Sunday, April 29, 2007

Lesson #12 - Sell... don't be Sold

I have hired a lot of sales people in my history as an entrepreneur, and I can honestly say I am horrible at it (but I have learned a lot). I am hoping this blog may shed some light on the challenges of finding the right sales person.

I believe one of the most critical hires, and probably one of the biggest risks an entrepreneur has to make is the first sales person. I have seen ventures fly and die based on this one person. So here is my quick guide for Hiring a Sales Person.

1. Don't hire a manager - hire a sales animal. I have made this mistake one too many times. Here is why - I always hired a resume, and never a person that can execute the task I need done. Managers don't want to sell - they want to manage. They certainly don't want to cold call, do demos and get on a plane every week. Its hard to avoid this pitfall, because of the environment of a startup. You always want to have a solid "VP of Sales" on the business plan, and able to convince the investors that we can hit 10M in revenue in three years. You need to get out of this mindset - remember - don't follow their rules - focus on building a company. Who cares if your first sales person didn't work at IBM- if he is closing deals - you made the right choice.

2. Eat the dog food first - or you will end up hiring the wrong dog. I can tell you, that despite my inability to spot talent - I am actually a pretty good sales person. Not because I wanted to be when I was growing up - but because it is 90% of what an entrepreneur does and must do. I have been the first sales person of every venture I have founded, and it I can't tell you how important this is for multiple reasons. The first reason - you need to make sure you have something to sell. Timing is everything in hiring people - and hiring a sales person before the product is ready for prime time is just a waste of time and money. The second reason - you need to know what kind of sales person you need. Interacting with prospects will give you insight on who your customer is, what they want and what they know. If you are selling a product to tech guys at Fortune 500 companies - you need to consider this when you look for the right person to hire.

3. Check references - History is the great predictor of the Future. Call managers who they worked for and ask tough questions. What was their quota? What did they sell? Did they work alone? What was their commission? In my second company, my first sales person hire was a guy who sold ads for the local newspaper - and my partner thought I was crazy for hiring him because we were selling enterprise software for ERP systems. Not exactly the same. The reason I hired him was based on the conversations I had with his former manager. He said "This guy can sell... period." I knew it was going to be tough to train him - but what I learned was - it was a lot easier training a guy about a product, versus training a guy on how to sell. He ended up being a great sales person - sold millions of dollars of software - and is still doing it today (in a different tech company).

4. Hire someone Hungry (and preferably with a mountain of debt) - If a sales person has money, there isn't much incentive to hit the streets. If a sales person is paid a large base salary, there isn't much incentive to work for the commission. You need someone who wants to create wealth (primarily for themselves). If the person you are looking to hire drives up in a Mercedes for the interview - make sure its a lease. Sales is about success-based compensation. If a sales person pushes back on a compensation plan that has commission as a big component - then they are not a sales person.

5. Make the Interview a sales pitch - it really works. A colleague of mine, who happens to be a very successful entrepreneur, and much better at me in hiring great people - gave me this tidbit of advice. Make the interview a sales pitch. As an angel investor - I can't believe I didn't think of this as a manager (since I see hundreds of pitches by people who aren't qualified to be an entrepreneur). You will see immediately how the person handles pressure, the tough questions and is able to sell you (probably the toughest customer). If your product is a little too complex for the person to sell during his interview - make up a product that they can get up to speed on quickly. For example - the new IPOD, or maybe a new HP Printer. As long as they can do 2 hours of research on the web, and put together a powerpoint and cover the highlights of the product - it should be plenty to show you their strengths and weaknesses.

6. Give a personality test - you never know what you'll find. I have never done this for any employee - but one of my portfolio companies started doing this - and they seem to have gained from the experience. There are a few free services on the web that offer tests (like

7. Set Expectations and clear, measurable Goals - with a timeline. One reason why sales people sometimes don't perform in a startup environment is because their are no clear goals. Its hard to set quotas, when there is little or no sales history to base it on. And even if you setup quotas - you need to setup the critical steps that need to be taken to reach the quota. Make sure every task is sales related. Don't have the sales person waste time reviewing data sheets, or editing the website. They are there to sell - any distraction you give them will dominate their attention - because its an excuse not to pick up the phone and make calls.

8. Micro-manage. In the first 90 days of having a new sales person on the job - meet with them every morning - set the days agenda, and make sure the next day you go over the task list. This may sound over-whelming - but its the only way you will know this is the right person, and you need to figure this out in the first 90 days. On day 91, have a staff meeting, and get all feedback and make a tough decision - thumbs up or thumbs down.

9. Ask the hard questions - even if they are rhetorical. A startup environment can be very hectic - everything is changing, moving fast - and due to the chaotic nature of being in a small team - its natural that friendships form. This is a very dangerous aspect to being in a startup. Its tough being a "boss" to a friend, and it is especially tough putting them on the spot and asking the tough questions. This needs to be addressed up front. If there is mutual respect, and you work as a team - and no one is taking personal attacks - it will become a very natural part of running the business.

10. Feed the monster - invest in your sales person. If you believe you found the right person, and he passes the litmus test - its time to invest. The only thing that is worse then a lame-duck sales person, is a rain-maker with no marketing behind him. You need to feed the monster. Whatever it takes - telemarketing, email marketing, advertising, events, etc - find ways to get your superstar leads. So many companies spend all their money on R&D and the salary of the sales guy - and that's it. You absolutely need money for marketing - in fact - if you hired a sales person (which means your product is ready) - you need to be spending atleast 1-2x of the sales persons salary on marketing. So if you hired a guy for 5k per month base - you need to spend 5-10k in marketing per month.

I am sure I missed a few lessons that I have learned - but I tried to focus on "preventative" lessons that can make sure you get the right person, instead of focusing on "my sales guy is awful, what do I do now??"

And remember - don't be sold by your new hire on "the reasons" they can't sell - or they need more time, training, a better website, a new feature, etc.... They are selling you, and not selling your product.

Good luck - follow your gut.

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