Building a world-class sales org | Jason Lemkin (SaaStr)

Jason’s background (00:00:00)

• Jason Lemkin, the founder of SaaStr, shares his insights on building a world-class sales organization.
• Key considerations when hiring your first salesperson include the right timing, the ideal candidate profile, and the importance of hiring two salespeople initially.
• Compensation structures, interviewing techniques, and the role of a VP of Sales are crucial aspects of building a successful sales team.
• To avoid burnout and financial strain, it's essential to manage sales expectations and resources effectively.
• Fostering a healthy relationship between product and sales teams is vital, with the head of product actively involved in the sales process.
• Trial periods, contract durations, and feature requests should be carefully evaluated to optimize sales strategies.

The importance of sales in B2B businesses (00:06:18)

• Founders should honestly assess whether their product requires a sales team or not, based on factors such as customer needs, deployment effort, and onboarding requirements.
• If customers are willing to pay a substantial amount, such as $5,000, for the product, it indicates a sales-type motion rather than a self-serve model.
• Founders should focus on acquiring high-value customers rather than solely pursuing low-paying customers.
• Many startups initially adopt a product-led growth strategy but eventually transition to hiring salespeople for top-down sales, often combining both approaches in a hybrid model.
• The decision of when to hire a sales team is critical, and successful companies have done so at various stages of growth.

Signs that you should start hiring salespeople (00:11:23)

• Founders should find a way to close the first 10 customers themselves, even if they dislike sales.
• Customers love talking to the CEO, and founders are usually good at the middle part of sales (holding conversations).
• Founders should focus on getting good at the middle part of sales and then work up the courage to ask for next steps and money.
• Founders don't need help in the middle part of sales and can be 10 times better than sales reps at larger competitors.

Attributes to look for in early sales reps (00:14:19)

• Founders should begin hiring sales representatives once they have closed 10 customers and more than 20% of their time is booked with customers.
• The first two sales hires should be individuals who the founder would personally purchase their product from, regardless of their background or experience.
• Founders should conduct thorough interviews with at least 30 sales candidates before making a hire.
• In the early stages, founders should prioritize hiring "pirates and romantics" who are passionate about the product rather than those with extensive sales experience.
• Finding leads is challenging, and hiring the right sales personnel is crucial for a company's success.
• Founders should exercise patience and persistence in interviewing candidates until they find someone who is passionate about their product and has the ability to sell it effectively.
• Avoid rushing into hiring a VP of sales until the company is ready.

Hiring a VP of Sales (00:19:08)

• Founders should hire two sales reps who can consistently hit quota and close deals before hiring a VP of Sales.
• The early sales team should be product gurus and experts in the company's product and audience.
• Founders should start hiring their first salesperson when they have closed the first 10 customers on their own and are spending more than 20% of their time on sales.
• Before hiring a VP of Sales, founders should have a repeatable sales process and be able to consistently sell their product.
• Interview about 30 people for each sales rep position and select the two who are the best fit for the company and the product.
• Prioritize candidates with a few years of B2B sales experience and a level of maturity that allows them to be trusted with leads and customers.

The role of a VP of Sales (00:26:43)

• Hire a VP of Sales when you're ready to scale from 3 to 300 reps.
• Give the VP of Sales a bag SL or AOTA SL.
• They need to be doing sales themselves in today's world, at least for a little while.
• If they don't want to do sales, don't hire them.
• The best sales folks love sales and the craft of honing the script, beating the competition, and working on a team.
• Burnout is a reality, especially after the last three years of yo-yoing.
• Don't hire someone who doesn't want to sell, no matter how smart they are.
• In today's distributed world, it's more important to visit customers, not less.
• The biggest strategic mistake you can make in sales hiring today is hiring someone who doesn't actually want to sell.

Interviewing salespeople (00:30:06)

• When interviewing sales candidates, ask them about their plans for their first two weeks, their sales skills, and their product knowledge.
• Great sales leaders prioritize meeting customers over internal meetings and are actively involved in big deals.
• Beware of candidates who prioritize process over customer interaction or who are burnt out.
• For roles above $50-100 million in revenue, a focus on process may be more acceptable.
• Salespeople should have a deep understanding of the product and be knowledgeable and confident in their ability to solve customers' problems.
• The best sales representatives provide value to customers by helping them understand the market and their problems, rather than using aggressive sales tactics.
• During the hiring process, conduct reference checks and assess candidates' abilities through real-world scenarios.
• Don't rush the hiring process and make sure the candidate is a good fit for the role and the company.

Determining sales compensation and quota (00:45:16)

• In the early stages of a startup, prioritize hiring fewer, better sales reps who can close more deals than they take home in compensation.
• Offer a 100% commission-based compensation plan for the first few months to incentivize new sales reps.
• Aim for a compensation structure where sales reps bring in four to five times what they take home.
• Focus on closing deals rather than hitting specific quotas in the early stages.
• Implement a bonus structure where reps take 100% of their sales for the first month or two, then gradually adjust the plan so they bring in four to five times their compensation.
• Concentrate leads in the best closers while bringing new people up.

Transitioning from 100% commission to a smaller percentage (00:53:34)

• Switch from 100% commission to a smaller percentage, but do it for a maximum of one quarter to avoid mediocre reps leaning into it too much.
• Mish hires are the most important thing in scaling startups, and it's important to root them out quickly if they're not a good fit.
• Hire someone whose last product was harder to sell, as they will have the skills to sell your product.
• Trust your gut and hire someone whose last product was harder to sell.
• Reps who have sold a harder product will have the skills to sell your product and will be more successful.
• An example of a successful hire who had previously sold a harder product is Sam Blonde, who went on to become the CEO of Brex and a partner at Founders Fund.

Indicators of a hard-to-sell product (00:56:58)

• A more technical product is harder to sell.
• A more competitive space is a positive indicator.
• A more complicated business process can be challenging to sell.
• Selling to VPs of engineering or product is more difficult than selling to other roles.
• Simplicity is key - avoid overly complicated products or messaging.

Scaling the sales organization (00:59:39)

• As a business scales, the sales organization evolves according to the "rules of eight": eight SDRs (outbound reps) need one manager, eight AEs (sales execs) need a director, and eight directors need a VP.
• When hiring a VP of sales, it's important to hire a "stretch" candidate who can source better managers under them to ensure scalability. Founders should be cautious about hiring their first VP of sales for their first VP role, as they may not be willing to do the job anymore.
• Internal promotions are important, but it's crucial to maintain a balance and hire externally as well. To scale a sales organization, it's crucial to have experienced leaders in management positions. Promoting junior reps without proper leadership skills can hinder growth.
• LinkedIn is an effective platform for B2B businesses to reach potential customers and build relationships with decision-makers. LinkedIn ads provide access to a vast network of professionals, including senior executives and C-level executives.
• LinkedIn's targeting and measurement tools are specifically designed for B2B marketing, delivering a higher return on ad spend compared to other social media platforms. LinkedIn audiences have twice the buying power of the average web audience. LinkedIn offers a $100 credit for new campaigns.

Understanding sales roles and titles (01:05:26)

• Sales Development Representatives (SDRs) are entry-level sales professionals who generate leads through email and phone calls. They typically earn a base salary of $60k to $80k in the US and are responsible for qualifying and passing leads to Account Executives (AEs).
• AEs are more experienced sales professionals who close deals and manage customer relationships. They typically earn a base salary of $90k to $200k, with a 50/50 bonus split based on the size of the deals they close.
• Founders should hire SDRs to generate demand and support AEs, as managing a team of SDRs requires a lot of time and effort.
• There is no clear career path for SDRs and AEs beyond moving into management.
• Hiring the top-performing AE from another company to be the Head of Sales is not always the best decision, as sales executives and managers require different skill sets.
• The shift towards remote work and flexible hours has contributed to a lack of natural breeding of great management skills.

Product involvement in sales, and vice versa (01:10:02)

• In successful B2B organizations, the head of product should be deeply involved in sales and understand customer needs.
• Product leaders should prioritize based on a long-term vision, while sales leaders focus on short-term deals.
• Sales leaders should listen to customer feedback and make informed decisions about feature requests, even if it means changing priorities.
• Sales and product tension is a sign of a well-run B2B company, but it needs to be managed effectively to avoid organizational breakdowns.
• Sales teams should force-rank their priorities during meetings to ensure alignment, while product teams should allocate a portion of their time to address sales team needs and inputs.

Thoughts on product teams taking on P&L responsibilities (01:20:32)

• Product teams are increasingly taking on P&L responsibilities and revenue goals.
• Customer success teams' goals have shifted from customer happiness to revenue generation, straining customer relationships.
• Weaponizing customer success and product teams can harm customer experiences.
• Aligning the product team with revenue goals is important, but pressuring individual PMs to generate revenue from experimental features should be avoided.
• Product extensions and new feature launches can be expensive and risky, so decisions should be made carefully.
• Unlike startups, big companies are more forgiving of product failures, which can encourage innovation.
• Prioritize reducing churn as the most important metric for SaaS companies, especially those with a self-service or product-led growth model.
• Focus on building a sustainable business that compounds revenue over time rather than resorting to short-term tactics that may damage customer relationships.

One thing founders can do to become better at sales (01:27:23)

• Founders and product leaders should learn to ask for the next step after every meeting, such as another meeting, a demo, or a signed contract.
• Great salespeople methodically progress deals and leave nothing to chance.
• Resources like SaaStr University and the book "From Impossible to Inevitable" can help founders and product leaders improve their sales skills.
• Be cautious of low-quality sales courses and programs.
• Pavilion is a valuable community for sales professionals and founders to network and connect.

The ideal trial length for a free trial sales team (01:31:02)

• Prioritize customer-centricity and building businesses that can reach $1 billion ARR organically.
• Consider the customer-centricity of metrics when making decisions, especially regarding free trials.
• Appoint a "VP of Free" or someone to champion the interests of the free user base and optimize the free trial experience.
• Nurturing the long tail of free users is important even if only a small percentage convert to paying customers.
• Founders should focus on delivering more value than they take out from customers.

Closing thoughts (01:39:50)

• Make this the year of the customer.
• Sales, customer success, and product teams have faced challenges in the last 18 months.
• Product people should be the voice of the customer and champion their needs.
• Work harder and find delight in making customers happy.
• Avoid drudgery and endless discussions by focusing on customer happiness.
• Inject energy into your company and inspire teams by shipping great products.
• Set a challenge to ship three great things this year.