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This case study is an amalgam of several true
stories about technology-based companies that faced the challenge of recruiting
salespeople and building a sales force to take on the giants in their industry.
The following conversation took place two years ago at the headquarters of a
young computer product company. The vice president of sales and marketing,
George Donahue, was speaking with company president Don Johnston:
- George: "The sales plan you and the board have come
up with is very aggressive. The only way we can make these numbers is to
hire
salespeople who already know the market and the territory and who have a
track record selling related products. Since Gargantuan, Inc. is the
competitor we have to beat, my plan is to hire experienced salespeople
mostly from Gargantuan."
Don: "George, the whole idea behind our company is to
improve on what Gargantuan has done, to establish our uniqueness. I can't go
to the board and tell them that we're going to be just like the competition.
I want fresh people, people who haven't been tainted by the traditional way
of doing things. Why can't we develop our own sales staff?"
George: "You're dreaming, Don. We don't have time for
trainees. We need killers! We need guys who know how to close. I understand
the uniqueness of this company. That's why I took a pay cut to come here.
But I also know it takes years to develop a first-rate salesman. We've got
to start with experienced people. Once we've got some sales momentum, we
should look at adding trainees. But not this fiscal year."
Don: "You really sure about this?"
George: "Absolutely. Look! Here are the names of three
top performers from Gargantuan. I've known them for years, and they have all
said they would love to come work for me. We can probably also attract two
or three good people from Superbig Technology. Take this man: Last year, he
sold more than $1.5 million. We need only a couple of guys like that. So you
get to take the company public on schedule, and I make my bonus."
Don: "Whatever kind of people we hire, I don't want to
just buy salespeople. The right people should be willing to work on a modest
base salary and then be compensated primarily for the results they produce.
This is going to be a very exciting company to work for. A really good
salesperson should see that and agree to make the investment along with the
rest of us."
George: "Be realistic, Don. These are successful guys.
They have houses and nice cars, kids with braces and college expenses. Even
if they wanted to, most of them can't afford to lower their standard of
living even temporarily. To get top performers, we will have to structure an
aggressive compensation plan. And because our company and our products are
unproven, we will also have to guarantee them a minimum commission
level."
Don: "They get paid whether they produce or not! Are
you nuts? I built this company on the idea that everyone contributes their
best and we all share in the benefits of that success."
George: "Don, believe me, that's the only way. Look,
you and the engineers have done a great job of putting together the company
and designing the products. But you hired me to make the sales happen. And
I'm telling you that we can't accomplish your sales objectives with anything
less than a senior sales force. And the people who can do the job for us
don't come cheap. I'm telling you, there's no other way."
Don: "OK. You're right. It has to be your call. But
these hot shots of yours better be good. I'll give them 120 days. Either
they produce, or they're out!"
A year later, Don and George met to review the previous year's results and
plan strategies for the coming year:
- Don: "Well, it looks as though we are going to do
the third round financing ahead of schedule. I'm afraid we will be giving up
a lot more equity than we had planned to, but we don't have many options.
Your sales plan didn't work, George. Most of your 'killers' have produced
very little."
George: "You really can't blame them, Don. These guys
from Gargantuan and Superbig are accustomed to having more technical support
than we were able to give them. And we didn't spend nearly enough for
advertising. You have to admit, too, that the product wasn't as ready as we
had thought."
Don: "I think all that is so much bull! Your salesmen
are nothing but big-ticket order takers. They did fine at well-known
companies, but they can't present a new concept. And while you are on the
subject of the product, every feature your sales guys ask for is a me-too
copy of something Gargantuan has. Our engineers are so busy trying to
duplicate them, they haven't had enough time to finish what we were planning
to build. Why can't you teach your guys to sell what we have? You know, some
of those people you hired are real dogs, and to think what we paid to
attract them. It makes me sick."
George: "It takes time. I'm flushing out the weakest
performers, but most of the field have excellent forecasts. Give me a little
more time. You'll be very pleased with the results."
Don: "As long as you're replacing people, can't we
just grow a few of our own instead of hiring everyone else's worst
losers?"
George: "We don't have time to train new people. We
need salespeople who can land on their feet running. And they aren't losers.
They just need more support from us. By the way, I just heard that Huge
International is in trouble. We can probably pick up two or three of their
top producers."
Don: "Well, maybe you're right, and the sales plan was
just too optimistic. But the investors have told me there isn't going to be
another round of financing. If we don't reach break-even in six months,
we're dead. This is our last chance. I'm betting everything on you and your
team, George. Please don't let me down."
George: "I promise you we won't. Now, let me get back
to work. We've got some serious selling to do."
This year, no meeting was held. George was last seen managing a sales region
for Superbig. Don was looking for capital for his next product.
Most of the companies upon which this case study is based have ceased to
exist. One survived by being bought out. Two survived by eliminating the
professional sales force and having the founding executives and engineers take
on the sales function.
What Can We Learn From Don and George?
When a technology-based company is created, the first people to be hired are
usually in engineering and manufacturing functions. These hires are nearly
always experts in their respective fields; you either know how to design a
widget or you don't. As the company develops a bit further, it hires more
specialists. Finance is usually among the first, along with marketing and more
experts in engineering and manufacturing.
Given this pattern of starting the company with specialists, it certainly
makes sense to continue the pattern by hiring the most experienced sales people
one can find from the established industry leaders. However, for most
technology-based startups, experienced salespeople fail to produce. Here are
some ideas on why:
- Large companies provide their salespeople with an enormous infrastructure:
sales management tools, first-rate training programs, support engineers,
extensive libraries of brochures and presentation materials, beepers, laptop
computers, beautiful offices -- the list goes on. A salesperson who works in
that environment becomes dependent upon all those tools and all that
support. Few young companies can match the big guys in sales support, and
few salespeople who work in those environments can go back to living without
the support.
- Many highly successful salespeople at big companies have mastered a kind
of selling that is different from what is needed by a startup. A young
company needs someone who can go out and convince people that a new product
and a new company will meet their needs better than anything offered by the
big guys. Salespeople at a big company don't have to be evangelists. They
can spend all of their energies on tailoring optimal solutions.
- The mere fact that a salesperson from a big competitor is willing to work
for a young company can be a warning sign. Given the greater ease of selling
for a known industry leader, and all the support and other benefits given to
their salespeople, why would anyone want to take the risk of going to an
unproven company? Is it because they are failing at the big company and need
a new job? Or is it because they are really more suited to the small-company
environment?
From our experience, technology-based startups that grow and thrive usually
develop their own sales force rather than hire from their major competitors.
They look for bright, aggressive people whose careers are on the way up and who
are entrepreneurial enough to make do without all of the support infrastructure
of a bigger company.
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