If only it was this easy. If it was, this entrepreneurship thing would be a laid back effort and venture capital investing would be a sure winner.
But it is not so simple. Let’s explore a couple reasons why.
- It is hard to be a sales person for a small technology company selling to large entities. This means that $1.5M quotas are hard to hit and the average sales productivity of a sales person at a tech start-up is far lower than quota. The math looks very different if the average sales person is generating $750k per year versus $1.5M.
- How do you know who to hire? Sales people from big companies think success translates to small start-ups when often it doesn’t. A person who delivered a $3.0 million quota at Oracle will most likely not deliver half that figure at a start-up. Do you hire domain experience? Technology experience? Solution sales experience? Do you hire people from successful start-ups? Maybe you need to figure this out before you accelerate the hiring process.
- Innovative products need time for demand to build. Corporations may not have budget. Only thought leaders may be ready to implement the product. Adding sales capacity does not ensure that demand will increase.
- Getting sales people to sell the product available today rather than the product of the future is hard. When you say no to a sales person and tell them they cannot make promises, you are taking money out of their pocket. If you say yes, you are slowing down the entire organization’s ability to maintain flexibility for the future.
- When you hire 10 sales people, you need to hire additional sales engineers, you need more inside sales / lead generators, you need more marketing support, and the demo team gets overloaded. More proposals and RFPs need to be reviewed. Pricing structures need to be approved. Product management and development get crushed with requests. Activity goes up measurably, cost or stress goes up. But do sales? All this activity precedes sales by six months (or much more).
- Turnover in sales inevitably occurs, causing distrust in the marketplace and confusion at home. The fastest way to lose a good sales person is to give them an impossible task – on commission. But don’t worry – the bad ones stay for the duration.
I had a VP of Sales once who was a truly pragmatic soul. When he was asked if he needed more sales people to hit his number he would always look at his current team and ask if they were overburdened. If not, he would say – “Let’s take the money and put it into lead generation – marketing, inside sales, etc.” He would want his sales guys loaded up before I brought on more capacity. He knew that increasing the supply of your sales people does not increase the demand for your product. Smart guy – great sales leader.
Bottom line – more sales people lead to more activity and more activity leads to more cost. More qualified opportunities and the right product targeted to the right buyer lead to more sales. Figure this out before you put all your gas into expanding the sales team. This entrepreneurship thing requires higher order math than simple arithmetic.