I was talking with a CEO of a tech startup the other day that is building a SaaS platform and we had a very interesting debate about the following question; WHO do you hire as a VP of Sales?
This conversation got me thinking that, in every SaaS company there are roughly 4 distinctive stages of Annual Recurring Revenue (ARR) ($0 to $1M, $1M – $10M, $10M to $40M and $40M to $100M+) and there are 4 distinctive types of VP of Sales that match to those stages. The worst mistake a startup CEO can make is is hiring someone with the wrong stage experience and/or at the wrong stage.
4 distinctive types of VP of Sales
The Evangelist. The Evangelist is someone that is generally very smart and very passionate about your product and is highly customer-centric. He/she can almost immediately go out and start selling your product to anyone they can get a meeting with, and/ or can talk to the ground any in-bound prospect that might be interested. They know how to think creatively and cross-functionally and they are also fun personalities to work with. At the first glance they seem like the perfect fit for your startup, especially if you have never hired a VP of Sales before. But usually Evangelists come with a problem, he / she has never actually built and/ or scaled a sales team before and as a result 9 times out of 10, this is a waste of a hire and a waste of your time, as CEO.
The Replicator. This applies to every SaaS company which is in the post-initial traction stage. In this stage, your startup has some customers, but not a lot and it also has some in-bound leads but not enough. Your startup has painstakingly built a micro-brand, and as a CEO you have probably hired a couple of sales executives on your own. But you have no idea how to scale this or the ability to get it to the next level. Almost immediately after the hire of the Replicator your Revenue per Lead goes up. Because he/she knows how to close deals and knows how to recruit, hire and on board new hires. At the same time the Replicator knows how to build the basic processes needed in place in order to do it again, and again, because he/ she likes to win and likes to manage teams, and likes to tackle the puzzle of how to get from $1M or $2M to $10M or $20M+. Unfortunately, 95% of VP of Sales in the market can’t do this phase, so the potential talent pool is limited.
The Go Big. This is hard to find type, but not quite as hard as the Replicator, because joining a decently funded SaaS startup with $10-$20m in ARR, the end-game is all about the PROCESS. For Go Big, you have to do the same thing, again and again, whether you are hiring the right people, or you building a sales development representative (SDR) program. You must make your field sales team deliver and at the same time figure out how the out-bound sales cycle works, while driving the in-bound lead generation engine in collaboration with with the VP of Marketing. It’s hard to find this talent, but you can find them easily from a SaaS startup that just went through this phase. But do keep in mind that 95% of this type won’t able to do the earlier phase ($1-$10M).
The Dashboard. This type is what you get a lot of when you try to recruit out of the Big C’s. The Dashboard really understands how to sell up and how to deliver a killer internal presentation, looks pretty good in a suit and your BoD will probably love him/her. But really, all he/she does all day is look at and think about dashboards and meet with his/her Managers. What changes can I make to the team to get the dashboards up? How do I get more resources? How do I get more budget? Who can I hire, and who can I fire to get the dashboards up? How do I get rid of the bottom 20% of the team? Where should the Sales Kickoff meeting (SKO) be this year? , a.k.a. the really important questions.
3 Key Selection Success Factors
After you have identified the right candidate/s for hire with the correct background and the relevant experience, then you need to check for the following three key success factors, before hiring:
- Can They Do Competitive Sales? Many VP of Sales are NOT good at competitive sales, which may be fine depending on your market. But, if your startup operates in an extremely competitive market, make sure your VP of Sales comes out of that winner-takes-all/ take-no-prisoners background. He/she must live and breathe to compete and if they do so successfully, it’s probably a great addition to your team. If they don’t, they’ll be miserable in their role and probably fail; and your startup alongside them.
- Experience With Similar Deal Sizes. There are 3 basic categories of Annual Contract Value (ACV) for most SaaS companies: $X,000 – $XX,000 – $XXX,000. Of course, as a SaaS company you have customers of different shapes and sizes, but you must know and track your average deal size, a.k.a. your ACV. If you hire someone that has only done $50,000+ deals, they will most probably have no idea how to manage a high-velocity in-bound team doing $5,000 deals on a regular/ daily basis. If you hire someone with tons of $5,000 deals experience probably they will not know how to Sell-to-Power, a.k.a. get on the jet and close the deal, or how to do and/ or build field sales, if necessary. So your selection of VP of Sales, must have some recent experience at similar deal sizes.
- In-Bound vs. Out-Bound. If your sales model is primarily in-bound, make sure you hire someone that has managed a lot of in-bound. If you need an out-bound component, make sure the VP Sales can do that. Can he or she hire a whole floor of business development specialists, trying to get meetings set up? Most VP’s of Sales have done a bit of both, but whichever is a bigger part of your business, must match with their prior experience.
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Christos Lytras – Managing Partner