When to hire a VP of Sales
As I mention in an earlier post, companies evolve and need different types of management with different profiles as they grow. A clear kiss of death that I have seen more often than not is hiring a VP of Sales too early. Here is the typical scenario - you just signed 3 or 4 customers in a couple of different verticals and you feel that all you need is some bodies on the street to grow your business. On top of that, you figure that you want to hire the senior guy first so he can bring in his own troops. Hiring a VP of Sales too early can cost you dearly. Here are a few reasons why:
- VPs of Sales need to make their comp. Typical salaries range from $150-200k plus performance equaling a total package of $300 to $350k. Most VPs of Sales will try to get you to guarantee the first year or at least the first couple quarters of compensation to offset the risk of working at such an early company.
- All VPs need people to manage which means your VP of Sales will want to hire a bunch of reps to grow the business. The experieced enterprise direct sales reps will cost you $80-100k base plus performance of up to $150-175k total comp. Once again many of the best reps will want to get some guaranteed draw for at least a quarter or two to get started.
What ends up being a situation where you expect to bring on a performance-oriented sales team becomes one which many of your new hires get guaranteed comp for a couple quarters. The burn rate added to your company almost doubles overnight with these heavyweight sales guys with no leads to go after and no mature product to sell. In addition, over time the sales team will get frustrated if the product is not ready for primetime and they will be out looking for a new job in a couple of quarters making all of this effort a very expensive experiment. Hiring a VP of Sales is not a commitment to hire one guy, it is a commitment to bring on a team, one that will not be cheap. Before you make this commitment, make sure you are ready. As you can read from an earlier post, when you ramp your sales efforts is critical.
Do more with less and be careful of ramping up sales until you have a repeatable selling model. In other words do not hire too many sales people and send them on a wild goose chase until you have built the right product, honed the value proposition, identified a few target markets with pain, and can easily replicate the sales process and model from some of your customer wins.
Many of the best companies I have seen have taken the bootstrapped approach where the founders of the company act as the initial sales team to close a few deals, to learn about the customer, and further refine the product. Yes, this can only last so long as everyday out of the office or with customers means another day not developing the product. That being said, rather than hire a VP of Sales first, I would encourage you to focus on generating leads and hiring a sales rep or two to follow up on them. This way you can take a smaller step to refine your sales model and product before going big. Remember don't hire a VP of Sales to only have them hunting for dodo birds.
