Appointment SettingSales

When to Hire the First Sales Rep for Your Startup

By August 6, 2019 No Comments
When-to-hire-the-first-sales-rep

You’ve successfully launched your new startup. Now you must pivot your focus to growth — increasing sales and bringing on new customers. But how do you know you’re ready to take on a dedicated salesperson full-time?

There’s no straight answer, number of months, or amount of revenue to reveal here. Whether or not it’s time to hire a sales rep depends on a number of situational factors.

We’re here to give you some concrete benchmarks that signal whether or not you’re ready to make a sales hire and to be your guide through this critical stage of startup growth.

What is your startup’s current situation?

Who do you already have on your team, and how have sales been performed so far? There’s a few common organizational structures we see in young startups looking to grow their sales.

  • CEO as a one-person sales team: This is a common scenario in relatively new startups. The CEO or founder knows the product offering better than anyone. They’ve been responsible for not only selling the idea to first customers, but investors and new team members too. These early-stage founders rely on themselves to prospect and pursue new business. This is often an important first step for new companies, but isn’t sustainable for long, as the CEO begins to take on more and more responsibilities.
  • Business development manager on board: You’ve hired a biz dev manager who helps manage overall business growth, from crafting sales techniques to building strategic partnerships with channels and vendors. Many startup founders turn to this person as an early hire, and having one onboard often indicates that some sales process has been established or is being established.
  • Hired a marketing manager: You may have hired a marketing manager at this stage of your company’s growth. Even today’s novice founders understand the potential impact good marketing can have on a new business, which is what often prompts them to hire for this role before sales. Still, some consider this putting the cart before the horse. If you’ve been successful at bringing in warmed-up marketing leads, your need for a new sales hire who can close them will be more apparent.

Besides who you’ve got on your team, your current budget, including current and expected funding, are important situational factors to consider too.

When it comes to analyzing the budget for your first sales hire, don’t forget to take the details below into account:

  • How many sales you’ve already won/how many customers you have
  • Your average customer lifetime value
  • How much you can afford to pay your sales hire (remember that good salespeople are always in demand — the better the salesperson, the higher the salary needed to retain them)
  • The expected speed of ramping your new salesperson to full productivity
  • The average length of past sales cycles (helps you determine when you’ll start to see a return on your new sales hire)

How will you know it’s time to hire a salesperson?

Concerns over budget and resources aside, how will you know it’s the right time in your long-term sales strategy to hire a new closer? We recommend waiting until you’ve reached the following 4 milestones before making your first sales hire.

1. You have at least 10 clients

Many sales experts agree that a startup founder shouldn’t look to hire outside talent until they’ve done the legwork to earn the first 10 clients. There are 2 main reasons for this advice:

  • You know people are willing to buy your product
  • You know how to sell people on your product
clients

Especially for B2B startups, where deal sizes often range in the hundreds to thousands, the ability to bring at least 10 clients on board is a strong indication that there’s a demand for your product. Those first customers are essential to the growth that will lead to your first sales hire.

By the 10-customer benchmark you know that your product is sellable. You’ve verified that there are people out there who have a need for what you’re selling. This confirms that your effort and money spent on hiring a salesperson won’t be for nothing.

At the same time, you’ve learned which talking points are effective for convincing prospects that your product can fulfill their needs, which is useful once you start developing a process for future salespeople to follow.

2. You know your product-market fit

Now that you’ve won some customers, you should have some idea of how your product fits into the current market. This means knowing how it’s differentiated from similar products and why buyers would choose your product over a competitor.

market-fit

Some common product differentiators include:

  • Support: Multiple studies find that buyers increasingly factor quality and convenience of support into their purchase decisions. Excellent customer service can increase sales by ensuring customers get long-term value from their purchases.
  • Price: Cost is a big decision factor for many buyers, so having a lower price point or flexible pricing options can give you a big competitive advantage. Especially for B2B buyers, whose purchase choices often come down to their bottom line.
  • Features: Does your product have something no other product has? Maybe it allows for greater customization, or makes an advanced feature more accessible to a different type of buyer. Boasting an extra valuable or innovative feature is an impactful way to set yourself apart.

At this point, you should know which aspects of your offering are important to your buyers. Your experiences prospecting can be used as a tool for market validation because speaking directly with prospects helps you know which type of buyers see these differentiators as valuable.

Becoming an expert on your product-market fit is important as it helps you develop further talking points and messaging.

3. You have a developed sales process

One of the most critical elements for early-stage sales success is the development of a repeatable sales process. Before you add your first salesperson to the team, you need a framework for them to follow when pursuing and nurturing prospects.

sales-process

We can’t preach the importance of process enough at EBQ. EBQ works with a variety of new startups, so we’ve seen both the triumph that comes with a well-established sales process and the defeat that can happen without a process.

In the case of FinTech startup LenderClose, we were able to help their founder(/lone salesperson) create what he refers to as a “friction free” process.

Establishing LenderClose’s sales process early resulted in a 380% increase in revenue over the year that followed. It also laid the foundation for the startup’s founder to stop doing sales himself and instead recruit his own team of salespeople.

Your future sales reps, especially the first few hires, need a solid outline of tasks and best practices to guide them as they make their first sells.

Start by creating a sales playbook for your offering, which may include elements such as:

  • Overview of the company and product
  • Ideal customer profile and buyer personas
  • Messaging (value propositions, call scripts, email templates)
  • Key activities at each stage of the sales cycle
  • Multi-touch cadence
  • How to handle common objections
  • CRM process and tips
  • Key performance indicators

When crafting these elements, we find it helpful to analyze each stage of the sales funnel to determine which activities are needed at which points in the sales cycle. For a starting point, we recently developed a “sales funnel template” that will help you outline your sales process. Download the template here.

4. You have a lead generation strategy

Finally, you’ll know you’re in need of your first sales rep when you have leads coming into your pipeline—especially if you’re having trouble keeping up with inbound volume on your own.

strategy

Before making your first sales hire, we advise having a strategy for generating both cold and inbound leads.

  • Cold leads: Generated through data-building efforts and manual prospecting
  • Inbound leads: Generated through inbound marketing efforts

For generating cold leads, there are many different data services you can utilize to build out your database. Your sales reps might also prospect for cold leads manually through networking tactics, such as using LinkedIn if they’re in B2B sales.

When it comes to inbound leads, an effective marketing strategy acts as support for your salespeople by giving them warm inbound leads to follow up on. The purpose of marketing is to engage your target audience and generate awareness of your product, giving sales teams the ability to focus on leads who have shown some level of interest.

Make sure you’ve nailed down your process for generating both cold and warm leads, so your first sales hires don’t get stuck in the early stages of the pipeline.

Ideally, salespeople shouldn’t do all of their own prospecting, as the long process of cold calling and qualifying causes them to lose valuable time that could be spent nurturing and closing deals.

Particularly if you have long and involved sales cycles, we recommend using a specialized rep called a sales development rep (SDR) to cold call and follow up with marketing leads in order to nudge them closer to the decision stage and set sales appointments for the closer.

Some startups prefer to hire an SDR to support the salesperson-founder, before hiring another sales rep, because of their ability to make a small or one-person team more productive. You can read more about this lead generation strategy in our Ultimate Guide to B2B Appointment Setting.

What are your options for hiring salespeople?

Find a sales co-founder

Depending on which stage your startup is in, there may still be time to find a sales-focused co-founder. This option would be most valuable for a founder who hasn’t yet met the 4 criteria we described above, someone who needs long-term sales expertise and assistance establishing their processes.

Besides expertise, one upside of hiring a sales co-founder is that there’s typically no salary starting out. Of course, this involves promising equity in the company as compensation, and you may already be past the point of recruiting another founding member.

Full-time permanent salesperson

The obvious route is to hire a full-time salesperson for your startup. It’s important that you only consider this option once you’ve won some clients and have a sales process in place.

Hiring a dedicated sales rep is a big step for a startup, but it allows one person to focus all their time and effort toward bringing new business to the company. Do keep in mind that hiring a full-time rep, especially a talented one, is expensive for an early-stage startup.

According to The Bridge Group’s Periodic Table of Inside Sales Metrics, the average salary of a SaaS sales rep amounts to $62,000, while full on-target earnings will cost you a staggering $126,000 per year. And that’s just for one average rep, not necessarily the best of the best.

Commission only

One alternative to hiring a full-time salaried sales rep is to recruit someone willing to work for commission only.

Small companies primarily elect to hire commission-only sales reps to reduce their employer expenses. However, many sales experts believe that paying based only on commission can cause you to lose money by hurting sales productivity and motivation.

As Aaron Ross, author and CEO of Predictable Revenue, once put it, “If you hire someone and you’re not really willing to invest time and resources in them—and that’s really what a commission-only salesperson suggests—then you’re missing an opportunity.”

He goes on to describe commission-only salespeople who are just in it for their cut of the deal as “the ones who will bail out first if hard times hit.”

Outsourced sales reps

Many startups see success by hiring their first sales reps through an outsourced sales and marketing firm. This option entices many founders because it doesn’t involve the same risk as hiring internally, especially when you consider all the expenses that fall on the outsourcing firm instead of their own company.

One big advantage of outsourcing your sales is that these firms often have a proven process already established, which makes sales more efficient and can be a reference for you as you begin to build your own internal sales process.

If you choose to go the outsourcing route, we advise choosing a firm that has a management structure built in, so you don’t have to focus on micromanaging an outside team. For instance, EBQ’s outsourced sales service includes a success manager and project manager to provide a full department experience at a fraction of the cost of building it internally.

Lay the groundwork with a proven process

We’ve worked with thousands of startups, so we understand that everything little thing—even hiring a single sales rep—can have a big impact on the success and longevity of your company.

You can’t afford to cut corners and recruit someone before you’re ready, but you can’t wait too long to make that first sales hire either. What you can do is plan ahead for the costs and ensure your first reps have a productive path to follow.

We hope this guide has helped you determine whether or not you’re ready to hire. And if you’re looking for experienced sales reps with a fool-proof process, feel free to contact the Specialists at EBQ.