One of my clients is a fast-growing, C-series advertising technology company with an exceptional executive management team, enviable customer list, and revenue growth rate that strongly suggests they won’t need more funding before an exit. The CRO I placed has built a strong sales team for their core solution, and now the company is in the early stages of launching a product extension that will open up a new revenue stream from an untapped customer segment. But they’re not going to hire anyone to sell it yet. Why?
The simple answer is, while there is an industry-wide recognition of the need for the type of solution they’re developing, the specific market requirements and pricing model aren’t yet fully known. A sales organization can only be successful when they can sell a solution with a defined set of features, benefits, and pricing that provides value for customers and allows a reasonable profit margin for the company. Perhaps more importantly, without the above, a sales organization’s performance cannot be accurately measured and financially rewarded.
The premature hiring of a sales team is virtually guaranteed to fail: without clarity around goals, commission structure, and earnings potential, salespeople will look at the opportunity cost of staying around until the product takes shape vs. leaving for another position to sell a commercially viable solution with a fairly predictable financial outcome based on meeting clear revenue targets.
So what is my client hiring? A business development executive whose responsibility will be similar to sales in certain aspects (customer relationship development, presentations, needs analysis, selling “beta” tests) but with one foot in product, helping the product development, engineering, and finance teams prioritize features and functionality, and define the go-to-market pricing model. The compensation structure is weighted toward base salary, with a bonus structure measured against a set of milestones and quantitative objectives (e.g., number of meetings/presentations, number of beta tests signed) rather than revenue only. By setting the goals/objectives up front and compensating accordingly, my client will get the right person who will be fairly compensated and set the stage for hiring a sales team when the market and product are ready for it.
Where are you in your product lifecycle, and which model makes sense for you?
Guest author Steve Touhill is a partner with GM Ryan International, a boutique executive search firm serving early venture and growth equity companies in Internet/mobile advertising, marketing, and media technology. Prior to joining GM Ryan in 2008, Steve led sales teams at AOL, Lightningcast (acquired by AOL in 2006), and Clearspring Technologies (now AddThis).