When Your First Sales Hires Fail...Apr 08, 2022
It constantly amazes me how frequently I see founders hire their first 2 AEs, see them fail to get close to quota and look to solve the problem by adding more AEs! 💸
Let’s break down why this happens and how to solve these early-stage sales challenges. In this newsletter, I’ll cover 3 areas I’ve observed as an operator, advisor and investor.
1) Founder perspective
2) What really causes the failure?
3) How to solve it
1. Founder perspective
Pressure from investors: Typically the story told to investors by founders is “we need your money to grow sales”. So it’s not really pressure from investors, it’s pressure from founders on themselves, that they don’t know how to backtrack from. See #3 below for an expansion on this.
Bad attitude: Some founders think of salespeople as gladiators… …throw them into the colosseum of battle, and it’s survival of the fittest, you just need to have a constant flow of ‘em. Eventually, the cream will rise to the top and we’re sorted.
This is both culture-killing, miles off the mark, and not scalable. And of course, it’s the fastest way to burn through your latest round of funding with little to show for it - other than a shit-ton of dilution for you and your staff.
Bad advice: Founders advised by people who have never been operators and have never been in the GTM field of battle themselves irreparably damage startups every single day.
Know no-better: This is the first rodeo for many founders, so further to the point above, they don’t know any different, so they are prone to take advice from people they think are helping but are not. Some of the advice I’ve seen founders receive from so-called “GTM Experts” has astounded me over the years.
2. What really causes the failure?
Here are some causes of early-stage sales failure I’ve seen in my career to date:
Failure to document: Probably the single biggest reason is a failure to extract from the founder the process that got them from 0 to 1. Founders are notoriously bad at documenting everything from their original hypothesis to their client onboarding flow. Failure to document leaves new hires to learn via osmosis. That can work (inefficiently) for a couple of hires… …good luck after that!
Poor recruiting: There’s a playbook for optimal recruiting too, and no surprise the trick is in documenting the process and criteria for hiring. If the first 2 AEs failed it’s typically one of 2 reasons, bad hire, or poor enablement (see below).
Poor enablement: If you don’t have a well-documented onboarding curriculum that you support new hires to work through BEFORE day 1, and then hold their hand from day 1 to end of their ramp period, you’re leaving too much to chance.
Elevated targets: If AEs aren’t hitting quota, it could simply be that the quotas are too high. In early-stage startups, when things are still fairly unknown you need to over-index on the morale of the team versus revenue. Take 25% off what you think an AE can realistically achieve in the next quarter, and adjust up (or down) with market signal over time.
Founder ego & self-sabotage: There’s this weird phenomenon where founders refuse to let go of deals, or relationships and still want to run pipeline to prove in some perverse way that they remain the best at sales, or that they closed the most revenue. I’m not sure whether it’s ego, some weird money-saving exercise (if they run the biggest deals they don’t pay commission) or something else. It sounds weird even writing this, but sadly this is more common than you think - and obviously doesn’t scale!
3. How to solve it?
Speak to your investors: rather than hire to illustrate to investors that you’re using, or more accurately “burning” their money as promised, you’ll need to reset expectations that growth will initially slow so you can fix some sales recruitment and onboarding issues you’ve uncovered. Hard conversation to have in the short term, however, you and they will thank me in the future, I promise.
Recruitment: If both AEs are missing quota, you possibly hired badly. Take a close look at your recruitment process, and ensure it’s optimal. Some tips in one of my previous posts here.
Sales enablement: If your recruitment process was solid, and both AEs failed, there’s some chance they didn’t fail you, but that somewhere along the line you failed them. You’ll need to go back and double-check onboarding and support through the whole funnel is up to scratch. Do the double-checking before you fire them both!
If you conclude you have solid onboarding and recruitment, but 1 AE succeeded and 1 failed for example, I’m much more confident that the latter hire is a mis-hire in this scenario, and my advice is you fire fast and move on.
Obviously, if both succeed, you’re cooking!
Get help, evolving from founder-led sales: It’s not easy to cross this chasm. Even if you document everything well, you’ll still need to be in the weeds of deals with these first hires, and even if you are, you’ll need to find ways to test that the transfer of knowledge has been successful.
Many founders are over-zealous in their desire to get away from sales. Whilst I get that eagerness, it often comes back to bite them on the ass. Get someone by your side you trust to help you build GTM.
Successfully exiting the founder-led sales phase is a major milestone that de-risks your startup and makes you much more attractive to investors.
The bottom line is this: don’t rush it and if you’re a first-time founder, or don’t have a sales background, get help.
However, be sure to audit where you are getting that help from, there’s more bad advice than good advice out there.
You’ve got this 👊🏼