Risks when you hire salespersonsn

How risky is it to hire salespersons for a startup?

When you hire salespersons for a startup you likely hesitate because of the risks associated to hiring a salesperson. You may also lack time to sit down, structure your sales, starts the hiring process and introduce new salespeople.

I had a conversation with a tech founder the other day about him possibly hiring salespersons to his tech company. Most of his sales is still done by himself despite that sales starting to take off. Naturally, he is also pre-occupied with a lot of other tasks craving his attention.

To him, hiring salespersons starts to become a necessity to keep up with enquiries, to capture hot sales leads. He was in his car heading for a sales meeting when we spoke. We talked about a possible regional sales representative to cut down on the need for travelling.

The key risks when you hire salespersons for a startup are: (1) You hire salespersons too soon. (2) They work on the wrong things. (3) The cultural fit becomes a problem. (4) Cost and expenses starts to accumulate. (5) Your sales methodology is yet not in place to help steer you salespeople.

I like to break those key risks down into more specific risk when to hire salespersons.

So, let’s dig deeper into above 5 risks, and a few more, when you hire salespersons for a startup.

A real-life story about two different salespersons

Hiring salespersons

Working with sales efficiency at a commercial bank we found a telling situation with two colleagues. One of the colleagues was always occupied, and his desk was cluttered with papers and stuff. His colleague on the other hand had an empty desk and left early every day to pick up her kids from school.

Despite him being highly regarded by customers and always on the phone solving customers problems, there was a problem of our own. He’s annual sales was only 50% of hers. The female colleague’s sales was undisputed.

The reason? He spend his timing serving existing customers, helping them to solve small daily challenges. That made him highly popular with customers, while new sales were low despite that being his target.

She was much more analytical, well prepare and followed the bank’s sales funnel process. She nursed leads soft-handed, engaged with hot leads and focused on closing when the time was right. Customer support issues were referred to the customer support department.

The risk when you hire salespersons is that you’re not clear about objectives and scope of work. It’s very common with startups that hire sales people to mix sales with customer support and customer success tasks.

Being clear on the scope of work and staying close but not intrusive with sales is key limiting risks once you have hired salespersons.

The risk is that you hire salespersons to soon

You will hire salespersons too soon if you’re still in a product development mode. If you’re still working on your minimum viable product.

If you have not yet sold your product to enough of early adopters, then you’re still trying to understand your product market fit. It is almost destinated to fail if you hire salespersons at this stage.

You will know that it is too early and hence to risky to hire salespersons when:

  • The product offering is still not developed leading to inefficient sales. Hire engineers first.
  • Your product market fit is not yet there. Learn to understand true pain points with enough early adopter customers before you hire salespersons.
  • Nailing who you most valuable target customers are takes a bit of time. It’s common with a startup to sell to whoever likes to purchase, but soon you will learn who the most valuable customers are. You will need your salespersons to work on high value customers to get a good payoff when you hire salespersons.
  • At this early stage of your startup you do not yet have a relevant sales methodology. Without a thought through sales methodology your salesperson hiring will have slim chances to become successful.

How tempting it may be, you’re better off in the early days to hire engineers to develop your product than hiring salespersons. The exception being if you’re a team of founders of which one has a clear sales personality.

Cost can quickly escalate when you start to hire people

Startup’s usually has limited funds and need to prioritize spending. Hiring people is one of the more costly expenditures one can do, in particular salespersons.

The cost when you hire salespersons include not only salary and social charges but also cost for traveling and entertainment. With long sales lead times it can take years to get to positive cashflow, and even longer to positive payback. Still, at some point you need to hire salespersons to get leverage on you startup.

Cost when you hire salespersons are:

  • Salary, commissions and social charges.
  • Office and office related expenses including IT-licenses, a laptop a cell phone.
  • Travel expenses including hotels, cost of cars, flights, trains and meal charges.
  • Entertainment expenses such as lunches, coffee and dinners with prospects.

But which came first, the chicken or the egg? A startup needs to sell to earn cashflow to spend. The reality is that the founder or the founding team needs to sell their product. At least throughout the early years.

There are great financial risks when you hire salespersons before you have a positive cashflow. Before you can afford to hire salespersons for your startup.

A founder dilemma is that most entrepreneurs are either one of the following three personality types: The products person, the salesperson or the operations person. In my experience, founders or founding teams that becomes successful has little bit of every personality type: product, sales, operations.

There is a risk that you hire salespersons that end up working with the wrong customers

You hire salespersons to sell, not to solve relatively minor problems with existing customers. For that you either use operations, a customer support person or a customer success person.

Another nasty risk is to hire salespersons that end up working on low value customers. To salespersons, working with low value customers or as customer support is to work with the wrong customers.

Most entrepreneurs will witness that themselves has targeted the wrong customers in the early days of a startup. It’s part of the learning process as an entrepreneur. Developing the product is about zig-zaging between pain points that we discover working with our early adopter customers.

As our product offering is maturing with increasingly more paying early adopters it gradually becomes clear who the value creating customers are.

Hiring the right salesperson is important to limit the risk that they work with the wrong customers. Your first hiring should probably know the industry well to be able to identify and truly understand customer pain points.

There is a risk that your salesperson will work with the wrong customers if you do poor vetting and hiring. With the cost associated with salespersons you risk jeopardize the entire startup if you hire the wrong salespersons.

The risks with salespersons also include not using your sales funnel or CRM

Many founders have a sales methodology but maybe not an articulated sales funnel they follow. In the early days most startup don’t have a CRM system either, i.e. a Customer Relationship Management System.

There is a risk your sales become highly inefficient if you do not document your sales funnel and how to use your CRM system. The risk your sales investments fail is very high if you hire salespersons while not giving them targets, your sales methodology process and proper tools.

When you start to get sales-traction you also start to know what sales methodology works best for you. Not only have you fine tuned your product offering with your early adopters you have developed a winning sales concept.

Limiting the risks when you hire salespersons for your startup includes:

  1. Document your sales funnel, what process and actions do you have from lead generation to deal closing. Simplify so the process is actually used. There is an risk you hire salespersons that will not work according to you sales funnel if it’s too complex.
  2. Be clear about your sales targets: You can’t blame a salesperson working on low value leads unless you have set proper targets.
  3. Simplify you CRM
  4. Coach, follow up and lead your salespersons. You should not be surprised if your salespersons find their own way to do sales unless you manage them.

If you do not do the above, you risk that your salespersons to not use your sales funnel or your CRM. At least not in they way you would like them to do.

Not generating quality leads and sales is a common risk hiring salespersons

Annoyingly, low value sales-leads and sales often comes when you hire salespersons. Usually however, it’s due to unclarity.

Beyond hiring the wrong salespersons in the first place, low quality sales-leads and low-quality sales closings often come from:

  1. Poorly described target customers easily make salespersons to work on low quality sales. How can they not? Obvious as it seems, we need to be very clear who our target prospects and target customers are. People hear and read things differently. Dialogues, coaching, steering and follow-up is key when you hire salespersons for a startup. Also with senior salespersons.
  2. Ideal product sales need to be clear to everyone. Here we talk about things such as minimum contract sizes, serial order volumes and up sale potentials. Being clear on how we charge for adjustments, implementations or change orders. A clear understanding of initial gross margin requirements vis-a-ví up sale margins is also important.

Salespersons comes in different shape and forms. While one salesperson prospect intensively, others act more as a customer service employee focusing on existing customers. Some are social, loves to travel and entertain while others are analytical and process oriented. Some are always busy but seems not to close many new deals while others are very target oriented.

Not generating quality leads and quality sales becomes a risk when you hire salespersons. In particular if you do not give them proper targets, tools and follow up. Transforming from a hands-on doer to become a leader is one of biggest challenges for entrepreneurs with growing businesses.

Wrong cultural fit is a big risk when you hire salespersons for a startup

Many tech companies are started by engineers that focus on product development. The first hiring’s are usually also engineers with a product development focus.

It’s not unusual with cultural clashes when eventually hiring salespersons for such a startup.

Hiring ‘aggressive’ salespeople into a non-selling product development team is a risk. These salespeople may come across as arrogant damaging the corporate culture that has been built by the engineers.

Cultural fit is important for the workplace, for wellbeing, productivity and team spirit.

It is important for the founder to lead the team. Being a leader includes to nurse the company DNA but also to emphasize the necessity to sell.

Being a hands-on tech-oriented founder sometimes makes it hard to lead and nurse a culture. “Just do it” often feels so much easier and faster, as one of my entrepreneur friends express it. To gain leverage in sales however, it’s vital to lead if you aim to hire salespersons.

Conclusion – risks to consider when you hire salespersons to a startup

There are many risks to consider when you hire salespersons. Often though, being pre-occupied with many different tasks, including sales, often hinders most founders to go out and hire salespersons.

Once founders do take time to start to think of hiring salespeople, risks often come to mind. Commonly cost concerns, risk of working with the wrong customers and risks of sales consuming time instead of making contributions.

Talk to any successful entrepreneur you may know. Successful entrepreneurs will tell you that there are risks involved hiring salespeople. They will also tell you that you will come to a point when you need to hire salespersons. You can’t leverage you startup for growth success doing all the sales yourself.

Address the risks mentioned above, and you will increase the likelihood that you hire salespersons that makes a real difference.

Good luck with you first sales hiring!

Read more on how to grow tech companies beyond early customers.

Read more about sales traction.

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Jonas Florinus

Jonas Florinus

Jonas has 25 years operational experience growing businesses, 10 years with venture capital and private equity and more than $8 billion in personal transaction experience. For the last 5 years Jonas has been an entrepreneur himself.
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