Thread by @arjmahadevan

Should you build a sales team?

How do you know if/when to hire a sales rep?

Here are some tips from @dharmesh on building startup sales teams

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 -- not as your first hire).

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 from you (if you're not a salesperson)

5. Resist the temptation to create complicated compensation plans.

If it requires a spreadsheet with multiple tabs and lookup functions to figure out the commission, it’s too hard.

Don't worry, you'll have plenty of time to confuse yourself and your sales people later. For now, 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.

In the early stages of your company, your story and pitch should be getting better every day.

7. Sales people will generally act in mostly rational (but often surprising) ways based on incentives.

The rules of the game defines the behavior of the players.

Don't say you weren't warned.

8. ALWAYS connect incentives somehow to ultimate customer happiness and success.

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, 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: Let's 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

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 salesforce (that meets with customers in person) if your average deal size is only $10,000.

The math won’t work.

Likewise, if you have an inside sales team, any price point less than $500/month is going to be tricky.

13. Once you get beyond three or so people, running your sales in a spreadsheet will become painful.

Start looking at CRM systems

14. Start watching the shape of your “funnel” as early as possible.

Better yet, get ahead of the game and figure out your flywheel.

How many leads are you getting a month?

How many turn into opportunities?

How many of those convert into paying customers?

How many of those customers are delighted -- and are now advocates?

Once you understand your flywheel, you can slowly start tweaking your system to fix the “leaks”.

Check out the full post from @dharmesh here onstartups.com/tabid/3339/bid…