I was going through a discussion on LinkedIn the other day and yes, I find my content inspiration on LinkedIn and Quora.
The topic of discussion was: increasing sales and making “sales more repeatable”.
It grabbed my attention so naturally I started to read the comments. Without pitching and waiting on the sidelines I observed the comments of folks from different backgrounds. Quite a lot of sales veterans pitched in and it was interesting to see how most recommended hiring decent sales people and building out the sales team.
This advice although not a bad one I see being plastered everywhere, and if taken out of context can be very destructive. Especially for startups that are in their early growth stage. Which is why I wanted to write this article to add to that discussion and answer the question on whether or not you need a sales team?
I don’t believe there is a simple answer for this. There is no one size fits all when it comes to having a sales team. For instance one of the companies that I worked for, LiveChat, grew to $4M ARR without ever hiring a single sales person. In fact, I was their first ever sales hire with the single goal of creating a sales team at LiveChat.
Goes to show that this topic isn’t really that black and white. However, in true HustleX fashion I will try and dissect this topic and answer the question of whether a sales team (or a salesperson) is something that you need or not.
First things first, before you decide whether or not you should hire sales people or let alone build a sales team, do this:
Look at Your Numbers
Yes, it’s really that simple. It all starts with understanding where you currently stand and where you want to get to. So let’s analyze two different scenarios, assuming that both these companies don’t have a sales team and founders are the ones doing sales full time.
Company A is closing around 10 new customers a month.
- They get around 100 new free trials a month
- Out of which they get 50 MQLs (more on that here)
- They qualify and turn 20 of those into bona fide prospects or “SQLs” (Sales Qualified Leads)
- Of those 20 SQLs, they close 10 customers
- Their close rate is 50%!
A 50% close rate is pretty darn good, no matter how big or small of a company you are. This is not an easy feat!
Company B on the other hand is closing around 20 new customers a month.
- They get around 500 new trials a month
- Out of which they get around 300 MQLs
- They bring in around 100 SQLs
- Of those 100 SQLs, they close 20 new customers
- Their close rate is 20%.
The close rate isn’t that impressive. Whereas the issue also seems to lie in the fact that their trial to SQL conversion seems to be super low despite the fact that 60% of the trials are MQLs, so they fit the ICP.
Knowing that both of these companies don’t have a single sales person. Who do you think is more in need of a sales team or a sales person?
Yes, you’re right Company B!
Hiring a sales team in the case of Company B seems like the right next step. As founders probably have their hands full with other things on their plates, for instance running the company. So sales is obviously taking a hit.
There seems to be a decent number of trials coming in every month and majority of those trials are marketing qualified. Which leaves us to believe that the sales process is the one that isn’t being managed well. If a lead is “qualified”, then the close rate should be way more than 20%. Which is where you need to bring in a sales person or a sales team to do sales full time to make sure that the leads don’t fall out of the funnel and are getting full attention and are being followed on time.
Company A on the other hand is doing fairly well. They have a 50% close rate which means that the sales process is working.
The leads on the other hand seem to be not too much to handle as the volume is fairly low. The founders themselves can handle 20 qualified leads a month. Not only is that not very many calls, but in the early days, the founders are such experts in the product, its nuances, how to hack it, etc … you want them to keep selling, at least until it becomes > 25% of their time. 10 demos a month isn’t yet > 25% of their time. Assuming those are 30 mins demos done via a screen-share software.
So adding a new sales person in to the mix won’t really help in sales until there are enough leads that the founders just don’t have time to manage them. That’s probably 25+ qualified leads a month, potentially more. But before that, a warm body that doesn’t know your product well isn’t really going to help.
Bottomline, analyze the numbers and see where you’re at. If it’s too much work for you, by all means go ahead and hire a sales person however make sure whatever decision you take has a direct positive influence towards reaching your targets.
Cost of Hiring a Salesperson
Salespeople aren’t cheap. They are motivated by commissions, this instant gratification method works (and well at that). Top that with the base salary and it starts to become a staggering amount to pay out every month.
Granted salespeople help bring new clients. However, you have to analyze the fact if you have enough pipeline opportunity to afford a salesperson in the first place. Numbers might vary by company or product, but look at your pipeline numbers. What is the value of your sales pipeline vis-à-vis the cost of hiring a salesperson?
This kind of analysis should give you a good indication of whether you have a sustainable business with enough margin to afford to pay a sales rep.
Also, if you’re not locking your customers to yearly plans and salespeople are closing them to pay monthly without a contract in place. That can be very disastrous for the company’s bottomline. Mainly, because the customer can choose to churn anytime they like. And if they churn within a few months of buying, that will lead to a longer payback period which can add further hurt the bottomline.
What it Takes to Sell your Product
Does your product require a lot of hand holding for your customers? If so, having a sales team or a sales person onboard to guide them through that process is probably the best option.
On the other hand, if your product is more of a self service. Then a sales person would be rendered useless as the ROI would simply not be justified.
If your product is comprised of enterprise offering. Then, without a doubt you will need a team to be able to make sure that they are taking care of the prospects through out the sales cycle. The sales team will need to dedicate themselves to the brand and their only job is to guide the customers and get them to sign up.
Start by Selling Yourself
Okay, not by “selling yourself” but selling, yourself. I have witnessed too many startup founders who don’t have experience in selling and don’t feel comfortable making sales calls or asking prospects to buy. This is probably because many of the founders are product or tech people. If you indeed fit this profile, then you need to start by selling your own product first.
Spending time with the customers is the best way to find out what prospects needs are and how good your solution currently is at mapping to their needs. This only happens of you’re not a wolf of wall street sales person. You learn by asking.
The mistake many startup people make is they hire a “sales person” to go out and talk with customers so they can do what they’re good at which is building product or “running the company.”
Sales people are a different breed. The problem is that in an early stage business there probably isn’t a perfect fit between your early product and a customer’s needs. You learn that by showing them your product, watching their reactions, asking them questions about what they’d like to see improved and then racing to the the dev team about what you’ve learned and how you can incorporate it into your product plans. Repeat this process 50 times and trust me you’ll see patterns.
Of course, once you’re unable to keep up with demand. Your sales pipeline is looking great, but you can’t close as many deals due to lack of ability to follow up with demand. That’s the perfect time to bring a seasoned salesperson onboard and let them do what they do best. And that’s selling!
If you’re building out a sales team and/or are considering hiring salespeople and have any questions. Feel to free to write them below or send an email to me, happy to help!