Building Sales Teams: How, When and Who

Let's introduce the panel, ladies and gentlemen, Again your Moderator, Brendan Cassidy, VP of Sales from EcoSign. Talk to us LinkedIn. Mandy Cole, VP of Sales from Zenefits. And we have Sam Jacobs, SVP of Sales and Marketing at Live Stream. Hey everybody, how we doing today? My name is Brendan Cassidy as introduced former VP of Sales, LinkedIn, Echo Sign, Talk Desk. Recently, HackerRank. With us is Mandy Cole, VP of Sales with Zenefits. Prior to that, Living Social. And then Sam Jacobs, SVP of worldwide sales and marketing for Livestream. And today we're talking about how, when and where to build a sales organization. And we're looking forward to having that discussion. So we'll start off with a few questions and I'll start with Sam.

Yes, Brent?

When is the appropriate time to start a sales team?

Well, so I think the appropriate time to start a sales team if you're an early founder, is when you have customers. We were just talking about this offstage. I think it's the job of the founder to sign up essentially the first 10 to 20 customers. And that's because the important thing to do before you start a sales team, you hire your first rep, is you need to make sure that you have product market fit, which some of these things are cliches, but they're true. The product has to serve a need. It has to meet the needs of its customers, and your customers have to be willing to pay money for it. The problem that I've seen and that I've experienced in my career, when you hire somebody like me or like Mandy or like Brendan, you know, what I do is I give companies revenue. So if they're not ready for, if the product isn't a good fit for the customer set, I'm going to probably find a way to give that revenue to the company anyway. But the sacrifice is going to come in the LTV and the churn dynamics and essentially the net promoter and delation, as Dharmesh Shah said yesterday in the customer success and feedback itself. So I think it's really, really important that before you build a sales team, you're ready because the customers are telling you that the product works, they want to renew, they're happy with it, and the founder has done those sales on his own or her own or the team has done it on their own so that they can. It makes sense to begin to monetize and commercialize because once you start, it tends to be hard to stop. So what do you think, Mandy?

I agree. It also helps you just think about the end to end Customer experience. I'm sorry, y'.

All.

This just happened this morning. Murphy's Law. And so making sure you have all those pieces in place. To your point, if you can sell people but you can't onboard them, you can't retain them, you don't understand what their challenges are in month two, three, four, it's going to be hard to prepare for that. And it also then helps you understand what type of person you want to hire. A lot of times you don't need to hire somebody as your first vp. You may need a director level, or maybe you hire an AE first and then make sure. But understanding what the sales cycle is like and really making sure you price it right. And like you said, there is market opportunity. And where you're going to target first will also help you determine who's your next hire.

Yeah.

Okay, so you're a founder. You have product market fit. You've sort of stepped in as your first sales guy. Essentially, you have some customers, some recurring revenue at that point. Do you hire a VP of sales or do you bring in a couple salespeople first? What would be your advice to a founder?

I mean, Jason's written a lot of articles about this. I don't think that's the right time to hire a VP of sales. I think you bring in a couple reps. There's math associated with when to start doing this. So hopefully you have leads. And that's the nature of product market fit is maybe your customers are talking about to people that are not your customers about the quality of the product. So if you and Tomas Tunguz up on the other stage was talking about this just now, there's a fundamental unit of sales and marketing investment that it's not just a salesperson, it's the number of leads that are required to support that salesperson. So you need to understand the economics of your business, what price point you're going to set, and then you can hire salespeople. But you just have to understand that they need some kind of leads, either through an outbound SDR and prospecting or through some kind of inbound process, maybe through SEO or content generation. But they need to create a certain number of opportunities and close those opportunities at a certain rate over the course of their time with you. And if you don't have enough leads to create those opportunities to win those deals, then you may not be ready to hire that team or you'll need an outbound SDR to. To begin to develop those leads.

So, Mandy, and again, I think some of these are Common sense. Some of these are consistently gotten wrong by founders and will be gotten wrong tomorrow no matter what we tell them. But you're a CEO. Again, excited. You just raised seed round or an A round. You have no leads, but you do have some revenue. Do you hire an AE or do you hire an sdr?

I think it depends on if. If they're inbound leads or not. You know, how much have you done around just trying to attract inbound leads? Do you have people already coming in? Because if you do, you can use that to figure out that same pipeline that Sam was just talking about. How many do you need? And an inbound pipeline will look different from an outbound pipeline. And are they the people that you want coming in? Do you have that messaging? Right. So I think if you're comfortable with closing a few of those, I would. An SDR is an easier person to get up to speed and to actually help you test that market opportunity before you bring in a closer. Because bringing somebody in that expects to be fed and then isn't getting fed because you're still figuring that out then can be not an optimal situation.

No leads, no salespeople. That's the lesson. Sam, we were talking yesterday. I'm a big proponent of when you're a VP of sales, you want to bring in three to five people sort of that, you know, had probably worked for you in the past sort of in network, probably from the last place you worked. And I think those of us that work in California are. Everybody knows non competes are not. Are non enforceable in California. So that sort of. That element is not considered legal risk here for us. But Sam brought up a good point, which is if you're not in California, non competes are actually legally enforceable. And so you can't actually recruit maybe the team that worked for you in your last company. If that's the case, what do you look for when hiring those first few reps, really from the ground floor? How do you bring that mix in?

Well, yeah, and this is just continuing a conversation that's probably ongoing across the sales community. You know, Jason Lemkin writes about how your best VP of sales should have their top three reps that they want to bring over right away. It really depends on the market. Brendan, to your point, the first reason is because of non competes and I have a non solicit with my former employer. So I literally cannot just go and poach employees of my old company, even if I wanted to, without incurring liability that I don't wish to placed upon My current employer. That's one reason. But the second reason is that in inside sales and mid market sales, you know, really, ACVs may be up to about $50,000. I'm working with people that they don't really want to move jobs per se into the same function. So I can't take a great young rep, he or she is 24, 25, 26 years old, is fully ramped up and just doing a great job at the old place. They don't want to move laterally, they want to move up. So the people that I tend to hire are people that are looking for an opportunity to build a team or to take the next step in their career. If it's an sdr, come here and be an ae. If it's an ae, maybe you can come and build a team. It's really not that easy because the nature of inside sales, it's not my experience at low ACVs, I've seen field sales and enterprise sales reps that have been doing it for 20 years. They love being individual contributors. It is possible, possible based on the comp that they make to bring them over from a previous place into a lateral position. Here's your new list of customers start calling them. But for young people, this is not often the 20 year career. This is one step on their career that they're looking for. And if you're just offering them exactly the same set of skills, responsibilities, it's going to be a difficult, it's going to be a difficult proposition. So to transition that into your question, Brendan, and again, if you read like recaps of Saster, you'll see a lot of the same themes. So some of this isn't rocket science, but just to reinforce the qualities that I look for that I think a lot of people look for, are really about. It's not about experience per se, it's about cultural fit and personality fit. There's a lot of stuff written about this. The number one thing that Andrew Quinn, sales trainer at HubSpot says is the determining factor for sales success is intellectual curiosity. People that are curious about the world, that are interested in the world beyond themselves, that's going to help them empathize and relate to their prospects and really listen when they're on the phone. And it also just makes them more fun, interesting people to work with. So that's something that I look for. Of course I look for competitiveness, grit, perseverance. How do I evaluate that? We like college athletes or people that have been in some kind of competitive situation. So this is Sort of a thing I said on a Bowery Capital podcast. But people that have played college athletics at small liberal arts schools are a favorite of mine. Why is that? Because they are already used to failure. Right? They didn't get to go to D1. They didn't get to play at. I don't mean that in the wrong way. They didn't play at Michigan, so they're already used to the idea that they have to work really, really hard and be passionate about something. But they're still. It doesn't necessarily mean that they're entitled to win the super bowl or whatever it is. Team sports are just great because, again, it teaches you how to work with other people and it teaches you that to get where you want to go, it requires daily discipline and daily practice.

Mandy, what are your thoughts around this?

I think so in hiring the person going back to what you were saying in the first part, and we've apparently read a lot of the same books, so I'm trying to try not to just repeat what you said. I think it is a balance. Because the challenge too is if you go out and get somebody with a lot of experience and a book of business, sometimes they're not doing the things that you need to do to build a book of business, and they're making good money not doing that. So while it's exciting for you to have this thing that's new and it's exciting, that's not potentially exciting to them because they can look at it that to them as I've got to go and do everything over again to get to where I am. So you've got to find somebody that actually is really excited about that. And I would not downplay that. It's going to be hard. It's going to be awesome. But look, you're going to do this because if you have somebody that's still like, I want to do it, then that's a great sign. So, you know, if you're going to go for the experience there, and I think, and there's lots written about this too, there's a big debate always going on about experience. I have a client list versus raw. I'm willing to learn. I have curiosity. I've hired both several times. If you get this without this, it doesn't work. So I would choose the curiosity and the effort over the experience because you can teach people to sell into an industry, but if they don't naturally aren't wanting to really understand that business, really understand what's the challenges the business have, how can you Solve that. How can they work with them to do that and build that kind of trust? And they have to do it quickly. These days, you don't get five calls to do that. You get one then it's hard to teach that. You can teach them the product if you're just hiring your first people. And so you do want some of those people. A lot of times you can find, like Sam was saying, somebody that's been in SDR for a year or two and they're in a place where they're still waiting, but they're good. I would just really drill into them on. Tell me about your team. Where do you rank on your team? Go through their pipeline with them, and does that match what you found that you need for yours? Because, you know, we have teams where there's all sorts of different, varying degrees of people's effort. And so you want to make sure that you're bringing somebody that is really ready to go and there's just not a space for them there.

One, one specific tactical point that I think about a lot, which is someone once told me this great phrase, this great quote. There's an inverse relationship between the quality of the salesperson and the quality of the product in many cases. So if you're looking for people with sales experience, just my personal experience is the big brand name Fortune 100 companies. It might feel really safe to hire somebody with experience at one of those companies. But just remember that they benefited from the air cover that that brand and that reputation produced for them. And so they. It's sometimes better to look for salespeople that struggled with an inferior product and that had to work a lot hard because maybe they weren't getting a tremendous amount of leads. So again, just in the spirit of suggestion, look for people that didn't get everything handed to them as a determining quality for success. Because if you're just looking for people that worked at insert the blank publicly traded cloud company, I think that sometimes those people aren't used to what it takes to get a company off the ground at a very early stage.

People don't know what they don't know. You think you want to do it. You think like it's so exciting until they're really in it. And a couple of ways that you can sort of see if that's they're saying yes, but if they really mean yes. And you guys probably have other ways to do this too, are actually put them on calls, don't make them take calls, but sit them with somebody or with you. And because you Won't have this whole regimented process that they probably came from and all the sales tools and see how they react to that. And if they're concerned that they're not gonna get enough leads or concern versus wow, this is a. What about if we talked about it like this? You'll be able to see their natural reaction in that environment. The other thing is just ask them right now, when you leave work, tell me about the last awesome day you had at work and what three things happened that day. And did they find a new customer, find an opportunity, solve a customer's problem, or was it someone's birthday and they got cake and they found out that they were going to get two times more leads so they don't have to prospect anymore? I mean, sometimes people won't think about filtering that when they answer that question and you can see if it matches what's actually going on in your day to day organization.

So, Sam, getting back to your point, so other than looking at the graduating roster of small college football teams in the New York tri state area, Holy.

Cross is a good one.

Okay, got it. So I'm going to start, I'm going to start that one. Unfortunately, there's not a lot of small college football in California. But where do you find these people?

I mean, it's sort of like the answer to content marketing. Where do you find your leads? I think one place you can find them is very, very effective recruiters. So that's obviously one place you can find them. The second most obvious answer is you can find them on LinkedIn. The third obvious answer is you can find them by building relationships with undergraduate schools where people are coming out of undergraduate programs. The fourth obvious answer is you can look at companies that you want to emulate that aren't doing so well and you could start to recruit those employees. But I think the real answer to build a long term sustainable sales brand for your company is you as the VP of sales, need to be somebody that people want to work for. So that means that your company, it's not just the company, because sales is a specific function within the broader mission of the company. There's a lot of, you know, there's a halo effect around the mission of the company. So if people really identify with whatever the company is doing, yes, you're going to get applicants. But the other thing that people want to have to believe is that they have to believe that you as a VP of sales or you as a sales organization are going to help improve their career, teach them something, and that's where essentially it's a form of content marketing. So an example is, you know, at Livestream, we run the Brooklyn Sales meetup and we do that intentionally to share best practices because, you know, we're all passionate about building a really high quality community of sales professionals in New York. But we also do that, frankly, because it shows that we really, really care about professional development and that helps us attract applicants over time. But, you know, in the absence of that, which is a long term, multi year mission, you know, there's a couple obvious places, and one of them is companies that have large sales organizations, many of which, you know, have high turnover, but can train people really well so you can get the benefit of that. And then recruiters are, you know, I believe in the value of talented intermediaries to help us grow and scale a business. And so, you know, companies like Bets or higherkeep, which is a recruiter that we use, those are great places to, to go.

So I guess question for either of you, looking at, obviously the bulk, many of the people that we're working with are managing today are millennials from this newer generation. I'm not sure what the millennial age range is, actually. Somebody told me it was up to 40. So if that's the case, then I'm not entirely sure. But, you know, what is it?

81.

81. Got it. Okay. So I think it's different.

Different.

It's a different set of sort of values, motives, et cetera, just different personality. Managing millennials earlier in their sales career, do you notice anything sort of different about what drives them versus maybe the people that we've hired and managed in the past? This is really for either you. Sure?

I think there are a couple things that are a little bit different. I think they really value giving input and they value, you know, feeling like they're making a difference in your company. They want to know, like, what am I doing every day that's making a difference? And I want to share my input and what I think could help. And so it's finding a way to harness that. But then also keep them focused on the things that need to happen every day to make sure you have that pipeline. And so if you can make sure when you're structuring it. And I think they need clear expectations too. They don't like their cheese to be moved. I don't think most people do, but definitely I would be careful in hiring. And then from experience, don't say, oh yeah, and if you work really hard, you can get promoted in three months. It'll be like latched on. And then if you decide that's going to change, like, it is really hard to get over that. So, you know, I would really try and keep that. Be as honest with you can about the opportunity, but really play up the. You can learn a lot here. You're going to be able to get exposure to things that you wouldn't get. Just going to a big company where this is your role and everything's preset and there is no determination, but here's how you're going to do it. And then find ways to construct. Basically construct a way for them to give input on the things you really want. So instead of just making a free for all, always give us feedback. Say, hey, it sounds like everyone. Here's the biggest challenge we're having right now. Let's get people together. Why don't you guys come back with two opportunities? It's amazing how fired up that gets people. And it's also helping you solve a problem and keeping people focused on their main goal.

I agree with everything Mandy said. I think, again, some of this stuff is cliche to me and probably some of us, because we talk about it all the time. But maybe it's illuminating for some of the folks in the audience. There's this famous Dan Pink Tank TED Talk about what motivates really anybody. I would say millennials are perfectly suited for this example, which is it's three factors. Autonomy, mastery, and purpose. And so I think it's the responsibility of us as managers to clarify and communicate the purpose of the organization. What is the mission? Where are we going? And that's something that you cannot do often enough. You have to do it so many times that it feels exhausting and you feel like you're repeating yourself. What is the point of why we're all here? I think that's something that millennials and anybody wants to identify with. Mastery really just means you're going to invest in them and you're going to give them the opportunity to get better at what they do. And then autonomy is again, it's really, it's not about leaving them alone. It's about setting clear expectations so that they know what they're supposed to do every day. The other thing I would say, and the best example of this, is Yelp. They have a nice sales team in New York, and I'm a big believer in it. The headline is Create a Professional Development Path, which sounds perhaps obvious, but anybody wants to feel like they're making progress towards a destination in their career. And Yelp has Done an incredible job, which I've basically copied in my VP of sales roles. Me too. At Livestream and previous companies, Millennials, they want feedback. They want to know that they're moving along. So you have to create a progression through which they can get promoted. And it's different than maybe for some of us, it was 10 or 15 years ago. Promotions are not something that I think are going to happen every three or four years for young people. I think they want to know that there's a sequence of promotions over sometimes six to nine months. And so, for example, at Livestream, you come in as an inbound sdr, but, and Mandy's right, you can't say a number that's. That's too long. But really, you're going to do that for six to nine months. And then after you become an inbound sdr, you're going to pick a path. You can become an inbound account executive, you can become an outbound sdr, because we actually say being an outbound SDR is the equivalent difficulty rating of an inbound account executive. Or you can actually move towards account management, customer success, which is still part of the commercial organization. And there's levels and levels. And Yelp has SDR1 SDR2AE1AE2. And the whole point is that you can constantly give people an opportunity to get a raise, get new responsibilities, learn a new skill, manage other people, and that sense of progress is really, really critical. Now, if you're, you know, if you're 50,000 in MRR, it may be a little early to install a rigorous professional development path, but if you're 212-million in ARR and you're scaling quickly, I think, I think it's a perfect time to put some kind of structure in place.

Got it. So I think we're about halfway through, so probably an appropriate time for us to take some questions from the audience. So we'll let you guys go. Yep. The best tips for recruiting new sales reps. When you're a young startup company especially, you've had a mixed experience of hiring sales reps that weren't a good fit. What's the best tips for in that kind of interview process? Working out who is the best fit for the business in the long run.

In the long run, I think if you've hired some people that you feel like aren't the best fit, first, maybe take a step back and figure out what you're probably doing now, what that is, and even ask if you have or know other people that are in sales or are leading sales organizations. I know and I'm sure you guys too, people reach out to me a lot saying, hey, here's where I am. What do you think people are always willing to share. I'm sure you're getting that here. So once you get that, it'll help you target better where those people are. And if it is somebody that I want somebody more early stage and what kind of experience level do they have and then what I think of it from a can do will do and fit. So can they do the job? So what kind of experience or skill level do you think they have to do the job? Will they. So that's the effort piece that you don't know until you talk to them. And then are they a fit for your organization? Are they flexible? Are they willing to grow? Are they willing to do a little more than their job? And finding those people, I think it goes back a lot to what Sam was talking about. You can definitely they're online, you can use a recruiter, you can start to do just some networking on your own. Something that's been successful for me in our past two roles is actually doing open houses where we. I've used my reps to do this too. But reaching out to people. And just in a lot of places, there's different sales organizations and groups. You can find them on LinkedIn. You can find a bunch of places and posting that you're having just a casual meet and greet open house and beer and food that brings them in. And then you get to meet some of them there too. That's something I've seen be successful outside of some of the channels we already talked about.

I would also say, and again, some of this is it doesn't mean to come across as new agey, but figure out what you believe. Figure out what your values are. What your values are and write them down so that that you can communicate them to the people that you're trying to recruit. So what we've done at Livestream, we've posted sort of a representation of what we believe is important in a sales organization. I've got it on my LinkedIn. People and candidates can find it and go through it. But first thing you want to be able to do is because I don't think finding talented people is the hardest part of it. The hardest part of it is that you have to convince those people that they should work for you. So you should write down what you believe. You should write down why your company is special, what your mission is, and you should be prepared to defend that, and if you can inspire them through that, I think you have a good opportunity to recruit them. But in the absence of that, you don't have any collateral, you don't have any support to reinforce the message that you want around the candidates.

Question, when you get to a scale that you need a sales management layer, could you share some best practices?

You know, do you, do you promote from within?

Sometimes the best salesperson isn't the best manager.

Do you bring people in from the outside? Is that, you know, what do you do in that situation? My experience is one of the things, if you're scaling quickly, one of the things you have to worry about is how are you going to preserve culture and preserve the sense of community in the company. And the biggest way that I do that, there's two ways, and one of them is hire from within. So My rule is 80, 20. My rule is 80% of your promotion should come from within the company and 20% should come opportunistically from outside. Because you never want to make a set rule. But yes, it's true. And you're constantly going to read about people that tell you that a great individual contributor might not become a great manager. But if you've read Andy Grove's High Output Management, he'll tell you, what else are you supposed to do? Because you need to be able to demonstrate to everybody else in the company that this person that you're putting in a management position has the credibility because they've done it in the past to teach other people how to do it. So I strongly prefer to promote from within whenever you can. And again, it's about 80% of the time, and I do it because they're going to have credibility. They know the culture, they have institutional knowledge, and also because it preserves the other aspects of the company that you think are important. The second way to preserve culture as you grow wasn't what you asked, but just as a tip is to keep distilling and forcing down. Basically create small teams as big teams get bigger. So as the number of direct reports for a sales manager expands, create smaller pods or small teams. That helps drive accountability. And again, to Mandy's point, people want to feel like they're contributing and accomplishing. And if they feel like they're a team of 20 SDRs, they might not feel that sense of ownership around the outcome of the business. If they feel like they're part of a group of three people responsible for driving a specific ARR goal, they'll perhaps behave with more autonomy around the business.

Yeah, just One point I'll add. I do think when you're sort of unflattening the sales organization, you definitely can, you know who you want to promote probably fairly quickly, but you can't promote too quickly. Like if somebody comes in, they crush it for a quarter and then you move out and they manage a team of, you know, five or 10 people, they have to have proven it over a period of time. For me, you know, ideally two years, maybe one year. I definitely get with the sort of hyperscale model that that period gets accelerated. And I think that's actually that can create problems. Right. When you're trying to move, you're forced to move people up too quickly. But I do think they have to have proven themselves over some period of time. But I definitely think promote from within absolutely has to be the mandate and it will become part of your hiring brand as well. Right. People are going to come in and know it reinforces the concept of a meritocracy. Right. Those who perform and prove themselves over time are the people that are going to be given the first opportunity to move up in the organization. And I think people, you can't ask for much more than that. Right. There's no political or bureaucratic element to it. It's those that perform and prove themselves are the people that move up. And I think that's if, if you have that, that's a pretty functional sales org.

For quick context. So I run a team of, I have eight sales reps and then four SDRs. And the thing so far, and we're starting to scale relatively well. And the thing I've done well so far has been taking a 22 to 24 year old straight out of college and turning them into a rep that really follows the predictable process. Right. I've got seven of my eight are those and then the four in my farm system from SDR is on and I've got a pretty good system going. My question is, as I hit this kind of new phase of scale, am I going to run into barriers having a system that only has 22? Basically, I take people with no experience and turn them into sales reps. Is that a flag as I get it? So next year I'll probably double the sales team. Is that scalable or should I start expanding?

I think it depends on if you decide to what your market approach is. If you're now gonna go and sell a different customer size or a different industry and you feel like you need somebody different, that's something you'd have to evaluate. If you feel like, look, I've got plenty of market opportunity. I just need more people, and this works fine. I mean, that's how Yelp grew their team. It wasn't necessarily, you know, their whole model was that, and it worked. So I think that if it's working for you and you don't see anything coming up around, you know, changes in your product or your market opportunity, that would then cause you to think you need somebody with a different skill set. I wouldn't worry about that. The one thing I would make sure you do is be thinking about now, are there people on your team that could then become a manager? How do you put that carrot out in front of them? To Brendan's point about like, hey, if I see these things from you in the next six months, and do you have somebody you can grow within? And if not, that might be the other reason why you would want to hire somebody and go ahead and have them start in sales. But that has a little more experience that you feel like could grow into that. So they still come up with that team and get that experience, but you have some more bench strength on your management side.

Yeah, I think the. The only issue would be, and I'm not sure what the. Your SDRs are. Are they entirely outbound?

Yeah, they're a hybrid. They all 75% outbound, 25% inbound.

So I would say if it's primarily outbound, then I think you can continue down that track within reason, where you can sort of manufacture the demand. I think if your SDRs are inbound SDRs, then there's an element outside of your control. Right. Which is going to be, hey, if our demand model doesn't scale or our marketing demand model doesn't scale, then it doesn't scale. Right. But if you can continue to manufacture that demand through an outbound model, then I don't see any reason to be overly concerned about it. I think when you're talking about hiring more experienced salespeople, I think that's part of your question. You probably layer that in later as maybe you move up market or segment or do those kind of things. Generally speaking, in a startup, I think everybody knows the Oracle salesforce, you don't want to hire those people. Right. But it's a tough standard. Right? Because, okay, you say, hey, I don't want to hire big company people. That's not a fit for a startup. But, hey, okay, so what do I want? Okay, so I want people that have proven themselves and done it on the ground floor of a successful startup. There's not that many people that have done that. Right. And so sort of if you X out those two and say, hey, there's going to be a limited supply of that, then you're really just looking for raw talent on some level. And I think that's if you can continue to keep that pipeline going, that's a great place to be.

Yeah, I think you're doing it the right way. If you can take people that don't have sales experience and turn them into performing reps at quota, then you're building a sustainable long term business. If you're constantly dependent on the next rock star that you're able to recruit away from XYZ company, then that's definitionally not sustainable. The other thing I would say is one of my favorite little anecdotes is a buddy of mine who works at Lux Capital says anytime I get to look at a deal in the venture business, you always have to ask yourself, why do I get to look at this deal? What happened before this deal landed on my desk? And I think about that every time I interview a salesperson. That was that. You look at their resume. They were the top performing rep at Insert the Blank company. They cracked crushed quota 3/4 in a row. They were a member of the president's club. If all of those things are true. Because I'll tell you that my top reps, I'm doing everything I can to make sure that they're excited, they're happy, they're fulfilled, that they feel like I'm constantly worried, what do they want for their career? What do they want for themselves? So when I get to interview that person, I'm asking myself, why do I get to interview you? What's going on that you're not telling me? That I get to sit in front of you right now and talk to you about why you want to join Livestream. So and that bears out in my experience again, the reps that I bring in from the outside that are top performing. You know, I have to say I don't have the success rate that I'd like to brag about. It just works a lot better when we can bring them in at an early age, train them, develop them, make them feel a part of the culture and community and grow from there.

And I'm going to go back to the point of the sort of Salesforce Oracle SAP model. I think it's, I've actually hired a lot of great young salespeople that started there for maybe a year or two and then said, God, I don't want to be, you know, I don't want to just be a name or a number here. I think it's the people that are institutionalized in that big company and that big company culture and having that brand behind them. That's what I try to avoid personally is people that only know the experience of waking up and being number one in their space with no competition. I call it woke up on third base and thought you hit a triple syndrome. Actually, I didn't make that up. I stole that from someone. But I think that's sort of the mentality around it. But getting someone one or two years, three years out of Oracle, I've had actually a lot of great experience in bringing those people in where they get some exposure to the process and structure, but understood that they didn't want to be a part of that machine for the next 10 years of their life.

A lot of people will go there because they think I need to have that experience to get another job. So I agree with that.

Hi, quick question.

On compensation packages, what are your best practices for hiring entry level salespeople?

Three quarters. I mean, entry level salespeople I would define as SDRs. And for them it's three quarters base, one quarter commission. Roughly. You can play with those percentages for SDRs. I've done some research on this, so there is no set way to do it, but the traditional, from what that's worth, which probably means like the plurality, but perhaps not the majority. The plurality is 50 50, a mix of creation of sales qualified opportunities in a given time period and then 50% the revenue that's closed from those sales qualified opportunities. My last shop, it was 100% closed revenue. We had no focus on number of leads created. I've seen places where it was 100% the number of flips or leads that you create. You know, the, the SQLs that you create. I like 5050 as a mix, the SDRs. And some people might tell you we don't have any control over if the business closes. If I flip to a rep that can't close the business, that's not really fair. And my general answer is life's not fair. We're all accountable to the results of the company and to our shareholders. And it's just something that we're all going to have goals and metrics that aren't 100% within our control. So I like to, I also just like to have the SDRs looking down the pipe and making sure that they're focused on what happens to the flip, not just creating it.

Yep. That's the SDR role is so great because it's your ability too to weed out, to find the people that are going to be the people on your sales team. And if somebody's not going to be a great fit for that, you can discover that before you put them on the floor. And so it's going to increase the longevity. I mean, I found in our teams that people that we promote from sdr, you know, hit the ground running. They're, you know, from an ROI perspective, they're bringing in the most revenue for the company and they stay longer, the retention on them is longer because they made it through this pathway and they feel, you know, they feel proud of that. I've also had it. I mean, it kind of depends on where you are in terms of what you need to focus on. And sometimes people will start just on creating opportunities. I think if you do that, you have to be very structured and an opportunity that I will pay you looks like this. These industries set in this time with these decision makers so that you don't just have people gaming the system and then you create this dynamic between your sales team or they're upset because they're not getting the right things. But longer term, you do need to tie it to that because it's the way that they understand and you'll get to. That's the only way they're gonna learn. Not the only way, but a big way that they'll learn. This is how it is building my own pipeline and I'm gonna have to eat what I kill soon. And if I'm not good at putting things on somebody else's calendar that are good and doing that consistently, why would they do something different for themselves?

The last thing I was, I mean, just again, tactics. Monthly commissions really strongly believe you should pay monthly. It obviously depends on the length of the sales cycle. If it's an true enterprise sale and it's six months and million dollar deals, maybe not. But it's really, if you pay, you know, not. And this may not even be a point of dispute or debate, but if you pay quarterly, then obviously a big percentage of your sales are going to happen the last week of the quarter. This way you can just compress that so that most of your sales in a month happen the last week of the month. And we have a whole structure at livestream about how to manage for the last week of the month, which works pretty well.

Yeah, I think AES, generally speaking pay well I think is the general concept that pay them above market rate. If you can make sure they're profitable, make sure it's not a cost center. But there's just so many options out there. So unless you have a prior relationship or somebody that knows you, has worked for you in the past or specifically is coming there to work for you, trying to squeeze your salespeople on commission is just going to be a self fulfilling prophecy. It's like a death cycle. You're just not going to get great talent to come work for you. You certainly can hire young talent that you can develop, but ultimately once they develop, they're just going to go find a higher paying sales job. So my advice is pay well within a structure that ensures salespeople are profitable. But that's my philosophy.

Who chooses who answers.

I know.

Use your best judgment.

Hi, how you doing? Thank you very much. My name's Andy, I'm from the iPad receptionist. We've gotten to about 40k and MRR, brought in two different, I guess account executives. This is my first SaaS startup and I've been struggling with how do you actually deal with territory versus specialization? Do you actually provide a territory for a person or do you work on specialization where there's different people and everybody's working sort of nationally or whatever. Avoid struggle with territory. If you could just help me with that.

My answer is it sort of depends on the nature of the business. If you're getting a lot of inbound leads, then territories don't make a lot of sense. Territories. Again, my experience, Brendan and Mandy can, I mean they, they work at companies with very, very large or Brendan, they both have experience with companies with very large sales organizations. But my experience is territories develop over time but that initially the ocean is so big that you can focus on a specialization or an industry vertical. If you're getting inbound lanes, again, it doesn't really make sense because you just want to divide those as evenly as possible if you think the reps are of equal talent. Territories evolve. Once you feel like you've hit true scale and you need to squeeze every last drop of revenue out of each geography zip code in Yelp's case or some of these SMB businesses, it's down to, you know, you worked at Main Street Hub, it's down to the zip code and you know, like the city block, etc. But my experience is focus on verticals and ICP, ideal customer profile. If you only have two reps, I don't think you need that yet. I think if you have 10 reps and you know, and it's a, and it's A longer sales cycle and you really have to get to know the account really well. That's probably the point at which geography matters a little bit more. You know, field sales, obviously it's going to matter a lot because they need to visit them in person inside sales. That's one of the benefits is that you don't, you know, they can call anybody. So if you're going to do a territory, it might just be east coast, west coast or something like that.

Yeah. It also depends. Are you asking your, I think you said two salespeople, is that right? Are you asking them to develop and build all their own pipeline or do they have like STRs that are supporting them right now?

They're just, we're just working on inbound leads and I'm still building the outbound sales. What I. The re. I actually ended up splitting them between east coast time zones and then the three west mostly just because somebody's got to be. We're in, we're in Colorado so somebody's got to be up at 7 o' clock in the morning handling leads. Somebody's working later to handle the west coast leads.

Congratulations. It sounds like you have some leads though. That's good. Yeah, no, we do.

We have.

They're working all on leads in job one.

Yeah, that's step one.

Yeah.

Thank you.

I would say that's one of the common mistakes I see in a lot of big company sales executives that try to do startups is putting in territory structures as if they're a big company. And again, people are creatures of habit. They're going to do what they know. And a lot of times, really up until about 10 million in ARR. It does not make any sense unless you're asking your salespeople to drive all of their own pipeline. And again. But again, most people understand today you have to segment your, you have to create demand, whether that's through marketing or SDRs. You can't ask your a. It's tough to ask your AES to create their own pipeline. The best AES can do their own prospecting. It just doesn't scale. But if you assume that, that those are segmented, then you know territory. I don't. And again, every situation is different but eight or nine times out of ten it does not, it is not appropriate, stage appropriate. And that's where. That's one of the common mistakes big company sales execs make over and over and over again and it can kill you. I mean I was in a startup where literally 80% of the opportunity was in 20% of the territory, and they had reps in, like, Kansas and Oklahoma, and they had, like, 80% of the reps. Literally had zero deal flow. Right. And it's like, hey, you know, the, you know, the rep in the Bay Area and the rep in New York are crushing it. Hey, no surprise. That's where 100% of the leads are. So it's just stuff like that that you're like, hey, like, common sense. I know you were at Salesforce for 10 years. Congrats. But, like, not appropriate for where we are. So.

Brendan, you get to pick Brendan.

That's what we. Oh, that's.

Let's go here, Mr. Moderator.

All right, so question about off boarding sales reps.

When do you identify the sales rep is not working out? What are the main things that you're seeing and how do you offboard them? Well, so main things we look for are quota attainment. There are. It's not it. He said, is that it? Is it only. No, it's not it. Obviously, if somebody's. I mean, there are superficial qualities. Like, people are working really hard. They appear to be doing a lot. You can look in Salesforce and their activity levels are high. You know, this is a whole, like, management conversation, essentially, as people say, you know, is it that they can't do it or that they don't want to do it? If they can't do it, then you need to teach them. And then you need to figure out, are they coachable, Are they teachable? If. If they can't do it and they're not coachable, then you've made likely a bad hire. If they can't do it, but they are willing to learn through interaction, then maybe you need to invest more in coaching them and developing them. And if they don't want to do it, then again, that's a 50, 50 relationship where you have to figure out what kind of culture are you setting where you're not motivating people. And then you have to figure out if this is the bad millennial or the good millennial, because they tend to be. Be binary. But I just say, like, we work on monthly commissions. If you miss, as I have a deck. So the other thing is clarify expectations. So when what. You know, what's expected of me? That's the number one question people ask. And first, break all the rules. A great book. So first thing is you're allowed to miss. Hit quota, green light, miss quota once, yellow light, you're allowed to miss quota once, one month out of a quarter or, you know, out of four, it depends what you expect quota to be. And then if you miss quota two months in a row, red light, that's bad. And then three months in a row if you've missed quota. But again, I'm defining quota as essentially the 80th percentile. Right. Like or the 20th. 80% of the reps should be at or above quota. Some people set quota so that only 10% of people can attain it. If you're using it as my framework, which is that most of the time, and I do this obviously because I'm cutting the revenue plan and I want to make sure that I don't stretch ourselves when it comes to revenue projections. If quota is where 80% of the people should be at any given time, then you can miss it. One month, you're in trouble. Two months. And I'm starting to look at those qualitative characteristics like are you engaged at work, are you coming in on time, are you doing good stuff? What's your activity levels in Salesforce? And then three months and is the time to as you say, off board them?

Yeah, I think if you don't get them, if the light bulb is not on by three or four months in, it's not coming on probably. And so, you know, I think you have to have a little bit of flexibility in a startup. Right. Especially where there's probably not a lot of historical to data to say, hey, like this is what success is here. Over 36. This company hasn't been around 36 months. But I think if, if you don't see that upward arc by their third full month in, then some people just take a little bit longer. And I think that's why you don't fire somebody at three months in. But that's red flag. It's a concern. And then something happened in onboarding or you just didn't hire the right person. But you have to go back and double down essentially at that point and try and see if you can get them on that curve.

Again, setting those expectations actually make it easier to off board. Sorry. So if you don't know if you're still kind of playing with what your quote is, you can at least say like, look, this is a consistent performance around activity. You need to be creating this many opportunities a week or setting this many held demos a week and then you can back into what they need to do to do that. And then I need to see perform, I need to see improvement on that week over week or month over month. So I look for those things. If quote isn't Quite there and that's. Do they have continuous effort and are they positive attitude? Are they coachable? If those things are there, you can give them a little more time. You're still going to have some people that eventually like Brendan saying like it's just not the right fit for them. But if you've set that up and you're having that conversation continuously, what you'll find is that person gets frustrated and it's kind of a little easier to say like, so let's just check in. I mean, how are you feeling? We've worked on this, We've worked on this. I mean, what do you think? How are you? I mean a lot of times you'll find like, is this really the right fit for you? I want you to be happy. I want you to be in a role where you're striving and boy, you've tried X, Y and Z. Doesn't seem to be working. A lot of times you'll find that person takes themselves out.

Yeah. And I think just last point, it sort of reinforces for me again, I know, Sam, you have the, the non solicit issue. So that exception aside, hiring, you know, if you can hire three or five. Three or five, three to five people truly vetted in your network or have worked for you before early, it just removes a ton of drama in the early stages. So at talkdesk we hired Paul Donati, who is the number one rep in the history of Echo Sign. And literally his first full month he closed like 100k. And that's not, it's very abnormal. Right. But if you can get those people in that can sort of hit the ground running and be super productive, maybe even without knowing the entire market first, I think that's a huge advantage. And that's for me. That's why I always carry that list around in my pocket, which is, hey, who's the three to five people that you know? Who's your dream team? Whatever that scenario is. Good.

Hi.

First off, I wanted to thank you guys for this panel. It's been extremely informal or informative. I currently our product is a construction project management big data analytics solution and it requires a lot of like product knowledge. I find it very analogous to healthcare in many ways. There's a lot of intricacies involved. We're looking to hire our first sales hire and there's kind of two camps I think that exist within our organization, which is let's hire people with previous industry experience, guys that have been out on projects, you know, in the field. My camp is we can train them appropriately to learn the product and then, you know, we rely more on the traits that you, you guys mentioned, which is, you know, somebody that played for a D3 team in college but is a real go getter, is resilient. That's my camp. If you were to hire your first.

I think we said D2, not D3.

Oh, sorry, D2.

We don't want D3. We don't want D3 players.

Yeah, so if, if you guys were to hire your first sales hires, we're in a sprint right now to gain more users to get more product feedback before we have commercial launch like everybody else, I'm sure. Would you put more weight on the traits that you guys mentioned and, or with limited resources, go with the hire that has the really great resume of selling in the enterprise space but doesn't know this industry that well?

What does he give you? What does he or she, the big resume give you? That's. I know that's not your camp, but what do they give you that's appealing?

So I mean, essentially, you know, somebody that has, you know, consistently either hit and, or exceeded their quota numbers, you know, perhaps has sold a product that may have been a shitty product, quite frankly, excuse my French, but I feel like the ones that can sell a crappy product are probably going to be the best salespeople and have done really well with it. And that's, that's kind of my more, more my camp.

You need somebody at the company that can, maybe it's you. You know, I don't know how big the organization is, but if there's somebody that's doing something else, maybe it's like somebody in product that can train, coach and develop somebody, then my advice would be to go for the, you know, the, the person that has the fundamental qualities and characteristics that you're looking for versus the product knowledge. But I'm hopeful that the product knowledge exists somewhere else in the organization and that there's somebody that is essentially. They don't define themselves as a salesperson, but they end up in all the meetings, they're highly commercial, they like talking to people. So even though they haven't defined themselves as sales, they're essentially doing the work of salespeople. If he or she exists in your organ, if that's you, then I would go for the person with, I mean, they need to be trained by somebody. I don't think that a, you know, 20 year vet of the construction industry is sounds like what you need at this point, but I could be wrong.

Thank you.

I agree.

Hi there on your left, quick question.

On the cost of sales for startups. If you're selling into enterprise, any kind.

Of idea on that general percentage?

What should be a cost of sales?

Or does those metrics even matter at the early stage?

I'm sorry, what cost of sales?

What should the cost of sales be in a startup? Cost of sales, does those metrics matter? Startups? I mean a traditional, you know, I think we've heard earlier, 20% of your overall investment should be sales and marketing potentially. If you mean what should I pay people? Or is that what you're sort of saying, if you're selling hundred thousand dollar.

You know, subscription to an enterprise, what.

Should be a cost? Well, a couple rules of thumb is first of all that you want at least 3 to 1 in terms of the annual quota that that the rep is delivering versus the total comp and OTE that you're paying that and that's low most of the time. People like to look at 5, 6, 7 to 1. So that means that if they're delivering a million dollars, then five to one would be. The OTE would be $200,000 in compensation.

Yeah, I was gonna say five.

Yeah, there you go. Mandy said hers is five.

I wouldn't be overly worried about that in the early stages. I think just getting reps productive and profitable I think is important. But that's more something I'd look at when you're really scaling and unflattening, et cetera.

I mean if you're talking about what percent of the deal you should. So 5 to 1 would mean. And that's including benefits, that's including everything. If you're talking about what's the payout so that you can make sure you don't get over your skis. Because I've certainly seen situations where you're so desperate to get a sale that you're paying out a disproportionate share of revenue to the rep or to as sales, marketing expense. Like, you know, 10% of the deal is a good place to be. 20% is an aggressive place to be. You know, 5% is a very good place to be if you're a shareholder and perhaps not a great place to be if you're the rep. But somewhere around 10, 11, 12% is probably what you want to pay out in terms of deal value. The other thing you just need to make sure is that you're aligning your business goals with. I've seen issues. Just make sure that you're paying. For example, when Cash is collected that you're demanding upfront annual payments. Do all the things to help you manage your working capital and don't get your comp structure out of alignment with your business objectives. So that you're paying money to the rep before you collect it yourself, for example, which sounds completely obvious, but for example, don't pay on ar in my opinion, like it has to be a function of pay ARR with upfront annual payment. If you're paying on ARR but you allow the customer to pay quarterly and you're paying out 15, 10% to the rep right away or a month after they close the deal, then you have a working capital situation on your hands where those payments are out of alignment.

And the payments, if you will, also help you retain that rep. So you want to make sure to keep it in line with when you're getting the money. They're also building a book of business, so. But also helps you longer term.

Great, thanks.

I've got a question right here. Sorry. Thanks so much for all of this information. It's been really insightful. I've heard a couple different things throughout the panels over the past couple days in regards to STR versus AE ratio and would love to get your thoughts and input, especially since right now on our team we're in a position where we have more AE headcount available than SDRs. But the growth that we're trying to achieve, the AES that we're bringing in with their experience level, they don't necessarily want to do a lot of the outbound effort in building their own pipeline. So do you Double down on SDRs, maybe reduce 1 of the AE headcount to hire more SDRs, or do you just work through that load and hope that you'll eventually get enough SDR support to be able to support those fully ramped AES. Sorry if that's complicated.

I can talk about that because we have a different SDR to AE model right now. We have two to one, I think.

Two AES to one STR or two. There you go.

But where we are right now, we. I mean we have a lot of market opportunity and for us for a while it was figuring out where in that market opportunity is the most profitable for us. And I think now we're where we're honing in on that and that ratio will probably change in the next six months. So I think if you have the market opportunity and you know that they can sustain the amount of activity, the amount of opportunities to then make the revenue work, just like Sam was Talking about that you're going to actually double the revenue from that AE then or you're willing to invest some upfront and just getting more market share and eat that a little bit, then it's worth it. I would think. Longer term, like if you decide to do that now, what does that look like in six months or a year though? Is it a short term problem you're trying to fix and is there something else you can do to do that? Because hiring people and then you're managing them and then also having off board and that's expensive and it's time consuming. So make sure to balance those two things.

I would just. The other thing is it's a math problem. Problem. It's just one and it's easily solvable. It's how many opportunities are the SDRs creating? How many opportunities does an AE need? What's their close rate? What's the asp? That's how much money the AE is going to make every month. If those figures are out of alignment and the SDR is producing at whatever your. Whatever they can produce, whatever that is, whether you know, if they can produce 10 opportunities but the ACV is too low and the reps can't hit quota on those 10 opportunities, then you need fewer AES and more SDRs until you have the leads to support them.

So we have a company and we sell to businesses in the tourism space. So with tourism space you can sell to them pretty well from October through.

May and then kind of what space is that again?

The tourism space. Okay, so then June through August, it's kind of like nuclear winter. They are ultra busy. The sales cycle becomes extremely hard. So in setting quotas with a pretty seasonal selling cycle. Do you have any thoughts there? Because also our team has ramped from 2 to 9 in the last six months. So just trying to set the quotas down and make them fair throughout the year. Unattainable, but having a little bit of trouble with the seasonality.

I haven't worked in a business that seasonal. My general rule of thumb is you have the same quota in August as you do in October. October is typically the busiest month for everybody and August is typically one of the slowest. But I don't like communicating that message to the reps and giving them an excuse not to hit their quota. However, for every rule there's an exception. It sounds like your business actually is very, very seasonal. And so you might need seasonal quotas, you might need different quota. I mean, the only thing you have to do is just make sure you communicate it in advance, obviously. But by the way, that's not a. You know, maybe there's a way you can make the business less seasonal. So I don't know what that means. Maybe that means you run certain promotions during the time when normally you can't get a lot of engagement. Maybe you're offering more free months or more discounts, or you're finding some reason. Or maybe you just need content marketing to tell these tours and people why now is the time to buy, even if they're very busy. But.

Yeah, I don't have anything to add.

Yeah. So I. Yeah, I think we're over. So I think that's it. So thank you. Thank you.