I answered the following question over on clarity.fm:
What do (bootstrapped) startups offer to new sales hires? Commission only?
Here I reiterate and expand upon my answer.
Having spent the last 25 years launching my own companies and working with start-ups, I understand the pressure to hire sales people that can accelerate the acquisition of customers and infusion of cash, but I also have first-hand exposure to the problems of hiring sales people, particularly in the earliest days of the venture, so I generally advise against doing so. There are a few reasons:
- Cost Prohibitive – Reliable sales people and those that can consistently sell and convert prospects into customers (the only ones that should be considered for hire) are highly sought after by employers who can pay them well, but unfortunately unfunded and bootstrapping start-ups, typically can’t afford to compete for these sales people. I have worked with several startups where the prospect of paying a $75k base salary plus commissions, or even a $4k monthly draw would be problematic. The default response is often to hire sales people with spotty track records who will accept less base salary. Unfortunately, this typically doesn’t result in the sales person magically becoming a superstar and achieving the desired sales goals.
- The Right Mix of Skills and DNA – Selling for a startup is very different than selling for an established company where the brand is well known, the product is stable and established, there is a customer base for references, and there is sales infrastructure and support for the sales person. In many of the startups I have been involved with, the product offering, value proposition, and target market have evolved quickly, and there have been many start-stops and product challenges. Not all sales people, even the great ones, have the predisposition to be successful in a this kind of an environment. It takes a rare mix of skills and DNA/personality traits along with the critical domain knowledge for someone to be a successful sales person in a startup. Startups often hire the wrong sales person, who in turn achieves disappointing results (after several unsuccessful tries at recruiting sales reps, many of these companies come to Peak for help).
- Care and Feeding – Many start-up execs and founders, under great pressure to generate sales, have the expectation that a good sales person will be able to come in and simply produce sales. Not much thought is given to the sales support and/or management a sales rep might need and management’s time is often spent fighting fires. It is not unusual for there to be a “sink or swim” culture, where the rep is expected to figure things out and sell, but this presents a major challenge for most sales people who need to be managed in order to perform well. For more on this, see The Myth of The Self Managing Sales Rep.
- Too Early – In some cases, there may not even be many or even any sales that validate the product, yet the founders have a lack of faith in their own sales abilities and/or a feeling that they don’t have time to sell, and want to hire a sales person that can bring on customers. While it may be virtually impossible to get an established and successful sales person to accept the risks of coming into this kind of a situation, it may be even more difficult for them to actually produce the desired sales until the company is further along the path of launching and the direction has settled down. In my experience, the founders need to be very involved in the selling activity (for the sake of having an intimate understanding of what does and does not work) and customers will only want to deal with the founders who have extensive domain knowledge and are very closely tied to the company’s offering and direction.
That said, if a startup venture’s plan is still to hire a salesperson, my advice is to find someone who has demonstrated sales success in startups and is excited by the early stage in company building. Create a compensation plan heavily leveraged on sales results but pay a fair base to attract an established sales person. Unless the startup is in an industry where 100% commission is a common practice, I would recommend against a $0 base as this may creates the false impression that the hire isn’t passing time with one company while looking for another job with a better compensation plan. The rep will need to be 100% focussed on selling for the startup in order to have any success. Don’t sugarcoat the challenge, it will be tough, but certainly sell the vision and opportunity to be part of a growth story, which will be more likely to attract the right type of DNA.
A sales person is not a magic bullet in a startup, although I wish that were the case. Instead, the timing and expectations have to be in line with what the right sales person can realistically contribute.
Here are some additional posts related to the topic of selling in a startup that I would recommend any entrepreneur to read when they have a few minutes:
Tip: Don’t Stop Selling Once You Hire Your First Sales Rep.
An Intro to Hiring Sales Reps for Startups.
The 5 Types of Reps Common to Startups.
To your success!
Photo Credit: benarent via Compfight cc
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
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