‍28 MAY 2024

‍

As an early stage investor, one of the most common questions that we get from founders is, “I need to hire someone in sales, where should I start?” 

With the transition out of founder led sales being one of the most pivotal moments for an early stage business, answering this question is critically important and something we work through with our portfolio companies often.

In answering this question, businesses must not only answer who is the right person for your first sales hire, but also, and perhaps more importantly, when is the right time to make your first sales hire? How do you set yourself and your new hire up for success once they are onboard? Not only is it a critically important decision, it’s also an incredibly difficult one to answer.

Enter Dave Shepherd. One of the sharpest growth minds you’ll meet, Dave honed his craft with over 10 years at Hubspot both in the US and Australia, rising from account executive all the way to leading the ANZ business. During his time at Hubspot, he saw the business grow from $20M ARR to $1B ARR, and as an early hire in the ANZ region, he had a front row seat to growing the ANZ business to $50M ARR.

These days, Dave works with early stage businesses on all things growth and leadership, focusing on questions such as defining company vision, establishing best practice operations, effectively managing teams and developing self-leadership.

Given Dave’s experience both building, managing & advising high performance sales teams (as well as being a gun salesperson himself), we couldn’t think of a better person to help us put pen to paper and answer these questions and more. ‍

‍

When is the right time to make your first sales hire?

‍

The short answer to this, is that almost everybody does it too soon. Sales requires a lot of effort, so it makes sense that founders who are already wearing a million hats want to find a way to take this one off. But one of the biggest mistakes that founders make is that they stop selling too soon. As an early-stage founder, even once you’ve made your first sales hire, you don’t get to stop selling. It's likely that you still have years of being involved in the sales process.

So, to answer the original question, I think the right time to make your first hire is when you’ve got product market fit.

It’s difficult in a lot of cases to know when you’ve actually got product market fit (more on this shortly), but if you’re trying to assess how effective your reps are, and there’s still uncertainty around your ideal customer profile (ICP) and whether your product is meeting the needs of the market, it’s going to be really, really difficult.‍

‍

How do you tell if you have product market fit?

‍

Product market fit is a somewhat nebulous concept, but I would say that there’s two key elements to look at and assess yourself on: winning customers and keeping customers.

Winning customers is simple – are you able to sell to people consistently and do you have a repeatable sales motion? That is, can you predict how many deals, and which customers will close in a month or quarter?

Obviously, you need to win customers first, but for me, product market fit is much more about whether you’re able to keep them. Once you can identify, with some level of consistency, the kinds of customers that not only buy but stay, and you’ve got a strong cohort of these customers, you’ve probably got product market fit. You can then go out and start targeting your sales motion toward this ICP, which should allow you to start winning customers with more consistency. That’s when you’ll really know that you have product market fit.‍

‍

Is there a specific role that founders should look to hire for first?

To go back to the point I made earlier, the biggest mistake that founders make is that they stop selling too soon. So, the reason you’re going to need to hire a sales person is not to remove yourself from the process, but to provide leverage. The decision therefore comes down to, what hire can you make to free up your time and release pressure?

There’s a few options here, and it depends on things like how much sales experience the founder has and whether you’re selling to enterprise or SME, but in most cases, I think the answer is an SDR (sales development representative).

There’s a few reasons why I like the SDR hire here; they’re low risk because they’re relatively cheap and easy to train, and their job is primarily centred around activity, which is relatively easy to measure. If we go back to the key objective of providing leverage for a founder, an SDR is going to be spending the majority of their time finding prospects and booking meetings, which is more often than not the most time intensive and annoying part of sales for the founder. Another reason I like this one, is that the nature of the role leaves no room for ambiguity about whether the founder has to keep selling, so they’re almost prevented from making the mistake of stepping out too early by making an SDR their first sales hire.

The other option that I like, is what I’d call a sales manager. What you’re looking for in this person, is someone who has managed or coached sales people in some capacity before, but who’s also still going to come in and sell for you. They’re still going to be doing the core job of an AE, but you get two things in addition to that; (a) they’ve been promoted beyond AE at some point, so you’ve got much more confidence they can actually sell, and (b) they’re going to be able to help you build your team and playbooks. They’ll cost you more than an AE, but from a risk reward perspective, that additional confidence in their ability to sell and help you build and train your team is worth it every time. An important qualifier to note here (and this is applicable for any early sales hire you’re making), is that you need to make sure they’re still willing to both prospect and sell until the team is built out.

I think in 90% of situations, from a risk reward perspective, one of the two hires above is going to make the most sense.

In businesses where you’re dealing with large, complex, enterprise deals, I think there’s a valid case to go and get someone who’s quite senior like a VP of Sales or CRO or whatever you want to call them. To return again to the point around hiring to create leverage for the founder – even if you hire a super senior and experienced sales person, the founder will still be the one selling the product and vision. Where this hire creates leverage, is in navigating all of the bureaucracy and procedural elements like procurement, security, legals, pricing, etc, which can be a huge unlock for an early stage business. With this hire, there’s two key considerations; (a) they’re likely to be super expensive, and therefore risky if they don’t work out, and (b) at the risk of sounding like a broken record, you need to make sure they actually want to sell (at least until the team is built out).

The hire I actually like the least, or maybe better put, I think is the most risky, is the AE. It’s probably the role I see hired most often as the first sales hire.

Why I think there’s a lot of risk here, is that to start with, they’re going to be twice as expensive as an SDR, and there’s a lot of them out there, with, to be honest, a pretty wide dispersion of skills and talent. That’s not to say you can’t make a great hire at the AE level, but I think you’re taking a pretty big risk on quality for quite an expensive rep. Given the opportunity cost of getting it wrong is so high for an early stage business, I think it’s worth it every time to pay up for that sales manager, where you can validate that somewhere along the line, they were really good at their job as an AE and were able to get promoted.‍

‍

How do you think about sharing of responsibilities as you begin to transition away from founder-led sales?

‍

I think the crux of it all, is that there’s a very long list of jobs to be done throughout the sales cycle from prospecting through to close, and all of them have to be done. It all comes back to how to create leverage for yourself as a founder. So, if you go and hire the SDR, you’ll have less prospecting to do and can focus more on closing. If you go and hire the VP of Sales, cool, they might take some of the load off in closing, but someone’s still got to do the prospecting. Ultimately it doesn’t matter who does it, but everything still has to be done.‍

‍

Once you’ve made your hire, what do you think is the best approach to onboarding reps and getting them up to speed quickly?

‍

I think there’s 3 steps – shadow, document, and review. I think this works best when it’s done in a really methodical way, going through every single step of the sales process one at a time. What I mean by this is, I’d literally have the new hire watch me go through my process of how I find my leads, and I’d have them take notes and create a document outlining the process before they can start doing that step of the process. Then I’d move onto how I reach out to my leads and so on, until they’ve documented and practiced every step of the process. The final step here, which is super important, is the review. There’s always going to be things that can be improved, and the new hire will often have more sales experience than the founder and might have have better processes – it’s critical to take the time to do this review and ensure that all of this feedback is reflected in your documentation.

By going through this process, you’ll eventually end up with a really tight playbook that outlines every step of the sales process. You now have your Sales Onboarding Playbook. Not only is this going to make every subsequent hire easier to onboard, it ensures consistency across your sales organisation. Overtime, the playbook will get better and better as you continue iterate and include best practices and new ideas.‍

‍

Once you’ve got your reps up and running, what is your approach to setting and managing targets?

There’s two really critical things here; (1) make sure you’ve really clearly defined your metrics and funnel math (leads > calls > discoveries > demos, etc), and (2) make sure that you can measure these metrics really easily. In terms of how to set targets, if you’ve got some level of repeatability to your sales motion, then you should know what level of activity a rep needs to be doing on a daily, weekly and monthly basis in order to hit their number.

Fundamentally, sales is all about activity. People are going to have good days and bad days, and good weeks and bad weeks, but over a month, there’s enough time for a rep to adjust their effort accordingly to correct for bad days or bad weeks. If you’ve got a rep who’s consistently putting in the effort over a good length of time and the results still aren’t showing, you’ve got a pretty good sign that something isn’t working. If you’ve got a rep who isn’t putting in the effort, then you have a different problem. I don't like to work with sales people that don't put in the effort. It's just a never ending headache, no matter how incredible they are at selling.‍

‍

Pretty closely tied to targets, how would you approach compensation for your early reps?

‍

I’ll start by saying that it’s really important to understand this this is something that’s going to change every 12 months, maybe even every 6 months if things are moving really quickly in your start-up.

I think when you’re first starting out this can be really hard. You’re not going to have enough meaningful data to develop a quota that’s based on anything more than your hopes and dreams. What I’d recommend, and I don’t think a lot of people do this because it’s a little counter intuitive, is to start with a salary with no variable component. It’s not going to stay this way forever, and your rep should know this upfront, but until you can come up with a quota that’s fair and based on real metrics, I think this makes the most sense so you're not setting reps up for failure right out of the gates.

The exception to this, is with an SDR, where you can more easily set targets around activity, as they’re purely focused on the top of the funnel. For example, I’d start by doing 30-50% of OTE based on the number of meetings they’re booking, and then after 3 – 6 months, once you’ve got more data, you can add in some kind of quality metric around those meetings and shift the targets toward how many meetings convert to a demo.

Another thing that I think is super important to do for your first few sales hires, is to give them equity. There’s always going to be situations when the best interests of the rep are not entirely aligned with the best interests of the company. Empowering your early reps with ownership in the business is going to go a long way in making sure that they are closing deals, and also that they’re closing the right deals.

‍

‍We’ve spent a lot of time on the specifics, so to round it out, let’s go super general. What are your top three pieces of sales advice?

Number one is to beware of hiring shitty sales people. It sounds simple, but sales people are sales people, and whether they’re good, bad or average at selling, they’re going to be persuasive in an interview. That doesn’t necessarily make them a good sales person. The two things I’m always screening for in an interview are work ethic and intelligence. Fundamentally, sales is about activity, so I think work ethic is pretty self explanatory. You also need to make sure you’re hiring people who are adaptable and can handle uncertainty, and whilst intelligence isn’t the only way to screen for this, it usually works pretty well.

Number two is to make sure you build time for reflection into your weekly cadence. I think the biggest reason most people struggle with sales is because they’re scared – scared of losing the deal, scared of not making quota, scared of asking pointed questions. The list can be endless. Ultimately, these moments of trepidation are pointers to unbelievable and exciting opportunities for growth. If you can carve out time to reflect on how you can be that little bit better each week, you’re going to find that it compounds really quickly and you’re going to become a better sales person.

And number three, I would ask yourself, how can I make this more enjoyable? We put so much pressure on ourselves that we lose sight of the fact that most of the time people will buy from people they like, and in general, if you're having a good time, people will like you more. Be ruthless in your dedication to following your sales process, but have a good time. Your prospects will notice it and it will lead to more sales.  

‍

We hope you found David’s thoughts on scaling your sales team as insightful as we did.

‍

Best part, we’re partnering with the AWS for startups team to host an exclusive workshop with David himself, so you can ask your burning questions in person and get the chance to deep dive into specifics 👇

‍

🚨 OIF and AWS for startups Workshop with David Shepherd🚨

Date: Monday 24th June

Time: 4pm - 6pm AEST

Location: AWS Offices - Level 8, 2 Market St, Sydney 2000

‍

REGISTER HERE