Seth DeHartWhen founding teams need to scale their sales efforts beyond their first few clients, they need to hire a sales leader. This is a very risky and scary next step for founders as it’s a critical hire (often make or break) for an early stage company.
An easy way for non-sales teams to assess a potential sales candidate is to look at his or her profile. By profiling the candidate, it helps you categorize the risk associated with the various types of hires and what role they can play as your first sales hire.
From the Beginning into High Growth Mode.
In the early days, your first sales hire needs to have several skills to help the startup scale, but most importantly it’s the skill of driving revenue… DRIVING REVENUE.
First and foremost, companies need a sales hire who can roll up his or her sleeves and get their hands dirty. It’s critical for this person to pick up the phone, cold call, and write scripts for themselves and future hires. They must have the ability to schedule sales calls as well as manage sales cycles on their own, end to end. This hire shouldn’t be afraid to test hypotheses and must remember that the company will constantly evolve. They need to understand that they will continuously need to improve the strategy and pitch. Your first sales hire will essentially be the foundation for the feedback loop between sales and product.
Many sales leaders, with many years of sales experience with large corporations, do not have what it takes to be an early startup sales leader. It takes a unique profile for a sales leader who has moved to the cushier life of sales management to go back to being an individual contributor (IC). The hustle and urgency needed is often lost on senior reps at large corporations. They’ve probably had a ton of resources at their disposal to build their pitch decks, marketing collateral etc. This isn’t the case for all, but remember we are profiling for non-sales founders to shape their decision making process.
Hustle and Urgency is a Must.
Cash and revenue generation is the absolute top priority for the first sales hire. In the beginning, it’s more important for the first sales hire to contribute to the bottom line than it is for them to be a good manager. In fact, if you are generating revenue from your first hire, you have options. You can start to understand the ROI for each incremental sales hire. Later on you can focus directly on hiring a good manager when you have proven that you can sell your product, you have a predictable revenue stream (and cash in hand) and need more reps in order to grow. Although finding the right sales leader can be time consuming and a long process, it’s a good problem to have. It means you’re succeeding.
But beware: Even very weak candidates with sales experience are good at making themselves sound accomplished and indispensable to an inexperienced founding team. Salespeople can sell themselves better than anything. I once knew a sales rep who said, “If I could only do my job as well as I interview I’d actually be a pretty good rep.” He would get hired after every interview, but if you hired this guy as your first sales hire, you would be sunk.
To begin to understand the risks and skills associated with each sales candidate you can profile each applicant into 1 of 6 categories. This isn’t foolproof, but it allows founders to understand what you get (and what you definitely aren’t getting) with each category and to narrow your interview screening based on some guideposts and vet the candidates accordingly.
In order of lowest to highest risk, here are the main options for your first sales hire:
1. Previous Startup Experience
Ideally, your first sales hire has worked at a startup and understands/agrees with everything above. They rose to a leadership role at another startup, but they want the chance to use their skill set to build an early stage company. They’ll need to start selling as an IC in order to build and grow their own team.
My ideal first sales hire would understand creative compensation structures and sharing risk. This hire is usually costly, but if the risk is shared correctly with compensation ramps and correct goals, this candidate can generate revenue and then scale the team rapidly as the sales processes are proven. They should document the processes they use to manage sales end to end in their sales cycles and hire reps who they believe can replicate those efforts. This is likely your VP of sales and may be the only sales manager you ever need.
2. Recently Promoted to Management
The second option for your first sales hire would be to find an IC that has recently been promoted to management. They probably know they have a slow path of middle management in front of them at their existing company. These candidates don’t have the experience as a true sales leader but they have some experience managing reps and know how to sell. They will impact revenue immediately, but will likely have expectations (rightly or wrongly) that they will be the head of sales.
They will certainly help in the early days. The drawback is down the road you may need to have a tough conversation about the fact that they won’t be your head of sales. The key to avoiding this painful conversation at a later stage is to set the right expectations out of the gates that a VP sales title is not guaranteed.
3. Individual Contributor without Management Experience
Third place is a “young gun” IC with no sales management experience. Each of these options comes with risk and this one comes with a decent amount. Because they haven’t managed anyone they may not understand how to “self manage” and need some oversight from the founders. They will definitely require much guidance from the founding team if/when they need to start hiring/managing.
If the founding team doesn’t have much management experience this increases the risk of this hire. But if the rep generates enough revenue you can then afford to hire one of the profiles above. As long as they have the hustle and sense of urgency, they can generate revenue which opens up more options. And if they have enough sales experience and the right leadership qualities, they may be able to make the step into management.
4. Senior Sales Rep without Startup Experience
Next up would be a senior sales rep who has no startup sales experience and works for a large company. When people boast about their Rolodex, or even use this word, it’s a red flag. Rolodexes (or personal connection client/prospect lists) can seem appealing for early stage startups looking for intros, but what happens when those contacts are exhausted? Is the rep ready to cold call? The Rolodex won’t scale but the startup needs to.
It’s often better to start with a sales rep who is light on connections, but heavy on the skills. For this rep, it’s critically important to set the right expectations around the hustle and scrappy nature needed to make a startup successful. I see this hire made a lot (and usually fails), but that happens when a founding team doesn’t know how to set “the right expectations”. This is a double edged sword. While these reps can be valuable, they need a sales manager who knows how to manage them.
5. Senior Sales Manager
Another option is a senior sales manager who hasn’t sold for some time. Just because they have a fancy title at a well known company and can use all the sales management lingo, it doesn’t mean they have hustle. They likely don’t understand what hustle and urgency for a startup even means. It’s likely their skills are rusty when it comes to cold calling, managing sales cycles, etc.
Unless they agree to being an individual contributor until certain goals are met it should be a no-go. Also note that this type of candidate is expensive so the risk is very high. They typically don’t have the mindset and sense of urgency that an early stage startup needs to be successful. This is a much later stage hire — if ever.
6. Everyone else with sales experience
This list is in order of risk, and everyone else with sales experience falls into this final category. Sales experience takes many different shapes. Hustle and intelligence, team fit, cost and industry knowledge all are important factors. You can find talented candidates in this pool and many can and will be successful. There are definitely candidates in this category who can (and should) be listed higher on the risk profile list. But if you are a team with no sales experience, you should be acutely aware of the risks involved. Each profile will require different guidance/management to make the business successful.
Setting the Right Expectations
Share The Risk
The key to these categories is knowing the risks associated with each and every candidate and the focus needed to screen for the skills and work ethic to overcome/minimize the risks. It’s about setting the right expectations and sharing the risk/reward. I have no problem ramping a sales leader above industry standards comp if it’s based on achieving goals and performance. Setting the right goals for every sales hire is critical for your success and their happiness. Expect that the best hires are expensive. But if they are smart, they are joining the startup for the upside and that upside should be shared.
Set Reasonable Goals
Sales goals for equity are easier to set and negotiable around industry standards, but a less common comp goal is setting revenue targets for an increase in base salary. Showing new hires how their contribution to revenue can grow the business and help grow their own salary is a reasonable option. This strategy shares risk while showing founders how confident the new hire is in their ability impact revenue contribution. For example: you could start a new hire at a $60k base salary and for every $10K MRR (or $120k Annual Contract Value) you could bump the salary up $10k. You could then cap it at a reasonable number. I’ve seen this used and it worked out for everyone involved. You can use this type of risk/goal/reward model for most types of compensation.
Get A Second Opinion
As you think through how you are going to profile and screen candidates, having a sales advisor (from profile group 1) to help interview and guide founders though this process is hugely valuable. Hiring with extreme transparency and actually discussing the risks with each candidate has positive results. It allows founders to understand whether the candidate understands impact and significance of their role on the team.
Ultimately every hire will be risky. If founders can assess the risks that come with each hire and build strategies around them, you can minimize risk and maximize upside for everyone involved.
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