua/Darden/Haas/Stern/Kenan etc. does not guarantee success. Real business is about sales/customer satisfaction and making a PROFIT! An MBA only suggests you can recognize an effective entrepreneur -not that you ARE ONE!
5) Profits are nice, but you have to sleep at night too. Ethics are important also. Employees and customers take solace in leadership that is committed to excellence AND ethics. Don't short change the value of integrity.
Good article few points:
1. A commenter added "Sales is an art not a science" ; Hogwash. Yes sales people need skills that some more technically gifted people may think of as other-worldly but mostly they need training, tenacity and perseverence. I can train anyone to be an effective sales person as long as they themselves are willing (and have over the last 15 years). It is mostly a numbers game. Post market definition then it is down to activity. I detest people that dress my business up as some sort of voodoo - it detracts from the stated aim and makes measuring a very difficult activity.
2. Hire experience - domain knowledge will result in far more interesting conversations. Some training is always useful SPIN or VALUE - won't guarantee success but is a step in the right direction.
3. Start up businesses nearly always want commission only sales people. Imagine you paid your CFO or your best programmer on the accuracy of their work in commissions and imagine the sort of person you would get. See?
Excellent article; a lot of these thoughts are part of your subconscious but reading a well put-together article drives the point home.
We are right in the middle of building a sales team to take our software solutions to market. As founders, we are selling and evangelizing our solutions but we are also going down the path of working with virtual sales teams.
Structuring a suitable compensation / incentive plan is the tricky part; any thoughts will be appreciated.
Fantastic. Simplified concepts this is good thank you somuch for sharing/.
Good points Dharmesh and many good comments.
I've been a VP Sales for the last 12 years and done four start-ups post 2000. The only wisdom I question is jumping into CRM too soon. I successfully ramped a start-up from $0 to $ 194mm (and 90+ Sales & Support people)on nothing more than excel spread sheets and word weekly activity reports. Also, I can attest to the fact that hiring sales people is one of the most difficult tasks any company can undertake (even for a 20 year veteran like myself). Consequently, I suggest tapping into an advanced evaluation system like the David Kurlan candidate screening tool. (Google it).
Best wishes to all of you !
Good inputs Dharmesh - just in time information for me at least :)
Good article with some good observations of sales people and processes.
As a trainer with a background in sales recruitment I would also add be very careful who you hire as your first sales person. Check their background and achievements out as much as possible and ensure that you like them as a person.
As the blog states sales people are 'special' and it really helps if the ones you pick have characteristics and attributes that you like.
Look for ones who actively read and study sales with an aim to improve their techniques. Sales isn't something you learn once - it's a continuous process of getting better - like any skill!
Again good blog.
Stephen Hart from Edenchanges
Thank you Dharmesh!
we are in the process of hiring a sales cum marketting person. ur article sorts out many conflicts.
I have 8 years sales experience and am thinking about going freelance to support new businesses that have exactly this dilemma. I am interested to know where I could advertise, the rates people are willing to pay for a freelancer, and the types of services needed. Any information would be very gratefully received.
Very good advice, Dharmesh!
Having worked for many start-ups in the last 10 years I would like to add to your thoughts:
- An holistic approach is needed: Sales needs marketing and vice versa. If people do not read/hear about your product or service, selling is very hard. I am not talking about huge advertising campaigns, do less but do it better.
- Building sales from scratch in a new market is also hard. Leveraging existing networks could be a smart way. E.g. if you want to start to sell your service or product to Europe, companies like mine could be a helpful and less costly way to enter the market instead of hiring a sales rep.
Since a start-up has three equally important legs (finance, operations, and sales), it is vital that there is a balance between the three. Having launched more than 250 start-ups in 15 years, I have found that operations is typically ahead of the sales force - new entrepreneurs tend to hire sales too late (After they have perfected production and delivery of their product/service without knowing whether it can sell). Then, cash flow becomes tight and the business risks failure unless there is a proper burn budget (not often the case). So, don't get too far down the road before implementing a balanced marketing plan which includes branding, advertising, CRM, promotions, and direct sales people - especially in our current marketplace of high unemployment.
I guess one could write a 500 page book, telling the same thing (and I'm sure someone will or has), but this straight list does the same job beautifully! THANKS!
Good article with excellent practical tips. Lot of common sense which is not so common.
Dharmesh: your comments are very valid and helpful. However I would like to add some thoughts based on my over 30 years in sales in high tech industry:
when and how to hire the "right" sales person or team depends on so many different things such as your product and your market that I believe it is difficult to make generally applicable statements.
Nevertheless a couple of things are certain:
Sales is no brain surgery. It is a numbers game.
What any company needs to establish or have is a process. The more detailed the process is the better.
Based on above you should look at people who are motivated by money and who are going to follow your process to the letter.
Everything else such as network, is nice-to-have but not essential.
Enjoyable article Dharmesh!
One comment wondered where the steps are to recruit those salespeople. you can find them here
As the resident expert on sales, I would like to make an official modification to points 3 and 6.
It is actually easier to hire multiple salespeople (when you are ready) because they can all be trained and onboarded at once.
Agile methodologies are fine once you have adopted a formal sales methodology. Don't make one up and see what happens, take one on and modify your script (only for prospecting) and demos (only once you have a prospect with compelling reasons to buy from you and who is completely qualified to buy). You make a good point with tracking data maniacally, but even more important than sales data is the data the drives revenue. For example, if you look at what it takes a salesperson to close one deal in its simplest form you'll have pipeline and prepipeline metrics:
Appointments Booked Should be the same number as Suspects.
Each of these numbers create conversion ratios that will indicate where the bottlenecks are - where you must make improvements.
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Building a network of clever people doesn't need to involve a CV. Networking carried out properly can result in very good contacts. It was The Guardian that only a year ago printed...
'A 'degree of separation' is a measure of social distance between people. You are one degree away from everyone you know, two degrees away from everyone they know, and so on. The concept was popularised by John Guare's 1990 play, Six Degrees of Separation, which was turned into a film starring Will Smith, Stockard Channing, Donald Sutherland and Ian McKellen. One of the characters says: 'I read somewhere that everybody on this planet is separated by only six other people. Six degrees of separation between us and everyone else on this planet. The President of the United States, a gondolier in Venice, just fill in the names. I find it extremely comforting that we're so close. I also find it like Chinese water torture, that we're so close because you have to find the right six people to make the right connection ... I am bound, you are bound, to everyone on this planet by a trail of six people.''
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Myxtrasalary.com has built itself to an amazing size using purely social networking. It was only earlier this year that the money making phenomenon placed one classified advertisement series in their local paper with a budget of $100. Now they predict reaching a total of 10 million sign ups by the end of August.
Good news gets a greater audience in social networking than bad. Nobody wants to remember in their profile bad news because they will have a daily reminder. But good news, or steps towards aspiration dominates the pages.
Job seeking is in that middle ground where your public presence would work for and against. The world knows that you are available, and they know that you are either unhappy or have been sacked (probably for touting for a new job on the social networks!). Catch 22 - or best you use the tried and tested methods of burying your CV on the notice boards, or maybe use a more personal and direct professional who will market you properly and land you the dream job. Or pack it all in, retire and become one of the 10 million internet online money-making future millionaires
Great post. I have seen real issues especially when it comes to outside sales forces. My 1st startup burnt through massive time and capital churning through unproductive sales reps. They are still doing it today. They would do well to read your tips
Great Stuff, lots of common sense in the approach, one key for all new concerns, is from the beginning - work equally as hard on your demand generation activities, regardless of what your capture team looks like you have to feed the machine, and the more opportunities you can bring in the less chances you have of doing anything for a buck.
The toughest emotional issue for a founder/CEO is to back out of the day-to-day passionate selling of their product/service...in the pursuit of scaling. If you're not selling it's even harder. Here are my points
- Whomever sells at whatever level is first an ambassador for your company.
- Know your business model inside and out, how it scales and how it fits with the customers business model
- Now define the sales model. How to reach the right people at the right companies at the right time with the right message. Do you need hunters and gatherers or do you need consultants or just Google adwords?
- Now that you know who you need...now you need to create a comp plan that matches the skill sets of your ambassadors.
Nice try Dharmesh. You made some good points, but fall into the typical start up trap. The process of selling, or setting up sales teams, is neither intuitive or common sense. It takes talent and experience.
You probably wouldn't hire me to be a software or hardware engineer. Why then do you believe that company founders and owners can sell. Especially if they have never sold anything.
Selling and marketing are professions just like engineering and accounting. When you make mistakes you loose business and that can be very devastating to your business.
Please send me an email if you would like to explore this matter further or would like an article written by someone who has achieved success numerous times for many start up companies.
Just wanted to say thanks for a great article and some great advice!
This is a great post. When I was an entrepreneur and product manager at Open Market, one of my best lessons came from a wise old marketer who instructed me to write a sales guide for our new product. Sounded simple. But the discipline of laying out the customer pain, our value proposition, the competitive differentiation, the pricing structure, etc. was incredibly painful yet valuable. Selling is very hard. It's even harder if you haven't figured out your value proposition. So I agree with you 100% - figure out how to sell, what works in selling (beta test the sales process yourself, in other words) and then hire sales teams to systemitize and scale.
Excellent comments by all!
Start-up CEOs who see market expansion as critical to their company's success often employ or retain general sales and marketing organizations to drive revenue growth. The statistics for success are not good.
Since 2002, we have taken a different approach.
Entering new markets with revenue from Early Adopters requires skills unique to driving adoption, not general sales and marketing activities. Just as we would expect different engineering skills for different engineering projects, the same is true for sales and marketing professionals. One size does not fit all.
Early Adopters require discussions above the product level. They must see how your unique business value solves their problem or creates a unique opportunity. They must also see how your company aligns with theirs at all levels and functions. They want to deal directly with your company.
In addition, the strategies used to target and engage with them must be validated and documented to support future general sales and marketing campaigns.
An interim team of professionals expert at driving adoption should be considered as your interim sales and marketing organization or as an augmentation effort.
The process of driving adoption in new markets is often skipped by start-up CEOs resulting in numerous problems starting with turnover of sales and marketing people once every 12-18 months on average. What are the primary causes for this?
Usually, market plans are too general to implement and/or messaging is absent or too weak for the client to see your business value. If a deal is closed at all, it is almost always simply on the merits of the product and usually at the expense of heavy discounting. This is not sustainable revenue.
With this revenue slide, marketing and sales turns to pitching the product wherever it will stick. These activities directly contribute to pricing pressure , irregular sales cycles, inaccurate forecasts, slow adoption, competition from unexpected sources and market share well below targets.
Time is running out, costs increase. VP Sales are let go; the process starts over.
Creating demand means having the skills required to acquire revenue from Early Adopters AND to validate revenue growth strategies used to enter select markets and engage with key targets. This accelerates revenue momentum, your market share and your company's valuation.
In 2007 we launched an EU based email messaging security company to very select US Tier 1 markets. Beyond reducing the sales process 35% to 8 months, we acquired 3 more Tier 1's in less than 16 months.
CEOs should consider a closely held revenue generation process with strategies to validate critical assumptions in their business and market plans before investing in general sales and marketing organizations.
CEO and Founder
Client Success Group, Inc
I would agree with the points, however I'd say that point 12 also should be applied in reverse: the sales structure should be in line with the pricing (i.e. the market rates for what you're selling). For example, most SaaS companies don't have a sales team at all, they have a marketing team that generates the leads that bring customers to the site where the sale is closed (the subscription is signed up for) directly by the client. That's how they keep their costs low - it's cheaper to give the client a 30-day free trial period to help them make up their minds then to pay a sales person to convince them to part with their money before they've even used the software.
Great article and very true. Sales people are a breed on to themselves. It is a huge risk for a start-up to hire sales people who will promise to deliver the earth and very few can and do in reality. I would agree that the founders should be the ones selling. We are a start up and we have set up a telesales / social media team to get it going that way. Any hints in this area welcome!
Don't look for salespeople to define your optimal sales method. That is up to you, the business owner. And what is your optimal sales method? Probably what the top competitor in your niche is doing.
If you look for a salesperson to define how to sell your product, you will just be burning cash, waiting for the magic secret that doesn't exist. And where will that cash come from? Not from your salesman's production. No, it will come from sales you now have to make to pay his salary. Or from burning precious investment capital.
So my advice is to only add sales people when it is crystal clear you need them, and you can tell them exactly how and to whom to sell. And do a very, very thorough job of interviewing to get the one with the right charactaristics.
#1. What is common reward schema for hiring sales person, esp. with initially low budget?
#2. This year we think about hiring a sales person for our product (software documentation tool) but no one of candidates could describe how s\he will act - just common words, like "increasing visibility and awareness, building strategic relationships, branding, etc..". Actually, we're still looking for a motivated rep who can really help up with sales and who can develop a real sales plan or strategy. Feel free to contact me if you'd like to work with us.
Great article, totally relevant for startups!
I'd like to thank you for this post and the great comments that have been added to it.
As an entrepreneur - a geek turned marketing and sales, with some success (such as launching a self-financed portal and ECM software business (with 50k€ of equity, no suventions, nor fund raising) leading it to 1.5M€ revenue with operational profit, 70 large account customers, 15 employees...) - I think that an important missing point is the following:
Do not oppose geeks, sales, marketing... Each professional adds value to your business. Their work must be aligned toward a common goal : customer satisfaction. One way to do it is to make each of them a shareholder of your business : distribute shares and/or stock options, in addition to merit stock-options to reward great achievers.
Very interesting! You might want to consider reposting it on the entrepreneurial section of FiredUpNetwork....https://firedupnetwork.com/entrepreneurship.php
Great insight ,sales people sell we provide the product . If the product is crap, expect little sales. It all comes back to the product as I see it.Customers Needs not sales person's greed works every time.
No customers just shut your door.
Sales is execution and mantra for them is to 'Think BIG'. However, founders and owners have to do lot of hands on hard work themselves before they pitch in their sales team
Well i think that sales is more of an art than anything else. All you need is to convince people to trust and ultimately buy your product. That's it.
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Thanks for sharing some insightful tips. I must agree to all of them. I just want to add something - sales people should not only focus on revenue, but also concentrate on consumers' satisfaction.
Regarding CRMs have alook at ZOHO.com
lots of tools and all free to certain sizes
their CRM is very good and -I agree dont burn cash source many quality tools at little or no cost.
The best point for me was #8: "ALWAYS connect incentives [for sales people] somehow to ultimate customer happiness."
If you make a sale but end up with dissatisfied customers - you failed. As a business owner, it's your responsibility to ensure that your sales team values each customer's happiness and not just each sale to earn their commission. Sales people can absolutely influence customer happiness and making them aware that they hold that power and that it is a great responsibility is crucial to your success.
Most of us are in the business of making business easier for other people. Whether we offer accounting services, marketing services, office supplies - you name it. Making business easier and making people happy is what we aim to do.
Very insightful advice, especially for a self-proclaimed non-sales person! I tend to disagree with a few points however, starting with the notion that the exec management team should be selling. Think about it: you just gave Sales 101 advice to start-ups. Does an investor (or conversely, the marketplace) really want that same team toiling about in the marketplace actually selling? Nooo. The market wants to understand business value, opportunity, how to engage, and their upside. They don't want to be wowed by clever technology, business school pedigree, or Sand Hill name-dropping. And since most founding teams have little to no sales experience, they have a difficult time translating their wonderful product into a differentiable offering that buyers understand on their own terms, can position internally, rally resources around, and ultimately buy. Success today is not simply about a great technology or a fat rolodex of sales contacts. Sales success is much more than that - it's an art and a science as much as the product itself is.
The founding team needs to focus on building the product, building the company, and working with investors on guiding the start-up to success. Leave the actual selling to sales people who should be focused on building your differentiation, your business value proposition, and properly setting expectations for success with target prospects in the market.
Make sure that your salesman understands that the commission plan for the first year will not be the commission plan for the second year. A 20% commission in the first year might make sense, but 20% probably won't.
Establish a target compensation & quota. The commission rate will fall out. As quota increases, the commission rate can fall.
Excellent article. Great insight. No 8
"ALWAYS connect incentives somehow to ultimate customer happiness. "
is very true, but we tend to neglect.
In fact this will increase retention of customers and lead to repeat sales and possible up sell also.
Great article. I will like some more info
1. Clarification on item #12 (i.e deal size being $10K; outside sales won't work). What if the 1st year sale is worth $3.5K; COCA is $5K and Lifetime value is $40K. Will outside sales still work??
2. Any rule of thumb on how many months/years it should be to recover COCA? Any rules of thumb on COCA to LTV ratios?
Nice artical, I think either go with executive who has got his name as brand in market, even marketing person name could be used in PR. If you could not find the highly known person then go for hungry guy who is recent graduate. I also fully agree if you build team overnight you will end up somthing you wont expect.
Great article and very sound advice. I spent the last 15 years building sales teams for startups and new divisions of existing companies. There are many variables that go into a successful sales approach to the business and I will highlight just a few. I agree the founders have to sell and always should be integral in the selling process in the beginning to train and teach new salespeople. A key ingredient (which most people might disagree with) is to build a bond with the salesperson. Most salespeople who leave your company (and your customers) will do so abruptly based on how they are treated. Building a good relationship with them gets them emotionally involved in the effort. You will get much more effort from a salesperson if they feel a bond with the company and most importantly see the future opportunity. The type of person you pick to get your business started off depends if your product or service is transactional or solution oriented. This is very helpful in determining the sales structure you will need to support it. Finally salespeople need to know the service or product delivery limits so that they do not put the operational people in a bind when they are finalizing a sale. Overselling to get the deal done can have a negative impact on your future revenue with that customer. I hope this was helpful.
Excellent article and many good tips - here are my own $.02.
1. A key point is not how great the team is or the wonderful features of the product - the key is solving the client or propect's needs with the benefits of the product.
2. Having started my own gig now, my issue is that it takes too much of a founder's time to be prospecting - better to delegate this to a budding sales person (2 yr experience), and then the founder can go to close the sale. But it is good idea to hire some prospectors because it is a numbers game until you get into that conference room.
I would say its an Interesting Theory...
Few practical problems that start-up face are - they may not be always cash rich and hiring a sales team (or even a sales-man) may just look like a luxury. I agree to many points but here are my two cents on working out a sales strategy for a "not so cash-rich start-up"
1]It would be best to find an outsourcing sales service, because in that case the amount you pay them can be paid through the revenues that they generate.
2]The Main Founder(i presume the one who comes-up with the IDEA) may or may not be a sales person, however he MUST be THE BEST person to know his product or service and its benefits. At the same time he could be PLAN the sales strategy.
3]If possible, i would suggest that it will be wise to partner with a person who is a good sales-man and accept him as a founder member. Sales is a continuous process and thus this man is equally important.
I myself trying to work out on the above points and believe and see that they work!
thanks for the article...
This is a very good post on sales, I'm glad I read it! My friend Matt Ackerson www.twitter.com/mattackerson)
pointed me to your blog.
I think tip #10 is very critical. Proceeding without a logical revenue model is a recipe for disaster and promises to waste a lot of one's time, and money.
Good stuff, I'm excited to read up on your older posts!
Excellent post. When you start out you want to be extremely frugal and ramp up your sales force slowly. It's all about learning what works. Where you ought to invest - are engineers with great customer communication skills.
I agree with many others - great post!
Here is a follow-up question. How are in-bound leads managed when there is a strong-selling founder and a sales force? At what point are all new leads turned over to sales versus handled by the founder?
For startups, I especially agree with #2 and #8:
"ALWAYS connect incentives somehow to ultimate customer happiness."
Any pro figures out (engineers) what it takes to produce SATISFACTION. This is & always will be THE product. Especially true with today's subscription software.
Thanks For sharing such a gr8 article .I am sure it will help me when I am going to start my own firm ...
Very informative article all of the points were well taken especially point #2. Thanks for sharing this article.
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Dharmesh awesome article and I had to have a little fun with this one. Hopefully you enjoy and keep up the great posts
Getting in the door is the toughest part of the sales process. Fortuntely getting in the door is very simple once you have a good playbook for doing so. Even with the Internet and social networking you still need the ability to pick up the phone and interact with someone in a cold call and/or warm call. I ask entrepreneurs if they are comfortable going up to a person at a trade show and introducing themselves and they always say "Sure". I ask the same person if they feel comfortable doing the introduction over the phone and they say "Ugh, no, I hate it." Why? Because they were never taught the right way to do it!! Once you know, it's easy and can dramatically improve your cash flow and business outlook. Being able to pick up the phone and land a meeting with a targeted person can mean the difference between success and failure in business. You need to make it happen!
Good piece Dharmesh. I like to add that hiring virtual sales teams is one way to keep COCA very low during early days of the start up.