Some very good points. Most of this advice is more relevant for latter stage companies and it's an important distinction to make.
Founders often make the mistake of hiring closers (the kind of sales people this article describes) too early. They should really be looking for biz dev types who can go out and identify target markets, quality referral channels and refine the pitch to be eventually handed off to a true "sales person."
So what I don't really understand is what exactly the "right" sales people are doing that the others aren't. I totally understand that there is distribution of competence for anything - but what is the real difference?
I can only come up with a few things I can figure out on my own so maybe someone can tell me if I am missing one:
1. Understand the customer better through research/interaction and pitch a cleaner "value"
2. Drive the CTO/CEO to refine the product to match customer need better
3. Find the right person in the organization
4. Have personal contacts prior to joining the organization that convert better
5. Use "psychology" or whatever to gently coerce a sale
*6. Manage other sales people well
What am I missing?
It seems like the better a product is the less variability in competence would matter - so in that sense the difference between ok and awesome is just the speed at which they can convert.
From my interactions with sales people, here are a couple differentiators I have noticed
1. Sheer relentlessness - A good sales person will follow-up on a lead to an extent you and I may consider excessive. They will make call after call, bouncing back from rejection with an unsettling ease.
2. Preparation - Good sales people are very prepared. Customer says they can't afford it, sales guy has a prepared comeback to keep the deal alive. Customer suggests a free pilot, sales guy gently deflects back to closing a revenue deal. These aren't off the cuff interactions but studiously prepared counters to sales objections.
3. Ask good questions - Really good sales people are great at asking questions that help them understand what the customer needs so they can customize their pitch to hit the sweet spot.
4. Are honest - Ok, this one surprised me. Like most people, I had the stereotype of the slimy sales guy in mind but I have been very pleasantly surprised at the number of sales people that pull the product guys aside before a customer visit to basically say "don't bullshit". They care more about the trust the customer has in them than the quick buck. Yes, really
This is a common, reasonable thought process that often follows from the lack of understanding of what (effective) sales people do. But it's also a big part of what make sales people and almost all non-sales people feel somewhat immiscible - especially at a startup where you're probably a tight-knit group.
the #1 thing an effective salesperson does (in any size company) is this:
-> Focus your company's energy to be as effective as possible at closing deals you'll be able and willing to repeat.
How do they do this?
#1 - Avoid wasting your company's precious time on deals that don't convert to paying customers in a reasonable timeframe.
#2 - Close those deals that do. This requires skills like listening, positioning, negotiating, empathy, technical and also truly understanding the actual reasons someone is compelled to buy your technology.
#3 - Manage a pipeline: fill it with more prospective deals that look like those that do close; qualify and then remove those that don't.
#4 - Build trust with prospective and existing customers.
At b2b startups, sales people are there to help discover, build, and tune the repeatable sale -- this important work at a startup will help you (and your board) learn if/where it even exists!
Unfortunately, if you took 10 companies, good at sales but kinda bad at engineering. Another 10, kinda bad at sales but great at engineering -- yeah you know where I'm going with this.
Great article. I don't totally grok #2 about not turning over existing leads/deals to sales. That seems like a decent place to get started with minimal downside (as long as person has even the slightest discretion on shedding suboptimal situations).
I also get concerned when sales learns that it can ask product for anything and get it. My experience is it's generally better to "sell what's on the lot". This avoids the endless delays in closing pending some future enhancement.
Yes in general I thought this was a good article. But I also found some of it odd. In general sales people hate coming in with a clean slate. They want to pick up some existing customers and existing deal flow so they can learn quickly how the product is actually used (to help with positioning it accurately) and what the objections and issues are in the sales cycle. Perhaps the author was more implying "don't stick them with weird old BD/partnership stuff that isn't really 'real' to bog them down early)
I think you're absolutely right about not wanting to bog down your salespeople with old relationships. Here's why:
It seems to me that a lot of companies who are at the point where they'd hire a full-time sales staff struggle with their early clients and not-quite-clients. In hiring salespeople, companies are defining themselves as established players with an established product to sell, whereas the relationships with early customers centered much more around being the new guys on whom the buying company is taking a risk and often getting a say in feature development and a discount compared to the competition.
Re-framing those early relationships, especially "with middle managers from dinosaur companies," is a very long and frustrating process for all the parties involved.
I could absolutely see why you'd want to avoid your news sales staff getting sucked into those relationships and instead do what they're fantastic at: parachuting in, developing new relationships quickly, and pivoting those to closed deals.
(Background/assumptions: I do bizdev-ish things for a large tech company. From the tone of the article, I'm assuming that we're talking about B2B businesses with products priced such that the relationship with individual clients takes time to develop.)
Yeah, the "BD vs Sales" thing is exactly what I was trying to get at. My experience is that companies hiring salespeople for the first time often don't have much of a sales pipeline yet, but do have a backlog of not-very-similar bizdev and partnership conversations going on. Salespeople who jump in on the bizdev "opportunities" -- which are not what a sales lead would actually call "opportunities" -- can spend a lot of time spinning their wheels. If, on the other hand, you've got a real pipeline and existing dealflow, by all means route that to your new sales reps.
Why should lead generation be outside the control of the sales group? Isn't marketing about a lot more than just lead generation? I always thought the best salespeople either come with there own long list of leads, or they are good at generating new leads, or both.
Even when lead-gen lives inside the sales organization, the salespeople who generate leads and the salespeople who close deals are generally not the same people. It's a different skillset to hammer the phones and repeat scripts than to gauge technical fit and negotiate.
The reason to have lead-gen live in marketing is because modern lead-gen is often based on marketing initiatives. For example, a good source of leads are people who attend webinars, read blog posts, or watch videos, all of which are organized and pushed out by marketing.
You're correct that a marketing team does much more than just generate leads for salespeople to follow, but generally the entire goal of marketing is to generate targeted awareness in the market which raises the value of the company through mind-share or revenue.
There's a lot more to say about this shift, as the job of a salesperson today is very different than the same job even 5 or 10 years ago. This has a lot to do with the relative amount of knowledge out in the wild.
In the good old days, you didn't really even know what a Xerox machine was until a salesperson told you about it, let alone all the ways you could use it to help your business.
Nowadays, customers are doing more and more research (through marketing materials) to guide their decision making process before ever talking to a salesperson.
What yannu said. Doesn't really matter whether marketing lives inside the sales org or not. It can work either way. (And your new VP of Sales will always tell you that marketing should report to her.) What matters is that you a) have enough and the right kind of marketing in place to fill the top of your sales funnel, and b) instrument and evaluate marketing performance at least as quantitatively and aggressively as you do sales performance.
What is interesting is the conflict of interest that can lead to. A sales leader who is responsible for both sales and marketing might have a vested interest in tossing marketing under the bus if they can't get traction or close.
It also makes it hard to get projects off the ground that can have a long-term payoff since Sales tends to be very focused on the short-term tangibles, even if the former are critical to healthy growth in the big picture (think SEO, branding, laying the infrastructure for automation, etc.).
Having marketing as a distinct group can help make sure there is a healthy conversation between the various priorities, and also make sure there's a voice that is empowered to say "look, we mutually agreed on these lead scoring criteria, and fact of the matter is you're not following up on all leads within 24hrs, that's not marketing's fault."
I actually had that conversation once before when the sales lead also owned marketing. This was also an individual who ignored my need to have all sales conversations logged and categorized correctly in our CRM, so there were other issues.
What happens when you do it the other way around: having salespeople work for your marketing team, essentially being their "finishers"? It seems like you'd get not-necessarily-good-or-bad effects like marketing feeling empowered to offer discounts and bundles through "their" sales force.
You might get that, or you might get undo blame on the sales team if lead quality is an issue. Of course, that's why it is critical to understand what a quality lead is, and have objective criteria for it.
Ultimately, I think the two disciplines, while related and needing to work together, are relatively separate. Their incentives should be aligned, and that is not always possible to implement in some sales organizations.
I've done a lot of lead gen in my career. Mostly it was of the one-to-many kind where I'm managing scaleable marketing programs, vs. the one-to-one kind where I'm dialing for dollars. There was a very brief stint doing the latter which occurred when a sales guy was promoted to run sales and marketing and thought that would be more effective--I quickly had some data to prove him wrong.
In any event, marketing is in fact about a lot more than lead gen, but lead gen is a very measurable piece, and also the one that sales reps have the most visibility into and are thus most vocal about.
Some sales people will be expected to prospect, but often the person who is great at hunting (ie. prospecting) is not necessarily the best at closing. Very different skill sets. Also, you want your closer focused on closing, not worrying about filling his pipeline.
Doing one-to-many lead gen at scale requires vastly different skills that many (most?) salespeople simply do not have. For example, managing an AdWords campaign, or setting up analytics.
Thanks, this is helpful. You mention having marketing by the time you hire the VP Sales, and you link to a few posts on hiring VP of Sales- do you have any links/thoughts on hiring marketing?
My experience is weighted towards building and selling enterprise products (so, selling to Fortune 500 companies). I actually think the VP of Marketing hire is even harder, for enterprise-oriented startups, than the VP of Sales hire. Most of the candidates you'll find with "big company" experience will want to do a lot of "big company" style marketing -- focusing on branding rather than lead gen, hiring expensive agencies, and positioning via high-profile partnerships. All of which strategems are problematic for startups, to say the least.
A VC friend of mine told me once that one of his investments had hired and fired 9 VPs of Marketing, I think over something like an eight-year span. (We were having a conversation about how hard it is to find -- and to evaluate before hiring -- marketing people who understand both enterprise selling and startups.)
It really depends on your biz model and there are many variations. At my company we do 1.5% of the monthly revenue of each client the sales person has "closed." Typical monthly value of a client is around $20k and we have no cap on commissions.
Reps are also the first line of defense when it comes to customer service for their clients. This works great for us because the reps who provide the best customer service typically get most of their new clients from referrals from existing clients.
Thanks. Just for your example, do they only get their commission after the client has paid?
Just general curiosity as I am technical and I have no idea how their models work. The three things that I am familiar with are:
1) I give you a small discount of my dayrate in exchange for a slice of equity (low single digit percentages)
2) You are an employee and take a paycut to participate in their vesting schedule with CAP table (the same as 1) really)
3) You are a cofounder and get a solid stake in the company but instead of providing capital as a technical person you are more likely to build an MVP for not much money in exchange for solid double digit percantages or equals pequals in the company.
Whereas their model is completely different and more comparable to real estate agents or similar.
Generally the principle behind designing sales compensation works along these lines
(i) First figure out a notional target amount of revenue you would expect a salesperson doing reasonably well to generate over a time period. [1]
(ii) Then offer sales role(s) with a base salary and a higher[2] OTE (on target earnings) figure reflecting their expected earnings (including salary) if they hit this notional target. This is what the compensation will be advertised as, and how it'll be benchmarked against rival company salaries
(iii) In the simplest case, the salesperson gets paid the base salary plus (OTE - SALARY)/TARGET per unit of revenue they book during the course of a reporting period[3]...
As they probably over or undershoot their target by quite a bit, chances are they earn more or less than the magical OTE
Common variations on the simple case include increasing the commission percentage for sales over the target (or various other thresholds) to weight incentives in favour of the lowest performer, setting a base threshold so the salesperson doesn't earn any commission at all until they've reached this minimum tolerable level of performance, and offering fixed cash bonuses for various other achievements. Salespeople looking after a mixture of new and existing accounts might find their OTE composed of separate targets for new and retained business with different percentages, or they might have a single target with new sales required to cancel out the losses.
Either way, the compensation is usually calculated based on when the revenue gets booked and paid at the end of the quarter, month or week. So salespeople might get paid before client pays, but they might get paid three months after if they're on a quarterly commission scheme.
[1]Of course definitions of reasonable vary, and any kind of targeting might be more alchemy than science, especially in a startup.
[2]Maybe a mere 15% above the base salary (if the sales role is mostly admin and the salesperson isn't expected to boost the figure through excellent work) or it might be more than triple the base salary (typically promoting above-market achievable earnings as an upside for accepting below-market base salary, much like the high-equity offers for developers)
[3] the reporting periods is probably a quarter or a month, but possibly weeks for very transactional sales or years for the 4-deals-a-year enterprise roles).
Interesting to see the justification for screwing engineers on the pay.
EDIT:
To clarify--the idea of commission is effectively an equity stake in either the revenue or profit (depending on the setup, right)?
So, the sales folks see an immediate return on their work. The engineers, while salaried, have no such visceral link to the performance of the product...just some trivial paper and the thin sliver of hope they won't be fucked over during an exit.
I'd definitely be interested in knowing more about your company, davideous. I have no doubt that not paying commissions can work for some companies. And getting comfortable with paying commissions to salespeople took me, personally, a really long time. (Too long, from the perspective of being a good CEO and doing what needed to be done to move my company forward.)
The arguments in the Fog Creek post sound right, and really resonate with those of us who are engineering/product people. But they don't match the reality of my own experience. At least for the high-cost, high-touch, long sales cycle stuff that I have the most experience with, the best salespeople all want their compensation to be heavily weighted towards commissions. So if you want to hire the best sales reps -- and, just as with engineers, you really, really want to hire the best -- you have to recognize and understand that preference.
But I'd be happy to be wrong about this! In addition to Fog Creek, I remember reading another blog post about a startup that doesn't pay commissions. Maybe a Foundry Group company: Moz? I can't find that post now, though.
We sell enterprise email server software. It's high-touch and sometimes a long sales cycle. Lots of demos of the software via screen-share.
Right now we have two people in sales. They are collaborating multiple times a day on Skype and help each other out on basically every sale.
Much of your concern seems to be about the ability to hire the best people, given the preference for commissions. I've been fortunate here: I've been able to hire my sales reps through personal connections, based off of reliably knowing their prior performance -- and I know I have really good people.
Perhaps it would have been harder to start the sales organization without commissions without these connections. But it's working for us right now.
Love the idea of sales not working on comission, as it also ensures more directness with the customer, and looking after their interest and what products are best for them. I still remember some calls with a software company back in the day and I really liked how they told me when a product wasn't for me, and when I should use the competition. And it was good advice. It increased my loyality to that brand a lot and I shared that story a lot.
Plus, you don't get things like the sales people making more than others for closing leads they didn't generate, which isn't a great feeling either. The whole team is responsible for the sale, and the sales guy may or may not have put more sweat into it.
Enterprise sales folks making 2-3x what senior engineers make - especially - isn't right - and it happens a lot. Pay should be equal to work expenditure, at risk of sounding somewhat communist. (let's not even start on 8 figure CEO compensation).
Imagine if you as an engineer were told your total compensation was $150,000 per year. But only half of that would be certain. The other $75,000 would be dependent on how many unique features you helped ship in a month/quarter/year and how many of those were bug free. And you didn't have full control over the release cycle - there were a lot of dependencies with other orgs (devops/QA/product management) And as your company grew they could yank you off a feature about to release and put you in a new group where you were just starting to work on a new release. You had to assume that your company wasn't going to screw up and impact your ability to ship. That's at least the right mindset to compare yourself to sales person compensation. And remember, technical sales people can do very well so if it looks more attractive you should think about making the leap.
Sounds great. It would certainly beggar-thy-neighbor the deadweight over to companies that that give you the same check every two weeks no matter how little you deliver.
Sales people have much lower base pay and it's made up for with commission. Engineers would probably dislike the ability of the product to sell as a condition of their salary. It's all a question of risk tolerance.
"probably wrong" if you are only looking at engineer salaries at the coasts or at BigCo.
I very much get that businesses live and die by sales--anybody who's been in a startup (much less founded one) does.
But I also get that part of the reason the product sells is because the people working on it are personally invested in the outcome. The engineer trades a somewhat higher salary and lower ceiling for the ability to directly impact how the market and product interact.
It's precisely because sales is so important that I am curious if engineers wouldn't be better served (as well as their companies!) were they treated the same as sales folks.
The fact is that engineers produce value but don't capture it nearly as well, and I cannot help but wonder what would happen if they worked on commission or royalty.
The challenge is measurement. For sales people, it's easier to measure the individual sales, hence you can have commission based on individual performance. For developers it is much harder to measure individual performance.
We have implemented commission for developers based on overall sales number. Based on pre-announced targets, developers can get 1x, 2x, 3x salary as a bonus/commission at the end of the year. No caps.
Founders often make the mistake of hiring closers (the kind of sales people this article describes) too early. They should really be looking for biz dev types who can go out and identify target markets, quality referral channels and refine the pitch to be eventually handed off to a true "sales person."