Maverick billionaire Mark Cuban recently said that the two best forms of equity for entrepreneurs are sweat equity and customer equity. Sweat equity is “the grind” -- the hours and work you put into creating the service or product. Customer equity is the validation of revenue you get from customers.
Newsflash: You can’t get customer equity without sales.
Here’s the challenge. This type of equity often requires founders to go beyond their initial validation of the product by friends, family, and referrals. Validation (read: sales) must also come from the wider market. And for most startups, that involves bringing in more people to sell.
But when do you know the right time to scale a sales team? What are the indicators that the time is right to bring on your first professional seller? Or that you should hire your fifth or 10th or 20th sales rep?
“I think one of the biggest lessons I’ve had was scaling too quickly, scaling the sales team too early,” Imo Udom, CEO and co-founder of mobile recruiting app WePow, told me without hesitation in our recent chat.
This mistake of scaling too quickly not only cost Udom financial cash burn, it also saddled him with the unfortunate responsibility of having to lay off over 80% of his sales team.
“While you’re growing your business, you’re trying to get hyper growth,” Udom said. “You know you have pressure from investors and the market. It is very easy to fall into the trap of, ‘Ooh, if I had more sales reps I would be closing more deals.’”
Learning from his own mistake and onboarding advice from his mentors, Udom believes that understanding the basics of your sales metrics and process is fundamental to scaling. He shared five key questions founders ought to ask themselves to determine whether they are ready to scale their sales teams.
1) Which part of my sales motion is repeatable?
Scaling doesn’t thrive on beginner’s luck. It thrives on consistency. That’s why before attempting to scale, it is vital to identify the activities that produce results on an ongoing basis. They’re repeatable. And you know why and how often.
Udom suggests starting your sales team with three reps.
“If you only have one person in the role, you don’t know if they are telling the truth or not about your process,” Udom says. “Do you have a crack or do you not? If you have two people, that is better. You create competition but sometimes two people could just be friends and they can kind of collude. When you have three, you have the odd person typically. You have real competition and you typically get all the answers you need.”
Once you have those two to three people, you can tell which sales processes are successful and repeatable. You will have a better understanding of what success looks like -- then you can start stepping on the gas.
Part of repeatability means that you’ll need to understand the number of calls, emails, follow ups, and conversation you need to have with clients. How much effort does it take to achieve Y results?
2) What kind of message should you communicate?
Finding the right message for your target market is important. For the most part, the message needs to resonate with how the market creates value.
But finding those compelling value propositions are just the starting point. You’ll also need to ensure that there’s great consistency when articulating it across your different customer groups.
Consistency is vital because, as Udom says, “the early sales team has do everything. They have to grind, be on the phone, be on emails, and do a lot of prospecting.”
And you don’t want your sales reps to be blurting out different messages that are not consistent internally.
3) Which lead profile do you need to spend the most time with?
Time is the least available resource for sales teams. Which is why it’s important to know who’s worth spending time with before you hire your fifth or even 15th salesperson. Part of determining this is knowing which lead profiles -- or buyer personas -- within your target market’s business moves the needle forward the most.
Is she the IT manager or the CFO? Is she the recruiting executive or the onboarding specialist? Is this person a gatekeeper or decision maker, or an internal lobbyist or champion?
You need to have a clear persona of your most important customers. Knowing this before scaling helps you to structure the time of your sales teams in the best possible way.
4) What does the closing process look like and how long does it take?
Your salespeople’s success rises and falls on their expectations. So it’s important to establish the right expectations for closing sales deals before you hire more salespeople. This cannot be emphasized enough. The best way to establish the right expectation is track and measure the performance of your current sales team of two to three sales reps.
Among other things, you’ll also need to understand the elements of your closing sequence. Does it take on the average three meetings? Eight weeks? Seven emails and one demo? Does the close typically happen over email or is it a upgrade from free trial to paying customer?
Use the best metrics that make sense for your own business.
You need to understand the trends so that not only can you hold new sales reps accountable, but you can set the right rhythm for them and set realistic expectations.
5) How do you position your product versus others in the market?
This final question allows you to think about where your service sits in the broad scheme of the market. Are you a complementary or substitutionary solution? What pain points do champions say you can solve best?
By the time you’re bringing 10 or 20 salespeople on board, you shouldn’t be discovering your positioning -- you should be reinforcing it. So through customer feedback and product iterations, it is vital that you develop a holistic understanding of how your solution stacks up against your closest competitors.
The real test for founders who have a lot of passion and understanding for their business “is bringing in someone who isn’t an original founder and telling them to sell your product,” Udom emphasized. These questions, combined with your own passion, will help you to determine the right time to scale your sales team.
Originally published Sep 5, 2016 8:30:00 AM, updated July 28 2017