Don’t get me wrong, circuses can create a lot of smiles and are pretty fun, but you don’t want clowns running your business.
As the U.S. president of Xero, I’ve mentored startups through C100, which connects entrepreneurs to executives, venture capitalists and tech CEOs in Silicon Valley. One increasingly popular question frequently asked by many startup CEOs is “how does one build an effective sales team.” Many of these startup CEO’s have engineering or product backgrounds and the thought of building a sales team is quite foreign to them. Wander no more! Here are five insights to help you to build a successful sales team.
1. Know what you are solving for
Before deciding whether you need a salesperson as your next hire, be clear on what you want to accomplish. What is your primary business goal? Is it market share and a big push for customers? Is it top-line revenue growth or are you driving to profitability? Having clarity around what you are trying to achieve over the next 12 months (and beyond) will help you structure your compensation plans and sales structure.
2. Define the appropriate sales structure
At the simplest level, how you setup your team is largely dependent on the complexity of the product you’re selling. If you are getting tons of customers up and running with no consultation, then congratulations, you are one of those very few companies that are heading for a big exit. For those that aren’t seeing this kind of growth (99.9% of companies), a sales team is helpful to move the needle.
As you move along the chain in complexity, a higher touch salesperson becomes required.
If You Hire Clowns, You’ll End Up With A Circus
Part of the sales structure is setting up an appropriate commission structure. That’s an entirely different subject, but in a nutshell, salespeople are typically commissioned between 50-100% of base salary. When a salesperson joins your team, there is often an onboarding period where the commission is paid based on achievement of objectives, not sales. This is called Management by Objective.
3. Have a recruiting plan
Need to build your team? You have three choices. 1) recruit for the position yourself and leverage your network, 2) hire an in-house recruiter, or 3) contract an outsourced recruiter. Most startups do a mix of 1 and 3.
Hiring an outsourced recruiter can take two forms—retained search or fee for placement. Retained search is typically used only when you are hiring a very senior role and have a highly targeted search.
One thing that’s important is spending the time to define the job description. Be sure you know exactly how this new hire will bring your team to the next level. What should they accomplish in the first three months, six months and 12 months? Defining the skill set, experience and domain expertise of the ideal candidate is critical to recruit (and ultimately retain) talent.
4. Track conversion religiously
Below is a very simplistic view of a funnel but gives the idea of what metrics, at the very minimum, should be tracked over time to continuously improve conversion. This regimen and tracking helps to identify where the issues are preventing your business from growing. If the unique visitors-to trial conversions is off, you probably need to tweak your website, better qualify the leads you are driving to your site or try a few different trial offers. At the very least, these sales metrics should be tracked weekly.
5.Test your business model
The easiest way to go out of business is to spend more money acquiring customers than they return in revenue. The chart below shows two key metrics: 1) Customer Acquisition Cost (CAC), and 2) Lifetime Value of a Customer (LTV).
If You Hire Clowns, You’ll End Up With A Circus
As a rule of thumb, LTV should be 3x greater than CAC. As a reference point, the LTV of Salesforce and Constant Contact are fives times greater than CAC. If you can recover CAC in less than 12 months, you’ll be in good stead.
Put your numbers into the model above and see how you fair. Some of this is academic. If you are just getting started and your product has been in the market for a short time, I don’t advocate spending hours upon hours in fantasy spreadsheets. Get a sense of your annual contract value and use this as a guiding principle to set up a quick scenario analysis around potential churn rates and cost to serve.
No matter how great your product is, it means nothing unless you’re driving sales. Sure, there are edge cases with SaaS companies that have built companies with “no” salespeople, but they are the rare exception, not the rule. Your odds of success and long-term growth only go up if you have great salespeople behind you.
What strategies have worked for you? Please leave your comments below.
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