[polldaddy poll=7867363]Is your sales salary expense exceeding $189M this year? If you’re the Yankees, the corresponding response is [yawn], “yes”. They will be paying the MLB luxury tax this year, as they do every year, for exceeding the League’s Salary Cap. To the Yankees fan in the stands, if you buy one of the forecasted 2 million hotdogs expected to be sold in 2014 at the stadium near the parking lot covering the House that Ruth Built, recovering that $25+M luxury tax bill could make those dirty water dogs a bit expensive. Even with free sauerkraut.
Maybe you are more like the Houston Astros, whose payroll is about 10% of NY’s? They play the same game, have the same need to compete and win, but with less cash and therefore a different kind of player. Software, B2B Cloud, and consulting companies all have the same dynamics with their player rosters, the sales teams.
I tried Googling various combinations of Tech sales rep failure, sales rep success, sales rep optimal shoe size, etc., and while you would think the information in this blog post is sort of common knowledge, Google has yet to find and index it.
Sales Talent – Who goes where?
If you’re a Tier 1 with growing sales, you get the all-star, well connected, home run hitters who then stays for years building deep relationships at key accounts and making all-star money. Once key account sales revenues start dropping due to saturation, the economy, or a technology pivot, even Tier 1 reps have to sell harder to keep their earnings steady. Those reps not making their numbers find their territories sliced and diced, making it even harder to keep their jobs. Ever been negotiating with an embattled Tier 1 Enterprise Software rep? You want an Observer from the International Red Cross in the room to ensure no war crime is committed. Ever been in a late-stage meeting with a Sales VP or CRO who’s under pressure? I’d rather swim in a rip-current. When they leave, some will stay in Tier 1, and others will temporarily go to Tier 2 and 3 until they can come back to Tier 1.
For Tier 2 and 3 tech companies, either those happily up and coming or those not so happily plateaued, hiring and managing a sales team is not easy. Top talent won’t automatically come to you, except during a Great Recession when one of those former Tier 1 reps needs a quick place to land and decides you’re going to fund their ongoing job search while burning through your 6 months of non-recoverable draw.
I recently spoke about the state of sales rep hiring and management with several industry friends, including Jeff Hoffman, a seasoned Sales VP at both Tier 1 and Tier 2 vendors and another contact, a highly successful Tier 2 sales rep. Filtered through our firm’s lens, here’s a consensus reality.
Who do you hire if you’re not yet a Tier 1?
There’s a type of rep who likes the challenge of Tiers 2 and 3, and dislikes the politics and complications often found in Tier 1’s. Self-reliant and resilient, they are the equivalent of the Houston Astros’ starting player who will play well in the Majors, but not at the $230M superstar level (then again, the Yankees spent a boat-load of cash in 2013 and ….).
What’s the successful Tier 2 and 3 hiring profile?
Tip-offs sales rep and Sales Leadership candidates are serious about selling your products (and not just looking for a paycheck)
- After the 1st interview, they turn the tables and interview you, demanding a demo of the product they will be selling. Only a desperate sales rep candidate determines if a product is saleable after they’re hired
- Sales VP’s, and Sales Team leaders will ask to interview their direct reports and will ensure they have the authority to replace incumbents they feel are not ‘winners’. They won’t take the fall for their predecessor’s hiring mistakes and won’t spend a nanosecond prodding an incumbent sales rep to get out there and do sales calls
Hunter (Territory Sales Rep)
- 7 to 10 years proven sales performance in a Tier 2 or Tier 3 vendor
- Communicates to Marketing exactly what is needed to fill or unblock their Sales Funnel
- Has sales skills, not necessarily vertical industry knowledge; listens, seeks each prospect’s needs and motives
- The products they sold were often me-too, but they still sold them day after day, and this is a plus
Harvester (Account Manager)
- 10 to 15 years’ experience with deep and leverageable relationships in a large customer you’d like to have. Quiz them on how that customer buys, how to become a certified vendor, how procurement operates and how they personally grew the user base and revenues
- Did they carry the revenue number or was it shared by a larger team?
- Be careful – many Tier 1 Account Managers are amazed, when after leaving their Tier 1 vendor jobs, their former customers forget their names. It wasn’t them; it was the logo on their business card imparting credibility and access
- Probably has some vertical industry experience (ex: Insurance, Healthcare/Hospitals, Pharma, Specific Manufacturing, Online Banking and Digital Payments) and can have a conversation at the customer’s Director and Senior Team levels.
Consulting is a bit different, where the need to be conversant about an industry or technology is crucial and so 20+ years’ experience in a vertical or technology is often a requirement. Here, I would also review their writing skills.
At all levels, make sure they are very social media prospecting proficient, such as advanced LinkedIn skills. It’s a numbers game, and your Customer Acquisition Costs have to be controlled.
Managing the new Sales Rep – The Timeline
How do you know you hired a winner? We use the following 9 month timeline with our clients and when they have a new sales team:
First 30 Days – Are they still looking for a job? Is there potential here?
- Understands your comp plan the way you understand your calculations and earning targets, and have computed the number of closed deals required to make quota.
- Espouses a C-Level version of your value proposition (a 1-2 minute version of your Elevator Pitch)
- Verbalizes a high-level map between your Value Proposition and your specific offerings, stated in Day-In-The-Life terms
- Reaches out and tells their contacts and former customers where they landed. Be cautious of reps who claim “their contacts are busy, or they’ll get back in touch” as they’re most likely buying time while still looking. This is especially true of reps formerly out of work for a year or more.
- Demonstrates a predilection for action vs planning and advising
- Involuntarily retooled Sales VP’s are prone to staying in their comfort zone, staying busy helping on special projects, rather than focusing on sales activities.
- Asking a lot of questions is not the same as high activity levels
- Avoids being a 1-person Sales and Marketing machine. Flexible, but does not spend days putting together intricate presentations unless they are specific deal related
- Shows resiliency; can they get knocked down or hit a speed bump and rapidly recover?
Next 60 Days – Are their skills as good as represented and are they trying to make traction happen?
- Conducts 2 demos or deep-dive conversations conducted in cooperation with your sales support teams (might be a BA, or an Engineer who is adept on their feet and customer empathetic) to the right person based on sales cycle stage
- Conducts a next set of 4 demos or deep-dive conversations, both follow-on and new prospect, proving they are in the marketplace and can control a sales cycle.
- Works to attain a deeper understanding of how the customer uses your offering, actively refining their own version of the Value Proposition, now down to the Manager Level (from the C-Level we talked about above)
- Participates in your Objection Clinic using their current prospecting and early-stage sales campaigns as input
Next 90 Days – Are they on the path to success? Are they settling in for the long haul?
- Recites a refined customer-specific version of your Value Proposition and product map in their sleep.
- Delivers 8-10, 30 minute Level 1 demos or equivalent conversations
- Orchestrates 3-4 Level 2 demos with a well-defined customer need you can potentially solve, budget, timing, buying cycle and Procurement processes.
- These can be forecasted as 30 percenters for tracking purposes.
- Has at least 2-3 qualified opportunities where the deal terms and any deeper technical issues are being discussed, and you have personally talked to each buyer/decision maker. Be careful of sales campaigns that drag on without your complete first hand understanding of why.
- Reps, at this point, can forecast Phantom Deals (more wishing than having) to show activity. It’s hard to attend a sales forecasting meeting and not put something on the list at 6 months, so the pressure is on to say something, anything.
- These 30% forecasted deals should have discovery, fit, pricing and evaluation completed within the next 30 days. Once completed, they can be forecasted at 50%.
- Many sales reps get 6 months of recoverable draw to cover start-up cash flow needs, so near the 6-month mark, look for a sudden drop in new prospecting or deals being postponed or slowing. It usually means they’re close to leaving.
Next 90 Days – Thumbs up or thumbs down?
- Creates at least 1 deal, closeable within your fiscal year, and where you and their Legal are actively involved in direct customer conversations
- This deal should be forecasted at 70%
- This is the point where a panicky rep will start forecasting Zombie Deals, i.e. keeping deals on your forecast even though the rep knows the deal is either dead or postponed to the next fiscal year. I always ask the most senior buying executive what would happen to them if they did not buy within my fiscal year
- If there isn’t a near-in deal, question why a rep would hang around if they seemingly cannot make a lot of money. Good reps are like cats – you rent their loyalty by feeding them
The Final 90 Days – Are they Hall of Famers?
- Has a deeper understanding of your optimal Deal Size based on the bottom line financials and ensures all forecasted deals are within that optimal band
- Understands and communicates to Sales Management and Marketing where their lost deals fell apart and helps devise fixes.
As Moneyball proved, you don’t need a whopping payroll to be a contending team. Hire a solid team, be realistic about production, and lead them effectively in your vision of how Most Unexceptional to play your game.
Richard Eichen is the Founder and Managing Principal of Return on Efficiency, LLC, http://www.growroe.com , focusing on companies, initiatives and products where technology is the primary means of delivery and revenue. He is one of their senior Turnaround, Transformation, Program Rescue and Process Rescue leaders. As a Change Agent, Trusted Advisor, Program Leader and Interim Executive, Rich has over 25 years hands-on experience reshaping companies, Operations, IT/Systems Integration and strategic initiatives. He can be reached at email@example.com, and followed on Twitter, @RDEgrowroe