We all know that the sales team at any company is important, but sometimes people tend to think of it as a separate unit within a company that operates in its own bubble, on its own terms. But that’s far from the case. While succeeding at sales is a unique business skill, the sales team itself is an integral part of any company, especially a startup. Sales should receive the full attention of the CEO and CFO, and they should be closely involved in building and supporting the sales team.
It’s up to the CEO to keep an eye on the sales. While there may be a talented VP of Sales in place, there is a still a crucial role for the CEO to play in monitoring the larger picture and making sure that the sales team is fully supported and performing as expected. This is especially true at a young company.
Sales: The Key to it All
Especially at a startup, sales should be the focus of the CEO’s attention, time, and energy (even if the CEO doesn’t personally come from the sales world). A relocation may be necessary for a set amount of time, so the CEO can be in the same place as the market. It’s important for major clients to see the CEO in person. In addition, a startup should hire the best salespeople who are the best fit for their product. And for a sales team to be good, salespeople need to receive good incentives that, of course, fit the company’s situation and goals. Payments should be totally transparent, with salespeople knowing exactly how much they’re going to make in any commission plan.
How should commission be structured? For a mature company with a stable pipeline, single digit commissions are fair. But in an early stage company, there are certain common practices and metrics that are typically followed. Management needs to be aware of which payment system is appropriate at the different stages of a company. Don’t try to cut corners with your sales team – a company needs to pay a lot for a successful sales force. However, it’s also important to keep an eye on payments to make sure that the company is still efficient and profitable.
There is a high-risk variable involved in developing commission payment structures. OTEs (on target earnings) are comprised of a base salary + a variable (i.e. the commission). What should this variable be? It could be a percentage of bookings or revenue – this works great for a mature company. But at an early stage company, the level of uncertainty is so high that it’s hard to define the appropriate percentage for a commission, and it’s not known whether a salesperson will be able to meet the sales target. So, what can management do to attract top salespeople? One method is to assign the payment structure according to the number of meetings, pilots, or trials set, and not closed deals. Another to guarantee commission for a set amount of time. A company could take responsibility for the first 6 months, for example, paying guaranteed commission no matter how many sales are made. This gives the salesperson the needed ramp-up period.
Structured discounts for the ramp-up could look something like this: Q1 – 0% of target; Q2 – 25%; Q3 – 50%; Q4 – 75%. The payment structure, including ratios, formulas, and what the salesperson takes home should be completely transparent. Remember, commission is a tool to help ensure salespeople meet the company’s targets, and that they’re aligned with overall business goals.
Keep it Simple
What’s to guarantee a salesperson won’t quit right after the ramp-up period? Nothing. But the reason to create a commission plan is to incentivize your salespeople to bring in customers and make sales. Don’t make the commission structure complex – salespeople should earn a lot of money as they bring you more customers. People don’t tend to leave good-paying jobs if everything’s working out well. Note, though, that in any sales team there will be some people who don’t work out in the end, so it’s a good idea to set reasonable hiring targets to begin with. It’s worth it to investigate both the successes and failures in this respect. If a salesperson leaves, it’s important to learn why they really left. And if a salesperson is succeeded, it’s equally important to investigate what they’re doing right.
Support & Track Your Sales
Providing solid support to your sales team is absolutely critical for their success. There should be a kick-off meeting with all senior management, and it’s ok to foster some healthy competition between salespeople – it’s ok for them to copy and learn from each other. Additionally, it’s also important to share failures, so that everyone learns from them. It’s important that the sales teams be disciplined. A crucial way to ensure this is by implementing a sales platform where everyone documents and shares the entire sales process in one place. It’s the best way to track and measure success, and it serves as the basis for crucial business metrics and steps, including building operational plans, funding structures, and more.
It’s essential that the sales process is clear and structured. This means that, first of all, the complete process should be broken down according to set KPIs and metrics – meetings, leads, or deals, etc. Second, it’s important to measure salespeople’s activities regularly, even once a week, according to the predefined KPIs and targets. Evaluation shouldn’t be left to the end of the quarter or once every six months. The CFO should regularly review the data to see what’s working sin the sales process and what isn’t, so that problems can be identified in time.
In addition, you need to provide your sales team with a well-developed pitch. Companies must identify the relevant buyer in the target organization and ensure that the marketing materials meet those needs. Clear communication plans and materials are crucial, so that everyone is following the same protocol, which can be adjusted and updated as needed. Marketing plays a key role in this, as it’s hard to sell a product that no one’s ever heard of. Customers should feel like they’re joining something that’s up and running, with a presence. Marketing is crucial in getting this into play and creating the necessary halo effect to help drive sales.
The Role of the CFO
CFOs need to be involved in setting up the sales operation, helping to shape the payment structure, qualified customers, setting up commission plans, and defining how the pipeline is valued. In addition, the CFO can help educate the sales team about how to present the company, especially a startup, as a solid organization, and help avoid the pitfall of losing a deal because of being a smaller, unfunded organization. The CFO needs to keep track of the data to ensure that the sales process is working and flag any issues that come up in real time (not at the end of the quarter or year). However, the CFO should not be involved in the sales pitch, navigating within an enterprise customer, or marketing – those are best left to the respective experts in the company. CFOs can assist sales with contracts, revenue forecasting, and measuring impact and risk, but they should not be driving the sales cycle or managing the sales force.
The more successful the sales team, the more successful the entire organization. So make sure to put a clear, attractive commission in place from the start, so you’re able to hire the best salespeople around. Your goal is to be in a position to recruit more salespeople as time goes on, because sales drives everything. And you’re going to need that revenue to scale.
Ofer Katz, Founder and co-CEO, Nextage