Founders looking to build their sales teams from the ground up have, understandably, quote a few questions. When should you start hiring a sales team? How many SDRs and AEs should you have? How do you structure territory, compensation and leadership? Mandy Cole, VP of Sales at Zenefits; Sam Jacobs, SVP of Sales and Marketing at Livestream; and Brendon Cassidy, VP of Sales at Talkdesk, Echosign and LinkedIn, answer those questions and more.
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In a nutshell:
- Don’t hire reps from brand-name companies with great products. Instead, find people who have few leads to work with, or have had to sell bad products.
- Use frequent promotions and company impact as a selling point.
- Territory structures can wait until you’ve hit at least $10 million ARR.
Q: When’s the right time to start a sales team?
Jacobs: Once you’ve hit product-market fit and have 10-20 customers.
Q: Should you hire reps or a VP of sales first?
Jacobs: Bring in a few reps first. Ideally, you should have enough leads coming in that that SDR has enough work to do, and once you have enough lead volume that the SDR needs managing, bring in a VP of sales.
Q: Should you hire an AE or SDR?
Cole: If most of your leads are inbound, get an SDR - they’re easy to get up to speed and test opportunities. But bringing in an AE who’s a closer isn’t the worst thing either.
Q: What should you look for in your first few reps?
Jacobs: It depends on the market - if you’re looking at someone who’s ACV is under $50,000, they’ll likely want to make a lateral move. In that case, you can bring in an SDR to interview as an AE. People who play team sports and went to small liberal arts schools are great hires - they’re motivated, used to failure and not entitled.
If you’re looking for people with sales experience, don’t hunt from massive brand names - those reps had lots of air cover. Instead, look for people who haven’t had lots of leads, and were dealing with an inferior product. There’s an inverse relationship between the quality of the product, and the quality of the salesperson.
Q: What’s different about managing millennials?
Cole: Play up the potential for experience and exposure. Millenials value giving input and having an impact, and find ways to have them give you the feedback you want and need.
Jacobs: Let them know that promotions won’t happen every three or four years - it’ll be every six to nine months at first, and after that, they can choose a track to specialize in. Constantly give people opportunities for raises or promotions, and clearly communicate your values.
He suggests that 80% of promotions come from within, and 20% from outside - this feeling of meritocracy can become a huge selling point if it’s part of your brand.
Cassidy: Don’t bring in people who are used to dominating a space with no real competitors.
"Avoid hires that are used to top institutions. They woke up on third base thinking they hit a triple." - Cassidy
Q: Should you hire and train people with no sales experience?
Cole: If you’re not tackling a new market and that strategy is working for you, go for it.
Cassidy: If it’s primarily outbound, yes. If inbound, be wary.
Q: How do you approach commissions?
Jacobs: Give monthly commissions - if you go quarterly, you’ll see lots of sales happening at the end of the quarter.
Cassidy: Pay AE’s above market rate, as long as they’re profitable.
Q: Territories or specialization?
Jacobs: Territories don’t work initially, when there’s so much volume. They evolve over time. Initially, you should focus on the ideal customer profile instead.
Cassidy: Don’t put in territory structures until you hit $10 million in ARR.
Q: Do you have any tips on setting quota?
Jacobs: 80% of your reps should be at or above quota. If a rep misses quota for a month, let it go. At two straight months, look at qualitative characteristics - punctuality, absenteeism, Salesforce activity, etc. After three straight months of missing quota, fire the rep. Unless you’re in a highly seasonal business (like travel), he recommends keeping quota the same year-round.
Q: What should be the cost of sales?
Jacobs: 20% of the initial investment should be in sales or marketing. The ratio of quota to total compensation (including benefits, commissions, etc.) should be at least 3:1 for top performers, and 5 or 6:1 for lower performers. 10-12% of the deal value should be set aside as payout for reps.
Q: What’s the ideal SDR to AE ratio?
Cole: They currently have a 2:1 SDR:AE ratio. If you have the market opportunity to load up on SDRs, go for it.
Jacobs: There’s no one-size-fits-all ratio. Instead, it’s a math problem: how many opportunities created by each SDR? How many opportunities are needed by each AE? What the conversion rate and ACV?