In my Inc.com article “You’re Not Ready for a Sales Hire,” I warned people away from the knee-jerk reaction to typical startup product problems. Sales is all about repeatable, scalable communications. But if you focus on sales too early, early customers can drag your product from serving a market into serving their niche.
At some point, though, you will be ready to build that sales team. Check these 10 boxes and you’ll know you’re ready.
- Product/Market Fit: Has your product found a niche of early adopters who will pay? A quick way to tell: if 40% of your customers, when surveyed, say they’d be “very disappointed” if they couldn’t use your product.
- More than $1 Million: You need to have a clear path to at least $1 million in bookable revenue. If you can’t make a list of the customers who are likely to spend that much with you, don’t hire.
- Inbound Interest: You should be getting emails and calls from potential customers. If no one is curious enough to contact you, your product isn’t ready. Only an enormous marketing budget will make up for a lame product – and that’s a waste.
- Economic Sales Plan: David Skok from Matrix Ventures has done us all a huge service by posting his Inside Sales economic model. And Brad Feld (disclosure: Brad is an investor in Yesware) gave me a back-of-the-envelope version of the same thing: “When a salesperson can earn back her monthly salary in MRR (monthly recurring revenue) every month, you are ready to scale your sales team.” The calculus for non-recurring products is different, but the idea is the same: after a two-to-four-month ramp, every salesperson has to be extremely profitable.
- Outlined a Comp Plan: Sales compensation is one of the craziest, most mixed-up, least data-driven aspects of modern business. “Standard” comp plans range from 100% variable to 80% fixed, and there are interesting anecdotes on paying salespeople 100% fixed salary. No matter where you start, pick one approach before you start your hiring process. A quick tip: make sure your comp plans are cash-flow positive for your business. Pay out any variable component of the plan only after your business has cashed your customer’s check.
- Sketched a Territory Plan: With someone else on board, you have to divide your leads. How’s that going to happen? As with comp, there are hundreds of sales territory models. The standard approach is geographical or alphabetical, but for a global product and your first sales hire, that’s not going to work. At Yesware, we started by dividing leads by opportunity size. Your mileage may vary.
- Conducted Onboarding and Training: According to Trish Bertuzzi, inside salespeople take an average of four months to reach full productivity. You will fall on the bad side of average if you don’t have a basic company and product training in place before your first salesperson starts. Include hands-on time with your product, and plenty of call scripts/email templates for your new recruits. Shadowing you is not sales training.
- Have a Place to Sit and Demo: This sounds obvious, but it’s crucial. Without a readily available and quiet place from which to make calls, your new salesperson will fail.
- Choose a CRM: The default choice, especially for venture-backed companies, is Salesforce.com for its app ecosystem. But also consider Insight.ly for its Gmail integration; Base for its mobile experience; and either Highrise or Batchbook for their simplicity.
- Willingness to Let Go: This is often the hardest box to check for founders. When you hire a salesperson, you’ve also hired a new face of the company. To be effective, your salespeople have to become independent of you. They will explain things differently. They will have different work habits than you. They will help you and your company grow up. You have to be ready for this step. If you can’t let go and trust someone else with “your” customers, don’t hire a salesperson.
And after you’ve hired your first salesperson, here’s one test to figure out if you are ready for your second:
11. Sellable Product: As the founder, you have an unfair selling advantage. Before you hire your second or third salesperson, make sure that someone else can close deals consistently. If not, the product just isn’t ready. When Paul Hlatky, six months out of college and two months into selling Yesware, closed a major cloud storage provider with minimal interference from me, I knew we had a sellable product.
I hope this helps you build a world-beating team of revenue magnets. Please let me know how you know you’re ready to hire in the comments below.