Why Early-Stage Startups Shouldn't Hire a Head of Sales
Early-stage startups need to always be discovering. Which means that until the product can sell itself, the job of sales needs to remain with the CEO.
Working with startups, I see the same mistake over and over again. The company builds a great product, generates a few early sales, and quickly hires a head of sales to get them to the next level. It never works out well.
I get it. I hate sales. Pitching your product all day is almost as frustrating and time consuming as fundraising. But you need traction and revenue. Now that the product is built and you’ve signed up initial customers, it seems like the time to hire a specialist to focus full time on selling.
Besides, you’re really not a sales guy. You feel like you’re fumbling around when dealing with customers and you haven’t figured out how to close the deals. There’s a science to sales, right, or at least techniques that you don’t know. Nobody doubts it’s critical to have a technical expert leading product development so now is the time to bring in a sales professional to lead the sales process, right?
You may think you have a product now. What you have is an MVP. It’s still an experiment with a primary purpose not to generate revenue but to initiate a customer response. Yes, you have initial traction with a few customers, but those are early adopters who are either so desperate for a solution that they’re willing to take a chance on a work-in-progress, or they’re people who like to be on the bleeding edge and have a small budget for shiny new toys. These early customers are important to validate your assumptions and shake out the bugs, but to get to the next level, you absolutely have to continue customer discovery rather than handing off the customer to someone who’s goal is to push product.
The role of a sales person is to sell the product you have now. To sales people, the sales process is a numbers game — the sales funnel. Reach out to lots of contacts, get some percentage interested, close some percentage of those sales. The way to make more sales is put more leads into the top of the funnel, work the leads in the middle, and do something to incentivize those at the bottom to sign right now. If your product isn’t the right fit, move on quickly to the next lead. This is the sale mentality, summarized as “always be closing.” Quotas and commissions require a short-term focus; a good sales person doesn’t waste time on a lead that may not pay out for years.
There’s a time to bring in a sales team to turn the crank to ramp up sales, typically after Series A. You’re not there yet. At this stage, your mentality needs to be “Always Be Discovering.” The point of your product is less to be generating revenue than to facilitate customer discovery. Will users pay for it? How much will they pay? You asked them before, but the rubber meets the road, when the guy who thinks your product is the greatest idea since the bread slicing machine has to convince his boss and his boss’ boss and the CFO and the CIO to pay for a roll-out.
There’s so much you need to know that you can only learn by interacting with users. Personally. How are they using the product — is it the way you expected? Which features do they use? Which ones sound good but are rarely used? Is the product being used to solve problems you hadn’t even thought of? Of all the features on your to-do list, which ones make their eyes light up and which just get a shrug?
This is not the role of a head of sales, CRO, or even a sales manager. This is the job of the CEO together with the heads of product and marketing.
More importantly, the customers who aren’t purchasing your product are as valuable as the ones who do. If you think they need your product, rather than writing them off and moving on, you need to figure out why they aren’t interested and how to change their mind. Is it pricing, is it features, or is it simply inertia? Depending on what you discover, you’ll need to adjust your product and your marketing and iterate again. You won’t get this information filtered through someone whose primary concern is hitting a quarterly quota.
So what’s the downside to hiring a head of sales anyway, especially if you get them to work strictly on commission? Sales at this stage are not a matter of turning the crank and do not materialize quickly. They involve significant hand-holding and special feature development, and take a long time to close. Inevitably, the sales manager makes few sales, generates only a fraction of the income they were anticipating, and after six months, decides to move on. You’ve lost time training the person, and more importantly, missed the opportunity to build relationships directly with the customers.
But you need someone with connections to get you in the door with the big players. Absolutely true. Which is why you should build partnerships. Build relationships with resellers and vendors of complementary products. Get influencers, consultants, and industry experts to introduce you to people who need your product. Offer generous finders’ fees. But do the sales yourself.
But…but…but. I hear you — you can’t afford to spend all day on sales when there is so much else to do. So, yes, hire an intern or personal assistant to help with initial outreach. But even there, you need to be deeply involved. You need to be trying different things every day to see what works and what doesn’t. This isn’t A/B testing; it’s more like M/T/W/Th/F testing. You need to craft the messages and watch the responses even if someone else is helping send it out and scheduling the calls for you. Then do it all over again tomorrow with a new iteration.
In the end, you’re the person responsible for building the business. Your goal is not to hit an ARR of $1M now but to put in place the blocks to get to an ARR of $100M in five years. And that has to start with a deep understanding of the customer. That’s why you built the MVP; that’s why you’re signing up users now. That’s why at this stage, the most important thing you can do is always be discovering.
Serial entrepreneur, angel investor, startup marketing specialist, writer, sake snob.