Building a Sales Org: Who, When, How | Summary and Q&A

TL;DR

Building a sales organization involves understanding the sales learning curve and progressing through initiation, transition, and execution phases. Hiring strategies vary depending on the phase, with Renaissance reps in the beginning and more experienced, coin-operated reps in later stages.

Key Insights

• 🏛️ Building a sales organization requires understanding the sales learning curve and progressing through initiation, transition, and execution phases.
• 💦 The initiation phase requires hiring Renaissance reps, who are self-sufficient and accustomed to working without extensive support.
• 📔 Transitioning to the execution phase involves generating sufficient revenue to cover costs and considering a repeatable sales model.
• 🌥️ Coin-operated reps, with experience in larger organizations, are suitable for the execution phase when resources like marketing and sales engineering are available.
• 💯 Core employees who played a role in building the sales organization can be utilized for expansion and new initiatives in later phases.
• 😤 The sales learning curve helps determine the organization's sales model, hiring strategies, and overall sales team scalability.
• 😫 Quotas and commission rates should be set based on the sales organization's revenue goals, typically aiming for three to five times the cost.

Transcript

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Questions & Answers

Q: What is the sales learning curve and why is it important in building a sales organization?

The sales learning curve represents the time it takes for an organization to understand how to sell its product and the productivity of salespeople. It is crucial because it helps determine the organization's sales model and strategies for hiring and scaling the sales team.

Q: How can hiring strategies differ between the initiation, transition, and execution phases?

In the initiation phase, hiring a Renaissance rep, who is typically technical and self-sufficient, is suitable. In the transition phase, when salespeople generate at least one times their costs, more experienced reps can be hired. In the execution phase, hiring coin-operated reps with experience in larger organizations becomes possible.

Q: What is a repeatable sales model, and why is it important?

A repeatable sales model refers to a stage where salespeople can consistently generate revenue that covers their costs and contributes to the entire organization. It is essential because it indicates the scalability and efficiency of the sales organization.

Q: How can core employees who helped build the sales organization be utilized in later phases?

These core employees, who have a deep understanding of the company, can be valuable for opening new geographies, developing new products, or tackling other expansion initiatives. Their ability to work without formal resources makes them ideal for such tasks.

Summary

This video discusses the steps involved in building a sales organization, including understanding the sales learning curve and the different phases of development. It also explains the types of salespeople to hire at each phase and the importance of aligning resources and skills with the company's life cycle. Additionally, it addresses the role of the CEO in working with salespeople and the value of retaining core team members throughout the organization's growth.

Questions & Answers

Q: What is the sales learning curve?

The sales learning curve represents the time it takes for an organization to understand how to sell its product and how customers buy. Similar to building a product, it takes time to grasp the productivity of salespeople and the overall organization. The sales learning curve consists of three phases: initiation, transition, and execution.

Q: What is the initiation phase of building out a sales organization?

The initiation phase is the starting point where a company does not have a clear understanding of how long it takes for a salesperson to ramp up, the potential revenue they can generate, or if the product can be sold. During this phase, it is crucial to hire a Renaissance rep who is versatile, likely technical, and capable of working as a one-person band without any sales, engineering, or marketing support.

Q: How do I know when I'm no longer in the initiation phase?

Moving from the initiation phase to the transition phase happens when two to three Renaissance reps, on average, generate one times their fully loaded costs. Once the salespeople can cover their costs, the organization transitions to the execution phase.

Q: What characterizes the execution phase of building a sales organization?

The execution phase is marked by having a repeatable sales model, wherein salespeople consistently generate revenue more than three times their fully loaded costs. At this stage, the sales organization not only covers its own expenses but also contributes to the revenue of the entire organization. A highly productive company may be five times the fully loaded cost.

Q: What type of salesperson should be hired for the execution phase?

With a repeatable sales model, it becomes feasible to hire salespeople with experience from larger organizations who are accustomed to having marketing and sales engineering support. These individuals are referred to as "coin-operated" and are better suited for this phase as they can leverage the available resources. Hiring startup personnel at this stage may not be suitable due to potential mismatches in skills and expectations.

Q: How does understanding the company's life cycle impact hiring decisions?

Hiring decisions should align with the phase of the company's life cycle. In the earlier stages, such as the initiation and transition phases, it is essential to hire versatile Renaissance reps who can operate with limited resources. As the company progresses towards the execution phase, it becomes feasible to hire salespeople who have experience in larger organizations and are well-versed in utilizing marketing and sales engineering support.

Q: Why should the CEO work closely with salespeople in the early phases?

Working closely with salespeople in the initiation and transition phases allows the CEO to gain an appreciation for the challenges faced by the sales organization and the feedback from customers. This knowledge is crucial in the decision-making process, including hiring a VP of Sales in the later stages.

Q: How should core team members who started the sales organization be utilized?

Core team members who joined the company in the early stages are valuable assets due to their extensive knowledge about the company's history and sales process. As the organization grows, these individuals can be instrumental in opening new geographies or introducing new products, as they are accustomed to working without formal resources.

Takeaways

Building a sales organization involves understanding the sales learning curve and progressing through different phases. Hiring salespeople who align with the specific phase and the company's life cycle is crucial. Working closely with salespeople in the initial stages provides valuable insights, and retaining core team members from the early days can be beneficial as they possess unique knowledge about the company.

Summary & Key Takeaways

• The sales learning curve is similar to the product development process and involves understanding customer buying behavior and salesperson productivity.

• Building a sales organization consists of three phases: initiation, transition, and execution. The goal is to reach the execution phase with a repeatable sales model.

• Hiring strategies differ based on the phase, with Renaissance reps for the initiation phase and more experienced coin-operated reps for the execution phase.