Bringing on the first sales hire has recently become a popular topic amongst several of our portfolio company CEOs. For SaaS companies, the discussion generally centers around 3 key questions:
Has the company achieved product/market fit?
Has the CEO and/or company leadership demonstrated a repeatable process for converting prospects into customers?
Are there enough leads to necessitate a new sales hire?
Product/Market Fit It's easy to know when you've hit your stride and achieved product/market fit. Customers will begin to churn less frequently and more of them will get beyond the first 3 months of usage. You'll see more engagement within the product and you'll hear more frequent anecdotes from your customers about how you're solving their problems and providing real value. You'll start seeing more of your leads coming in through word of mouth and you'll quickly realize that the grass roots marketing efforts and your dedication to customer on-boarding and success are paying off.
Don't hire a salesperson until you're confident about product/market fit.
Repeatable Sales Process Establishing a repeatable sales process can be trickier for new CEOs, especially if they lack go to market experience. It can be tempting to bring in a hired gun to build the process and effectively outsource the responsibility. Don't do that!
Sales leadership is ultimately the CEO’s responsibility. As a result, the CEO must intimately understand what it takes to lead a prospect through the buying journey and turn them into a customer.
Some questions to consider when establishing the sales process:
Is the demo built out and effective?
Will multiple salespeople be able to use it and/or create their own demos?
Does the deck or one-pager communicate the product vision and value, and bring the prospect further along on their journey?
What should the discounting matrix look like?
If you're selling to Enterprise customers, do you have enough of the security items figured out (process, documentation, training, external audits, etc)?
Do you have a contract that will be a reasonable starting point for larger customers (as opposed to your online EULA which would typically work as a clickthrough for smaller customers)?
The CEO should establish the sales process, understand the journey from prospect to paying customer, and optimize their conversion rates. This will become the starting point for your sales compensation structure as well as a barometer to gauge their success.
Leads When it comes to leads, it’s important to balance quality with quantity. I'm in favor of having a smaller quantity of leads that are of a higher quality - assuming there are enough leads to get your first salesperson started. You don't want so many leads coming that your team is unable to handle each of them and they are ultimately dropped. And you want the leads to be of the highest quality to give your first salesperson the best possible opportunity. It’s likely that an attempt to drive significantly more leads in the short term will ultimately result in a lower level of quality.
There's a natural tension between sourcing enough quality leads for your salespeople vs. having them drive some of their own. As you scale your sales team, your marketers will have to catch up and re-calibrate, giving your new salespeople the opportunity to ramp and your existing salespeople will have to prospect on their own.
Another aspect that new CEOs struggle with is in defining the role that they want their first sales hire to fill. Does the company need:
A process VP who can scale the sales organization?
A rolodex-carrying executive with industry contacts?
An SDR (sales development representative) who can do a first screening with leads and only pass on true prospects?
Or a traditional inside sales AE (account executive)?
If you hire the "VP", you should make sure they understand that the primary expectation for them is to sell, sell, sell and to carry their own weight. They are the only salesperson so establishing a formal process, crafting compensation plan, and any non-selling activities can wait - while the actual selling can not wait. Unfortunately, it's difficult for most people to be both great at selling and to be great at managing the sales process simultaneously.
A rolodex-carrying heavy hitter is really only an appropriate choice if you’re elephant hunting right from the start. As it takes time for the product team to build necessary functionality, scale and security needed by Enterprise customers, there are few companies that should opt to sell to the biggest and most complex organizations first. The rolodex guy can be critical for the growth of an Enterprise software company, but this person is usually a poor choice as a first sales hire.
If you’re considering the SDR hire, I would argue you're not actually hiring your first salesperson. A salesperson is someone who will close the majority of your deals on their own, while an SDR could be extremely valuable for effectively managing your time with real prospects further down the funnel.
A SaaS company’s first sales hire should be an account executive. A quota-carrying salesperson who is driven to hit their targets and achieve their desired compensation levels. Ideally, this AE would have experience meeting and exceeding quota, as well as a hunger and enthusiasm for selling your product.. Empower a socially competitive sales environment by hiring two AEs at roughly the same time. Beyond increasing sales, hiring two AEs can help you define and evaluate performance while driving healthy competition and helping to build a culture of high performance sales.
More to come on thinking through comp plans for your first hires...