December 22, 2017
DevGuild: Pricing Strategy – Value-Based Pricing From 8,432 SaaS Cos
In this presentation, Price Intelligently CEO Patrick Campbell shares his findings from 8,432 software companies and uncovers the high-value...
In this Heavybit panel on early stage sales, Jeff Burkland of Burkland Associates meets with a group of experts who have shaped sales processes and teams for growing startups and beyond: Brad Gyger, VP of Worldwide Sales at Heroku, Sarah Arcoleo, Talent Partner at Rainforest, and Whalr CEO Mitch Morando.
Topics on the table include how and when to make early hires, effective ways to compensate and keep standout salespeople, as well as tips for establishing sales structures that can scale successfully. Questions from the audience cover what to look for in a good candidate, how to support a rapidly growing customer base and ways to keep salespeople motivated. How similar is hiring a salesperson to hiring a developer? Watch or read on to find out.
Jeff Burkland: We’re here to talk about building a sales team, how to build a sales team, an early sales team in the very early stages of a startup’s life and hopefully growth.
So questions like, how do I hire a great sales team? How do I comp them? How do I think about the structure? Do I think about process? That sort of thing.
To help us, I’d love to get a sense for who’s out there. So if you would, I’m going to ask a question, raise your hand if it applies. Are you in a company where you’re looking for, or maybe soon to be looking for, your first one or two sales hires?
Okay. And then, are you looking to scale beyond that? So you want to scale above two or so? Relatively even, that’s helpful, okay. There were a few that didn’t raise their hands. We have a lot of quota-carrying salespeople? All right, just a little bit. Those looking to scale and hire their sales team? There you go.
All right, thank you. What I’d like to do now is take a moment to briefly introduce each of us. It’ll be brief so that we can get into the meat of the conversation.
As Malia said, I’m Jeff Burkland. I founded and run Burkland Associates. Burkland Associates, we provide internal finance to startups. So think bookkeeping to part-time CFO. In our part-time CFO role, we often get to deal with the questions of sales scaling and how to comp sales, sometimes to the chagrin of the Head of Sales.
Mitch Morando: Evil finance…
Brad Gyger: And that’s why I am over here, yeah.
Jeff: We’ve got a buffer here, which you’ll learn about. And myself, I’ve been in several startups where we’ve had to address these questions. So I look forward to the answers here.
Here to my left is Sarah Arcoleo. Sarah is the Head of Talent for Rainforest. And from talking with her ahead of time, I can tell you that, if you want to know how to hire great salespeople, motivate them and improve their skills, she’s the one to talk to.
Next to her is Mitch Morando. When I think of Mitch, I think of the Morando Method. So you can all learn what that is. I and we and Burkland Associates have had the pleasure of knowing Mitch at several startups, including Segment, Amplitude, Rainforest, just to name a few.
Mitch has now founded and running Whalr, but he still gets out there to help accelerate sales for engineers. For those who know his kryptonite, you can ask me what that is later.
Mitch: It’s dangerous.
Jeff: And lastly, we’ve got Brad Gyger. In addition to tons of experience in sales the last seven years, he started as the first salesperson at Heroku and is now running worldwide enterprise sales for them at Salesforce now. Brad has, from the very early stage, hyper-scaled sales experience.
All right, questions. My first question. I’ve read that my first sales hire should be to hire two AEs. What do you think about that? Or should I hire a Head of Sales or something else? Mitch is twitching, we’ll start with Mitch.
Mitch: Getting acid reflux a little bit. Where did the “hire two salespeople” come from? Anybody know? Oh, it was Lemkin. Oh, I need to go back and read that post.
I always, again, Heavybit being more developer-first, I try and always translate things back to the engineering process. It’s like, well, could you go and hire two engineers, exceptional engineers at the same time? If you could find them, yeah, of course.
But I think it’s kind of a misconception to think that you can go find two great salespeople and hire them. If you can, consider yourself lucky.
In most cases, it’ll take anywhere from 3 to 12 months to even find that first or second sales hire, because they’re not your typical salesperson. They’re probably more of a product person that knows how to sell.
I always kind of cringe when I hear, I get asked that a lot. Like, two salespeople? If you can find them, for sure.
Jeff: So, Mitch says good luck.
Mitch: Good luck, yes.
Jeff: What do you think, Brad?
Brad: This is actually one of the things that I’m super passionate about as it relates to building a team in that, what if you hire two bad salespeople? Then you have no data that is of merit to the business.
We talked about this, Jeff, as well. It’s very much the scientific method of, “Come up with a hypothesis, conduct an experiment, gather the data, draw your conclusion.”
I think with early-stage sales, whether you’re doing it as a CEO/co-founder or you have that first salesperson, it is really about experimentation and having the data tell you what patterns you need to replicate when you hire that second or that third or that sales leader to develop a playbook that is rote that lets you scale.
It’s really about, for me, it’s one,
let the data dictate what the shape of that sales role or set of sales roles should look like. And when you have that, then you start to scale.
Jeff: Sales data. I don’t hear that much.
Brad: Any manager, leader, sales executive should be managing their business to data, right?
In the Heroku world, it was very much about understanding user cohorts and the shape of their usage and how we could grow and scale those users and tie that success to our success. That also informed when and how we would hire that second and third and fourth salesperson.
Typically, sales data is, “What’s your forecast?” and “When’s that deal coming in?” and “How big is the deal?” That’s the meat and potatoes of sales data. But for early stage, especially for folks in the audience like developer-focused selling, there are patterns of use.
Why do they sign up? When they sign up, when’s the first time they do something of interest? When’s the first time they start to scale their use? That’s, I think, a pretty common pattern for most of the folks out here.
That was how, when we built the Heroku model, we understood the patterns of customers and how and why they bought and when they decided to scale.
When we reached a certain volume of customers and MRR, ARR, we knew we had capacity for an additional salesperson. And that’s just understanding the funnel.
Mitch: I think you make a good point there about experimentation and then developing the playbook. Because every business is unique, even if you’re coming out of one business and you go to another team and they’re doing the same thing in the same space,
you have to really experiment and develop and figure out what works for you.
So I think that’s a really important point you raised.
Jeff: Sarah, what do you think?
Sarah Arcoleo: Yes, I have, maybe, a slightly different perspective. But to Mitch’s point, I think it is very hard to hire a salesperson, one. And two, doubly hard, I think that timeline of 3, 6, even 12 months is something that we should all be keeping in our minds.
It takes a long time to find that right person. But I feel like, if you can find two around the same time and can start them around the same time, I feel like you can get potentially more data at a really critical time in your business.
I also feel like salespeople are naturally competitive, so having these two people working side by side, they’re learning from each other, they’re also doing some natural A/B testing. And they’re also just motivating each other to win.
Jeff: All right. I find this is a great debate, too. Because I think to myself, because I’ve hired a few salespeople, and how do I know they’re any good? I’m not a salesperson, I don’t know.
I have to say, I think like Brad and Mitch’s answers are, they know if they’re good, they’re sales. And ours are sort of like, “I don’t know.” So the context might be viable in that.
Brad: Salespeople, most of them are natural sellers.
In the interview process, they’re going to be selling. But a lot of the things that you can flesh out in the interview process is results.
How do you fare against your peers? How do you differentiate? How are you going to talk to us about the metrics of merit for you as a salesperson and how you then tie that to the business that you’re trying to be accretive to?
That’s, again, it’s the data that they as a salesperson can demonstrate if they’re going to join the team and then try and replicate that success for your business.
Jeff: Is that how you then sort of also judge whether or not they’re doing a good job, through that data? How do you think about that, especially if you’ve got one?
Brad: Yeah. You can. For us, it was cohorts of customers.
But I think, if you know the goals of the business, whether you want to sign new logos, whether you want to drive incremental ARR or MRR, whether you want to land your first six or seven figure deal, there are going to be metrics that dictate whether or not you’re successful.
Have I built a pipeline of those six or seven-figure deals? Have I seen incremental 2, 5, 10, whatever it is, growth in MRR or ARR for the customers that that individual has touched? And can I extrapolate that it was specific activities rather than the trajectory is set for this customer, because we know they’re going to be the next unicorn, right?
So there are certain things that you’d have to tease out. But I think, as long as, and this is kind of one of the core tenets of
when you hire a salesperson, tie their goals to the goals of the business. And then that’s how you compensate them.
The data will dictate whether or not that person is successful, because if the business is seeing incremental lift, they’re doing their job.
Mitch: You hit on a key thing there, the metrics. I just had this conversation with somebody, a founder, the other day because he had this exact situation.
I think, when you think about shipping code, I go, “How do your engineers ship code, what do you measure?” He’s like, “Well, how many commits do you make? Do you get to the QA process? How many bugs do you get and how often you get to production?”
I go, “So, the first three days, how often is a new engineer?” He goes, “Well, in the first week, I know exactly what they’re doing. First month, I know exactly how many commits they’ve made.” I go, “Well, it’s the same on the sales side.”
There are two parts to the funnel, I think. And I really stress this for any new hire, even if somebody comes on my team. I’m like, “I don’t care what you do, and there’s two things I’m going to measure.”
First one is how many demos, or call it a material meeting, that you’re doing every week? Because that’s the input, you can’t fudge that number. You’re not going to get closes unless you have demos or meetings.
And then ultimately, the output is how many closes per month. And keeping the feedback cycle really short, because those two choke points, now it’s your job to enable them and make sure that they are equipped to do all these two things.
But I think that helped this founder kind of go, “Oh, yeah. I should be thinking about it more like I’m running the engineering team.” So those two things I would really emphasize, you can’t hide from those, from those two data points.
Sarah: I would add to what both of you have said, is to establish like a culture of transparency, especially when you’re like an early-stage founder and you’re working with people in the sales function, and you maybe don’t know quite as much about it.
It should be very transparent what this person in this function is doing. They should be making calls with you sitting right next to them.
There should be no surprises on a daily basis, either with deals that are going to close or deals that aren’t going to close. They should be sharing and very open with all of the different things that they’re doing with prospects and customers. I would also just have a lot of respect for the sales function and learn about it as much as you can.
Being at a place like Heavybit, you have many resources to turn to to find out more about sales and people in your networks and communities. Talk to them and get a sense for what they’re doing to measure the people, the salespeople, on their team and really educate yourself.
Jeff: Brad, you mentioned something through this about comping and how you align the goals with that of the company. I know you feel fairly strongly about that.
Mitch: Says the finance guy.
Brad: We’ll be back, Mitch.
Jeff: I have my thoughts on it, too. I’d love to hear what you think about early days when two salespeople, scaling beyond two to maybe eight or so. How do you think about comp, what do you think that the audience should be thinking about?
Brad: There’s a couple of broader tenets, which is, compensation drives behavior for salespeople, I’m sure we’ve all heard that. But also make it as simple as possible or the broadest constructs that I can give folks.
Within that, as we’ve volleyed back and forth, is tie that compensation structure to, as best you can, to the goals of the business. And I’ve seen this work very well and I’ve seen this work counter to the goals of the business.
The cautionary tale that I have is I was at another platform company prior to Heroku where the metric that the business cared about was MRR and ARR for platform usage. But how the business originally wanted to compensate the members of my sales team was just on signups.
So what that means is that there’s no concept of customer growth, customer success, tying the customer success to the success of the business. Because the salespeople were motivated to sign people up and then let whatever happen happen, or have them go to support CSG, “post-sale”.
Not only does that not provide lift to the business, most importantly, and to the customers, it’s also demotivating for the sales team because they see, “I’ve signed up all these customers and I really want to work with this very exciting new startup that I know, if we do the right things for them, they’re going to go through the roof and we can set them on a path to be the next unicorn.”
But the way the structure was set up was not that way, and so when I went to Heroku, I made very sure that if we could set up the right structure to have a salesperson be motivated to see that customer grow and thrive and then mature through the different product additions and life cycles, that they would have the right motivation and incentives to grow those customers.
The customers would succeed, the business would succeed, everybody wins.
It seems kind of altruistic, but very simple, tied everybody’s goals together and everyone wins.
Jeff: That’s awesome
Mitch: Got to keep it simple.
Jeff: Thanks for sharing that. And this also gives a window into the type of salesperson to look for in an early-stage company, the kind of salesperson that will provide that feedback, that will flex with the business, that will help the business figure out their product as they sell into that.
Sort of skipping that question now, because I wanted to say that. But Mitch, it seemed like you were going to add to that.
Mitch: Yeah, sorry, I was going to add, again, maybe a little bit more tactical around, because you’re going to have this conversation a lot. And it’s your job, either the sales leader or the CEO, it’s your job.
The first, whenever I sit down a team, I ask them, I go, “What’s the comp plan? Give me the specifics. I’m a rep here, how do I get paid and when do I get paid?” And it’s crazy, I’m like, where did you come up with this?
I used to do the same thing, because you as sales, maybe you just inherit it. And then a few years back, I’m like, this is totally asinine.
So I kind of just flipped it and I said, well, I want to keep it so simple, I don’t want the salesperson to build their own spreadsheet. Because every salesperson will do that, they’ve got to figure out how to make money. There’s nothing wrong with that.
And so I said, “Okay, I want two dimensions. I want two dimensions to keep you focused.” And you might have to push back on your teams or your founders and say can’t have everything. “You want upsales or you want net new logos, pick one. What do you want, what’s the most important to the business right now?”
For me and how we run our team, it’s net new logos and it’s giving me an annual contract. Has to be at least a 12-month contract. And if you bring me those things, then I’m going to pay you aggressively and I’m going to pay you upfront and we’re going to, you know, there’s a little couple of things you’ve got to do, but it’s aggressive.
So the salesperson, they don’t have to build a spreadsheet.
That’s the challenge to you guys, especially founders and sales leaders. Can you build a comp plan that your parents can understand?
Just so they don’t have to build their own spreadsheet, I think that’s really important. If you can’t, that’s your bad.
Brad: Yeah, and let me add one more things to the infamous salesperson spreadsheet on figuring how they get paid. In the very early days, you want salespeople that are entrepreneurial.
Even if it’s not necessarily a revenue target or a contract target, using MBOs, or Managed by Objectives. Just saying, “Let’s get this many new logos or let’s get this many 12-month contracts,” and provide some sort of reasonable compensation for just that MBO.
If you find someone who is entrepreneurial enough as a salesperson and is willing to experiment themselves, but they see the potential for material upside, that’s great, the experimentation can happen, you can play around with the comp plan.
There’s all the data that you need because you have the ability to experiment with that kind of a salesperson.
Jeff: We can turn to the audience and see if anybody has any questions. Anything out there?
Mitch: Sorry, I’m only smiling because, again, a very common question. How do you predict usage, what happens if it spikes, what happens if..? So you’re not unique.
The first part, customer success handoff. Usually, you do want a salesperson once they, I require my team, you’ve got to sit on the kickoff call, you’ve got to make sure you’ve got to do your win report,
you’ve got to make sure everything’s bundled up, all the context is there, they’re responsible for getting the first invoice out, getting it paid and the transition happens.
For some accounts, you may want your salesperson also to stay with that account a little bit. But you’d better figure out a way to comp them, because otherwise, it’s like get back to… But you should have some transition there.
Then, once all that’s done, tied off, invoice, his first invoice gets paid, then you get your commissions paid. So there are a couple steps there.
But you’re right, the salesperson has all the context and they need to be there because you want to buy something and then the salesperson’s gone, right? Your customer experience is crap, so you do have to make sure that you’re not paying them until certain things are done.
The second part, though, is I’d really challenge you on finding a way to figure out, you know your business better than anybody. You’ve got to be able to make some pretty educated guesses on what the usage is going to be.
And if you can’t, then that just means you need to do more diligence upfront to figure it out. And then guess and figure out a way to get the salesperson just paid upfront and back to net new revenue.
Because if they are paid as money comes in, that is the death. Because all I’m going to do is build a book of business and just coast like an insurance salesman, and that’s your bad.
You’ve got to figure out a way through somehow, to just accept a certain amount of risk to the business, but pay your rep upfront a certain amount and get them to move on and get new logos.
Like that’s really what they should do, boom, transition, go out, get the next one. Boom.
So I challenge you, there’s a way to do it, though. Because again, you’re shaking your head, but everyone has this usage base, seats, usage, whatever, unpredictability, but you can figure it out. You can call me after.
Brad: I think, a point that, oh, no, it’s spot on. I think the one part of that that I would say is don’t build a wall between sales and CSG.
And what I’ve seen be successful is, as long as, depending on if you want to pay incremental new revenue for things that the salespeople may add for new additions or they add new feature functionality that incurs additional revenue, that is not necessarily the job of CSG.
From my standpoint, the role of CSG is to ensure the customer has the optimal experience on the platform.
So if there is a conversation around “Hey, I need this new thing,” whether it’s you build robots or you build a ticketing system that sends it back over, at least then you have the way for the salesperson to continue to be motivated on the right things that you’ve outlined for them.
As it related to the initial handoff from sales to CSG, what I have seen work is, as early as possible, if there are CSG engineers, or success agents, or we call them customer success, as early as you can get them into the later stages of a win, the better.
Brad: That’s the fair trade between sales and CSG, is that if you have the CSG team early into the process before it closes, you have that nice transitional handoff.
And then the trade is, hey, when we know this customer will need these additional things, we have the ability again via some APIs, automation, what have you, ticketing system, that sales re-engages, when it was appropriate to talk about new and additional and exciting capabilities that need to be sold.
Sarah: You’re looking for a couple of things. If I was at Heavybit, I’d be looking for somebody with a technical background of some sort, either through school or through work experience.
It’s hard to tell this on a resume, so you might have to get some phone calls in and start talking with people. But you’re going to want to look for somebody who is okay with ambiguity.
As the first sales hire, there’s no playbook. You’ve got to get out there, figure things out. So you also have to look for somebody who’s really curious.
Looking on a resume, looking for a background that shows that they’ve dug in deep with something, they have some sort of interest and a history of digging in deep with that, and look for that on a resume.
Another thing that you’re looking for with any sales hires, a history of success. You definitely want to see that. A lot of times, sales candidates will share their metrics in the resume. And that’s important to see.
You want to see somebody who has won, somebody who sets goals for themselves and wins, I think that that’s really important to see. When I talk about a history of success, you’re definitely looking for a sales hire that is money motivated, I think, across the board, that’s important to see.
At really early stage, you don’t want to over-index for that, because it’s not all about just closing deals and getting commission. You have to dig in and be curious and figure things out and go back and forth with product and your CEOs and what you’re hearing from the board and these kinds of things.
I think it’s hard to tell, in general, with sales sometimes, just from a resume. So you’re going to have to determine what’s important to you. Get those things noted. You’re going to get a lot of people applying.
Stick to that and then start having conversations and pattern matching, you know, for what’s important to you and who you’re talking with and see what ends up sticking, who you end up going with.
Mitch: I would maybe add one more thing, I think it’s helpful for technical founders, is how do you hire engineers? It’s almost the exact same process.
One of the things, especially when it comes to, okay, what are the key two or three things that we’re hiring for for this particular culture, and what are the specific questions we’re going to ask them? And let’s be consistent about that. Because you know, you’re interviewing somebody that you don’t have likely a lot of experience around.
But I would encourage you to approach it with a rubric and a lot of diligence around the consistency and get away from the qualitative, “I hate this, thumbs up, thumbs down.” Like, are you kidding me? Would you invite a bunch of non-engineers to come in, and do that to one of your engineers? “I just didn’t like the way the screen was.”
Same on the sales side, unless somebody’s, it’s even, I mean, it’s hard for me to interview salespeople, too. I have to dig and pin them down and get a little bit uncomfortable with them. But if you at least can have consistency in how you’re doing these experiments and interviewing, that’s going to help you a tremendous amount.
Just approach it the same way you hire sales engineers.
Sales engineers, we walk through and we do a code review, right? Well, that’s the demo, that’s the salesperson pitching you on something. So I think there’s always going to be, I’m not sure how you feel, but that’s kind of the way I found–
Brad: Plus one to everything you both said. I think the only thing that I would build upon is the technical aptitude. And when I say technical aptitude, I don’t necessarily mean that they have a technical background, but at least they exhibit a passion and a willingness to learn all the things to be successful as a salesperson.
I have a CS background, I was a Java developer, I had a school. But it’s unrealistic for me to think that I can hire all salespeople who also have CS degrees, who are Java engineers or have been Java engineers who also want to sell technology. Just the confluence of those things doesn’t really exist in the wild.
But what I have found is the salespeople that I have hired have always had a track record of success and have demonstrated that.
When we interview them, they demonstrate the passion. And the way that we validate that is they all go through a demo.
Your salespeople should all be able to go through with, 0 to 60, here’s how my customers are going to use it. Here’s why it’s awesome. And have that passion come through.
So if you are interviewing folks, maybe they don’t have the background, but they have the aptitude and the passion beyond just the numbers and the sales data that backs up they’re a great candidate, I think you’re probably onto something special.
Mitch: I’ll tell one quick random story. I always tell the people, “You pick whatever you want, whatever you’re passionate about, just teach me something.” Because you want these people, they’ve got to be,
they’re not salespeople, they are teachers. And they’re very curious and they’re not like your typical salesperson.
But I always say, “Open to you.” Encourage them to demo and teach you anything that they’re interested in.
I’ve only had this one time, and I heard it on the spot, but she goes, “I’m just going to demo your product.” I was like, “What? Oh, okay.” And she fumbled through it, and you know, we had engineers in there asking narky questions, and she has just handled it all.
But she went and did and she pitched us our own product. And even she said that, I was like, you’re hired. Because even just to have the confidence to just be able to go in there and figure it out, and she did a lot of research beforehand, it was exceptional.
So, I like that, let them choose. You’ll get a lot out of what they pick and their teaching style.
Sarah: Yeah. I guess I would add a few more things, just thinking about resumes in general. I do look for some consistency, so not too much jumping around, I want somebody to grind it a little bit where they were and gotten through some things and seen some things. So I look for that.
I also do always appreciate some sort of cover letter. Something sort of tying their desire for a job to the job that we are offering. And it kind of just sets you apart.
I would say 10-20% of candidates include a cover letter, so it definitely does set you apart. And also just a very streamlined, one page, well crafted resume. That’s always just a beautiful thing to see and also sets you apart.
Jeff: So I’m hearing track record of success, the demo’s great and something setting them apart, something that looks good.
Sarah: I think one reason to start out with the Head of Sales is that they have the experience to really test the market, to speak with customers or prospects and find out what they really want, bring that back to product, do that sort of communication.
They know how to work within an organization, they know how to go ahead then and hire more people when the time is right, they understand when the time is right. They have experience building a pipeline and knowing how to go about doing that at scale.
In some ways, there’s real advantages to bringing in a Head of, maybe not a VP, but you just could leave it a Head of, give them a big upside, let them test and experiment. Again, somebody who’s really curious, wants to dig in and figure out if this is a sellable product.
Somebody that you jell with because you’re going to be working really closely with this person. Somebody that you trust because they know a lot more about this topic than you do. So I do think that there is some real value in bringing in a Head of Sales versus somebody who is just going out and doing a sales function.
Brad: Yeah, so I’d say there’s a couple things. Where it should start is, what are the shape of conversations you’re having with customers to dictate whether you need a salesperson to manage those conversations, or you need a Head of Sales.
Because there are terms of service, there are MSA, there are compliance or regulatory concerns where hiring a salesperson to manage that pipeline and the shape of those conversations which you as a founder, CEO, CFO, laws of physics dictate that you need to have someone own that funnel and those conversations.
Also, laws of physics will dictate if you’ve scaled a team to 5, 6, 10 salespeople to own those deal execution conversations. Laws of physics dictate that I now need to have someone own that part of the business.
That worked fairly well for us at Heroku, is we know the standard conversations that our online or our enterprise salespeople are going to have, we have a relative understanding of what the shape of the funnel and those books of business are going to look like.
And we know, again, laws of physics, when we reach 8, 10, 12 salespeople on those teams, we need to add management, sales management, to help scale things out.
But a lot of that will be dictated, again, by the top level, what are the types of conversations you have with customers, and that should guide you to tactical deal execution, salesperson, or these are big thorny things that I now, as a CEO or founder, am having to manage, and I need someone who can execute at a leadership level and then delegate to a salesperson if they need to.
Jeff: How do you comp that Head of Sales? Give him combined quota for those under him, or something else?
Brad: There’s also a concept of a player coach. So if you have an individual contributor, a salesperson that you know has the selling motions down backwards and forwards,
the idea of a player coach where maybe you give them the ability to control a little bit of their own upside, but motivate them to take ownership of a bigger number.
If it’s purely a sales leader, it is a roll-up of a team number, right, and you can, when you get to more mature models, you can talk about over assignment or you say, “Hey, if our business number is this and we have a certain number of sales managers, we’re going to give them slightly less number and we’re going to assign more quota to salespeople.”
But that’s when you get to pretty material scale. But for a sales leader, they are motivated to make, if their salespeople are successful, they, as a sales leader, will be successful. And that needs to be a team number.
Mitch: I think maybe one thing I’ll add is, again, it’s like hiring twos. If you can find somebody who, as a Head of Sales, their first reaction better be, “What are you going to do? Are you going to go out and sell, and I’ve got to go figure out how this, like, I’ve got to go sell it.” The wrong sales leader will be like, “I need to build an org chart.” So be very careful there.
Now, the problem is, you cannot find these people. You got, Farlan’s over here, you got Tom over here. These people do not exist, so
you’re never stopping to hire your VP of engineering from day one, and you’re never stopping looking for your Head of Sales
Because you ship code and you ship revenue, you just do those two things.
So I do think it’s healthy. You go in, you try and just get your two reps in there, of course, I always say this,
the founders have to sell first. You’ve got to sell your first five contracts, otherwise you will totally implode at some stage.
So let’s say you’ve got through that stage. You’re now in that first year, you’re going out and trying to meet with other people that you hear are very good sales leaders from and get to your next tranche. Usually, it’s, can you get to one million? And then, can you get to 12 million? Those are different sizes of sales teams.
But certainly, I got asked this the other day, it was like, “Our next milestone is we’re going to get to 12 million in ARR.” And so the founder is like, “I need 12 salespeople.” And I’m like, “You do not need 12 salespeople.” “But it’s one million quota and you know, I got into a spreadsheet,” I’m like, “That’s not how you think about it.”
Reality is, to get to 12 million ARR, let’s say you have somewhat of a reasonable ACV, 60 to 120K or something. But you maybe need a team of four, maybe six.
I have seen teams that just get in, again, culture is a big piece of it as long as there’s transparency and they’re learning. Or you might get four reps, and of course they all should be above quota and they should all be killing it and they should, that tells you you need to hire more.
But you can get a line of sight in the 12 million and be really confident that your sales work before you really have to go out and get that VP. But I think you need to start working day one, just like your VP of engineering.
Jeff: It’s pretty rare to go from 0 to 12 in one year. That would be what would imply the 12 reps, I think that’s what they mean instead. Any other, any questions over here?
Brad: For my business, I’ll say the most successful salespeople I have in my organization are not the most deeply technical. And I would say certainly, in the earlier days, you want someone maybe who has more of a technical bend or more of a technical passion, at the very least.
But then certainly widen the aperture and release the requirement, you know, loosen that requirement as time goes on. The earlier hires, as long as you’ve playbook-ified all of that technical prowess and
your first sales hire or your player coach or whomever it is, there’s mentorship that should happen there.
Some of that is documentation and telling the new reps to RTFM and figure this stuff out. But then also having a more senior, the first-sales-hire individual who wants to step into a more senior leadership type role can impart the gospel to them and get them more dangerous.
But again, over time, release or relax the requirement or having a deeply technical background or passion.
Mitch: Again, my context would be, your first couple of hires, trying to get to your first 10 million ARR, where you better, assuming you’re one of the co-founders, you better be very involved in every sale or at least anything that’s material.
So for me, the engineering technical background is not a requirement. You want people, though, that you said, RTFM, their first inclination to be, I gave you some copiers. First thing I’m going to do is I’m going to read the copier manual, I just need to go sit down with CSM and see what conversations are you guys having?
So you can get that in an interview, as far as I would bet madly on somebody who just takes that as their first “I’ve got to go figure it out.” Where you don’t want to err on. I’ve seen this happen many times, is bringing somebody who doesn’t have closing experience.
Because closing experience, unless you have done it, it’s as hard as shipping code. You do not even know what you don’t even know.
Getting somebody to sign a contract of any size is you never master it. I think that is the thing, they have to have closed before.
If they’re closing deals that are maybe a little bit lower of where you kind of want to get, it’s okay, they can learn. But they have to have, even if they’re gone off and sold door-to-door books or any, I don’t care.
But they have to have closed, because that’s why I hate the SDR role, because you’re not getting people into the closing role which is a very unique skillset that you just need a lot of practice in. I don’t know if that helps.
Jeff: I’m hearing a little bit of, “Maybe technical is good,” but also I’m hearing, “Yeah, I’m not as worried about that, I want somebody that can close.”
I have to ask, so, “RTFM”?
Mitch: Read the F-ing Manual.
Jeff: Okay. Did everybody else know that, am I the only one? Maybe I never read the manual, that’s the problem. All right, other questions? Okay, yes.
Brad: I’ve got a couple of initial thoughts. There’s a couple of ways you can do it. MBOs, as I’ve mentioned earlier, you can attach to pipeline. So either pipeline generated or pipeline that turns out to be a close.
You can give them a different structure that is still tied to revenue based on where they are accretive to the funnel. Which for most of those SDRs is turning an MQL into an SQL, and SQL into qualified pipeline into something that closes.
So again, figure out what you want to maximize for there, and you can tie it to some part of your funnel. It also depends on where that SDR sits. I’ve seen SDRs sit as a marketing function. And I’ve seen SDRs sit as a sales function.
Also to your point around metrics to promote, or success to promote, it depends on what that individual wants to be later in their career. Do they want to run marketing engines? Do they want to be a closer?
And where the SDR role sits and what their career aspirations are. You can do whatever you want as it relates to comp structure, but if you have someone who is an SDR in the marketing side and they want to be an AE,
you have to figure out how you can cross-pollinate so that person has a path to success, if you want to do the path to promote.
But the meta there is, if you can optimize for whatever part of the funnel you want that SDR to drive value in and provide some lift to, you have a way to provide some upside for them.
Jeff: How do you guys do it, Rainforest?
Sarah: We keep it pretty simple. All of our SDRs have a base and there’s three levels. They can go up by $5,000 when they hit certain milestones. And then they get a certain dollar amount for every, we call them SQLs.
Basically, when they do a demo and they pass it onto an AE and the AE says, “Yes, this is a deal I want to work,” then they get credit for that, they get an SQL or an SQO.
At the end of the month, they get, it’s not a commission, it’s like a set amount. But they have a quota of, I think right now it’s 12, so they’re supposed to go 12 a month. And then they get paid when they hit 12. They get that variable in their next paycheck.
Sometimes we’ll do little spiffs having to do with deals that do end up closing and they get some additional amount on top of that for a deal that goes on to close. But otherwise, we keep it very simple.
I also feel like, I’m very proud of the fact that I think we pay our SDRs pretty well. A lot of that is on the variable side, but it’s a tough job and we really respect the work that they do.
Another thing that we do to make it a more exciting job is, they listen in on calls, they work very closely with the AEs at our company and
they are invited to join calls and listen in so that they can start to learn some of that closing, you can’t really know closing until you do it.
But at least they’re learning by listening in and getting some familiarity with the function. So they have this nice back and forth, and it’s really wonderful to see the tail end of one of those calls. The AE and the SDR are sort of conversing about how it went and super exciting when it turns into an SQO or an SQL.
Mitch: I think you both hit on the key thing of keep it simple, and the key metric, all right. Kind of back into, it’s qualify it and get a demo set, right? And just keep it simple, however you do, a quota or just pamper, keeps them really focused.
What I personally don’t like is just tying it to some outcome that they don’t have any control over. If you’re that person, just think about how that would motivate you. You’re like, “I have no influence over that. But I’m going to sit there and watch it and I’m not going to be out there qualifying and getting meetings set.”
It’s your own bad if you’re incentivizing people to be looking past where they are and if it’s out of their control.
But the one thing that I’m really alarmed at this SDR function in this as a career path notion. And I yell at a lot of sales leaders, not you guys, but because when you are getting somebody is an SDR and if they’ve been in that role for more than two years, you’re dead. You are dead as far as sales goes.
To take somebody who’s doing really well and is SDR, they’re just out of school, they’re doing great, and you go “Hey SDR, would you like to be a manager or would you like to go into the the SMB closing role?”
For a 22, 23-year-old, 24-year-old kid, that’s not fair. It’s taking advantage of them, really, because you get to go home and tell your friends and your family, “I’m a manager,” right?
That sets you down this path now, you’re going to be another two, three, I have calls all the time where people are three, four, five years as an SDR manager. And they’re like, “I really want to get into sales now.” I go, “I’m sorry to tell you this, but you got taken advantage of.”
The only way you can do it now is basically parachute out and go get a sales job anywhere, and you’re going to take a hit on comp and your ego’s going to take a hit, and now your comp is capped.
I mean, how many VPs of SDR are there, are you kidding? So I just am really alarmed at this function and keep thinking of it as a career path.
Your sales leader should be thinking of that farm system, this is the farm system to get you. If you can grow your own talent, that’s the absolute best way to grow a sales org.
Because it’s your culture, you’re going to do it uniquely the same way you think about engineering, right? If you don’t have to hire external engineers with their bad habits and you can mold up junior engineers to write code in the same way that you guys do it, that’s the ideal. So please, don’t trick SDRs into being managers.
Jeff: Don’t trick SDRs. Bring them into an individual contributor role instead.
Mitch: At least five deals.
Jeff: Five deals.
Mitch: Yeah, I mean, you could say, whenever you feel like it hurts. If that’s something, if that’s a function that you enjoy. I’ve seen a lot of founders who, they enjoy the function, they want to help build the playbook. And that’s another little thing I’d insert there as well, is make sure that you’re helping to define the playbook.
The other part of it is, if it doesn’t hurt, as soon as you want someone to own that, it could be 5 deals, 10 deals, whatever, but
as soon as you know that you need to have someone own that part of the organization, that’s when you pull the trigger.
Sarah: When you do get to that point, you are going to be in sales mode. So you need to find a way to position your company and the opportunity in a really compelling way to the candidates that you’re speaking with.
And knowing that you have five deals or more closed, that really speaks, “There’s a market for this product. It’s sellable, people are interested in it.” And that piques interest of the people that you’re speaking with.
Mitch: That’s how you hire your first salesperson. If I go in and the founder hasn’t even done sales before, holy red alarm. You’re just signing yourself up for a total S-show.
But if you come in and you’re like, “Hey, I don’t even know sales and I’ve been able to just somehow get these deals done. If I can do it…”
Then the salesperson is like, “Oh, well, you not only have an appreciation for the function.” And you really do get an appreciation for it. Because you’re like, “Oh my god, I didn’t realize how much work goes in.” It’s not ribbon-cutting and contract-signing. It’s all the work that goes into getting everything teed up, and it’s really a grind.
But that’ll allow you to also track that person, because you’re like, “Hey, I get it and I value sales as much as I do engineering.” And that’s why you’re going to track the right type of salesperson too. So they’ll help you.
Jeff: All right, final question here. We can do this relatively shotgun, but if you could place one thought regarding early days of sales in a company into the heads of the audience, this could be a learning or something, learning from this, so summarizing what we talked about, or a learning you’ve seen before, what would it be?
Mitch: I don’t mind. Again, I tell everyone this and every team that I’ve worked with, doesn’t matter if it’s Segment, Amplitude, Fred, Rainforest, everyone, you have to go out and sell.
You’ve got to go out and close the contracts. Quit thinking there’s a shortcut to that. There are no shortcuts.
“I read a book, I got a mentor,” and it’s great. Go out and grind it, go figure out a way to get a contract signed. And you’re probably going to fail for a few, but keep doing it. Because that’s what ultimately is going to be the most valuable thing to you and your team.
You’re the only one that’s the most equipped to do it because, and I’ll add in, you have to go get face time. I kick so many founders because I’m like, “Where was their office?” “Oh, it’s right around the corner.” “Well, you didn’t go meet them in person?”
Because they, people, they will buy from you. They’re like, “Yeah, I expect bugs and all this crap. But you, I’m going to bet on you and your team.” So you go get face time.
I had a founder come in and go pipeline review his first salesperson, and the founder, the sales was like, I’m trying to get him to come to meetings and he just is giving me crap. I ship code, whatever. So I sit there and I’m like, every meeting she wants you to go to, you have to go to. I don’t give a shit.
And so come back a month later, and I swear, he goes, “I’ve come to a revelation, everybody. When I go to meetings, deals close.”
I shit you not. And then we both look at him, we’re like, “We told you that a month ago, right?” And he’s like, “Oh yeah, anyway.”
Really, you go get face time, you will close deals.
Jeff: I’d like to add, too, at this point. Peter, the CEO of Segment, likes to tell a story about how Mitch made him go out and do some selling. And this was when Peter was selling like 10K AAR deals, that kind of thing.
Mitch said, “Go ask for 120K.” Peter, you know, tells the story, he goes, “What? I can’t believe that.” And he goes and he asks for 120K. And the first time, the guy says no. And Peter walks away.
The next time, the guy says, “Okay, how about 20K?” So they just went from 10K to 20K. And the next time, the guy goes, “Okay.” Peter’s like boom, the light went off. And then he can bring in a salesperson.
Mitch: And there’s a little bit of extra context here, because again, assuming you’re selling to, especially engineers, I love selling to VPs of Eng. Unlimited budget, get whatever the hell they want.
But 120K, there’s a reason that is a real sweet spot. A, it’s easy to understand, 120K, 10K a month, okay. And it’s about half of a fully-loaded engineer.
So when you put that into the mindset of the VP, like, “Oh Jesus, half an engineer and I get all of your talent and you guys iterating and solving this problem?” Now, you’re not going to necessarily close it at 120K, but it’s a value point, it’s easily justifiable, all right, for a VP of Eng.
So just again, think of it that way when you’re thinking about this 120K price point. And you’ll, slowly over time, you’ll get there. You’ll get more confident about selling.
Jeff: All right. So I think that was one thought, right?
Mitch: You got it.
Brad: One thing.
Jeff: Yeah, one thing.
Brad: So if we could, going back to one of the earlier comments, one thing that I would leave you with as it relates to today’s conversation in the context for this session.
When you are building your compensation plans, tie the success of your customer, your business and your salespeople to that compensation structure.
That’s it. Very simple.
Sarah: I guess my final thought would be to just keep in mind, when you’re out there, that you are always scouting for talent.
You might not be at the stage yet where you’re ready to hire somebody in sales ops or ready to hire an SDR or a second SDR, but always be out there looking for them.
When you’re talking to people and when you’re reading the news and you’re seeing companies that are doing well or companies that have been acquired, or whatever signals that might be out there to show that somebody that you’re interested in is on the market, pay attention to those.
And continually build and work your network. Most of our, a good, I shouldn’t say most, but a good number of our hires come through the networks that we’ve built with Rainforest. So make sure that you are constantly working those.
Mitch: Yeah, that’s a great point, because
you should be able to hire your first team of 50 primarily by second degree of connection.
A lot of teams just aren’t thinking about like, “My engineering team doesn’t know salespeople.” Everybody knows a salesperson, right?
Probably the engineer kind of thinks that the salesperson’s not a salesperson. Wow, I didn’t even know you were in sales. So it’s not necessarily that that person is poachable, but it’s that they can help you calibrate like, “Oh, I would go talk to this person and this person.”
So that really is the way you get your team to first 50, it should be probably through network. But you’ve got to remind everybody, your team’s not thinking about it. You’ve got to remind them.
Jeff: All right. Brad, Mitch, Sarah, thank you very much for taking the time.
Interested in learning more about early stage sales best practices? Watch Marcy Campbell’s talk on Early Stage Sales and Business Development for more on building a sales org.