Silicon Valley is littered with platitudes about product market fit. Yes, it’s vital, but the best investors and founders often realize that nailing distribution is a critically overlooked requirement for a company to reach escape velocity. As the saying now goes: First-time founders focus on product, second-time founders focus on distribution. It is exceptionally rare for a product to truly sell itself in order to reach scale.
There are many ways to distribute a product. Marketing, sales, business development (including partnerships) are some of the most common. For enterprise-level software, there is typically a sales team involved. For most founders that don’t have sales experience — particularly enterprise sales management experience — this is a daunting task. Scarier is when it isn’t — i.e. the founder “wings it” and doesn’t recognize how critical it is to get right. There is a lot to think through before, during, and after you build your enterprise-level sales team.
Preparing to build your enterprise-level sales team
Give me six hours to chop down a tree and I will spend the first four sharpening the ax.
- Aligning your hiring values: I’ve found sales, marketing, product and engineering -frankly the entire org- can clash if there isn’t alignment on common values. Your company’s values should be true to you and your company. Are they clearly articulated and easy to remember? Are these the values you are looking for in new employees? If so, how? How will interviewers, interviewees and new teammates get a sense of those values? How will you discuss them (or not) as a group?
- Organizational structure: Your org structure will change. If the company is growing quickly, it may do so every six months (or less). When you’re building your team, have some intentionality around where the sales team should sit for the next ~12-18 months at least in terms of reporting structure. But attempting to plan beyond that is likely a fool’s errand, and less than that may lead to some spinning and turn.
- Compensation incentives: I’ve found salespeople care a ton about compensation structure. The worst look for a much higher guaranteed salary at the expense of cash upside (i.e. sales bonuses); the best look for greater total upside at the expense of lower guaranteed comp because they are confident in their ability to sell. All should care about whether the product itself is sellable. The challenge in structuring comp often comes when the product is unproven and there are few direct comparisons — i.e. the salesperson has a hard time estimating how much they will make. I typically find that salespeople, even great ones, are less interested in equity than their product, engineering or marketing counterparts. Senior salespeople can tolerate a much higher percentage of their total compensation being variable, but great salespeople, regardless of tenure, should believe in themselves and want the opportunity to earn more through higher variable comp structures.
- Hiring panel: Most founders need help understanding what to look for when interviewing for sales positions. Some of your investors will probably have experience interviewing for similar roles, or they may know other CEOs or advisors that can pitch in and be on an interview panel. Setting up a hiring panel and seeking 80/20 advice from these sorts of people can be invaluable. Note that they shouldn’t be in the first round of interviews, and after a few debrief conversations you should be able to replicate many of their questions yourself.
During the hiring process
- Running a sales funnel for hiring: I haven’t seen many effective enterprise sales teams that don’t run a metrics-driven sales funnel. Recruiting is basically sales, and a funnel is a practical way to both land the right candidates and to give yourself some reps on what it’s like to be in the sales team’s seat. More here.
- Alignment on your sales process: There are salespeople who play golf, go to networking events and have a pile of actual business cards (yes, still — I have seen it in the wild, even recently). Then there are those that run a very scientific sales funnel with clear tracking of performance against goals for each step (i.e. outreach, mid-funnel, bottom of funnel). I personally prefer the latter but you will need to decide what resonates most with your company. I am a massive believer in inputs and process — particularly for longer conversion cycle enterprise sales companies. Thus I always wanted to hire salespeople that believed in running metrics-driven funnels. I believe inputs are a leading indicator of successful outputs.
- The interview: One of the most important blog posts I ever read as CEO was about hiring salespeople by Ben Horowitz. After hiring probably 50 enterprise salespeople for various roles, I strongly believe in his philosophy that personality traits matter more than the ability to answer typical interview style quizzes. Having a demonstrated track record of taking on risk is particularly important for early salespeople at a startup — it will be a bumpy ride and they need to be ok with that.
Above all, I found that a deep sense of hunger was the most important factor. I remember a salesperson we hired early on that had about as perfect of a background as I could have imagined. Several months into employment, this person had a huge potential customer lined up for a sales call. It was on the books for a few weeks and the moment finally came on a Friday at 10am. At 1pm, I asked how it went — it was very material, both for them and for our company. “Oh my gosh, I can’t believe it, I totally forgot. I missed the call. I just spaced.” Put aside the importance of a salesperson being able to use their calendar, there is also the issue of hunger. Great salespeople have a hunger to grow. That person’s performance hadn’t been strong up to that point and only deteriorated from there. When we fired them a few weeks later, I relayed that I just found it hard to believe they had the hunger to succeed: I would have remembered that call even without a calendar — it would have been my biggest call of the year.
When interviewing, think about whether the candidate demonstrated hunger. Did they reach out in advance of the interview? Good is asking for time in advance to get the lay of the land. Better would be doing a few informational interviews with other teammates or alumni of the company. Did they come prepared? Good is having a pitch about your company and your product. Better would be walking in with an actual presentation about the company/product — and pitching for the role as if you were the customer. Did they do research on the company or on you specifically? Good is understanding the company history, mission and product attributes. Better is understanding the customer purchase criteria and how the product lines up, along with listening to your podcast last year about the company.
- References: I don’t normally find much value in front door references. Anyone that the candidate introduces you to is almost certainly going to be more loyal to the candidate than to you and won’t give helpful critiques. I believe backdoor references are moderately helpful. During conversations I’ve found using a numerical grade (“1-10: Where would you rank this person amongst everyone in their role you have worked with in your career? Why?”; “Would you hire them again?”; “What should this person work on?”) to useful questions.
However, when it comes to salespeople specifically, I find front door references can be more useful because the results from their previous role tend to speak for themselves. “Where did this person rank?”, “Tell me about their results”, and other similar questions to understand their actual performance are critical.
After the initial team is hired
- A friend at work: One of the best predictors of retention for any role is whether the person has a best friend at work. Those that answer “no” tend not to stay long. A buddy system, and ensuring that new teammates meet people across the org in the first 14 days, are really helpful for this.
- Training: After a few salespeople, particularly the sales manager, have been hired, a training system should be implemented to ramp up new sales teammates. Think through those initial few hires and what they have needed to succeed. A product overview? One on one time with you to understand the vision and mission? Whatever it is, make it happen.
- Spend time with the sales team: As CEO, demonstrate respect for all parts of the org and for people’s various roles.. Show the sales team they are important by giving them love in your 1:1s, in meetings and in front of the wider company. You have product demos at your Friday all hands? Great. Make sure the sales team can celebrate their wins, too. Someone really killing it for the sales team? Think about having them get some board exposure or a skip level with you. Encourage other leaders to spend time with sales team members as well — particularly through engineering and product.
- Quick to fire: There is no easier role than sales to tell when it just isn’t working, even within the first 30 days. Do they lack courage, hunger, creativity, resourcefulness, or persistence? Those are things that you just can’t teach. Move on. I’ve also found that sales teams see very quickly when someone isn’t pulling their weight. Performance is especially easy to gauge when a data-driven sales funnel is used. Often the salesperson can quickly become a culture carrier and “popular” – dont let that be confused with performance in the job.
- Warm leads: How can you help new sales team members with some warm leads to get the ball rolling? Could you, as CEO, hand some off to help build momentum for teammates?
- Tracking performance and running a sales funnel: For most early stage enterprise companies, basic Google Docs will work to track sales performance. Within 6-12 months of a salesperson being hired, they will want a more robust CRM. I’ve found this to be a good investment, but it often benefits from having an external advisor/investor weigh in on what to build into it.
- Sales check ins: They should have clear metrics to hit throughout their sales funnel. Don’t be afraid to ask for an ongoing dashboard or check-ins on a regular basis (i.e. 2-4 times per month, depending upon the growth of the company) to ensure you’re both learning about what is working in tandem. This isn’t micromanagement, you’re doing this so you can understand the sales funnel too. Is conversion higher than expected? Maybe you should hire faster. Is it much lower? What does that mean for the product roadmap or for the compensation of the sales team? Are there enough inbounds? If not perhaps a change in marketing is warranted.
- Funnel performance: You hired a team, you’re running a metrics-oriented funnel. Now you have to determine if it’s working. At an early stage company, the CEO will likely need to be close enough to help determine if the sales process is effective. You should have some initial expectations, hopefully based on analogous funnels or previous experience. Then ask yourself: Are you hitting goals? Is there enough outreach? Is conversion from outreach to the next step (i.e. a call/demo/trial) working? What about the conversion rate from mid-funnel to full sale? From full sale to repeat? A properly run sales funnel allows all teammates to hone in on where the problems are occurring. You may discover that your product has a long feedback loop. That is not uncommon in enterprise sales, and it is vital to focus not only on the outputs (i.e. whether a sale completed) but also the inputs. Clearly outputs are vital. But when the outputs only come 8-12 months after initial effort, a lack of understanding in sales performance can kill a startup.
What I didn’t talk about
Marketing support. How product & sales work together (or don’t). Sales specialists, account execs, SDRs, and so many other topics will come up as the sales team grows with the company. I’ve found, though, that nailing that initial organizational design and behavior, along with the critical first few hires, is vital for long-term sales success.