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14 Tips for Building a Startup Sales Team

Below is a great post by Dharmesh Shah on building a startup sales team.  You can read the full post here.

"Your sales force if your company's lifeblood. No matter how good your product is, it won't sell itself, no matter how much you believe otherwise. Establishing a competent, effective team to draw customers is often challenging for entrepreneurs, though, who would rather focus on research and development or chase VCs.

First off, a few disclaimers: I've never been a sales person. I've never even played a sales person on TV. All the points below have been pulled from startup sales teams that I think work pretty well (including the team at my marketing software startup).

1. Don't hire sales people too early. In the early days, the founders should be able to sell (and should be selling).

2. You don't need sales people, you need sales. Don't think VP of Sales - think "Revenue Engineer". (Not the greatest analogy, but just like you won't hire a development "manager" as one of the first 5 people in a startup, you shouldn't hire a sales "manager" either). Don't get caught up in fancy titles - focus on dollars in the door.

Below is a great post by Dharmesh Shah on building a startup sales team.  You can read the full post here. "Your sales force if your company's lifeblood. No matter how good your product is, it won't sell itself, no matter how much you believe otherwise. Establishing a competent, effective team to draw customers is often challenging for entrepreneurs, though, who would rather focus on research and development or chase VCs. First off, a few disclaimers: I've never been a sales person. I've never even played a sales person on TV. All the points below have been pulled from startup sales teams that I think work pretty well (including the team at my marketing software startup). 1. Don't hire sales people too early. In the early days, the founders should be able to sell (and should be selling). 2. You don't need sales people, you need sales. Don't think VP of Sales - think "Revenue Engineer". (Not the greatest analogy, but just like you won't hire a development "manager" as one of the first 5 people in a startup, you shouldn't hire a sales "manager" either). Don't get caught up in fancy titles - focus on dollars in the door. 3. Don't hire several sales people at once. Your goal is to figure out the "pattern" of what kinds of people are best based on what you're selling and who you're selling it to. You need some feedback from the system so you can continue to iterate on your hires. 4. If you've never hired or been around sales people before, be prepared for a bit of a shock to the system. They're not bad people, they're just different. If you're an introverted geek like me, it's helpful to remember that your startup needs to sell stuff. 5. Resist the temptation to create complicated compensation plans. If it requires a spreadsheet to figure out the commission, it's too hard. You'll have plenty of time to confuse sales people later - start simple. 6. Agile methodologies can work in sales as well. Iterate! Refine your demo script, your slides, and any other collateral information. Capture the lessons learned by the best-performing people and spread it to the rest. 7. Sales people will generally act in mostly rational (but often surprising) ways based on incentives. The rules of the game define the behavior of the players. You were warned. 8. Always connect incentives somehow to ultimate customer happiness. If you reward just "deals getting done", you'll get deals - but at too high a price. You might get push-back that sales people don't control/influence customer happiness, but they do. They "pick" customers. They set expectations. And they control the degree of "convincing" applied. 9. Make sure you understand the economics of your business. Figure out your total COCA (Cost of Customer Acquisition). This includes sales people, marketing people and marketing campaigns. Quick example: Lets say you paid a sales person $10k, a marketing person $10k and you spent $5k on Google AdWords (for a total of $25k) last month. If you sold 10 customers last month, your COCA is about $2,500. Different businesses have different needs in terms of sales vs. marketing spend. Make sure neither is too far out of whack. 10. Your life-time-value (how much revenue you expect to generate per customer) should be higher than your COCA. (No, I did not need a degree from MIT to figure that out.) Once your LTV is a multiple of your COCA, you're ready to start turning the knob and scaling the business a bit (hiring more sales people). But, if your LTV is way lower than your COCA, proceed with caution. If there is no hope for LTV getting higher than COCA, you've got a problem. Don't try to hire additional sales people until the economics sort of make sense. If the car is pointed towards a brick wall, hitting the accelerator is not a good idea. 11. Track data maniacally (even if it's just in a spreadsheet). Information you will want includes: What was sold, who sold it, when, for how much, etc. This data will be invaluable later as you start to scale. For example, you should be able to answer the question: We had 14 customers cancel last month - who sold those customers? Is there a pattern? In the early days, you likely won't have the volume (or the time) to analyze the data - but you should at least capture it for future use. 12. Your pricing should be in line with your sales structure. For example, you can't expect to have an outside sales force (that meets with customers in person) if your average deal size is only $10,000. The math won't work. 13. Once you get beyond three or so people, running your sales in a spreadsheet will become painful. Start looking at CRM systems (like Salesforce.com). 14. Start watching the shape of your "funnel" as early as possible. How many leads are you getting a month? How many turn into opportunities? How many of those convert into paying customers? Once you understand your funnel, you can slowly start tweaking your system to fix the "leaks". That's all I've got for now. For those of you that have built early-stage sales teams, what are your ideas and insights?"

It is your business!

On Reflections

Organisations touch our lives everyday, in one way or another, whether you like it or not. We simply cant do without them. From schooling to healthcare, from entertainment to electronics, from food to shelter - organisations touch every aspect of our lives. There are charity organisations, non-profits, non-governmental and for profit organisations. Be it any kind of org, if it needs to be successful and be effective in carrying out its mission, its purpose, then it certainly needs some kind of organising plan. We can call it a business model (even though not all orgs are businesses; we can use the word business in its broadest sense).

The point of this post is not to elaborate on the pros and cons of business models. I simply want to draw your attention to the similarity (often unnoticed) between an organisation (say, a business org) and your career. I think its an interesting similarity.

Every business (and a business plan) has to focus on some key parameters or elements in order to make sense of its existence and be effective in achieving its goals. Like, for example, a business needs to identify who its key customers are, how it plans to engage with these customers and what customers actually want. It also needs to know what its strengths are, its key relationships, its value chain, its cost and its revenue model, among other things. Clarity on some of these key elements are necessary (though they may not be entirely sufficient) for any organisation to achieve its true potential. Typically, these factors and many other facets of a business are covered in great detail in a business plan. This document then becomes a guiding light for members of organisations. Of course, the model can be dynamic (at least the effective ones are) and will need to be modified to reflect actual experiences and changing expectations of all stakeholders.

Now consider your own career. How different is it to the workings of an organisation? Don't elements like customers, value addition, costs and revenues make sense from a career point-of-view as well? Well, I think so and let me explain. Just like any business, you too have customers (the company or organisation you work for). You have costs (in terms of your time spent and other opportunity costs). You certainly need to know your strengths and weaknesses. You need to know your network of key relationships, both inside and outside your organisation. These days you do need a marketing plan and a "personal branding" strategy. Your revenue model is quite simply your compensation (in all its forms). You would do well to have an idea of how you add value to your organisation. You do make investments in many forms like a college education. So, in effect, all those elements apply to you as much as it applies to a business. You are not much different from a business at all, are you?

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