What to offer my first salesperson?

[spiggytopes]

I’m a single-founder startup producing specialized risk software for financial institutions. The company is based outside the US but that’s where a large part of the potential market lies, so I’m looking at engaging with a US-based sales-person whom I already know and has in-depth knowledge of the market (and a lot of contacts). The software solves a major industry problem at a fraction of the cost and business risk of existing solutions. Question: What’s an appropriate package to offer the salesperson? I’m willing to consider part-time working, a salary/vested equity mix, percentage of royalties, and so on. Most potential clients are on the east or west coasts, so there’d be a fair amount of travel costs to factor in as well.

[andrewstuart]

You should have a very high expectation of sales results from them, and you should give them a guaranteed commmitment that you will measure their results, and you should follow through on that commitment. Salespeople are notorious for giving excuses when they don't meet the sales targets they agreed to.

Fire them if they haven't got results within a reasonable timeframe which you both agreed to.

Offer nothing you can't back out of (like equity) until they have been on board 12 months at least and proven themseves invaluable.

There are lots of salespeople out there who can sell themselves to prospective employers better than they can sell your product.

You must learn how to be a good manager of salespeople rather than trying to "find a good salesperson" who will magically start bringing in the sales for you.

Probably you should do it yourself - you need to know first hand how hard it is to sell your own product, and you know how to succeed selling your product. Only with that knowledge can you effectively manage someone else to do the same job.

[CyberFonic]

Agree about many salespeople being good at selling themselves to prospective employers. My experience is that there's more of those than genuinely good ones. My trick is to offer very low retainer and high commissions. The best ones will go for it. Anyone who wants a high retainer might be better at making up excuses for lost sales.

I'm seeing two other problems.

1. You say that you are not in the US and you are hiring salespeople in the US. Have you looked at the company trading and legal issues?

2. Selling to big organizations can take a long time. There is more to selling your product than solving a big problem cheaply. There's politics, turf issues, vested interests, incumbent suppliers, etc. Lots of people who can nuke your sale but few that can push it through.

Since you are not on the ground have you considered seeking out a distributor / established co as joint venture partner? They might be better resourced to do what you require especially with regards to managing territories. Constantly flying coast to coast is not only expensive, but draining and unproductive.

[farout]

Haha - you are so right on several accounts:

1. Any good sales rep should be able to sell self, their best product.

2. When I went for jobs I was mainly interested in commission. However if the sale took long that is not good enough. You can have the commission stagger - matching the sales pipeline stages. This meaning - they get x for number of potentials in that have been qualified, y percentage for that have been demod, z for starting eval, p for finished eval, q for proposal, w for closed, and t for getting referrals. You get the idea.

Selling to big orgs is painful and time consuming. However if you can find something that they already are buying, partner with those folks since their sales reps are already in.

Always look for a personal stake when selling. The best way someone described it is like buying like you would do for yourself except it is someone else's money so even less diligence is needed. You have to work on literature to answer all the thoughts in their head that makes this a near risk free proposition. This means answering concerns from the CFO and how it compares with existing solution, and how to incorporate it so they get the full benefit.

I hate distributors in general. They do very little to make sales. Instead go with a value added reseller. They have the feet on the street. Plus if you treat the valued added resellers are you sales rep clones, they will sell and sell. Go for a reseller that is number 3 or 2 in the industry. They have something to prove. Then train the sales staff yourself. This means real practicing and providing excellent marketing collateral and support for questions. The marketing collateral does always ned to be fancy - remember they will not be fired for not using your product. Most places have inertia and they have more to lose than gain by switching to you no matter how much they save the company or make the company. Always find out how the switch will personally impact them - now they have real motivation.

PS in terms of English, I liked "Niches to Riches" book about benefits pieces. it is more B2C but remember folks are folks. It helped me tremendously. She is PR consultant.

Another sales book recommendation if you in a established market: The Wedge: How to Stop Selling and Start Winning It talks how one goes about replacing the existing competition that already has the business.

I worked in both greenfield and established markets - they both have unique challenges. If you want to talk more let me know, [e-mail]. I am in the middle of product coding so...

[CyberFonic]

Great collection of info. I especially liked your bit about "looking for a personal stake ... someone else's money so even less diligence". That's how Apple sold so many IIe's with VisiCalc.

[spiggytopes]

Thanks - that is excellent advice. I particularly appreciate the warning about salesmen being better at selling themselves than the product.

I have sold related systems quite successfully in the past and will likely continue to do so. My view of the sales-person's role is to get an initial meeting in the door and to close the sale - I certainly expect to be involved at some point. The main problem for me is the time and effort in chasing potential sales leads from the other side of the Pacfic.

[spiggytopes]

This all looks like superb advice - again, thanks!

- I will order 'Selling to Big Companies' tonight.

- Will make sure we all have a clear idea of the sales pipeline, targets

- Yes I have looked at the legal and trading issues - am being advised by a 'Big 4' firm who know the pitfalls

- Point about time to sell to large organisations is well taken. In fact part of the appeal of the system is that it gets round many of these problems.

- Am currently in discussion with some much larger established companies re licencing and distribution (one in London, one in Boston). They both love the product but are moving very slowly. I want to have a separate distribution channel as it's not clear at present which is going to succeed. However, having a distributor would certainly be easier than flying Australia-US each time a sales prospect needs me there!

- I really like the idea of low retainer/high commission. The business model is to charge a recurring subscription, so paying a high commission based on the first year's revenue won't impact so much on future cash flow.

- No equity on the table until they have proved themselves! At present I own 100% of the company (bootstrapped), but would consider giving someone with complementary skills in sales a portion of this if they had proved they could boost the company's value.

[codingstaff]

I've been trying to do what you are doing just a month ago. I actually flew over to US to meet with potential candidates. Some of them needed base salary, some were willing to work on % basis. I would advise finding guys that really know what your business is about. If your startup rocks, sales people will start knocking your doors.

[JoshKalkbrenner]

A carrot and a stick :|

[farout]

Having been a hi-tech quota exceeding :-) sales rep for a number years, here is what I advise:

1. Hire two reps: one for each coast. Even two part-time reps at each coast I say is better than one rep running around from coast to coast. Time wasting and regionally differences do crop up.

2. Read the the book, Selling to Big Companies.

3. Yes sell yourself so you understand the issues involved.

4. "Salespeople are notorious for giving excuses when they don't meet the sales targets they agreed to."

This is usually when the owner does not understand the market or misestimates the market. Any good sales person will leave and stop wasting time with people that will not work with them to make sales happen. It takes a company to sell. Especially if you want the easy and lucrative referrals.

What is the price point for this product? Who at the customer site will ultimately say yes?

At one company, it was easy to sell since the network engineer was the main guy/gal that had to approve the technical aspects. I just made sure they understood the personal utility of our product as well so they had a personal stake on how their life would with us or a competitor's product.

read the book, it is totally awesome. Having done the job for a number of years, I still learned lots of usually things that I was able to use immediately.

In terms of what to offer, I guess it really depends. Realize in the beginning you are really doing business development not just sales. So there needs to be more of a salary cushion. A low end salesperson is usually 40/40. 40k salary and 40k commission. Realize that the you are hiring a profession and not asking them to necessarily do charity work. However, together estimate the metrics of sales and the where the number of sales at each level in the sales pipeline. Also come up with remediation plans. Say in 2 months, you expect the rep will have made 5 sales. What happens if they have only made 2 sales. Have everything spelled out so everyone knows the ramifications and there are fewer surprises.

[notahacker]

> "Salespeople are notorious for giving excuses when they don't meet the sales targets they agreed to."

This is the sister argument for "developers are notorious for giving excuses when they miss deadlines they agreed to"

The key point about metrics is having something to base them off; difficult with a new product unless you know the competition (and the basis on which their clients switch) very well. A better starting point would be to agree upon how the rep intends to make 5 sales. If they make them, all is well; if they don't, you look at a simple measure of performance like whether they attended the meetings expected of them and ask what the feedback was. Resist the temptation to micromanage KPIs if things aren't going so well: if you suspect your salesperson is failing due to laziness then either you're wrong, and you'll drive them away faster or you're right and you still won't make things any better.

[rdl]

How do you feel about handing over all the in-progress sales to the account rep, so he can get some easy wins? I'm in a market with a 2 year sales cycle (there are shortcuts to make it 3-6 months), and there are leads/pilots in various stages. Do you get reduced commission for those, or none, or full?

[farout]

I am not sure who you are asking, but I will respond.

There is no such thing as an easy wins. Most companies do not realize a customer is not a sale. A customer is a customer that renews, tells others (referral aka word of mouth), or comes back as repeat business.

P&G has 4 moments of truth: First that the customer knows about you, second customer buys you, third customers accepts that you did what you claimed, and fourth customer tells others or buys again.

The more customers that are using your product the more sales you will get; kinda like network effect. They each can talk to each other about their experience and how it improved their lives/company. Since more people are using it, it is easier to get internal buy-in and sales on new accounts.

I agree with the person that said sales are hard initially. You have no brand awareness. Make it easy for your rep to sell. Sales is hard. Ask any CEO who has done it. I would pay the person for the numbers in each of the stages in the sales pipeline since that is how sales are made: step by step. vary the commission rates. Like the other person, focus on the process and then conversion rates for each stage.

My questions to you: How much profit will you make on 0 sales? What are you waiting for? Either close the business yourself or let a professional who has vested interest do it. In the beginning it is not about profit but market share and building brand equity.

[farout]

Edit: andrewstuart's said the quote on item 4. I am just responding that I do not agree.