Category Archives: sales model

Thoughts on Hiring Your First VP of Sales

There’s some great content out there on the subject of hiring your first VP of sales at a startup, so in this post I’m going to do some quick thoughts on the subject in an effort to complement the existing corpus.

In other words, this is not your classic TLDR Kelloggian essay, but some quick tips.

  • Hire them first.  That is, before hiring any salesreps.  The first VP of Sales should be your first salesrep.  Hire someone who wants to walk (and even discover) the path before leading others.  Hire someone who enjoys the fight.
  • Hire them hopelessly early.  Don’t wait for product availability.  Don’t wait until you’ve hired 3-4 reps and they need a manager.  Don’t wait until you have a bookings plan that needs hitting. Hire them as early as possible.
  • Glue yourselves together for 6-12 months.  You want to spend 6-12 months as Frick and Frack.  Why?  Most founders can sell their idea and their software.  The real question is:  can anyone else?  By gluing yourselves together you will transfer a huge amount of critical knowledge to the sales VP.  That, or you’ll drive each other crazy and discover you can’t work together.  Either way, it’s good to succeed or fail fast.  And the goal is total alignment.  [1]
  • Hire them before the VP of marketing.  I know some very smart people who disagree with me on this question, but as a three-time enterprise software CMO (and two-time CEO) I take no shame in saying that marketing is a support function.  We’re here to help.  Hire us after hiring sales.  Let the VP of Sales have a big vote in choosing who supports them [2].
  • Hire someone who is a first-line manager today.  Their title might be district manager or regional vice president, but you want someone close to the action, but who also is experienced in building and managing a team.  Why?  Because you want them to be successful as your first salesrep for 6-12 months and then build up a team that they can manage.  In a perfect world, they’d have prior experience managing up to 10 reps, but even 4-6 will do [3].  You want to avoid like the plague a big-company, second- or third-line manager who, while undoubtedly carrying a large number, likely spends more time in spreadsheets and internal reviews than in customer meetings.

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Notes
[1] Hat tip to Bhavin Shah for this idea.

[2] A wise VP of Marketing often won’t join before of the VP of Sales anyway.

[3] On the theory that someone’s forward potential is not limited to their prior experience.  Someone who’s successfully managed 4-6 reps can likely manage 10-12 with one extra first-line manager.  Managing 36 through a full layer of first-line managers is a different story.  That’s not to say they can’t do it, but it is a different job.  In any case, the thing to absolutely avoid is the RVP who can only manage through a layer of managers and views the sales trenches as a distant and potentially unpleasant memory.

The Holy Grail of Enterprise Sales: Is a Repeatable Sales Process Enough?

(This is the third in a three-part restructuring and build-out of a previous post.  See note [1] for details.)

In the first two posts in this series, we first defined a repeatable sales process and then discussed how to prove that your sales process is repeatable.

All that was just the warm-up for the big idea in this series:  is repeatability enough?

The other day I was re-reading my favorite book on data governance (and yes I have one), Non-Invasive Data Governance by Bob Seiner.  Reading it reminded me of the Capability Maturity Model, from Carnegie Mellon’s Software Engineering Institute.

Here’s the picture that triggered my thinking:

Did you see it?  Look again.

Repeatable is level two in a five-level model.  Here we are in sales and marketing striving to achieve what our engineering counterparts would call 40% of the way there.  Doesn’t that explain a lot?

To think about what we should strive for, I’m going to switch models, to CMMI, which later replaced CMM.   While it lacks a level called “repeatable” – which is what got me thinking about the whole topic in the first place – I think it’s nevertheless a better model for thinking about sales [2].

Here’s a picture of CMMI:

I’d say that most of what I defined as a repeatable sales process fits into the CMMI model as level 3, defined.  What’s above that?

  • Level 4, quantitively managed. While most salesforces are great about quantitative measurement of the result – tracking and potentially segmenting metrics like quota performance, average sales price, expansion rates, win rates – fewer actually track and measure the sales process [3].  For example, time spent at each stage, activity monitoring by stage, conversion by stage, and leakage reason by stage.  Better yet, why just track these variables when you can act on them?  For example, put rules in place to take squatted opportunities from reps and give them to someone else [4], or create excess stage-aging reports that will be reviewed in management meetings.
  • Level 5, optimizing. The idea here is that once the process is defined and managed (not just tracked) quantitatively, then we should be in a mode where we are constantly improving the process.  To me, this means both analytics on the existing process as well as qualitative feedback and debate about how to make it better.  That is, we are not only in continual improvement mode when it comes to sales execution, but also when it comes to sale process.  We want to constantly strive to execute the process as best we can and also strive to improve the process.  This, in my estimation, is both a matter of culture and focus.  You need a culture that process- and process-improvement-oriented.  You need to take the time – as it’s often very hard to do in sales – to focus not just on results, but on the process and how to constantly improve it.

To answer my own question:  is repeatability enough?  No, it’s not.  It’s a great first step in the industrialization of your sales process, but it quickly then becomes the platform on which you start quantitative management and optimization.

So the new question should be not “is your sales process repeatable?” but “is it optimizing?”  And never “optimized,” because you’re never done.

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Notes

[1] I have a bad habit, which I’ve been slowly overcoming, to accidently put real meat on one topic into an aside of a post on a different one.  After reading the original post, I realized that I’d buried the definition of a repeatable sales model and the tests for having one into a post that was really about applying CMMI to the sales model.  Ergo, as my penance, as a service to future readers, and to help my SEO, I am decomposing that post into three parts and elaborating on it during the restructuring process.

[2] The nuance is that in CMM you could have a process that was repeatable without being (formally) defined.  CMMI gets rid of this notion which, for whatever it’s worth, I think is pretty real in sales.  That is, without any formal definition, certain motions get repeated informally and through word of mouth.

[3] With the notable exception of average sales cycle length, which just about everyone tracks – but this just looks at the whole process, end to end.  (And some folks start it late, e.g., from-demo as opposed to from-acceptance.)

[4] Where squatting means accepting an opportunity but not working on it, either at all or sufficiently to keep it moving.

The Holy Grail of Enterprise Sales: Proving a Repeatable Sales Process

(This is the second in a three-part restructuring and build-out of a previous post.  See note [1] for details.)

In the prior post we introduced repeatable sales process as the Holy Grail of enterprise software sales and, unlike some who toss the term around rather casually, we defined a repeatable sales process as meaning you have six things:

  1. Standard hiring profile
  2. Standard onboarding program
  3. Standard support ratios
  4. Standard patch
  5. Standard kit
  6. Standard sales methodology

The point of this, of course, is to demonstrate that given these six standard elements you can consistently deliver a desirable, standard result.

The surprisingly elusive question is then, how to measure that?

  • Making plan?  This should be a necessary but not sufficient condition for proving repeatability.  As we’ll see below, you can make plan in healthy as well as unhealthy ways (e.g., off a small number of reps, off disproportionate expansion and weak new logo sales).
  • Realizing some percentage of your sales capacity?  I love this — and it’s quite useful if you’ve just lost or cut a big chunk of your salesforce and are ergo in the midst of a ramp reset — but it doesn’t prove repeatability because you can achieve it in both good and bad ways [2].
  • Having 80% of your salesreps at 100%+ of quota?  While I think percent of reps hitting quota is the right way to look at things, I think 80% at 100% is the wrong bar.

Why is defaulting to 80% of reps at 100%+ of quota the wrong bar?

  • The attainment percentage should vary as function of business model: with a velocity model, monthly quotas, and a $25K ARR average sales price (ASP), it’s a lot more applicable than with an enterprise model, annual quotas, and a $300K ASP.
  • 80% at 100%+ means you beat plan even if no one overperforms [3] – and that hopefully rarely happens.
  • There is a difference between annual and quarterly performance, so while 80% at 100% might be reasonable in some cases on an annual basis, on a quarterly basis it might be more like 50% — see the spreadsheet below for an example.
  • The reality of enterprise software is that performance is way more volatile than you might like it to be when you’re sitting in the board room
  • When we’re looking at overall productivity we might look at the entire salesforce, but when we’re looking at repeatability we should look at recently hired cohorts. Does 80% of your third-year reps at quota tell you as much about repeatability – and the presumed performance of new hires – as 80% of your first-year reps cohort?

Long story short, in enterprise software, I’d say 80% of salesreps at 80% of quota is healthy, providing the company is making plan.  I’d look at the most recent one-year and two-year cohorts more than the overall salesforce.  Most importantly, to limit survivor bias, I’d look at the attrition rate on each cohort and hope for nothing more than 20%/year.  What good is 80% at 80% of quota if 50% of the salesreps flamed out in the first year?  Tools like my salesrep ramp chart help with this analysis.

Just to make the point visceral, I’ll finish by showing a spreadsheet with a concrete example of what it looks like to make plan in a healthy vs. unhealthy way, and demonstrate that setting the bar at 80% of reps at 100% of quota is generally not realistic (particularly in a world of over-assignment).

If you look at the analysis near the bottom, you see the healthy company lands at 105% of plan, with 80% of reps at 80%+ of quota, and with only 40% of reps at 100%+ of quota.  The unhealthy company produces the same sales — landing the company at 105% of plan — but due to a more skewed distribution of performance gets there with only 47% of reps at 80%+ and only a mere 20% at 100%+.

In our final post in this series, we’ll ask the question:  is repeatability enough?

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Notes

[1] I have a bad habit, which I’ve been slowly overcoming, to accidently put real meat on one topic into an aside of a post on a different one.  After reading the original post, I realized that I’d buried the definition of a repeatable sales model and the tests for having one into a post that was really about applying CMMI to the sales model.  Ergo, as my penance, as a service to future readers, and to help my SEO, I am decomposing that post into three parts and elaborating on it during the restructuring process.

[2] Unless you’ve had either late hiring or unexpected attrition, 80% of your notional sales capacity should roughly be your operating plan targets.  So this is point is normally subtly equivalent to the prior one.

[3] Per the prior point, the typical over-assignment cushion is around 20%

The Holy Grail of Enterprise Sales: Defining the Repeatable Sales Process

(This is the first in a three-part restructuring and build-out of the prior post.  See note [1] for details.)

The number one question go-to-market question in any enterprise software startup is:  “do you have a repeatable sales process?” or, in more contemporary Silicon Valley patois, “do you have a repeatable sales motion?”

It’s one of the key milestones in startup evolution, which proceed roughly like:

  • Do you have a concept?
  • Do you have a working product?
  • Do you have any customer traction (e.g., $1M in ARR)?
  • Have you established product-market fit?
  • Do you have a repeatable sales process?

Now, when pressed to define “repeatable sales process,” I suspect many of those asking might reply along the same lines as the US Supreme Court in defining pornography:

“I shall not today attempt further to define the kinds of material I understand to be embraced… but I know it when I see it …”

That is, in my estimation, a lot of people throw the term around without defining it, so in the Kelloggian spirit of rigor, I thought I’d offer my definition:

A repeatable sales process means you have six things:

  1. Standard hiring profile
  2. Standard onboarding program
  3. Standard support ratios
  4. Standard patch
  5. Standard kit
  6. Standard sales methodology

All of which contribute to delivering a desirable, standard result.  Let’s take a deeper look at each:

  1. You hire salesreps with a standard hiring profile, including items such as years of experience, prior target employers or spaces, requisite skills, and personality assessments (e.g., DiSC, Hogan, CCAT).
  2. You give them a standard onboarding program, typically built by a dedicated director of sales productivity, using industry best practices, one to three weeks in length, and accompanied by ongoing clinics.
  3. You have standard support ratios (e.g., each rep gets 1/2 of a sales consultant, 1/3 of an SDR, and 1/6 of a sales manager).  As you grow, your sales model should also use ratios to staff more indirect forms of support such as alliances, salesops, and sales productivity.
  4. You have a standard patch (territory), and a method for creating one, where the rep can be successful.  This is typically a quantitative exercise done by salesops and ideally is accompanied by a patch-warming program [2] such that new reps don’t inherit cold patches.
  5. You have standard kit including tools such as collateral, presentations, demos, templates.  I strongly prefer fewer, better deliverables that reps actually know how to use to the more common deep piles of tools that make marketing feel productive, but that are misunderstood by sales and ineffective.
  6. You have a standard sales methodology that includes how you define and execute the sales process.  These include programs ranging from the boutique (e.g., Selling through Curiosity) to the mainstream (e.g., Force Management) to the classic (e.g., Customer-Centric Selling) and many more.  The purpose of these programs is two-fold:  to standardize language and process across the organization and to remind sales — in a technology feature-driven world — that customers buy products as solutions to problems, i.e., they buy 1/4″ holes, not 1/4″ bits.

And, most important, you can demonstrate that all of the above is delivering some desirable standard result, which will be the topic of the next post.

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Notes

[1] I have a bad habit, which I’ve been slowly overcoming, to accidently put real meat on one topic into an aside of a post on a different one.  My favorite example:  it took me ~15 years to create a post on my marketing credo (marketing exists to make sales easier) despite mentioning it in passing in numerous posts.  After reading the prior post, I realized that I’d buried the definition of a repeatable sales model and the tests for having one into a post that was really about applying CMMI to the sales model.  Ergo, as my penance, as a service to future readers, and to help my SEO, I am decomposing that post into three parts and elaborating on it during the restructuring process.

[2] I think of patch-warming as field marketing for fallow patches.  Much as field marketing works to help existing reps in colder patches, why can’t we apply the same concepts to patches that will soon be occupied?  This is an important, yet often completely overlooked, aspect of reducing rep ramping time.

Should Your SDRs Look for Projects or Pain?

There’s a common debate out there, it goes something like this:

“Our sales development representatives (SDRs) need to look for pain: finding business owners with a problem and the ability to get budget to go fix it.”

Versus:

“No, our SDRs need to look for projects: finding budgeted projects where our software is needed, and ideally an evaluation in the midst of being set up.”

Who’s right?

As once was once taught to me, the answer to every marketing question is “it depends” and the genius is knowing “on what.”  This question is no exception.  The answer is:  it depends.  And on:

  • Whether you’re in a hot or cold market.
  • Whether your SDR is working an inbound or outbound motion

I first encountered this problem decades ago rolling out Solution Selling (from which sprung the more modern Customer-Centric Selling).  Solution Selling was both visionary and controversial.  Visionary in that it forced sales to get beyond selling product (i.e., selling features, feeds, and speeds) instead focusing on the benefits of what the product did for the customer.  Controversial in that it uprooted traditional sales thinking — finding an existing evaluation was bad, argued Bosworth, because it meant that someone else had already created the customer’s vision for a solution and thus the buying agenda would be biased in their favor.

While I think Bosworth made an interesting point about the potential for wired evaluation processes and requests for proposal (RFPs), I never took him literally.  Then I met what I could only describe as “fundamentalist solution seller” in working on the rollout.

“OK, we we’re working on lead scoring, and here’s what we’re going to do:  10 points for target industry, 10 points for VP title or above, 10 points for business pain, -10 points for existing evaluation, and -10 points for assigned budget.”

Wut?

I’d read the book so I knew what Bosworth said, but, but he was just making a point, right?  We weren’t actually going to bury existing evaluations in the lead pile, were we?  All because the customer knew they wanted to buy in our category and had the audacity to start an evaluation process and assign budget before talking to us?

That would be like living in the Upside Down.  We couldn’t possibly be serious?  Such is the depth of religion often associated with the rollout of a new sales methodology.

Then I remembered the subtitle of the book (which everyone seems to forget).

“Creating buyers in difficult selling markets.”  This was not a book written for sellers in Geoffrey Moore’s tornado, it was book for written for those in difficult markets, tough markets, markets without a lot of prospects, i.e., cold markets.  In a cold market, no one’s out shopping so you have no choice but find potential buyers in latent pain, inform them a solution exists, and try to sell it to them.

Example:  baldness remedies.  Sure, I’d rather not be bald, but I’m not out shopping for solutions because I don’t think they exist.  This is what solution sellers call latent pain.  Thus, if you’re going to sell me a baldness remedy, you’re going need to find me, get my attention, remind me that I don’t like being bald, then — and this is really hard part — convince me that you have a solution that isn’t snake oil.  Such is life in cold markets.  Go look for pain because if you look for buyers you aren’t going to find many.

However, in hot markets there are plenty of buyers, the market has already convinced buyers they need to buy a product, so the question sellers should focus on is not “why buy one” but instead, “why buy mine.”

I’m always amazed that people don’t first do this high-level situation assessment before deciding on sales and marketing messaging, process, and methodology.  I know it’s not always black & white, so the real question is:  to what extent are our buyers already shopping vs. need to be informed about potential benefits before considering buying?  But it’s hard to devise any strategy without having an answer to it.

So, back to SDRs.

Let’s quickly talk about motion.  While SDR teams may be structured in many ways (e.g., inbound, outbound, hybrid), regardless of team structure there are two fundamentally different SDR motions.

  • Inbound.  Following-up with people who have “raised their hand” and shown interest in the company and its offerings.  Inbound is largely a filtering and qualification exercise.
  • Outbound.  Targeting accounts (and people within them) to try and mutate them into someone interested in the company and its offerings.  In other words, stalking:  we’re your destiny (i.e., you need to be our customer) and you just haven’t figured it out, yet.

In hot markets, you can probably fully feed your salesforce with inbound.  That said, many would argue that, particularly as you scale, you need to be more strategic and start picking your customers by complementing inbound with a combination of named-account selling, account-based marketing, and outbound SDR motion.

In cold markets, the proverbial phone never rings.  You have no choice but to target buyers with power, target pains, and convince them your company can solve them.

Peak hype-cycle markets can be confusing because there’s plenty of inbound interest, but few inbound buyers (i.e., lots of tire-kickers) — so they’re actually cold markets disguised as hot ones.

Let’s finally answer the question:

  • SDRs in hot markets should look for projects.
  • SDRs in cold markets should look for pain.
  • SDRs in hot markets at companies complementing inbound with target-account selling should look for pain.