How do you bootstrap a sales team?

James Daniels Entrepreneur, Hacker, TechStars alumn, and Mobile Device Management guru

October 17th, 2014

Hey FDers,

I have a bootstrapped company, KPIs are strong; 4 figure CLTV (5 in some cohorts), 3% m/m customer churn, negative revenue churn, and awesome companies in pipeline. I'm thinking it's time to boot up sales to kick things up a notch.

Any advice on finding that #1 sales person when all you can offer is commission?

Will Dukes Business Development Strategist and Professional Speaker

October 18th, 2014

Stong sales guys are smart, and commission only doesn't scare them if there is a solid plan and opportunity.

You have to put together a strong sales presentation for the job yourself.

You have leads- good. Be able to show where they are in the pipeline. Hone in on sales process KPIs. Show hard data on the length of the cycle, typical number of calls to get in, present, and get it closed.

Determine the commission structure and be able to show what a data-based earnings figure would be for the first 90 days, and then your realistic expectation for the next quarter.

Give examples of the sales collateral and ideal presentation style for the industry/your company, since good sales people along know what they're good at and not. Though ideal candidates in this situation may show potential for disruption and doing it better.

You need to also have a projection of what you expect the earning potential to be within two years. Depending on your area, it should be close to, if not in the 6 figures for the first year, and then well into six figures going forward.

However, don't tell them that. After you show them the process, and the first two quarter projections, you need to ask them what they would expect to make in the first year and second year. No matter what the answer, ask them to back it up.

Pessimists are out.

Delusional egomaniac are out.

Guys are who run numbers and are realistic are OK.

Guys who run numbers and are optimistic on the verge of psychosis are what you want.

Bottom line, sell them on the company and working for you, personally. Then sell them on the opportunity they have. Then make them sell you on why to hire them.

Michael Brill Technology startup exec focused on AI-driven products

October 18th, 2014

My experience is that a channel partner strategy is really, really tough in the early days. If you don't already have a repeatable sales motion, then a partner isn't going to figure it out for you. Instead they'll drag *you* into every sales call, suck up your time training, hardly give a shit about this weird little product corporate thought was a good idea, and 12 months from now you'll be just where you are now.

otoh, if you've got it wired and it's just about acceleration then Steve's suggestion may be an awesome way to go.

Bob Crowley Investor, Entrepreneur, Athlete

October 18th, 2014

It sounds as though you want an ultra pro surfer-type that can find, ride and slay his own killer waves. One who is accustomed to start-up risks, can size up the opportunity on his/her own and is willing to share the ride (up and downside) with the founder(s). You don't want to have to sell him/her but instead expose him/ her to your vision and the data behind the curtain - to come to their own conclusion and hopefully shared passion. When you find the right person, he/she will "get it" and seek equity over cash and completely understand that for the near future, working for commission and equity (a generous amount) is the best plan. Good luck - it's a critical hire.

Rob G

October 18th, 2014

OK, i'll bite, what the hell is "ARPA" (as it relates to sales)? I'm going to guess it is a FLA (four letter acronym) in the neighborhood of ARR (annual run rate). See my cautionary note below about your dataset. a couple of notes: Will, Bob and Michael combined have really hit this pretty squarely over the fence. Your 4-5 figure LTV pushes you in the partner direction, BUT i too would caution against a channel strategy just yet - hard for 1 guy and his dog to get the partners' mind share let alone the partners' reps' mind share. Big companies who can offer big commissions have trouble making partner models work. Very tough for small co. You will spend the same or more time training/motivating them as you will your own resource and you have much more control with an internal resource at likely at lower cost. Channel may show promise to fill in the blanks later down the road or for lower priced offerings (4-5 figure customer LTV). Your price point of 4-5 figure customer LTV dictates that you need to do this internally AND you need to be looking for a high-volume 'duck hunter' who hunts with a shotgun rather than a buffalo hunter who hunts with a rifle. This means someone who is comfortable and has lots of experience with high-volume phone and email work and prospecting (even though you have a pipeline). You can't afford the typical enterprise sales person who makes $200k+/yr closing 6&7 figure deals. Just be careful how you filter your candidates.

James, you seem to be big on metrics which is great when you have lots of reliable data points, but be cautious about how you project that data forward. The data upon which you are now relying was from a product within perhaps a suite of products provided by a larger company. To customers, especially enterprise customers, a product from a large established company implies strong support, reliable code, reliable future enhancements, standards compliance, upgrade-ability, security, and perhaps integration with a suite of other products. That plays very differently in their mind than your current situation: the exact same product from a small company: 1 man show, limited resources which could imply to your enterprise customers future risk re support, enhancements, security, integration, etc. said another way, YOUR KPIs will likely be very different than past KPIs.

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

October 19th, 2014

A few critical things to consider:

a) Getting market validation to frame out the MVP is needed, but make sure the market that is validating your idea is the market the product is aimed out. If I am doing a consumer app I would not go ask my Uncle Steve who does enterprise apps for large businesses - different market, different willingness to pay, different pain points.

b) Be aware that because a few contacts, who you think are the market, believe it's a good idea, that doesn't make it so. Small sample sizes, typically under 100, have proven unreliable to base business decisions on. Once you get consistent small sample feedback think if there is a way to get a larger base of market participants involved.

c) And be ESPECIALLY wary of single points of view by founder(s), whom typically think they know the market better than anyone. I have seen many companies crater by using these "focus groups of one". The product may be liked by the founder but who else cares? Most of the time, no one. Vision is one thing, ROI is something else. Success is when they meet.

Rob G

October 18th, 2014

What's your ideal customer profile? What is "negative revenue churn"? How have you calculated your LTV?

James Daniels Entrepreneur, Hacker, TechStars alumn, and Mobile Device Management guru

October 18th, 2014

Ideal customer is large development organizations and enterprises with internal development teams; I already have many leads.

Negative revenue churn meaning that the ARPA is going up in value month to month.

The best fit CLTVe I have right now is the ARPA vs. customer churn rate (4 month average). I also have known CTLVh (historical) which lags just behind. When I say that CLTV is five figures for some cohorts, I mean our enterprise segments. Our CLTVe/CAC is currently 13.4, which is awesome, but being bootstrapped I don't have cash in bank to give someone a base.

Advice?

James Daniels Entrepreneur, Hacker, TechStars alumn, and Mobile Device Management guru

October 18th, 2014

I should note that this is a recently spun off ramen-profitable product; I was running it as a division of a larger company for several years, so I have many years of stats to go on to calculate things like LTV but limited cash on hand to hire.

James Daniels Entrepreneur, Hacker, TechStars alumn, and Mobile Device Management guru

October 18th, 2014

ARPA, average monthly revenue per account. Sorry sales vs. SAAS TLAs :P

I think Bob is on point, I am looking for that sales minded co-founder. Yay unicorn hunting!

It was a stand alone SAAS product at a consulting company. Most customers didn't know that the two were related at all; and we didn't really mix staff. Also any customer of the consulting company (even if they used the product) didn't count towards my KPIs at all :( I'd agree they'd look different if we had revenue split on the books or the parent company offered other products. TLDR; I believe the historic KPIs should still be relevant.

Even though the data is promising the skills and mindsets at the parent company didn't match; my product needed to be investment/growth focused and the other is a cash business. Consulting and product are two different mindsets.

Thanks for the advice!

David Morse VP of Sales at Censio

November 29th, 2014

Will's answer is a good one. I did want to challenge one of your assumptions.

I've heard you say two things:

1. You sell to enterprises and large development orgs (i.e., sale is complex, not one-and-done, so you need some level of rep sophistication)

2. Your business is doing well financially

Why are you willing to only pay commission and have the salesperson assume 100% risk?

The commission-only approach might work for a young newbie who punches above her weight and is looking to get a start in sales. But I assume even this person has rent and other bills to pay. Will you offer a receoverable or non-recoverable draw? You'll have to spend a ton of time training this person too.

If you want someone with at least a couple of years selling to enterprise (even just inside sales), you'll probably need to pay some sort of base plus commission plus equity. Anyone who's any good will have lots of options at cool Boston companies that pay well and also offer equity.

But if you are dead-set on commission-only, my sense is that you'll want to focus on brand new college grads and teach them everything about selling plus offer a draw.

Then again, maybe your business is so great that you can convince a young, but experienced rep to join for commission only.

There's also a popular school of thought that says you should hire 2 salespeople, not one. In my experience, this is good advice.

http://saastr.com/2013/01/11/when-you-hire-your-first-sales-rep-just-make-sure-you-hire-two/