When You Hire Your First Sales Rep — Just Make Sure You Hire Two

Screen Shot 2013-01-10 at 4.29.48 PMThe time is probably going to come when you have to build a sales team in SaaS.  It may be Day 1 if you have plenty of capital and are selling to large enterprises.  It may be X months down the road, once you close a few deals of large enough size ($x,000 ACV) to justify hiring a sales rep.  It might be 5 years down the road, like DropBox and Evernote, when you decided to add a corporate/enterprise edition to your freemium app.

But if it even happened at DropBox — it will probably happen to you.  Hiring your first sales guy.

Now you may somehow have enough capital to hire a VP of Sales and a bunch of reps right then and there.  I’ll talk about this — a lot — in some other posts.  Because I really learned a lot having a simply awesome VP Sales and sales team.

But most likely, you won’t have the resources to hire a whole sales team upfront.  You’ll want to start with one experienced rep.

And there’s only one problem with that: no matter how well that rep does, you won’t learn anything.  You need at least 2 to learn.

Here’s why:

  • If your first rep does poorly, you’ll have no idea why.  The rep will blame you, your crappy product, your crappy company, your crappy lack of marketing.  Which may all be correct.  But if the rep is a bad fit, that may be the real reason.  You just won’t know.
  • If your first rep does well (our experience), you’ll still have no idea why.  Does the product sell itself?  Is it the rep’s suave phone skills?  Is your deal size, and are your customers, representative of the ones you’ll really get in the future?  Or is this rep only good at a a certain type of customer — and are you leaving other potential customers behind?  You just … won’t know.

I got this advice from one of our advisors with more experience that me here — but ignored it.  To save money, and really, in a mistaken attempt to Keep It Simple.  So for our first rep, I narrowed it down to 2 guys.  One, super smart, super eloquent, who explained our product well.  The other, well … less sharp.  But great at outbound.  At prospecting.  Never discouraged.  He’d do 50 calls a day, 20 days a month, even if he got 1000 hang-ups.

You can guess I went with the first guy ;)  And he was and is great.  I mean, Great.  He let me focus on closing a few key strategic accounts, and just banged out the rest.  The engineering team worked with him well, they loved his smarts and insights.  And the customers love him.  He’s still with EchoSign and Adobe to this day, and has done amazingly well.

The only problem was I learned nothing.  I mean about building and scaling sales processes for our company, at least.  It wasn’t until we finally had a second great rep, that I could learn.  That I learned about new segments we could sell into.  About how to sell at lower price points, and in higher volumes.  That I could compare and contrast.  I could guess before, squint at data.  But I didn’t know until I had 2 good ones.

Look, if you’ve been a VP of Sales yourself for 10 years, ignore this.  But most of you haven’t built or led an inside sales team before.  So you’re gonna need to learn.

So even if it seems expensive – hire two.  To start.  Then learn … and go from there.  It will be better, and thus cheaper, in the end.

21 comments

  1. Delightfully clever: A/B test your sales reps.

    I love it!

    Best,

    BW

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  11. Jason, how do you justify if you need a sales rep? What should be the LTV / ARPU? What if we suspect that our LTV is below what it could be because of the inbound marketing channels we have now?

    Thanks

    • Boy that’s a great question, deserving of its own post. I guess as long as your LTV/ARPU is > 2x, a sales rep is definitely going to pay. You want something higher than this of course, 3x or more … but I think it pays at just 2x because otherwise, you may never get that revenue, or the second order downstream revenue.

      • Yeah, the post would be awesome. Our LTV / ARPU is 2x; however, numbers matter as well, right? Say… does it make sense to have inside sales people if ARPU is around $200?

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  13. No. It’s only going to make sense to have true inside sales people if your ACV is at least about $2k or so, and even that is very low. You just can’t close enough deals otherwise. Will do a post on the math here.

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  16. Jason this is a terrific post. I have been reading a lot of your material since I found the blog, and have been applying the principles. Thank you. This post is appropriate for our SaaS company currently. We are a Salesforce ISV and sell a SaaS to government and non-profit so we absolutely have a high enough ACV. The decision to hire 1, 2 or 3 is definitely a tough one for us currently, and our management has gone back and fourth on what to do. Part of the decision will be based on available resource since we are bootstrapping.

    Here are some questions I have:
    1. “Keep it simple” – You stated you hired just one rep to “keep it simple”. What was your thinking behind this? Did that actually happen?
    2. Competitive Culture – In my past company I managed a sales team of recruiters. By hiring multiple recruiters we created a competitive culture. Do you feel this is also a benefit of hiring multiple reps?
    3. How much of the sales process do you need to have documents before you hire your first sales reps?

    Thank you for your continued insight on SaaS business, this is definitely helpful information.

    • 1/ it was less simple with 1 b/c i couldn’t A/B test.
      2/ yes. you want either a competitive, or at least, semi-competitive sales culture. this happens almost by definition as long as everyone knows how much everyone else is closing
      3/ it would be best if you closed a handful of customers yourself first ;)

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