I lost hundreds of thousands of dollars on hiring ineffective sales specialists for my B2B startup. With the knowledge I have now, I could have avoided that.
In 5 years of scaling my company, Competera, from zero to $28.2 billion in revenues, I’ve hit all sorts of bumps trying to develop an effective sales strategy. This experience taught me a lot. Today, my company has over 120 clients worldwide, with checks ranging from $50,000 to–300,000.
Here are my four rules for managing a sales department in a B2B startup — in early-stage and late-stage companies.
Always start with founder-led sales.
When I started my company, I would manage sales on my own. In 9 months, I closed three deals for almost $1 million ARR.
A founder’s involvement in sales at a B2B startup is unavoidable (and desirable). I don't know of any cases of growing a B2B SaaS company any other way. If you want to expand your early-stage enterprise, you need to do sales yourself until you reach $3-5 million ARR.
Hiring a sales account executive early is like having someone else between you and your child. No one will be more passionate and enthusiastic about selling your product than a founder. The most valuable thing you get by doing sales yourself is early feedback from users and the opportunity to build a long-term relationship with them.
B2B sales are also called human-to-human for a reason. As a startup founder, you build valuable interactions and nurture relationships with potential customers. I always tell other founders, “In your first years, make friends – not customers.”
One more reason to start with founder-led sales is an extremely high conversion rate. While the standard SaaS conversion rate is 15-20%, I’ve seen firsthand that a founder-led startup’s conversion rate can be as high as 60%. That’s important for any company, let alone a new one that is trying to stay afloat, start making money, and grow.
Craft sales playbook
A startup founder who leads deals and gets feedback from customers has more understanding of their company’s value proposition, goals, and its clients’ needs. All of this information has to become the foundation for salespeople who’ll join the company at later stages.
The knowledge generated during those first months or years by the founder should form the basis of a sales playbook. It’s a blueprint that helps future reps navigate the sales process, train new hires, and deal with difficult sales cases. Crafting such a guide will benefit your sales effectiveness (some say by up to 50%).
No competent sales manager will join a company without a playbook with all the necessary sales information. So until a playbook is completed, stick to a founder-led sales strategy, and don’t waste budget on sales reps.
Here’s what to include in your first sales playbook:
The story you sell. Write up your background, the reason you started the company, and the vision of the future you can create with your product, and add success stories that you can boast about.
Target ICP (ideal customer profile). Have a detailed description of a target customer, her day in life, problems, pains, values, budget range, and other indicators that are important for you. At Competera, we describe our ICP this way: “A commercial director who is responsible for increasing the company’s profit in retail stores with more than $100 million in revenue.”
Ideal sales formula. Describe how interaction with your customers looks like — from an inbound request to rollout.
Aha moments. Mention parts of your pitch and product that collect aha moments.
Key objections you face. What doubts do your customers have, and what arguments can you use to clear these doubts up?
Never outsource sales at B2B startups
After a year of leading sales, I decided to hire sales representatives. I chose a well-proven outsourcing sales team from the U.K. During a year of our partnership, they closed… one deal.
After this experience, I never outsource sales and advise you to do the same. Here are my arguments against outsourcing sales:
- An outsourced team doesn’t keep up with product changes. Startups update the product frequently (every six weeks at my firm), and external sales reps couldn’t follow the iterations. You lose alignment between teams and reduce your chances of landing a long-term deal.
- You lose your company’s vibe in communication with clients. In B2B sales, customers estimate your startup’s energy, vision, and how engaged you are. An outsourced team can’t give you this, and it’s vital in B2B.
- You don’t get honest, direct feedback. After an external sales manager provided me with a client’s feedback that sounded unreal to me, I decided to get to the bottom of things. So, I called a potential customer to figure out the problem. It turned out that the sales manager was so annoying that he just made up an excuse to get rid of him! Due to the outsourced team not being as involved in the sales process, I was missing important comments and the opinions of potential clients.
I believe that, for a startup with up to $10 million ARR, outsourcing sales can be devastating.
Sure, there were benefits to our collaboration. The outsourcing team improved the sales structure and helped finalize my company’s playbook. But we lost a lot of time that we could have spent hammering out long-term deals.
Always have at least two in-house sales managers.
On average, 42.5% of sales reps take ten months or longer to become productive enough to show results. You should diversify your risks and hire at least two managers to compare performance.
Check intermediate results of the new hires: conversation rates from the first positive response, from response to demo, from demo to follow-up conversation, and from follow-up conversation to “money.”
Outstanding professionals are never actively searching for a new job, so you will have to headhunt. Identify companies from your industry that sell your average check, find out about their sales managers (LinkedIn can help), and convince them to work for you.
I discovered the right candidate from Germany on LinkedIn and spent two years talking to him online. Then I found his former boss on social media and promised a stake in Competera if he would convince this guy to join me. Now, this sales manager brings Competera $3 million annually, and his former boss is our advisor and has a share in the company.
Another way to find a strong candidate is to turn to a boutique agency that specializes in hiring sales managers. They test candidates, assess their psychological profile, and so on.
We hired such an agency and received 117 candidates, from which we selected 40 to take the test. Of all those who passed it, five were invited for an interview, and only one got the job — the best one.
Key points
- Until a startup’s ARR reaches several million dollars, its founder should do the sales themselves. Founder-led sales show a 60% conversion rate, while the average sales manager’s rate is up to 20%.
- Don’t hire a sales team unless you have a playbook, a guide containing key info about a startup’s vision, ideal customer, sales formula, and how to handle objections/rejections. Gathering this information will improve your sales effectiveness.
- Sales reps in B2B startups should always be in-house. An outsourced team won’t be 100% synced with your dev team, and they won’t talk to clients as much to get their feedback.
- Well-performing sales managers never actively look for a job. Headhunt specialists from your rivals or hire a boutique recruitment agency.