In my last post I talked about selling your SaaS product to big companies. It included some of the key challenges for boards and CEOs. And No 1 on that list is building the right team.
In my subsequent discussions with companies and other NEDs, one problem in this area has dominated. At least in Scotland, finding sales people is proving difficult. Many SaaS companies feel hamstring by a failure to identify suitable recruits.
A group of NEDs and advisors are gathering in a few weeks to share ideas. In advance, I wanted to do a bit of thinking aloud.
My basic idea is simple. Why buy an expensive sales team with long track records? And offer further rewards with hard to define commission structures. Instead try to find young people with potential and ability to learn. Let them grow into the role like everyone else.
When I talk to entrepreneurs about this subject, the discussion centres on three things. Finding a candidate with the right experience and track record. Designing an appropriate (and expensive) salary and commission package. Confusion and uncertainty about the exact needs of the business.
At one level the last point is not surprising. For a SaaS company at the start of the scale up journey many things are unclear. Seeking larger customers is fine. But which are the best fit for your product? You know that selling to the enterprise is a longer and tougher road. Yet the steps along it and the path to success are unknown. Revenue depends on both new logo accounts and upsell. What is the right balance of resources between them?
SaaS Scale up - You don't know what you don't know
The reality is that hiring a sales person is not going to resolve these issues. At this stage of growing a SaaS business you are still exploring and experimenting. You must find the answers to a whole series of fundamental questions, including:
This is a job for the CEO and the whole team. A sales person may have the right skills and experience to help. But there is not a defined and measurable role waiting to be filled. Sales, account management, customer support and product development all need to combine to get to the right answer.
Ability to learn not ability to sell
So the reason you are unsure about the exact needs of your business is that you don’t know. And the critical task is to find out the answers. Not to sell an established product to a well understood target customer base. That comes later (if you are lucky).
In this light, the two earlier questions (track record and package) need quite different answers.
Take skills and experience first. The critical qualities needed to succeed in this role are:
It may well be that you can find a sales person who fits this description. But you will need to look well beyond their pure selling skills.
Hire for potential
Reading the list above again, does it remind you of anything? These are the talents that everyone in a startup needs. Every other senior appointment tends to be someone with little or no experience in the role. The CEO and founder may be a first time entrepreneur. The CTO will be a great software engineer but have they led a development team in the past?
Each company will have its own mix. The guiding principle is the same. A typical team is a group of ambitious, talented individuals doing something new. And taking on different and stretching roles as they do it.
As a founder you understand this. You look to hire people with potential to grow and achieve great things. Why would you approach sales any differently?
Most often, the CEO is the best person to “sell” your SaaS in the early days. Of course as you grow, you don’t have time to make every sale. But you can coach others. This article by Steli Efti on coaching junior reps offers a basic framework.
Reward for growth
Yet the reality is different time and again. I look at business plans and the most expensive planned hire is the sales lead. Often paid more than the CEO. The job spec includes 10 years experience. The objective is to find the finished article. One person who can rewrite the growth curve single handed.
On top of the big salary, sales reps are also looking for commission. If your SaaS is at the start of the enterprise journey you don’t know who you will sell to. What exactly you are selling. Or how much your customers will pay for it. How do you design the right reward systems?
Commissions and other sales rewards are systems of incentives. They work well in a world where the role of sales is defined in detail. The product options and margins are established. And the target market is clear. Then you can motivate the right behaviours. And set stretch goals.
Where these things are not well understood, incentives are fraught with danger. Without any ill will on either side, it is easy to encourage the wrong things. Sell at the wrong price. Sign up the wrong customers. Push for revenues too early. And a hundred other ways to damage your business.
So is a high paid VP of Sales the answer. Is a commission structure that no-one fully understands the best way to spend money?
The Chairman's view
Experienced sales people are difficult to find. Bringing them into a startup is high risk and high cost. It may still be the right strategy. But it is worth considering an alternative approach.
Look for people who are young, ambitious and talented. The type who fit well with the nascent culture of your organisation. Maybe someone who is in a sales training scheme. Or doing a sales support job and getting frustrated perhaps.
Offer them a fair base salary and some options. You can always add a commission scheme later. Work with them. Help them learn and grow into the best sales team on the planet. And they will help you find the right market and business model to build your SaaS….or is this all crazy?
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.