Hiring, Training and Compensating Salespeople

for B2B SaaS companies

July 2015

B2B SaaS companies live and die by their numbers. Fast-growing SaaS companies are valued much more favourably than larger but slower-growing ones. There’s no magic when it comes to accelerating growth - you need to setup and organize your sales team. This presentation looks at the 3 key challenges you’ll be facing when trying to setup and grow your sales team:

1. Who should you hire for my first sales positions?2. What should you do to bring them up to speed quickly?3. How should you pay them?

Introduction

Interested in a free 30-minutes review of your hiring, training and compensation processes for sales jobs? Get in touch: consulting@guillaumelerouge.com

First, close some sales yourselfMark Suster:One of the biggest mistakes I see early-stage startups making is hiring “seasoned” sales professionals or hiring people too senior, too early. Here is my recommended approach. Start by selling, yourself. I see way too many startup founders who don’t have experience in selling and probably don’t feel that comfortable going to customers and asking for orders. If this is you I think it’s really important to get over this hurdle.Spending time selling to customers is the best way to find out what their problems are and how good your solution currently is at mapping to their needs. You learn by asking. [...] I was WAY off between my book research about what the engineering & construction market would want (my first company) and what they actually wanted. I only found out through customer meetings.

Hiring salespeople

The right people, at the right timeHiring a good sales person can be incredibly difficult, especially if you’re transitioning from evangelical sales to a repeatable customer acquisition process. As outlined by Tom Tunguz, bad sales hire will cost you time and delay in the growth of your business.

That’s why it is crucially important that you approach your hiring efforts in a consistent and well-organized way. If you’ve never done it before, you should start by closing some sales yourself. This will provide you with invaluable insights and information about how the sales process really works.

Once you’ve done this, you’ll need to make sure you’re looking for the right type of people, at the right stage for your business.

Mark Suster:There are people who tell startups that they should hire the most senior people that they can find. I’m not one of those. I believe that you should always hire people are are looking to “punch above their weight class,” which means to hire people who want to be one league above where they are today. [...]You’re far more likely to find success from an individual contributor. You need the sales executive who aspires to be a VP Sales (e.g. one weight class above where he’s at) but has not yet been given the chance... He’s got something to prove. He’s joining you because your company offers him/her the hope of the big equity package but likely the step forward in his career that he’s been looking for.

Punching above your weight class

Jason M. Lemkin:You won’t have the resources to hire a whole sales team upfront. You’ll want to start with 1 experienced rep. And there’s only one problem with that: no matter how well that rep does, you won’t learn anything. You need at least 2 to learn:■ If your first rep does poorly, you’ll have no idea why. The rep will blame

you, your crappy product, your crappy company, your crappy lack of marketing. Which may all be correct. But if the rep is a bad fit, that may be the real reason. You just won’t know.

■ If your first rep does well, you’ll still have no idea why. Does the product sell itself? Is it the rep’s suave phone skills? Or is this rep only good at a a certain type of customer — and are you leaving other potential customers behind? You just … won’t know.

Hire salespeople in pairs

David Cummings:Early on in the B2B startup adventure, the majority on an entrepreneur’s time is tasked with finding product / market fit through customer discovery and sales.While cold calling and emailing isn’t a high priority on most people’s to do list, it works for getting in front of prospects and gathering information.Because it’s so valuable, entrepreneurs should hire a sales assistant sooner than expected as it helps the entrepreneur make better use of his or her time.

Consider hiring a sales assistant

Tom Tunguz:The first employee at Hubspot and tasked with building the sales team, Mark developed a structured interview to qualify candidates and correlated the attributes of the best sales candidates.With this knowledge in hand, Mark created a quantitative candidate assessment. Based on the linear regression mentioned above, the scorecard established hiring consistency and enabled the team to grow predictably.In addition, he shares the questions used to evaluate where a candidate falls along the spectrum of these five characteristics. The best part about this section is that it provides a framework for each company to determine the characteristics of the right sales people for their startup.

Build a structured interview process

Training salespeople

Information is powerThere’s no point in hiring the most talented sales people you can find if you’re not going to provide them with the training, information and resources they need to successfully sell your product.

What’s your ideal customer profile? What should a salesperson’s typical week look like? What are the key differentiators of your product? What are the best channels to go after? Which objections do reps usually face?

Unless you have put in place the adequate systems and processes, your reps will be left having to figure out all of this information by themselves, wasting significant amounts of time and money in the process. To avoid this, make sure to put in place a relevant training in coaching program.

Mark Suster:Most technology startups seem to be funded by product people or business people. Specifically what is often not in the DNA of founders are sales skills. Nor do they exist in the investors of early-stage companies. The result is a lack of knowledge of the process and of sales people themselves.[...]I boil it down to this: sales people are sales people. They are the lifeblood of many companies yet they are different than the traditional technology startup DNA so the ways that you hire, motivate, compensate and assess performance of these individuals will be different. Obviously to understand a “class” of people you have to make broad generalizations. Here are mine.

Understanding sales people

David Cummings:When interviewing sales reps, one of the most common questions we receive as an interviewer is “what would the first 30 days look like if I earned the job?” While the first 30 days will vary from company to company, there’s still plenty of commonality. Here’s an example first 30 days for a new sales rep.The first 30 days for a new sales rep is all about shadowing existing team members as well as training with the sales manager. Then, by the end of the month, it’s time for live calling and prospecting. Training is a critical part of the sales rep on-boarding process.

Focusing on the first 30 days

David Cummings:After a startup achieves product/market fit one of the most important next steps is to develop a sales and marketing machine. The sales team should be working towards a reproducible, and profitable, sales process. As part of that iteration, a sales playbook should be at the top of the sales manager or entrepreneurs list of items. A sales playbook is the how-to manual for a sales rep. The goal is to document and categorize as much sales related information as possible in a digestible format. [...]As you can tell, the sales playbook is very detailed covering upwards of 50+ pages. A key aspect is that it should be a living, breathing document that is constantly updated (e.g. a shared Google Doc).

Developing a sales playbook

Jim Keenan:Activity based management is stifling. It removes creativity from the process. It removes ownership and employees end up feeling like cogs in a wheel and not true contributors.Results based management however, gives people the ability to approach a problem the way they see fit. Get the results however you need to. What I like about results based management is it embraces peoples unique perspective on solving the problem and getting the desired results. It gives them freedom.In my opinion, results based management is a far better approach than activity based management. But, what happens when someone isn’t getting the results they should? That’s were the “freedom box” comes in.

Be ready to use the freedom box

Compensating salespeople

How much should I pay them?Let’s say it upfront: sales reps are motivated by cash. Sales is about money, especially at the individual contributor level. Earning it, chasing it, closing it, living it. Initially, this mindset isn’t likely to be present in your company. That’s not how engineers think. That’s not even how marketing people think.

To a sales rep however, cash is not a means, it’s an end. It’s the tangible proof that their efforts and their hard work are paying off - literally. As a founder, you’re probably going to want to put in place that you believe is fair to the rest of your company, probably something that includes salary caps. Don’t.

If your salespeople are killing it, your whole company will benefit. This section looks at putting in place a comp plan that will align the interests of everyone.

Jim Keenan:I get asked a lot how to build a good commission plan. I give the same answer every time. Keep it simple and align it with company goals. It amazes me how often companies screw this up. Commission plans need to do two things; motivate sales people and sell product. They should align what you say, with what you pay. The killer commission plan starts with two critical questions:1) What do you want to sell?2) How do you want the sales team to behave?Commission plans drive behavior, get it wrong or don't align commission incentives with the company’s goals you’ll get everything you don’t want and little of what you do want.

Creating a compensation plan

Jason M. Lemkin:The mismatched comp plan made it all the more confusing and created all the wrong incentives. So what did I do? I stepped back. I said, what are our goals, for getting from $1m to $20m+ in ARR? I listed them out:■ Make sure reps are paid a fair, market wage■ Make sure the great reps can really make good money■ No incentives for the mediocre to stay■ Make sure the reps are paid to love all the prospects and customers■ Not break the bank / Make sales clearly a profit center, not a cost center■ Maintain positive, long-term, win-win customer relationships■ Simplicity

A framework and some ideas - 1/2

Jason M. Lemkin:So here’s what I came up with, The Plan:■ Competitive base salary, but you cover it before any bonus■ But then, pay 2x as much in commission■ One accelerator: cash up front■ Payment upon receipt of cash, not contract e-signing

It worked great for me. There were automatic accelerators. The sky was the limit for the A+ reps. There was no need to “ratchet up” the plan. It rewarded the hungry. And perhaps most importantly as a founder / CEO - I knew exactly what I was paying for sales. 25% of ACV. No more black holes.

A framework and some ideas - 2/2

Kyle Porter (video):Our sales team is experiencing rapid growth, and with over a month of continuous deals, we’ve got sales on the brain. Ok, who are we kidding?We always have sales on the brain. That’s why we’re sharing our model for sales compensation and performance expectations.A few words of importance:● We set quota where it’s profitable if the rep hits the number but low enough

so they can crush it in multiples. Nobody has ever missed quota here and we plan to keep it that way as long as we can!

● It’s important that sales executives (closers) never have to prospect. Yes, they can if they want but our BDRs are their lead gen machine.

Salesloft’s plan for SDRs & AEs

Conclusion

Whichever way you look at it, your salespeople are going to live and die by the numbers. How many leads did I handle? How many demos did I perform? How many deals did I close? How much am I going to make this month? Your job is to find the best way to articulate those numbers with the broader numbers of your company: revenue, margin and cash-flow objectives.

As part of this process, you should always keep in mind that salespeople are only as effective as the means you give them to succeed. Unless they’re being properly trained and adequately compensated, they won’t be able to bring you the successes you need to make your plan.

Living and dying by the numbers

Jason M. Lemkin:1. You hire a sales rep to sell before you can prove you can do it yourself.

You have to prove it’s sellable first. You can’t outsource this.2. You hire a VP of Sales to sell before you prove you can do it yourself. You

gotta prove the process is at least just barely repeatable before you hire someone to turn up the volume and spin the wheel faster. You gotta build 2 reps that can hit quota before you hire a real VP of Sales.

3. Any of your first 2-3 sales reps are folks you personally wouldn’t buy from.4. You insist reps #4-400 are folks you personally would buy from. It takes a

village...Go read the remaining 6 reasons!

Bonus: top 10 sales hiring mistakes

Special thanks

Mark Suster (Upfront Ventures)➔ Website➔ Twitter

Jason M. Lemkin (Storm Ventures)➔ Website➔ Twitter

David Cummings (Pardot)➔ Website➔ Twitter

Jim Keenan (A Sales Guy)➔ Website

Tom Tunguz (Redpoint Ventures)➔ Website

Looking for help?

I am available for short consulting missions: strategy advice, questions about the enterprise sales cycle, positioning review…

Get in touch:consulting@guillaumelerouge.com

Guillaume Lerougeme@guillaumelerouge.com

Director of Sales & MarketingXWiki SAS