Equity · Sales commissions

Might be able to make an opportunistic add to the team -- what would you propose?

Anonymous

September 16th, 2015

While doing customer development for an upcoming software product, I came across someone who expressed interest in joining the company. We still need to figure out if there is a good fit. This post is not about whether I should make an offer, but rather about what sort of offer would be reasonable.

Our current thinking is for him to come in to help with sales, customer development, and provide input to product direction. He co-owns a business now for which he's a customer of mine, and has valid domain expertise, as well as good contacts. He already provided a couple product requests which I subsequently validated with other customers. He focuses on sales and operations in his current business, although they are both different from the sort of sales and operations in my business.

He only wants to do something part time with me (20 hours/week, to start). He'll be paying his bills from his current business. I'm more of a Product person. Although I've made a few pre-sales in advance of launch, I don't consider it a strong point. I planned to hold off on hiring for sales until I'd established more of a sales story and process myself. However, if he can be truly committed, I think he can help the company and the product move forward. Like I said, opportunistic.

One of the things we need to talk about is whether he wants to emphasize cash compensation or equity. Since he will be making some sales, we could set a commission for a set amount of time. If he wants to emphasize equity, I would be ok with that, too. I'm unsure of reasonable ranges to offer on either count, though. With the limited information I provided, any thoughts on either number? Thanks.

Peter Johnston Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.

September 17th, 2015

There are three things a startup has to have as core skills. 

One is technology. 

Every business is now a technology business - it is through technology that services are delivered, promises kept and relationships managed. The technology delivered customer experience is often a potential buyer's only point of reference in making a buying decision.

The second is Marketing

Marketing is no longer sending a few emails or putting up some ads. It is a science, creating an image and proposition people relate to and are attracted to, a buzz which spreads the idea to engage media, influencers and connectors, and a frictionless and motivating path to purchase or partnership.

The third - and note it only comes third - is what you offer. Product or service, delivering it with empathy, engagement and enthusiasm all with an underlying competence is vital to create confidence and reduce the value of alternatives.

Sales, by the way, come as a result of all three of these - they are not a discipline in their own right. Having a salesperson push product on people one-to-one is waaay to expensive to scale and businesses who use this method are finding margins plummet and resistance to the interruption almost 100%.
It is also fixed in the idea that you don't have an ongoing relationship with a customer, but merely take their money once and walk away to spend all that time and effort all over again on finding another new prospect. In a connected world this is lunacy, yet it is encouraged by most sales commission models.

Having a 20 hour a week ex-salesperson as a key player in your startup is a guaranteed route to failure. It will send your company the wrong way on customer experience, on retention and on user growth.

What is more worrying is the fact you are even considering it. This shows you don't have a structured marketing plan, linked into to your core technologies to give you metrics on user growth, churn, spread of influence etc. It shows you are still trying to work a "fixed product, sold once" strategy. 

A root and branch review of what you're doing and your plan to do it is required.