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Hiring your Head of Sales

30 Mins


By Team Artha

Stop selling. Start helping.

Zig Ziglar – author of “Over the Top” and other books

This is a very important decision in the life of a startup. Getting it right is important. Getting it wrong can put you back by several quarters.

This is a wonderful thought leadership piece by Bala Srinivasa, Co-Founder and MD at Arkam Ventures. Bala has had the experience of leading sales and marketing at two startups that were in very different stages – early stage (inception to $10 million+ in revenue) and middle stage ($18 million to $40 million+ in revenue). Having worked in Silicon Valley as well as Bangalore, he understands both the mature and emerging ecosystems and their nuances well. He has also mentored several startups and worked with some of them in helping them hire a sales leader for the first time.

Hiring your first sales head is one of the toughest positions to hire for and often ends in frustration for both sides.

This write-up is mostly for B2B or B2B2C technology product or service businesses (SaaS or otherwise), where one needs to build a sales team selling directly to enterprises.

Sales leadership in the Indian startup ecosystem

It’s worthwhile talking about the reality of the Indian startup ecosystem from a sales leadership perspective. Most startups in the Valley, or other mature markets, have a relatively deep pool of candidates to evaluate. By the deep pool, I mean candidates who have worked in a technology startup environment and have had success in helping grow from scratch to some level of scale – say $10-50 million in revenue. In addition, you also have a strong bench of director-level folk working with these top startup sales leaders. These are young but very promising sales leaders who have learnt the ropes and can be tapped as the new head of sales at smaller startups.

Neither of these two categories exists in the Indian startup environment. This is not to knock anyone, but simply the state of where the ecosystem is today. It is still a very young ecosystem with primarily first-time founders and management teams with limited startup experience. There are many examples of large company sales executives in India making a hash of things in a startup, and on the flip side, founders do not provide enough room for a senior executive to operate successfully. This will change and improve as we have more cycles of learning via second-time entrepreneurs and startup sales leaders, who have helped companies scale, and drive successful exits.

However, given where we are, it is even more important that startups have a framework to think about their sales leader hire and find a match that increases the chances of success.

So, when is the right time?

In general, I would say that until you get to $800,000 – $1 million in annual revenue, the founding team/CEO are the best people to sell. More than a revenue number, it’s the stage where you usually are still trying to figure out your product-market fit, working with early adopters, and trying out various angles. For example, in my first startup, we did not hire a head of sales until we were well into our third year and hit a few million dollars in revenue. Until then, we had a few initial customers, but we’re still struggling with our positioning and value proposition that would allow us to scale across a segment. Normally, ahead of sales is not of much use if he or she does not have a reasonably clear target market, value proposition, and a working product. Even after you hire one, it is going to be an iterative process of product positioning, but you are going to need a working baseline to start with.

Once you get past this stage, you are usually in a situation where organizational activity picks up. You will see an increase in the number of client meetings, inbound calls, requests for pilots/demos, internal staffing expansion in response to customer pull, etc. You also begin to notice that while there is a lot of activity, it’s taking a long time to see results – closed customer contracts and actual booked revenue. As a founder, you may now be fronting discussions with more than half-a-dozen clients as well as attending to all other functions of the company. The couple of sales people you have are working hard but suggest a lot of reasons as to why deals are getting delayed or falling off the radar.

This is usually a good time to start thinking about bringing in your first head of sales. While there are no hard-and-fast metrics, my sense is you may be closer to the $1.5 million revenue number by this time. The right hire should be able to help increase customer acquisition rates, shorten sales cycles, and most importantly, build a team that can scale in a consistent fashion.

Six areas to evaluate to find the right candidate.

Let’s take for granted that you are interviewing sales talent with a good track record of achieving targets, running national sales teams, and a knowledge of sales operations. There are six key areas you should explore with candidates to assess fit for your startup:

  • Passionate about the problem and market being pursued: This is fairly easy to read, difficult to fake, and actually not that common. Is your candidate able to discuss the problem and envision how the industry is likely to evolve over the next five years? Are they able to give you client examples or elaborate on issues and concerns with the status quo? It is not essential that they be from the same segment, but their interest is key, as is their point of view and the homework they should have done. Do they ask you pressing questions on how you solve adoption challenges? The best candidates will engage you in a thought-provoking discussion where you gain insights and confidence. It is the passion that will keep their head in the game during the inevitable tough times.

  • Chemistry with founders and product teams: This is a crucial component and something that you gauge over multiple meetings. Given the lack of startup experience in India, your future head of sales does not really have a sense of the heavy interactions needed with functional teams in a startup. Make sure the candidate spends enough time with your product and technology teams and structure the discussions such that both sides have a way to assess and engage. Feedback on chemistry from your other teams could be the tie-breaker that makes you decide on a candidate. For one of our startups, we had two well-qualified candidates – a seasoned veteran from the industry who worked at a large organization and had delivered large numbers and a candidate who had succeeded in a smaller organization without much of a brand name. While both were great individuals, the latter got the job due to higher quality of interaction with functional teams.

  • Metrics-driven sales culture: The main reason you are hiring is to bring some level of systematic thinking to how you run sales. This means someone who has a handle on what it “takes to make” your targets for the year. Ask about tools they have used or how they plan to monitor targets in terms of inbound leads, conversion rates, deal sizes, and account growth. If it’s a SaaS solution, can they articulate SaaS-specific, lead-generation activity, discussions, sales order ratios, and how to increase conversion rates? The lack of an effective sales process is an area of weakness for startups, and founders often don’t spend enough time understanding how the new hire is going to make it better. You certainly don’t want someone trying to duplicate a big company process in a startup. However, running a simple but metrics-driven lead generation, conversion, sales pipeline, and the deal-close process goes a long way in most cases.

  • Creative thinker who can define “your” go-to-market – Successful selling is a lot more than just hunting deals. For an early-stage startup, it involves close alignment of sales, marketing, and product management to deliver on a chosen go-to-market strategy. Is your candidate someone who has a handle on these functions, can help build them if needed, and make adjustments to build your unique GTM? For example, within a quarter of joining, a startup sales leader I know dropped a couple of target segments in a seemingly large category. This was a tough call but done in conjunction with the founder/product team and based on an analysis of high-cost-to-serve and low revenue from those customers. This freed up bandwidth to focus on higher-impact clients.

  • Ability to hire great sales people – This is a fundamental requirement that you need to reference check. Good sales leaders are able to attract a strong sales team. Ask how they go about the hiring process and how quickly they can them assemble a team. Within 3-4 months, your new sales leader should have made a lot of progress in putting a team in place. This includes being able to fire underperforming sales reps and yet maintain a positive atmosphere.

  • **Hands-on with attention to detail – **This sounds banal but is a key point to focus on in India. Many candidates come from companies where they have been part of hierarchical sales teams. Without startup experience, the tendency is to replicate what they have seen in the past. This ends up with a head of sales, regional heads in major cities, and salespeople reporting to regional heads for a $1.5-5.0 million revenue startup. This structure may work in some cases but is not optimal, as you want the head of sales to be closely involved with the field at a deal level. It is a time when go-to-market is being fine-tuned, the quality and calibre of sales hires are being established, and every deal is a big deal. Try to ferret out if your future head of sales shows an inclination to get into the trenches and work with each salesperson. Do they lead by example in detailing the company sales pitch, cold call/email scripts, marketing messages, demos and anything else that contributes to winning?

It’s unlikely anyone candidate is going to check all the boxes. Keep in mind that your product and stage of growth does have a bearing on who is a good fit for that stage. A revolutionary product that the market has not seen before, that has no clear-cut owner/budget for your target customer, requires an evangelical sale. A sales head, who deeply understands the problem/technology, is articulate with C-level decision-makers, and is creative about go-to-market, maybe more valuable than someone who is purely data and process-driven. The latter may do very well in a startup where the product and market are more easily understood.

Other considerations include familiarity with the business model – SaaS versus on-premises. Again, in India, you are unlikely to find too many SaaS sales leaders who have had successful stints in scaling a startup. They are more likely to come from larger companies, and you need to weigh that accordingly.

How to run a good selection process?

If you are a direct sales model tech startup in India, you don’t really have a choice but to look at a pool of candidates from two buckets. The first is medium-to-large established companies in the target vertical. The second would be generalist sales talent from well-known sales programs such as Oracle, Salesforce, SAP, and Google. The former is likely to have a lot more domain knowledge, while the latter is probably better at running sales processes in a disciplined manner.

It’s a good idea to have your recruiter source candidates from both pools to get a sense of fit. Use the six points we discussed earlier to assess the candidates and create your shortlist.

For the top two or three shortlisted candidates, request a summary sales plan and ask them to pitch it. This is a great way for you to get a sense of what they want to accomplish in the first year, how they think about go-to-market, the types of hires and budget, and lead-to-closure activity levels needed. Your feedback also helps the candidate assess their resourcing and ability to execute.

The pitch can tell you a lot. For example, does the sales plan make sense in terms of sale structure, revenue targets, leads, and close rates? You don’t have to be an expert, but you know more about your business than anyone else. A run-of the-mill presentation is not a great sign, and you want to move forward with candidates who show both the potential and interest in making a difference.

How to think about performance and compensation?

More than any other function, sales is a performance business. Most packages at funded startups are a combination of base comp, performance bonus, and equity.

A typical mix is a 50–70 per cent base and a 50–30 per cent bonus that is linked to targets, and equity is the norm. The performance bonus is frequently set based on minimum attainment – say, for example, 75 per cent of the annual target revenue number. It often scales linearly from there with accelerators for exceeding the target. There is a lot of variation in the mix across companies so treat these as just ballpark guidelines.

One thing to keep in mind is that you are not necessarily hiring for the next five years. You are hiring for this phase. The reality is that most startups go through two-three sales leaders as they evolve from an idea towards traction with a few dozen clients (<$10 million in revenue) and then to a scalable, repeatable business ($20 – 50 million+ revenue). There are heads of sales that do scale across phases, and that’s a great outcome if that happens.

Performance as a sales leader is pretty black or white. The company revenue target is usually the metric. There are instances where this can be tied to EBITDA as well as revenue. This is usually for a more mature phase. The one common question is around the head of sales owning an individual quota (that is, having a personal selling target). This is usually a bad idea. A hands-on sales head will need all the time to hire and coach sales team members, work on the sales process, metrics, and go-to-market. It is a lot more effective to link payouts to the total revenue number and remove any conflict with the sales team.

In an emerging startup environment like India, you may need to be a bit more patient in terms of results. By and large, you should start seeing a marked improvement in the way your sales operate within the first six months. If it involves building a sales team from scratch, it is going to take between 6–12 months to see a differential revenue impact. However, within the first six months, you should be able to see measurable improvement in how you go about lead generation, qualification, sales pitches, quality of meetings, and closures. All of this will ideally be a huge jump from the way it was being run before.

What is Founder/CEO responsibility?

First-time founders often struggle to give up their prior role as the person leading sales efforts. It is important that the founding team consciously allows the new sales head to take over. Early on, there may be sales reps, account managers, or other functional heads that circumvent the sales leader and reach out to the founder on key issues. A simple example would be an email regarding a deal without copying the head of sales. This has to be nipped in the bud immediately.

You could respond by copying the individual and head of sales and making it clear that all sales decisions are handled by the new leader. Giving up control is not easy for founders, but it is critical if you want a senior hire to feel trusted and succeed.

That said, it is the job of your sales head to demonstrate steady improvements discussed earlier. If you don’t see progress towards meaningful results in three to four quarters, it is time to re evaluate. It is harder when the results are middling. It may be a bad year, but you should see enough improvement in your entire sales approach that you are willing to continue. It could be that there was significant sales turnover due to product concerns, or it was just a terrible year for the whole industry. It is your responsibility to take these into account, discuss them with your board (if you have one) and part ways, if you have to, in a professional manner.

Every startup faces its unique circumstances, and there are few cookie-cutter solutions. I am hoping this discussion at least provides broad pointers on how to think about the issue.

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Team Artha