I’m sure you’ve heard (and maybe experienced it for yourself), but some of the data floating around on the state of sales in the tech startup space is pretty crazy right now. Turnover is high (at a VP level and also at an individual contributor level) and the number of reps reaching their goals is decreasing steadily year after year.
I’ve been talking about it a lot recently and so have others. And there’s a reason – your business runs on sales. And without this function working at full capacity, you’ll always be operating below your potential.
It’s not all doom and gloom. But it is worrisome. And there are 2 big issues I see that are contributing to this data. Here’s my take on how we should turn them around.
Issue #1: Unreasonable Sales Targets
This is a HUGE problem plaguing startup sales today with big, expensive consequences to boot. Unattainable sales targets affect your organization in several key ways:
- Less reps hitting quota means they get paid less and are frustrated (i.e. less motivated).
- This results in high turnover. And don’t forget, rep turnover isn’t cheap (an average of $115k+ each time).
- You spend a lot of time not selling because you’re chasing your tail training and ramping new hires.
- You lose a lot of momentum with your existing customers and the work it takes to maintain an account (FYI increasing customer retention rates by 5% increases profits by 25% to 95%).
- It’s now harder to hire talented salespeople because you have a bad reputation in the talent pool.
So where do unattainable targets come from?
From what I see and hear, most of the time in startup land this comes from investors or startup leaders who pull numbers out of thin air due to a lack of experience. On occasion, it will come from sales leaders themselves as well, through a plug and play mentality that doesn’t translate to their next role (sales is not one-size-fits all).
How do we fix this?
This will sound ridiculous, but the solution really is just to set realistic targets. The problem with this is most of the people who are setting unrealistic targets don’t know they are doing that, either because they don’t know how to actually set them in the first place or are being handed down a number from the VC.
So awareness around what is actually attainable is the first step for each party involved.
Salespeople: Speak up. You know when the target is unreasonable. You have to communicate just how this affects you and your ability to perform at a high level to the decision makers within your organizations. Always provide data/feedback from customers when possible! And if you are speaking up and no one’s listening, use your voice in another way: find a company with leadership who will. Know how to interview your potential employers to uncover the reality of the situation.
Startup leaders/Sales leaders: Don’t believe the startup “math” you read about on what it takes to be valued at 100M to exit for a billion. Unicorns are called such for a reason and few startups are one. Do your homework and be realistic about your market potential so you can fight the good fight with your VC’s if need be (if you’re VC backed and they’re the ones pushing the unrealistic targets) or so you can work with your sales team to set attainable goals based on market data. Your people are counting on you and your startup’s success is hanging on this.
VC’s: Drop the unicorn hunt and set any targets you’re insisting on from real market data on a business by business case. Attainable goals are not the same business to business or industry to industry. And when you get them wrong, you’re totally shooting yourself in the foot. You’ll never see the kind of return you could from the majority of your investments for the reasons above if you push your startups to set unreasonable goals.
Everyone: If you don’t know what what an attainable target looks like for your business because you’re just starting your company, admit it and let the market show you what’s realistic through benchmarked data before you throw out a random number. Diagnose before you prescribe!
How to actually set attainable sales goals:
This has been written about by many, many people. Here’s a few resources I recommend checking out to help you learn how to set reasonable sales goals:
- Sales Hacker – Sales Forecasting 101: Definition, Methods, Examples, KPIs
- Hubspot – 7 Steps to Setting Smarter Sales Goals
- Startup Nation – How to Set Realistic Sales Goals for Growing Your Startup
- Close.io – 5 steps to setting sales goals that help you grow (quickly)
- Sales Hacker – The Scientific Approach To Setting Sales Goals For Your SDR Team
Issue #2: Not Knowing How To Hire Salespeople
It has been said that hiring is the most important skill a founder will ever need and I agree wholeheartedly. If you’re a founder or a leader of any kind in a startup, your business or function will only be as good as the people you bring on board.
But knowing what talent really looks like for you (it’s not the same for every business) or how to hire them is something that many struggle with. Especially when it comes to sales.
In fact, as crazy as it sounds, the single biggest problem I see when startups hire salespeople or sales leaders these days is not actually knowing who they need or why they need them.
(Shameless plug: this is why I started ATP – to take the guesswork out of sales hiring for startups)
For instance, a startup I know of hired a CRO for a glorified senior director of sales role (less than 50 person company). They paid well over $800K+ in total comp when all was said and done. But this person didn’t hit their targets once in the entire time they were there before they bailed.
It was an incredible amount of money for a skillset that was completely mismatched. And the goal is prevent that kind of thing from happening with a rock solid hiring process that prevents this.
How to hire well:
- Know which skills you need for the role you’re hiring for. This comes from doing a deep dive on your business and making sure you have a good understanding of exactly what the person you’re going to hire will be required to do. Most think they understand this, but don’t go deep enough.
- Have a system for hiring that takes the emotion out of it. This is critical for ensuring that you have a way to consistently evaluate each candidate you interview and that you hit all the points you need to so you’re not missing any information. My go to system for doing this is a scorecard.
- Hire people who believe in you company and mission. This is one of the most critical and underrated things to consider when you hire. There is no substitute for the power of belief in the people you lead!
- Roll out the red carpet during interviews and onboarding. Talented people have options. In fact, they are rarely unemployed! Show them how much you value their potential contribution with a candidate experience that reflects how awesome your company is.
The key takeaway here is that there’s a general lack of true sales perspective and remembering that not all sales teams are created equal in the startup world at the leadership level these days. VC’s, CEO’s, and yes, even VPoS’s can’t just rely upon a rinse and repeat approach.
Awareness is critical. Getting help is the next step. Because it’s painful when you get these things wrong.
I don’t do this often, but we here at ATP eat, sleep, and breathe this stuff every day. And we have been for the last 20 years of our sales careers. So if you have questions on how to set reasonable targets or how to hire, we’ve done them both and can help. Get in touch and we’ll offer our assistance in whatever way we can!