In the early days of getting a business off the ground, founders often drive the entire process: from customer discovery to outbound prospecting to customer support. As a company begins to experience more traction, you’re inevitably faced with a key question –– When should I hire my first sales team member?
Mike Stankus, Chief Revenue Officer at Paperless Parts, and Ryan Burke, VP of Sales at Zilla Security, joined a group of founders from the Pillar VC community for a recent workshop to help founders consider when to shift from founder-led sales to rep-based selling, highlighting common pitfalls to avoid.
While every company is different, most companies consider bringing on their first Account Executive (AE) once they have at least version one of a sales process in place. This is often the process the company establishes through an initial founder-led sales process. The goal of hiring an AE is not for them to “figure it out,” but instead, to start testing and iterating on that version one sales process.
In general, founders should continue to be on as many sales pitches as possible in the early days of the business to get feedback from prospects. Once your first AEs are starting to hit quota, then it’s time to consider hiring a sales leader / VP of Sales to manage that team.
Mike and Ryan each have over 20+ years of experience in tech sales, and shared their advice about topics ranging from how to hire the right sales leader to how to build the right tech stack to how to support your sales team.
We’ve included a few highlights below:
1. Your first sales hire doesn’t have to be a seasoned sales executive, but should have a high “figure-it-out factor.”
Founders shouldn’t over-index on sales experience when hiring their first sales hire. In fact, if you’re an early-stage startup, you likely can’t yet afford a savvy sales executive –– who might command high salaries and commissions.
Instead, start by identifying the core characteristics that will lead to success in candidates.
Sales experience or technical experience isn’t always a must have. Mike started his career in the tech industry in the 1980s, and didn’t have a technical background. When selling into a highly technical audience, he found the key element to his success was having a good ear for listening to customers, understanding their needs and considering how the product solved their pain points. When he found himself in a conversation with a CIO or CTO, he would pull in a sales engineer or product team member to help answer the more deeply technical questions.
If you’re a company selling into a deeply networked industry, it can be tempting to hire someone who is embedded in the space who has a Rolodex of contacts. Ryan Burke cautions against this approach. Instead, he recommends surrounding yourself with advisors who have access to those networks, but hiring a hungry salesperson with talent and drive to execute the plan.
As you’re calibrating on the traits that will drive success at your company, building two potential target candidate profiles can also be helpful. For example, one with deep industry expertise but no sales experience, and another with a sales background who doesn’t come from the industry. Hire both to see which type of person performs better. After 3-6 months, you can quickly figure out which is the right profile of the salesperson you want to bring in once you scale.
2. Compensation Planning for Sales Hires
As you begin to build your sales team, compensation planning is critical for aligning incentives with desired business outcomes.
A good heuristic for making a sales plan is to multiply a salesperson’s On-Target Earnings (OTE) by 3-4x. If you’re paying $200,000 per year ($100,000 base salary, $100,000 commission), then you’d expect the salesperson to bring in $750,000-$800,000 in revenue per year.
The OTE compensation structure is usually a 50/50 split between salary and bonus. However, there may be exceptions to this rule for early-stage companies or for certain industries.
Some founders experiment with incentive structures such as paying commission for new logos acquired or coming up with a Management by Objectives (MBO) plan.
An MBO aligns employee tasks with overarching company goals. Introduced by management professor, Peter Drucker, an MBO-based revenue plan helps sales reps understand how day-to-day initiatives like sales call efficiency and pipeline creation lead to broader company-wide objectives like shortening the sales cycle or fundraising benchmarks.
Other founders choose to adjust their sales compensation mix to weigh more heavily towards salary (e.g. 60/40 or 70/30), in cases where the dollar amount closed isn’t as important as the number of new businesses onboarded.
Finally, keep in mind that sales employees who are joining an early-stage startup are often incentivized by long-term upside. If equity will be a compelling part of your offer, make sure your option pool is in order and you have plenty of shares to issue to prospective new team members.
3. Maximizing Sales Advisors and Consultants
Early-stage companies often engage with external sales advisors or consultants before hiring someone full-time. Because these people have busy schedules themselves and are often only working a few hours per week for your company, it can be difficult to keep track of how effective they are.
Mike recommends setting expectations early on so that both parties are on the same page. Whether you’re targeting a specific number of introductions per month or one closed deal per quarter, align on concrete goals and set up a regular cadence for checking in to ensure you’re both getting what you need out of the relationship.
When working with a consultant in the early days of a new business, many founders choose to compensate advisors or consultants with small amounts of cash, in the form of finder’s fees, along with a little bit of equity; 0.1 – 0.25% vesting over time is typical for an advisor, depending on the scope of the engagement. This helps your company collect early logos for the website to gain credibility while providing future upside potential that keeps consultants engaged in the long-term success of your company.
4. Tech Stack
There are more tools than ever to help sales teams succeed. Once you’ve begun to build out your team, it’s important to enable your sales leaders with the resources they need to succeed. From tracking outbound outreach to reviewing call recordings and keyword analysis, what is the right early-stage sales software stack?
Ryan Burke has spent his entire career in SaaS sales, building teams at Tangoe, Device42 and Zilla Security. He suggested the following sales tools based on company maturity.
At the founder-led stage:
- Founders can accomplish a lot by documenting things in G-suite and using Google Calendar to schedule reminders for follow up. It’s possible, for example, to track your first customers in a well constructed Google Sheet, Excel spreadsheet or Airtable database.
Some tools that augment G-suite include:
- Linkedin Sales Navigator to help founding teams tap into their network
- Calendly, which offers a free version to help facilitate meeting scheduling
Once you’re ready to bring on your first AE, you’ll want to have a lite-weight tech stack in place:
- CRM and Marketing Automation: Pipedrive or Hubspot are good initial options
- Sales Intelligence: Apollo.io (cheaper) or Zoominfo
- Prospecting/Sales Automation: Salesloft
Once you’re at the Series A+, approaching $1mm in ARR and $10k+ ACV, it is time to invest in a more robust CRM:
- Salesforce is the industry standard to help you track CAC payback, LTV:CAC, NDR, GDR. These metrics will help you analyze and inform how you reach in $5-10mm ARR
- Call Recording and intelligence: Gong or Salesloft to help you create a playlist of the greatest sales calls that can be shared across the team and with new hires.
Ryan suggests investing in the right tools to automate information gathering, generating new insights for your entire team as you scale.
Good news –– if you’ve found yourself in the spot where you’re ready to shift from founder-led sales to building out a team, it means something must be working in your company! We hope these insights are helpful as you consider how to get started!!