You have never hired a salesperson but you want to change that. Let me help you out. We’ve all been there once – even the best sales managers had to start somewhere, so you are in a great company. We’re going to cover all the basics that should enable you to hire your first sales team (you almost never want to have just one sales person).
The ideal moment is when:
Without that data you won’t be able to process the figures you will need to make other decisions. If you haven’t sold to unaffiliated clients yet – it’s too early because you are not sure if you can sell to people who don’t know you yet. If you don’t know those things there is a possibility your new salesperson will be put in a position in which success is impossible.
There are two models. The first one is for experienced salespeople with families, mortgages, and companies with long (9+ months) sales cycles typical to enterprise products. In that model you need to pay high base salary. For example 75% of on-target-earnings (OTE) + some bonus scheme on top of it (25% OTE). If someone has kids and mortgage, and has to wait a year for a deal to close, they will not wait around on a minimum salary. Not if they are smart (and you don’t want salespeople who are not). There is risk which is outside of their control so they will not bet their life on that (what if the company goes out of business? What if their boss is a lunatic? What if the compensation structure will change?).
The second model is designed for more junior sales people with no family, mortgage, high risk tolerance, and short sales cycles. That person can be paid a modest base salary (I’ve seen businesses go as low as 20% OTE) that will enable to make ends meet plus an aggressive bonus structure (even 80% OTE) so that the best will outearn senior people with high base salaries.
Since you don’t have experience in recruiting and managing salespeople opt for modest base salary salespeople at first. You don’t know what you are doing. So just limit the cost of inevitable mistakes. Make sure they have 1-2 years of experience with proven results because you actually want salespeople that know the basics already.
There are 3 major events you can compensate salespeople on: signing the contract, invoicing, or payment hits your account. Generally you want to pay your salespeople as fast as you can, especially junior ones who haven’t saved up cash to secure themselves yet. However, if you are working in an industry where a lot of debts have to be collected or you are exporting to countries that lack the infrastructure to do that efficiently you might consider paying your sales team once you receive payment for an invoice. On top of that there is a major risk in subscription services – if your average client stays with you 36 months do not pay your salespeople for 3 years for making the sale. This is a sales team and not a passive income generation office.
I can’t give you an exact answer since I don’t know your business. If you were my client I would provide you with a more contextual answer to that question – but that can be fixed,you know? For now I can tell you that every market and industry is different. Glassdoor, talking to headhunters and candidates, and reading ads with salaries disclosed in them should provide you with something you can benchmark your proposal against.
Couple weeks ago one of my colleagues impressed me by firing a salesperson after 4 days at work. That was a good decision – to say that a guy he fired was not a cultural fit is a huge understatement. He didn’t attach his ego to his decision and as soon he realized he did a bad hire he revised his decision. Besides firing assholes – you should formally evaluate your salespeople after first two full sales cycles. If your average sales cycle is 30 days and you’ve provided the sales team with enough leads and support they should perform in 60 days. They don’t have to be profitable. They don’t have to “crush it” yet. But they have to perform. Of course you should monitor their results on a weekly basis.
In some cases (startups) you might consider equity options for the founding member of the sales team (don’t forget about vesting). In some cases people who hunt for commissions are not a great fit in always short in cash early stage startups. You want a person who has the ability to disqualify a client (with a fat commission) because it’s not a great fit. Vesting equity option might tilt them into thinking more long term.
Since in the beginning you are hiring someone to compensate your weaknesses you might consider hiring someone who is a farmer or a hunter – depending what you are not. Hunters are acquiring new business by doing what they can to get a first transaction. Farmers are growing existing business to bring more value to the client (Upselling, Cross Selling, Renewals, Referrals) and charge clients more over time. For example: I am a hunter by trade and nature so I’ll hire aggressively to Casbeg’s customer success team because I know that I will be able to hunt personally – therefore I need help with farming. You might be like me or the other way around. Either way you can rig the game so that you can do sales in a way that will help you play to your strengths.
Maybe this is not really the right time to bring a full time salesperson to your company? Maybe you need to grow your business a little bit more, save up some cash, build up your lead generation and 3 months from now pull the trigger on that hire? If that’s the case consider hiring an assistant that will take some things of your plate (not only in sales but in general) so that you could spend more time on talking to clients. An assistant (especially part time one) is a fraction of the cost of a proper salesperson. Once you get ROI on hours assistant will save you – then you can hire a customer success manager that will take over relationships with existing clientele from you, so that you could spend more time on hunting new business. Then you can hire a new business manager who will hunt alongside so that you can focus on enterprise accounts only. That way you will gradually increase the output of every hour you spend on selling.
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