What job makes more than the CEO and only has an average tenure of 9-18 months? That’s right. The first VP of Sales at a Startup!
Yet VCs and advisors continue to push for startups to hire this person full time even though it’s going to increase burn by 10%, the average cost to replace a poor hire is 1.5x, and the inevitable loss causes a disruption to the org as a whole that sets the company back 6-12 months. This means you are going to spend between 500,000-1,000,000 for every vp of sales you hire knowing full well that the odds of this person working out are heavily against you.
Why do VCS tell (or force) many companies to make this hire? There really aren’t many alternatives. Why do sales consultants fall short and junior internal candidates quickly fail in the modern organization?
1. Ever changing mix of tactical and strategic needs in the early years of scaling
A majority of sales consultants I meet are great at producing reports, setting up salesforce, and making pretty decks. Not a bad thing, but it’s putting the cart before the horse. Your company still doesn’t know how to sell in the meetings, which is tactical and infinitely more important in the early 2-3 years. The focus early on must be on a tactical customer acquisition process first, before operational roles allow you to really grow at scale.
I’m not saying that you shouldn’t also focus on strategic initiatives, but I am saying that early on (pre-first 200-300 customers), the ability to actually execute the sales process matters the most.
2. Changing culture and the organization clinging to its 20 person mentality
A VP of sales is either viewed as a necessary evil, a potential savior, or as an outsider.
Everyone wanted the job in the department, everyone outside the department is skeptical at best, and the exec team and board are convinced this person must be the second coming who can take all the heavy strategy piece off their plate. No pressure at all…
For the rest of the org: There is a reason VPs of sales are rarely CEOs; a misconception exists that VPs of sales typically have a less than ideal understanding of other pieces of the puzzle and therefore tend to focus on top line drivers vs. bottom line contribution. Guess what: it’s what they are hired and know how to do, so it should be their focus. It’s not that they don’t really know or care, it’s that they are told and incentivized to not focus on those other groups and numbers. This causes an unnecessary stress on this role and many times is a leading reason why things don’t work out, rather than performance. Organizations hire this person to get the job done but oftentimes they unintentionally pit this person’s motives against other departments. Lose – lose.
Here’s how to get it right
1. First hire – player coach who has leadership experience but is still more of a sales woman or man.
What to look for: Strong sales ability and has a repeatable process. They have managed a team of at least five people for 2-4 years as well.
What to avoid: The industry guy – this guy talks about a Rolodex and then under delivers 9 out 10 times. They are further along in their career and cling to their way of sales. You can teach the industry but teaching him/her how to sell is an up hill battle you won’t win
2. Usually around 1.5-3 years later comes hire #2: the person with experience scaling to 100-200 sales people
What to look for: Strong experience taking a sales organization through massive growth phases, and an ability to relate to young staff in addition to the ability to lead and manage the growing leadership team. A proven track record of developing mid-level leaders.
What to avoid: The regional VP from a larger company, who has managed 100-400 salespeople only when all of the work in implementing structure and developing key components of the team has already been done. They struggle to innovate or see around corners and anticipate hiring/scaling issues. This person is a much better than hire three but can be a gigantic mistake if hired too early.
3. Hire three: the optimizer/strategy person- ex vp of sales at a larger startup or ran a large division of another tech company
What to look for: Someone who has been removed from the tactical for sometime and has experience in optimizing and showing 10-20% revenue growth through streamlining teams and systems. They can meet and have extensive experience with enterprise deals but are better in the office.
What to avoid: The enterprise leader whose core strength is carrying a bag and building morale. This stage is about optimizing, not landing lighthouse accounts at the executive level. Many senior leaders though still go back to the thrill of the hunt, and continue to lead from the front of the battle instead of the strategy tent behind the lines.
There is no exact formula for how to avoid miss-hiring and/or poor initial hiring at the VP of Sales level but you can avoid the same mistakes that 1000s of companies before you have made by understanding how to create the right environment before you on board this person, hiring the right type of person for the role, and then preparing the organization for growth at each critical phase. Make sure you set up your first VP for success and you can avoid many of these situations described above. You can get it right by setting the company up for scaling before hiring this person if you find the right partners to help you through these growth phases.