A little business, a little music, a little culture, a lot of growth. Austin, Tex., continues to be a cultural and economic leader and shows no signs of giving up either role. Everything in the city is growing and changing, from the plethora of technology companies and start-ups to its annual South by Southwest (SXSW) festival, which has grown to encompass film, interactive media, and music.
But what does all of this growth and change mean for the sales profession in Austin? Can this growth continue and what could get in its way? The good news is that the ongoing popularity of Austin both for businesses looking to build a great sales team, and for sales people looking for new career opportunities, shows no signs of slowing.
The Austin Landscape
Perennial member of the best, hottest, fastest growing and other “-est” lists, Austin continues to show why it ranks so high on so many dimensions.
Every March, over 70,000 visitors swarm 6th street to enjoy and participate in the fabled SXSW festival. Year round, business leaders from across the world fly into the Austin-Bergstrom International airport to take advantage of the city’s booming economy and talented workforce, while start-up founders are taking advantage of accelerators led by venture capitalists and angel investors. Austin’s unemployment rate is among the lowest, and sometimes the actual lowest, in the country.
Combined, these factors have resulted in Austin becoming one of the most desirable cities to conduct business.
Austin has established itself as a magnet for both start-up companies and the operations and offices of some the largest companies in the country. Although it is the headquarters of only one current Fortune 500 company (Whole Foods) and one former entrant (now-private Dell Computer), plenty of other companies have significant operations in the region including IBM, Accenture, AT&T, General Motors and Intel.
Indeed, the list continues to grow, especially along highways 360 and 183 where established and high growth SaaS based tech companies have carved out significant chunks of the greater Austin area for development and expansion.
The higher education landscape in the city is dominated by the University of Texas, which has a student population of more then 50,000 students and the largest urban campus in the country.The Austin Community College, however, is even larger with more then 60,000 students enrolled. And with only 195 miles separating Dallas and Austin, access for established and aspiring sales professionals alike looking to further their sales education can be easily found by hoping on a short flight or traveling up the I-35.
The College of Business at the University of Texas at Arlington, for example, offers a Sales Certificate Program (SCP), while the UT Dallas Naveen Jindal School of Management offers The Professional Sales Concentration degree.
105 miles east of Austin is Texas A&M University, which offers a Professional Selling and Sales Management certificate for students looking to further their sales careers in the manufacturing, technology, medical, retail and service industries. And with more than 20 higher education institutions in the region, there is a steady talent pipeline that sales leaders are drawing from to build their sales teams.
Forbes magazine currently ranks Austin second in job growth and number 21 on its list of best cities for business and careers. The region recorded annual growth of 3.2 percent for the year ending in September 2015. Although this strong economic growth is enough to keep Austin in the top 25 metropolitan areas for job growth, it slightly off the steady pace of more then five percent growth routinely recorded from mid-2012 through mid-2014.
These years of growth have all but tapped out the workforce.
Looking more closely at the region’s economic situation shows that the area’s unemployment rate stands at 3.3 percent, down from 4.1 percent a year earlier, according to data from the U.S. Bureau of Labor Statistics (BLS).
This is among the lowest in the country and well below the 4.9 percent unemployment rate for the U.S. as a whole. These staggeringly low unemployment figures have affected the ability of employers to recruit already rare senior sales people.
Companies approaching Peak to recruit senior account executives, sales managers, and VPs in Austin, for example, have reported their average search time to be nearly double that of similar markets.
What is Driving Growth?
Aside from the contraction that came during the 2008/2009 recession, Austin’s growth over the past ten years has gone in one direction…up. With business-first economic policies and no state income tax, there is no sign that the city’s upward economic trajectory will slow anytime soon.
Indeed, after moving its headquarters from Silicon Valley to Austin, Epicor Software Corp. president Joe Cowan told the Wall Street Journal that Austin’s “business-friendly climate” was a key driver of the move.
“I got to the point where I could no longer support what was happening in Sacramento. In the bio-technology space, the California legislature is creating literally hundreds of pieces of legislation a year in the form of taxes, workplace and environmental regulations that impact our industry.” – John Kinzell, EVP, Xeris Pharmaceuticals
In this environment, success and growth is self-perpetuating. As Austin continues to attract a well educated and highly skilled workforce, it will continue to attract growing companies looking to tap into that workforce and vice versa.
Sometimes known as “Silicon Hills,” much of the growth in Austin and its surrounding areas stems from its success in attracting technology companies. The latest BLS data notes how heavily Austin’s employment is concentrated in just eight occupational groups, one of which is computer and mathematical, compared to national distribution of these jobs.
Other key sectors driving job growth in Austin include:
- Advanced manufacturing
- Clean energy and power technology
- Corporate headquarters and regional offices
- Creative and digital media technology
- Data management
- Life sciences
- Space technology
“Austin is a hypergrowth economy. There are fewer mid-sized companies or enterprise software plays than in the past; SaaS start-ups are the predominant model and the mentality is go hard and grow, or fail quickly.” – Bruce Milne, Vice President and Chief Marketing Officer, Pivot3
The city is tailor-made for start up companies, ranking first in start-up activity by the Kaufmann Index with a start-up density (number of start ups per 100,000 residents) that is higher than that of Silicon Valley.
In fact, Adam Draper, founder of Boost VC, a venture capital firm, said that Austin would be the perfect place for locating his ideal start-up accelerator to foster rapid growth of new companies. “They have an investor infrastructure, a startup ecosystem, a great capital-gains tax—it’s like a perfect environment.”
In some ways, Austin is still playing catch up when it comes to funding start-ups. Quite simply, money does not flow as strongly as it does in Silicon Valley. In 2014, Austin attracted $610 million in investment for 114 deals. Although that is an impressive number, it is dwarfed by Silicon Valley ($24 billion for 1,390 deals) and even New York and New England ($4 billion combined).
In fact, if the city’s start-up activity is to continue to thrive and grow, the city needs to improve its funding infrastructure. According to a 2015 Capital Source Study conducted by the Austin Chamber of Commerce and the Austin Technology Council, increasing the number of funding sources for new companies will be a key driver of growth for the city. The study found that Austin only has 144 funding sources available to entrepreneurs, compared to 785 in Silicon Valley and 739 in New York. Even New England and the Midwest, including Chicago, are well ahead of Austin with 475 and 371 funding sources respectively.
And when Austin companies do obtain funding, those deals tend to be worth half or less than what companies in other regions are able to get. While deals in other cities often reach $10 million or more, Austin start-up companies must settle for an average deal of $5.4 million. There is some evidence, however, that average deal size may be improving.
If venture capital funding during the first half of 2015 (57 deals equaling $429.6 million) continues at its current pace, it is set to surpass 2014’s total (114 deals for $615 million). Although this does not necessarily mean there will be more deals, it does hold promise that the funding provided will be higher for each deal.
To see how Austin differs from the rest of Texas and the U.S., you need only look at how the city weathered the 2008/2009 recession. On the whole, Austin experienced job losses and a contracting economy throughout 2009 before returning to growth before the end of the first quarter of 2010. However, that contraction was not as deep or long lasting for Austin as it was for the state of Texas or the U.S. as a whole.
More recently, Austin’s economy appears to be unscathed by the plunge in oil prices because, unlike many areas of Texas, the city does not entirely rely on oil and gas industries, making its economic and job growth much steadier and less cyclical.
Meanwhile, job growth continues apace. The local economic forecast for the city and its surrounding areas states that available jobs increased by 39,100 in 2014, a significant number of them (6.7 percent) in professional and business services firms. Other significant employment gains came from the leisure and hospitality, retail, education and health, construction and financial activities sectors.
Looking ahead, economists expect job growth to continue by adding another 69,400 new jobs through this year and into 2016. Furthermore, The Austin Technology Council anticipates 11,754 new tech jobs will be added to the mix over the next five years. To fill all these new jobs, the region is adding to its population rapidly. Austin’s population increased by about 66,000 in 2014, a pace that is likely to continue for some time.
“We have more jobs than we have people to fill them right now,” – Chelsea McCullough, Former Executive Director of Texans for Economic Progress.
If there are any clouds on Austin’s horizon, they are caused by the regions ongoing rapid growth. Housing, especially that in or near Austin itself, is becoming scarcer and more expensive. The average sales price of existing homes increased significantly from $286,500 in 2013 to $323,600 in August 2015.
As a result, newcomers are sometimes being forced to look further outside of the city for affordable housing options in communities such as Thorndale, Smithville, Taylor, and Cedar Park. And while wage growth for senior sales people has kept pace with housing costs, Austin employers should expect to find it more difficult fill lower wage jobs as more people leave the area to escape the high cost of living.
Finally, the city’s infrastructure, including its roads, bridges and water resources, has not been able to keep pace with the region’s growth. Not surprisingly, Austin now ranks in the top ten for traffic congestion and the extended drought in Texas clearly indicated that dealing with water scarcity is a pressing need for the region and indeed the entire state.
Although it will take time to address these issues, there are indications that business and government leaders are heeding the call to manage the city’s growth better and to invest in upgrading transportation and water infrastructure. A recently approved ballot measure will shift some current tax revenue to transportation spending.
Opportunities in Sales
With a growing concentration of start-up and enterprise companies, Austin represents a natural location for companies headquartered elsewhere to set up operations, including sales teams. For example, Facebook’s Austin office is heavily recruiting for sales and sales-related jobs, including account management, ad operations, sales planning and operations and sales roles working directly with small and medium-size businesses.
Google has also expanded its presence in the city with plans to consolidate its current three locations into two when it moves into 200,000 square feet of newly renovated office space in downtown Austin. The Austin offices are heavily focused on sales, marketing and staffing.
Peak’s internal data underscores the client acquisition potential that Austin offers. Since 2009, recruiting engagements in the city from out of state employers have increased year over year.
Specifically, hiring requirements have concentrated on the following skill sets:
- Successful experience prospecting, hunting, and closing new business
- Successful experience selling into the c-suite
- Successful experience navigating a multiple stakeholder sale
- Successful experience selling an intangible solution
Given that start-ups live or die by their sales force’s ability to meet targets, there are plenty of opportunities for sales professionals looking for careers in an entrepreneurial environment, rather than working for an established company. In fact, since 2011, the demand from late stage start-ups in the greater Austin area to recruit senior level reps and above has risen more than 25%.
“The Austin market has established itself as a hub for great companies looking to hire great sales people” –Brent Thomson, CSO, Peak Sales Recruiting
The Impact on Sales Salaries
Given the low level of unemployment in the Austin area, B2B employers have to pay more to attract and retain key sales talent. Our own sales wage data indicates:
- Senior sales representatives selling software and SaaS solutions annual base salaries has risen 9.28% ($78,978 to $86,307) since 2013.
- Regional sales managers base salaries have also been on the rise in the region, with the average RSM earning a base of $122,692; up 4% from 2013.
- VP Sales have been the real winners in the city, however, earning an average base salary of $225,384, up more than 9.5% from 2013.
In general, wages and salaries in Austin are higher than the national average for many positions, including sales. Overall weekly wages for the Austin region as a whole average $1,099 and are somewhat higher for Travis County, which includes the city of Austin, at $1,153.
By comparison the national average for weekly wages is $1,048. BLS data indicates that hourly wages for sales professionals in the Austin area are ten percent higher at $20.49 than the national average of $18.59. The following table shows more specific position-level wage data for the Austin area.
Sales Wages in Austin-Round Rock-San Marcos, Texas Area
|Position||Median Hourly Wage||Mean Hourly Wage||Annual Mean Wage|
|Advertising Sales Agents||$27.01||$28.16||$58,570|
|Insurance Sales Agents||$20.47||$26.72||$55,580|
|Securities, Commodities, and Financial Services Sales Agents||$18.45||$34.63||$72,030|
|Sales Representatives, Services, All Other||$24.13||$29.79||$61,960|
|Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products||$30.62||$39.30||$81,750|
|Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products||$25.66||$31.05||$64,580|
|Demonstrators and Product Promoters||$12.80||$15.09||$31,380|
|Real Estate Brokers||$45.81||$56.11||$116,700|
|Real Estate Sales Agents||$27.20||$33.36||$69,380|
|Door-to-Door Sales Workers, News and Street Vendors, and Related Workers||$11.11||$11.57||$24,070|
|Sales and Related Workers, All Other||$15.85||$20.22||$42,070|
Source: U.S. Bureau of Labor Statistics
While not without its growing pains, Austin promises to be a strong engine of regional and national growth for some time to come. Companies expanding into or relocating to the area will have to put their best foot forward to attract and retain the sales talent necessary to grow their businesses. Given the opportunities that await in a thriving economic and cultural environment, those efforts are likely to yield significant rewards.
Are you an employer looking to expand your sales team in Austin? Our team can help. Learn more about our Austin operations here.