Building To build a sales organisation you need to understand the difference between artisanal and industrial sales, basic sales roles, staffing ratios, and the idea of a sales model.
Topics in building a sales organisation Copy link
- Selling in the early days
- Establishing product-market fit
- Core sales roles
- Throwing spaghetti at walls
- Sales model = roles, goals, and ratios
- Territories, compensation, and quotas
- Additional sales roles
Selling in the early days Copy link
In the early days, selling is artisanal, not industrial, and is often founder-led. Copy link
You are searching for the right model, which you can industrialise later.
You want smart, creative sellers – a small handful to begin with, including:
- People who don’t need or want a lot of support
- People who are prepared to execute with only a telephone
What's the most common mistake? Hiring big-company people who want to execute or scale an existing model.
The purpose of this phase is discovery – not the industrialisation of the model.
Think: if we call on people with <title> at companies of <size> in this <industry> around this <problem>, we find that we can often sell them a deal of <ARR> dollars in <timeframe>.
Establishing product-market fit Copy link
Early selling is also about establishing product-market fit Copy link
The Sean Ellis test is one popular way to quantify product-market fit (PMF):
- Survey your customers and ask: “How would you feel if you could no longer use our product?”
- If 40%+ are very disappointed, then PMF has been attained.
The Ellis test sets a high bar and may not be as useful in less end-user-driven markets. While it's a fun test of PMF, the real essence is about identifying the answers to three questions:
- Sell what?
- To whom?
- To solve what problem?
Sometimes you will have several different sets of answers to those questions. In that case, your job is to identify the most strategically promising set to focus on in your early selling.
Product/market fit means being in a good market with a product that can satisfy the market. Marc Andreessen
|Sell new ARR to new and (often) existing customers||New ARR sales performance per period (typically month or quarter and year)||Corporate - 0-5 years; Mid-market - 5-10 years; Enterprise - 10-15 years||Field sales teams work in-territory, typically from satellite offices or from home. Inside or corporate sales teams work at headquarters or in geographic hubs.|
|Provide technical sales support to AEs (e.g., presentations, RFPs, demos)||New ARR sales performance of reps supported||Regular – 0-10 years; Senior – 10+ years|
|Generate opportunities for AE's||The number of opportunities generated per week||Inbound||Process inbound inquiries, which are typically marketing-generated|
|Hybrid||Perform a mix of inbound and outbound work|
|Outbound||Perform outreach to targeted accounts, working closely with sales, often as part of Account-Based Marketing (ABM) program|
Beware of hiring big-company sellers who are used to working at market leaders and winning big deals based on company status, relationships, and “safe choice” logic.
- Unless they have previous startup experience, they are unlikely to adapt well to your environment despite potentially deep domain expertise
Former customers often make great solution consultants (SCs) but be careful not to damage customer relationships by hiring them.
SCs can become great sellers, but when successful, that transformation usually happens fairly early (e.g. 3-5 years) into their SC career.
- If SCs complain about seller compensation, remind them that “quotas are available” if they want to try their hand at sales
SDR is often an entry-level position where you filter for aggressiveness, ambition, and innate sales skills
- Those who succeed often go on to become great sellers
- In hiring, try to differentiate between those who truly want a career in sales and the "lost" – who default to sales because they don’t know what else to do
Throwing spaghetti at the wall Copy link
If you've built a specific application for a specific buyer to solve a specific problem, then it’s easy to focus your early selling efforts at that target.
However, if you have a general-purpose platform that you are selling to several different buyers to solve many different problems, you should: Copy link
- Make sure your early sales efforts are horizontal and exploratory. This process is often known as “throwing spaghetti at the wall to see what sticks”
- Beware of the risks of identifying spurious patterns caused by buyers who are friends of friends, technology enthusiasts, indecisive (‘tire kickers’) and/or poorly informed
- Look to identify a “money” problem – one that people will spend material amounts of money to solve
- Look for smart buyers who had a good understanding of their alternatives, had no external influences, and who chose to use your product to solve their problem
- See Crossing the Chasm for more on this topic
Once you’ve found this target you are ready to start building your sales organisation Copy link
|Roles||The roles, and the variations and types within them (e.g. inside vs. field sales).|
|Goals||The goals for key model-defining metrics. For example, quota, on-target earnings, average sales price (ASP), deals/year, average sale cycle (ASC).|
|Ratios||The ratios of supporting resources. For example, a small number of senior sellers with high quotas and heavy support staff vs. a large number of junior sellers with low quotas and light support staff.|
Sales model examples Copy link
As your company grows, you will likely run multiple sales models in parallel, but it's always best to start with one. Copy link
|Inside Sales Model||Enterprise Sales Model|
|On-target earnings (OTE)||$150K||$300K|
|ASP (average sales price)||$25K||$175K|
|Deals / quarter||6||2|
|Average sales cycle||60 days||240 days|
|AEs per SC||4||2|
|AEs per SDR||4||2|
|AEs per manager||8||6|
Territories, quotas and comp plans Copy link
Key compensation elements Copy link
- Base/variable weighting: percentage of on-target earnings (OTE) that is base salary vs. bonus
- Typically 50/50 for sales, 66/33 for SDRs, and 70/30 for SCs (although it does vary, particularly for SCs)
Quota/OTE ratio Copy link
- Sellers typically have a ratio of quota to OTE of 4:1
- For example, a position with a $1M ARR quota has $250K OTE
Quota vs. territory is a philosophical issue Copy link
- Equal quotas: assign equal quotas and try to carve territories with equal opportunity
- Variable quotas: assign variable quotas as a function of the opportunity within them
Small deals to a large audience suggests equal quotas while targeted vertical or account-based sales suggests variable quotas.
Additional sales roles Copy link
|Role||Definition||Span of control||Comments|
|Sales manager||Manages AEs||Typically manages 6–8 AEs||This can go as high as 10-12 with inside sales models|
|SDR Manager||Manages SDRs||Typically manages 8–12 SDRs||Typically hired when team is round 3–4 SDRs|
|SalesOps||Planning, compensation plans, reporting, metrics, territories, deal desk||Typically hired when team hits 6-10 AEs||Increasingly integrated to overall revops function (e.g. sales, marketing, success, PS)|
|SC Manager||Manages SCs||Typically hired when team hits 6-10 SCs||In the early days, SCs typically report to a sales manager|
|Sales Enablement||Builds sales onboarding and ongoing training programs||Typically hired when team hits around 10-20 AEs||Also known as Sales Productivity|
|Alliances||Builds relationships with ecosystem co-sell partners||10:1 AE to alliances staff ratio||Staffed as a function of partner strategy and can vary widely|
The traditional unit of quota is the individual sellers. Sellers then rely on the organisation to staff and allocate supporting resources to ensure their success
Shared supporting resources invariably create conflict as:
- Two sellers want the same SC at the same time
- Sellers disagree on SDR time split inbound vs. outbound
In a pod model, quota is given to, and only to, pod leaders who manage all the resources of the pod.
- A pod might consist of one field seller (leader), one inside seller, an SC, two SDRs, and a CSM
- Their success is singularly and jointly measured by the success of the pod
Pods theoretically maximise collaboration, localise conflict resolution, and lead to improved alignment.
- In essence, a pod is a matrix structure that empowers pod over function – the same kind of structure companies often use with geographic regions as they scale
However, pods can have several disadvantages, particularly in the early stages of a business. For example, they can:
- Inhibit functional leadership and best practices
- Impede the recruitment of certain candidates
- Under-leverage the individualistic nature of sellers
- Reduce accountability beyond the pod leader
- Eliminate checks and balances provided by functional leadership
Nevertheless, pods are fairly popular these days and worth considering.
To learn more about building Copy link
- The Sales Learning Curve by Mark Leslie
- The Top 5 Mistakes in Scale-ups by Dave Kellogg
- Predictable Revenue by Aaron Ross
- A Very Simple Compensation Plan For Your First Sales Reps by Jason Lemkin
- Simple Math to Set Up a Sales Team by David Sachs
- The Ultimate Guide to Sales Compensation by Hubspot
- The Startup Owner’s Manual by Steve Blank